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2016

DGX

DGX #When you're talking about margins, I want to make sure whether you are asking dollars or percentages, so I will address both. Typically, what we've said is an outreach purchase, it takes 12 to 18 months to get to its going rate on profitability of when we can get all the synergies achieved. And the outreach businesses are typically at our corporate margin percentage. So, we usually get some margin dollars pretty quickly on those outreach, but get to our going percentage of ratio profitability takes 12 to 18 months. For PLS, it's somewhat similar to an outreach in that there is a transition period of time. A lot of the savings is driven around moving the test menu partially off the hospital's site to ours. It doesn't happen the first day. The second piece is really the procurement savings. It's either changing out the platform or burning through their reagents, which typically are at higher cost than ours, so it takes a little while before we get to that going profitability. But I'd say the same thing, probably a little closer to 12 than the 18, when we get to the going rate of profitability for PLS within the first year to 1.5 years. Those margins are going to be lower than the corporate average slightly, but, as I said before, still an excellent return on invested capital and they're still double-digit margins. <UNK>, any given quarter, it may bounce around. The outlook that we provided in 2014 and we're planning, and I'll do it personally, to update you on that at our Investor Day on November 11, and show a look back at how we have done and give you a general idea of what you can expect going forward. It is really an annual basis or a CAGR basis. It's not necessarily what you're going to see in any given quarter. So, the things that are going to contribute to growing earnings faster than our revenue are unchanged. It's really going to be as we have returned to organic growth that has a high drop-through, and then we have the Invigorate program, which certainly is large enough in this period of time to offset price and our cost pay-fors, which is our annual merit inflation and things like that, and still have enough to expand margin. As you look at some of the PLS relationships that we have talked about, those have really started up this year. And as I mentioned earlier to the question, how long does it take PLS to get up and going in its profitability, it's generally 12 to 18 months, so you would expect those deals to be contributing more to the bottom line and helping to expand our margin more than they did this year. So, it really gets down to the fundamentals, which is the growth and the high drop-through we get there, our Invigorate program, which continues to drive efficiency, and then all of those things more are on an annual or a CAGR basis as opposed to any given quarter. And year to date, we're up 5.4%. That's a higher number than the third quarter. And, again, the other thing is, as you're well aware, we're accelerating organic growth, and we couple that with our acquisitions of 1% to 2% growth. That allows us, as they feather through our numbers, to also get some lift in operating income going forward. We have actually contributed about 1%, so at the low end but we are still within the 1% to 2%. And in terms of our appetite, it hasn't changed. But we're very diligent about the deals that we move forward with. As we've shared, we walk away from more deals than we execute. It's not as if it's not an interest, it's not as if we're not investing a lot of time in evaluating assets and potential outreach deals, but we do have a lot of rigor around our financial metrics, and we don't execute a deal if we don't see a path towards value creation, importantly. So, really, it comes down to our capital allocation strategy, which is, once you get beyond the 50% that we guarantee, of our free cash flow, to our shareholders, it comes mostly through the dividend but also through some share repurchases, and then the decision is what's the best value creation strategy. And we have to feel very comfortable that we're going to create more value through M&A than we will through share repurchases. Therefore, it's really situational. So, it's not a change in strategy; it's not a change in appetite. And certainly there's been a number of assets we have been evaluating. There's a lot of things we're looking at. And we are still having success with 1% growth from M&A, within the range. And, really, nothing has changed other than we're at the low end of the 1% to 2%. <UNK>, as you recall, we announced our 5-point strategy back in 2012. Part of that in terms of restoring growth was to accelerate our organic growth, which we're doing, and then second is to couple that with acquisitions. And if you look at 2013, 2014, 2015, and now 2016, we have been achieving that 1% to 2% growth through acquisitions. So, we've developed a credible track record of being able to do that in the past. And, as <UNK> said, prospectively our views haven't changed. And then you couple that with our strong cash position. We feel good about the cash we generated this quarter, and are using that cash wisely with our capital deployment plan. So, going forward we think we have a solid strategy to continue to build shareholder value, and the growth prospects both organically and through acquisitions remain encouraging. Sure, it's doing well. We've lapped it already, one-year anniversary in July. The initial work for both companies is to put both of our laboratory clinical trials business together, and then operationally integrate those. By integrating those, we will benefit from that in our equity earnings. We get 40% since we own 40% of the joint venture. So, we believe we've made some excellent progress and there is more opportunities in front of us in terms of the yield we'll see from that joint venture, because it takes some time to get the integration completed. But we're starting to see some of that already this year. Thanks, <UNK>, for the question. First of all, as I said, we're excited about the opportunity. It's an embryonic field, it's building, it's evolving. The field of precision medicine or personalized healthcare is very new, and it continues to provide opportunities. But it also takes time to develop. We believe, once again, that we, in this field, need to work together with others. Two years ago we announced the relationship with Memorial Sloan Kettering. We brought a product to the market called OncoVantage. The opportunity we're going after, <UNK>, is to get to those community oncologists, which, as I said in my remarks, about 70% of cancer care is there. What we realized is that Memorial Sloan is very strong and we have a strong presence in the United States. But by working together with some others, once again, we can even enhance what we've done already. The IBM opportunity allows us to use their platform and also their data capabilities in a much broader way. Second is, as you know, IBM is building out their go-to-market plan for IBM Watson in general, IBM Watson Health, and IBM Watson Genomics. We're hopeful that sales force, coupled with our sales force, will drive some additional demand as people become more aware of this. The other part of this, <UNK>, is we believe there is an opportunity for patients to become more aware of what they should gain access to in assessing what they need to do with their cancer care. And IBM is a very powerful marketing machine, and we're hopeful that their work and their visibility around cognitive computing, particularly in healthcare, will help us with this effort. Now, as far as future products, we have the existing products today. We're offering that. There is plans for us to expand that capability with a number of actionable genes. And then also an expanded panel, which will touch close to 400 genes that we will look at. Yes, we do believe that this will help us in terms of companion diagnostics with those cancer drugs, to rule in and rule out patients it can affect. And also making sure that we can support in the right way connecting patients to the right clinical trials through their oncologist with this information. So, this is ---+ work's in progress. A lot will be introduced in time. And it is a good example of the evolving nature of this whole effort across the world. But we are lining up with some of the best, Memorial Sloan Kettering, IBM. We talked about the Broad Institute and obviously their relationship they have with MIT and Harvard. So, we have a good team working on this and we feel very encouraged about the prospects here. First of all, one step at a time. We announced this relationship with HCA with their Denver-based division. They have six inpatient laboratories that we will manage for them. When we do this, we make them more efficient. If you understand how they work, and I would argue a lot of hospital systems work or for-profit corporations, they're going to see how it goes. And we expect to deliver. So, we're hopeful when we deliver, that we can then expand that discussion to say ---+ can we help you in some other areas. The first piece of business right now is to do what we said we're going to do in Denver, and do that well. And then we will grow the account, as you grow any account, going forward. I would also say that this discussion around hospital interest in what we're doing is building. What we find is that the C suite of integrated delivery systems, and hospital CEOs and CFOs, are quite interested in anything anyone could do to make them more efficient. I personally get engaged in this in a very active way. And I can tell you that when we go in and have a conversation with a CEO and a CFO, and share with them that we can save them 15% to 20% of their hospital inpatient laboratory cost, our batting average, if you will, of getting to the next conversation to start sharing some data is quite good. Very few times do they say we are not interested. Most times they say ---+ interesting, we should take a look at this, and we understand how you can help us, and let's see if the numbers work. When we go in there, we also talk about their lab strategy. Usually when we have a discussion around their inpatient laboratory costs, we then have a conversation around their reference testing, their most advanced testing that we provide to about 50% of hospitals. We talk about us being able to provide more of that for them. And then the third leg of the stool is they then start to question, if they are in an outreach business, essentially competing with us, do they want to remain in that business. The best end state for us is to become their lab partner ---+ where it is Quest inside. So, we do all three. We're helping them with their inpatient labs, making them more efficient. We're providing the most advanced testing for their hospital operations. And then, third, is where their laboratory for their non-hospital portion of the care they are providing within their geographic area. We have a number of examples of that, and probably some of the best examples is where we've actually formed joint ventures. And we have a number of longstanding joint ventures ---+ University of Pittsburgh Medical Center, probably the most recent large one is University of Massachusetts. We have a joint venture up in Massachusetts around that. And there's others, too, that we have built. So, I would argue that this is a growing trend. It's a trend that we're ahead on. It takes a while to build a services business. We've built the capabilities. We're now executing and we're now starting to see the results in our growth. The year to year on what you should expect, I can't give you anything specific. Obviously we're not giving guidance for next year. But you should expect us to adhere to our capital allocation policy, which is basically half of our free cash flow is committed to shareholders. And then above and beyond that depends on M&A and/or additional share repurchase. In terms of our authorization ---+ First of all, last year, at the end of the year, we said that our advanced diagnostics grew by about 5%. It's a sizable portion of our portfolio, about $1.8 billion. We do not share quarterly performance related to that portion of our Business, but it continues to grow. Some of the mentions I had in my introductory comments show that we continue to get good growth of some of the more advanced testing. And particularly our last question around our work with IBM, and work in genetics, that field continues to provide nice growth prospects for us. So, we're continuing to get growth, and, once again, we'll share the growth from that business in due course as we announce our results. As far as pricing, it's already in that 50 basis points headwind, if you will. We don't share specifics on what's happening with commercial contracts or what's happening per test, but it's implied in the 50 basis points. So, it's very manageable, we believe. There's always going to be some ups and downs in our portfolio tests. We're bringing new products to the marketplace, as well, which have new price points. So it's in that overall aggregate measure that we provide. We continue to build our sales and marketing capabilities. The way we've addressed the market is really to make sure that we capture the right level of focus around accounts. And with 65% of physicians now working for hospital systems, we believe it's important to have a geographic orientation to our sales force. So, we have about 108 sales districts and they have full responsibility for the whole portfolio of Quest into the market. Because it's hard to separate hospital business from physician business, given where healthcare is today and how it's organized. At the same time, we all know that healthcare is very specialized, so we also, in addition to the geographic orientation to our sales force, have dedicated specialized sales forces. We have a specialized sales force for our neurology business, we have a specialized sales force for our anatomic pathology business, a specialized sales force for our women's health business. And we believe we appropriately staff that for the opportunities in the marketplace. We're always trying to optimize our investment in our go-to-market plan with the opportunities we see in the marketplace. And we think we've struck the right balance to deliver on our goals of growth in 2016, and we believe we'll do so, also, as we go forward with accelerating growth, as well, in the future. Thanks again for joining the call today. As you can see, we're making good progress on executing our strategy. We look forward to seeing many of you at our Investor Day in New York City on November 11. Thank you very much, and have a great day.

2016_DGX

2018

INGN

INGN #Thanks, <UNK>. Good afternoon, and thank you for joining our first quarter 2018 conference call. In what is historically a seasonally slower quarter, I'm very proud to say 2018 got off to a great start as we generated total revenue of $79.1 million in the first quarter. Our record direct-to-consumer sales of $28.7 million in the first quarter of 2018 exceeded our expectations, primarily due to increased sales representative headcount and associated consumer spending. We're currently ahead of schedule to meet our plan of hiring 240 Cleveland-based employees by 2020, with the majority of those being sales reps. Given our recent success, our strategy is to steadily hire additional sales representatives throughout 2018 and continue to invest in marketing activities to increase consumer awareness as we believe that it's still our most effective means to drive growth of the direct-to-consumer sales. In fact, we expect to release a new TV commercial to showcase the benefits of our portable oxygen concentrators in the second quarter. Further, we initiated a direct-to-consumer pricing trial in the second quarter of 2018 to ensure our products are optimally priced. We expect to provide an update on this trial on our next earnings call. First quarter of 2018 domestic business-to-business sales of $28 million was a record for us and exceeded our expectations, primarily due to continued success with our private label partner and traditional home medical equipment providers. While we are very proud of the success in the first quarter and remain optimistic within the domestic business-to-business channel, it is important to remember that this business can be lumpy quarter-to-quarter. While we believe the conversion to nondelivery technology is underway, we think this will take 7 to 10 years due to the inherent challenges providers are facing both from an infrastructure and financial perspective. While sizable South Korean unit orders in the first quarter of 2017 did not repeat in the first quarter of 2018, international revenue of $16.9 million was still strong versus the first quarter of 2017. Despite the absence of major tender activity, growth was primarily due to continued adoption from our European partners and favorable currency rates. We believe we remain the preferred provider of portable oxygen concentrators in Europe, and we expect to see long-term opportunity for growth ahead as the market transitions from tank and liquid oxygen systems to nondelivery solutions. We are also proud of our operations team and supply chain for continuing to steadily increase output to meet our customers' demands. We have signed a new lease in Richardson, Texas to expand our manufacturing and operations footprint by approximately 23,000 square feet. Our current Texas manufacturing facility is approximately 37,000 square feet, so this additional space should provide for significant capacity expansion. Transitioning to the subject of proposed 25% tariff on roughly 1,300 imported Chinese materials and products, we are currently evaluating the potential impact to our supply chain. While aluminum and steel have received a sizable amount of attention with regards to proposed tariffs, there's no large quantity of either in our products. We would also like to point out that the majority of aluminum in our product is sourced domestically, so we do not expect there would be a significant impact on our raw material costs associated with any tariffs on aluminum. However, there are components in our products, such as lithium ion batteries and printed circuit board components, that are currently proposed to be subject to this tariff. We will continue to monitor these proposals and economic policy changes and take the necessary steps to protect our financial interests and reduce our supply chain risk. On the topic of competitive bidding around 2019, we have nothing new to report and await information from CMS on the next round of competitive bidding. Also, we wanted to comment on the recent proposal by CMS to remove HCPCS code E1390 for stationary concentrators from the master list of potential medical devices subject to prior authorization requirements. In short, there's no change to the actual billing practices based on this announcement, but this announcement confirms that code E1390 will not be subject to a prior authorization requirement given that reimbursement rates are under the $100 per month threshold. Lastly, there's been no update on either H. R. 4229 or the interim final rule that would provide retroactive reimbursement relief in noncompetitive bid areas. Looking ahead, I'm very proud of our Inogen associates and the progress made in what has historically been a seasonally slower quarter. While we've been engaged in multiple initiatives to fuel future growth, we've accelerated current growth, especially in the domestic direct-to-consumer and business-to-business sales channels. I'm very pleased with the increased adoption in these markets with our best-in-class and patient-preferred products. Looking at 2018, we're increasing our full year revenue guidance range to $310 million to $320 million, up from $298 million to $308 million and expect to continue to invest heavily in our sales force, marketing efforts and operations in order to drive portable oxygen concentrator adoption worldwide. With that, I will now turn the call over to our CFO, Ali <UNK>. Ali. Thanks, <UNK>, and good afternoon, everyone. During my prepared remarks, I will review our first quarter of 2018 financial performance and then provide details on our increased 2018 guidance. As <UNK> noted, total revenue for the first quarter of 2018 was $79.1 million, representing 50.6% growth over the first quarter of 2017. Looking at each of our revenue streams and turning first to our sales revenue. Total sales revenue of $73.6 million represented 93.1% of total revenue in the first quarter of 2018 and reflected 60.1% growth over the same quarter of the prior year. Total units sold increased to 45,400 in Q1 2018, up 77.3% from 25,600 in Q1 2017. Direct-to-consumer sales for the first quarter of 2018 were a record $28.7 million, representing 67.8% growth over the first quarter of 2017, primarily due to increased sales representative headcount and increased marketing expenditures. Record domestic business-to-business sales of $28 million in Q1 2018 reflected 60.4% growth over Q1 2017, with strong demand from our private label partner and traditional HME providers as more and more providers are adopting portable oxygen concentrators instead of tanks to service their oxygen patients. International business-to-business sales of $16.9 million in Q1 2018 increased 48% from Q1 2017 and was driven mostly by strong European volume and favorable currency rates. We are proud of this result, especially since the first quarter of 2017 included sizable unit orders from South Korea that did not repeat in the first quarter of 2018. Sales in Europe represented 89.5% of international sales in the first quarter of 2018, up from 73.2% in the first quarter of 2017. Average business-to-business selling prices declined over the same period in the prior year, primarily due to mix related to increased volume from our private label partners and secondarily associated with pricing discounts associated with increased volumes worldwide. Rental revenue represented 6.9% of total revenue in the first quarter of 2018 versus 12.4% in the first quarter of 2017. Rental revenue in the first quarter of 2018 was $5.5 million compared to $6.5 million in the first quarter of 2017, representing a decline of 16.3% from the same period in the prior year, primarily due to our continued focus on direct-to-consumer sales versus rentals and a $0.2 million Cures Act benefit in the first quarter of 2017 that did not repeat in the first quarter of 2018. Rental revenue in the first quarter of 2018 was flat sequentially versus rental revenue in the fourth quarter of 2017. We note that the first quarter of 2018 represents our most difficult comparable in 2018 given the $0.2 million Cures Act benefit received in the first quarter of 2017, representing a rental revenue headwind of 2.6% in the first quarter of 2018. Further, net rental patients on service declined 9.2% compared to the first quarter of 2017. Lastly, rental revenue was negatively impacted by the 1.2% decline in Medicare reimbursement rates for stationary oxygen in noncompetitive bid areas, effective January 1, 2018, due to the updated Medicare fee schedule. Turning to gross margin. For the first quarter of 2018, total gross margin was 47.7% compared to 49% in the first quarter of 2017. The decrease in total gross margin was primarily due to lower sales revenue per unit sold and lower rental gross margin, which was partially offset by lower average cost of sales revenue per unit. Our sales gross margin was 49.8% in the first quarter of 2018 versus 52.3% in the first quarter of 2017. The sales gross margin decline was due to a lower consolidated average selling price in the business-to-business channels due to increased sales volume to our private label partner and traditional home medical equipment providers, but was partially offset by increased mix towards direct-to-consumer sales and lower cost of sales revenue. Rental gross margin was 20% in the first quarter of 2018 versus 25.9% in the first quarter of 2017. The decrease in rental gross margin was primarily due to the $0.2 million Cures Act benefit received in the first quarter of 2017, which lifted rental margins by 2.3% in that quarter and increased logistics costs in the first quarter of 2018, partially offset by lower depreciation costs. As for operating expense, total operating expense increased to $29 million in the first quarter of 2018 or 36.7% of revenue versus $20.2 million or 38.4% of revenue in the first quarter of 2017. We are proud of this operating expense leverage we are showing in spite of the significant investments being made in our sales and marketing infrastructure. Research and development expense was $1.4 million in the first quarter of 2018 compared to $1.3 million recorded in the first quarter of 2017, primarily due to increased personnel-related expenses. Sales and marketing expense increased to $18 million in the first quarter of 2018 versus $10.5 million in the comparative period in 2017, primarily due to increased personnel-related expenses as we continued to hire inside sales representatives at our Cleveland facility in addition to increased advertising expenditures. In the first quarter of 2018, we spent $4.8 million in advertising as compared to $2 million in Q1 2017. General and administrative expense increased to $9.6 million in the first quarter of 2018 versus $8.3 million in the first quarter of 2017, primarily due to increased personnel-related expenses, but partially offset by a decrease in patent defense costs. In the first quarter of 2018, we reported an income tax benefit of $1.1 million, up from a $0.1 million benefit in the first quarter of 2017. Our income tax benefit in the first quarter of 2018 included a $3.3 million decrease in provision for income taxes related to excess tax benefits recognized from stock-based compensation compared to $2.2 million in the first quarter of 2017. Excluding the stock-based compensation benefit, our non-GAAP effective tax rate in the first quarter of 2018 was 22.5% versus 36.7% in the first quarter of 2017, primarily due to the impact of U.S. federal tax reform. In the first quarter of 2018, we've reported net income of $10.8 million compared to net income of $5.9 million in the first quarter of 2017. Earnings per diluted common share was $0.48 in the first quarter of 2018 versus $0.27 in the first quarter of 2017, an increase of 77.8%. Adjusted EBITDA for the first quarter of 2018 was $15.5 million, which represented a 19.6% return on revenue. Adjusted EBITDA increased 42.7% in the first quarter of 2018 versus the first quarter of 2017 where adjusted EBITDA was $10.9 million or a 20.7% return on revenue. Cash, cash equivalents and marketable securities were $188.3 million, an increase of $14.4 million compared to $173.9 million as of December 31, 2017. Turning to guidance. We are increasing our full year 2018 guidance range for total revenue to $310 million to $320 million, up from $298 million to $308 million, representing growth of 24.3% to 28.3% versus 2017 full year results. We expect direct-to-consumer sales to be our fastest-growing channel, domestic business-to-business sales to have a significant growth rate and international business-to-business sales to have a modest growth rate, where the strategy will still be focused on the European market. We now expect rental revenue to be down approximately 10% in 2018 compared to 2017 due to our continued focus on sales versus rental. As stated previously, the only known changes to Medicare reimbursement rates in 2018 are a roughly 1.2% decline in monthly stationary rates in noncompetitive bidding areas due to the fee schedule adjustment. Additionally, we are increasing our full year 2018 GAAP net income and non-GAAP net income guidance range to $38 million to $41 million, up from $36 million to $39 million, representing growth of 80.9% to 95.2% compared to 2017's GAAP net income of $21 million and growth of 33% to 43.5% compared to 2017 non-GAAP net income of $28.6 million. We are also increasing our guidance range for full year 2018 adjusted EBITDA to $62 million to $67 million, up from $60 million to $64 million, representing growth of 22% to 31.8% versus 2017 full year results. We still estimate that the decrease in provision for income taxes related to excess tax benefits recognized from stock-based compensation will lead to a decrease in provision for income taxes of approximately $8 million in 2018 based on forecasted stock activity, which would further lower our effective tax rate as compared to the U.S. statutory rate. Excluding the benefit from the estimated $8 million decrease in provision for income taxes expected in 2018 from stock-based compensation deduction, we expect a non-GAAP effective tax rate of approximately 25%. We expect our effective tax rate, including stock compensation deductions, to vary quarter-to-quarter depending on the amount of pretax net income and on the timing and size of stock option exercises. Lastly, we expect net positive cash flow for 2018 with no additional equity capital required to meet our current operating plan. With that, <UNK> and I will be happy to take the questions. Yes. Robbie, it's <UNK>. I'll take that one. On the B2B front, we had commented middle of last year that while a lot of the B2B players said they were trialing POCs, we said, look, they've gone down the path far enough and enough of a track record that we felt like really a conversion was underway, even if some players didn't even realize they were converting. You can only call it a trial so long. I think that's exactly what we're seeing. The reimbursement pressure on providers continues to force that conversion. We saw providers, again, and I've made this comment in the past, but it was true this time around of really all shapes and sizes continue to increase their purchases. So we continue to have some confidence that the conversion is underway. And as I've said in the past, too, if you do the math and you say this is a 7- to 10-year conversion cycle, then the rate of adoption has to increase somewhere along that time line or you just don't get there in 7 to 10 years. So we are seeing the volumes pick up. We're seeing a few new players to the game, the same old players buying a little bit more. It's good news. What we like is that it's fairly well diversified across the customers. So we're pleased, but there's no real secret or aha other than that people are progressing down that curve to convert their business. Now as I said in my opening remarks, it's still going to be lumpy in their starts and stops. There's inherent barriers and hurdles for the B2B community to convert their business and some run into cash flow issues during a conversion or they hit a credit crunch, so we expect this will continue to be lumpy. We're pleased with what we saw, but we continue to be cautious about our expectations because we don't want to be left holding the bag. So I think you'll see us continue to be a little on the cautious side in our estimate, but we do feel there's a conversion taking place. Now on the direct-to-consumer side, the results are driven by our increased hiring. I mentioned that the hiring in Cleveland is going, I'll say, not according to plan, but ahead of plan. We found that it's a great market. We're very pleased with the talent that we're finding there. So it has allowed us to hire. If you were to compare our 3-year plan, we're ahead of that plan, if you look at it on a linear basis. And we hired pretty heavily at the end of last year. Those people are now contributing. As you go into the first quarter, you've got ---+ the very first people we hired actually are seasoned reps or at the end of curve. The people hired at the very end of the year are still relatively new in the first quarter, but they climbed that curve. So primarily, the results are based on our hiring increase. There's some productivity improvement in there. But if you looked at the contribution of productivity versus headcount and sales capacity, sales capacity is the bigger driver. Yes, sure. As we've said before and as <UNK> just said, we don't want to get ahead of this market conversion. And we know that there are underlying fundamentals that make it difficult for the B2B community to continue to adopt POCs. And because of that, we just want to make sure that we're cautious with the guidance that we put out there on the B2B side of the business. International, obviously, is a lumpy business. Q4 was pretty weak for us. And Q1, obviously, rebounded quite nicely. But just given the fact that, that business can be driven by tenders and the timing of purchases, again, we don't want to get out ahead of the ---+ our European partners and their use of POCs. Obviously, there was an additional headwind on the rental side of the business. As we've continued to focus the team on cash sales, you'll see ---+ we do expect rentals to now decline, so we did factor that into the guidance as well. And the direct-to-consumer sales, obviously, was a fantastic start to the year, and we feel great about how that segment has been performing. But again, it's down to how many people can we hire, particularly in Cleveland where the majority of the growth is coming, and making sure that we put out achievable guidance. Margaret, it's <UNK>. I'll take that one. We've always measured the curve on our new sales reps, and we've said it's about a 4- to 6-month time frame for them to get to the end-of-curve steady state. In all of the locations where we hired new classes, we measure against that curve. So all the reps that we hired in a given class, their first month we measure against what would be the normal month 1, month 2, 3, 4, et cetera. So you have pretty good data around that. I'm pleased to say the folks in Cleveland are at or a little better than the historical curve. I've also said in the past couple of calls, we've invested pretty heavily in training, which has helped us to improve that onboarding curve a little bit. So certainly, we're at least at par, if not, a little better, on that 4- to 6-month end-of-curve journey. Now your second question on the second quarter, you do have to remember that the comps in the second quarter are a little tougher than the first quarter comps. So that's kind of where we landed where we did. That's with respect to looking at the baseline, and not all baselines are equal. So hopefully that makes sense to you. Yes. Just to expand on that a little bit. I mean, particularly in the back half of 2017, we saw accelerating growth on that direct-to-consumer sales line, and we ended the year with fourth quarter of 2017 being up almost 58% compared to the fourth quarter of 2016. So the comps do get tougher for us throughout the year versus our traditional seasonality where the second and the third quarter are tougher. So the first quarter was certainly the easiest comp for us on the direct-to-consumer sales channels, where growth in the previous year was only of about 28%. Yes. Margaret, we actually have always run our direct-to-consumer commercials. So that's no different. We are going to launch a new version of the commercial in the second quarter of this year. But we've been running our own ---+ we tweak them to refresh them. Sometimes, you can wear out a commercial. So throughout our past, really, 10-year history, we've always refreshed the commercial every so often just to keep it different, just like we run some different stations and different programming from time to time to keep it fresh. But that's really what we've done, and we'll continue to do that. But you should see a new commercial here before the end of the second quarter. That's what the plan is right now, and that's all done by us. Well, the spend will continue to ramp as we hire new people. So we've always kind of matched our spend to our sales capacity. So as we hire more reps, you've got to have more leads or else you choke the reps off and starve them. So that goes back to that, remember, market penetration, our best estimate if we use the freshest Medicare data is in that roughly 10% range, so being a long way from saturation. We've shown that we can continue to add sales capacity and continue to increase the spend to drive more leads and keep those new sales reps fully loaded. So we'll continue to do that. You'll see the spend increase as we hire reps. And as an aside, newer reps tend to chew up even more leads. They don't really have a pipeline, so they've got to generate a pipeline. So an existing rep in any given month, they may work X number of kind of leads that are already in their bucket and then Y number of new leads. Brand-new reps that come onboard, it's all new leads, so you have to load them up, and the spend tends to be a little higher to feed them until they get to steady state. And just to clarify on the cost side. The cost of the commercial development gets capitalized, and then it will be amortized over the expected life of the commercial. Yes. If you look at historical POC growth, and again, we've used the Medicare data to estimate that, the annual POC growth has been in the high teens. So while I don't have any newer data, I'm using the same ---+ the freshest data is 2016. I think with the growth rates that we saw, that certainly should be higher than the market growth rate. So it would lead you to conclude that we have strengthened our share position in the quarter. Yes. So I'll take that one, <UNK>. And certainly, as we've seen over time, we do have pricing pressure, particularly on the B2B side of the business. We expect that to continue with volume increases throughout 2018, so that is factored into guidance as it has been previously. And it really will come down to what level of volume increase are we're seeing to justify the ASP declines that we expect in those areas. When we look at it, really, I mean, it just comes down to this market is ---+ we do believe that they are in a conversion process. However, we do think that we don't want to get out ahead of that, and we want to make sure that our guidance is very achievable. On the direct-to-consumer side, certainly, we're continuing to invest in the sales force and continuing to grow that team. We still expect 2018 to be an investment year for us. And how the investments have performed so far in expanding the sales team, that has performed very nicely. I just want to point you again to the fact that throughout the year, our comps get harder on the direct-to-consumer side of the business. And that's against the normal seasonality that we see in the business. So looking at Q2 versus Q3 and Q4, Q2 is an easier comp for us on the direct-to-consumer side than Q3 or Q4 versus our typical seasonality in the business. So certainly, I think that all of those things should be factored into guidance and particularly on the direct-to-consumer side of the business. Yes. So when you look at that, while certainly B2B has a lower gross margin profile, it also has much lower operating expenses associated with it. So when we look at the market opportunity, we look to capture share both on the B2B side and the direct-to-consumer side because we're relatively agnostic on the bottom line. What we have been doing, though, is continuing to invest in the B2C side because we're still very early in the market penetration curve. As <UNK> said earlier, 9% or so penetration in the last data as of the end of 2016, we still have a long ---+ we have a long ramp to go to continue to take share both on the direct-to-consumer side as well as the business-to-business side away from the tank-based business model. So our focus really is to make sure that we maintain a market leadership position and that we continue to grow the market both on direct-to-consumer side and the B2B side and not to drive a specific mix in our business. Now inherent in guidance in 2018 is that direct-to-consumer sales would be the fastest-growing channel. So that would actually be a tailwind to gross margin expansion over the course of the year. Yes. Mike, it's <UNK>. I'll take that one. If you recall, last year, we engaged Foxconn as the manufacturing partner. So they're now producing our G3 product for European demand. And what that did is it offloaded considerable demand from our domestic facility in Richardson, Texas. So that immediately freed up capacity at that site. And then, as I mentioned in the opening, we have signed an additional lease for 23,000 square feet increased footprint. It's in Richardson, Texas as well, just around the corner from our current site. So that gives us significant space for expansion. So certainly, over the next at least a couple of few years, I'll say, we're in pretty good shape from a capacity standpoint. It is relatively easy for us to expand our capacity, probably more of a challenge if anything on the supply chain side, not on the footprint side for manufacturing. The manufacturing sales are relatively easy to replicate, and we've done a good job with our ops team of driving productivity increases year-over-year to increase our capacity as well. But the real work that you don't see is on the supply chain side, and we've got a team all over that because we don't want to miss the opportunity if the market accelerates and grow. And as I said, estimating a 7- to 10-year conversion, mathematically, if it does ---+ if you do see that come to fruition, then there would be an adoption acceleration. So we're prepared for that, and that's why we watch it so closely. So when you look at the sales gross margin for the direct-to-consumer side of the business, ASP has been relatively flat year-over-year. So they're actually ---+ with COGS coming down, you see a slight expansion of that gross margin over time because your ASP is flat. Now remember, we are doing a pricing trial in the second quarter in the direct-to-consumer channel. So that will determine what's the optimal price for us going forward. But just looking at the first quarter, certainly, that direct-to-consumer sales gross margin performed nicely with COGS coming down overall and ASP being relatively flat. When we look at the B2B side, there is always mix even within B2B depending on the customers that buy. Obviously, our distributor, our private label partner has lower prices in order for them to sell on to the HME community, so mix between them and also other large HME providers versus the smaller HME providers that buy smaller quantities and as a result have higher prices. Mix within that also is a contributing factor. So when we outlined those impacts, the first was just mix within the customer and then secondarily was overall price declines associated with the volume increases. No. There were no onetime orders like, for example, the South Korean order that we had in the first quarter of 2017. There was no large international orders like that where it was a new country. And certainly, we saw providers continuing to adopt worldwide, but there's nothing that we would call onetime in nature or driven by a specific tender or a new market opportunity. I wanted to start, first, just more broadly on pricing and how you think about that strategically going forward. <UNK> or Ali, do you feel that there is a real opportunity to accelerate the market growth from a volume standpoint if you do take maybe a broader price cut. Or are you more or less looking at the DTC side that maybe you deserve a premium given all the brand that you guys have built in the market. Yes. One of ---+ as I've said, the biggest barriers to conversion is really the fixed infrastructure that's already in place with the providers that have driven a delivery model since really their existence. You've got to ---+ to make this nondelivery model work, you've got to face the delivery structure out. And that takes time and it takes money. So reducing prices really doesn't help grease the skids. The other issue, as I mentioned, is just credit line. So people run into credit and cash flow constraints. I suppose you could argue that a little price reduction helps that a little bit, but you can't reduce the price enough that it makes that go away. So no, I don't see reducing prices would significantly increase the adoption in the HME community. Okay. And then my second question was just on international. I think from what I heard is there is no real big tenders. You didn't have the South Korean order. It was just a broad-based strong quarter from just kind of your ---+ chugging along. So is there ---+ so why haven't we ---+ why can't we call an inflection there. Has your visibility gotten better now that you have more of a direct presence with Foxconn and your ---+ and the distributor you bought there last year. Do you have better visibility there. Or is there any reason that you can point to, to call out that acceleration. Yes. In the European market ---+ really, international overall, we should just look at it as one bucket. It is the channel where we are still the farthest from the end users. So we have limited visibility. It's not a lot better than it's been in the past. Really, Foxconn doesn't give us any better visibility just by shipping from one point versus Texas. It does improve our service significantly. And the customers are extremely happy with what we've done with Foxconn, but it doesn't improve our visibility. European markets are very fragmented. You've got different reimbursement in every country. Some countries are tender driven; some are not. And that's why we've said the international sales are what we would call the lumpiest and most unpredictable bucket of all. We had a quarter ---+ end of the year that things were a little slow. And then this quarter, they jumped ahead. If you look at it, on the average, it kind of levels out. But that's why we're always very careful about making predictions on a market like that where we know inherently that sales are less predictable than anywhere else. I'd like to close with a few comments on our strategy for 2018. We expect to continue to seek ways to accelerate the global adoption of portable oxygen concentrators. We're supporting providers worldwide to convert to a nondelivery model, increasing our direct-to-consumer investments in the United States and pursuing product registration in new and emerging markets. At the same time, we're still focused on developing innovative oxygen concentrators to stay at the forefront of patient preference and further reduce our product costs as we gain additional scale. We're excited about the future of oxygen therapy where we see portable oxygen concentrators continuing to grow and becoming the standard of care for ambulatory patients in the next 7 to 10 years. Thank you for your interest in Inogen.

2018_INGN

2017

DVA

DVA #Thank you, <UNK>, and good afternoon Q1 was in line with what we expected in Kidney Care I'll summarize the financial performance and discuss some of the key business drivers Non-acquired growth for the quarter was 3.8%, which is within the range of our long-term expectation of 3.5% to 4.5% on an annual basis Our adjusted operating income was $380 million for the quarter The decrease versus fourth quarter of 2016 was driven by both normal seasonal factors and other factors that we outlined as part of our 2017 guidance Let me elaborate on each First, there were normal seasonal factors, including higher EPO utilization due to the flu season, higher payroll taxes in the first quarter of each year and two fewer treatment days Second, we faced some swing factors that we've previously disclosed Let me repeat them and provide some additional color We'll start with the four headwinds Number one, we experienced lower enrollment on patients on the ACA plans Number two, we continue to see an increase of clinical teammate wages Number three, there was a decline in adjusted operating income in our pharmacy operations You won't be able to see this in our segment breakout for the first quarter because improvements in other ancillary businesses helped offset this decrease, but you will see the decrease in future quarters Finally, revenue was higher in the first quarter of 2017, as our forecasted commercial rate decreases take place later in the year Now let me shift to a couple of the tailwinds As discussed previously, we have temporarily decreased our compensation accruals in 2017 due to a switch from profit share programs to a 401(k) match program, and we benefited from lower EPO pricing from our recent renegotiated contract with Amgen The primary adjustment to our Kidney Care adjusted operating income in the first quarter of 2017 was a government settlement that we previously disclosed As a reminder, we received $538 million in March Next, we're happy to announce the closing of the acquisition of Renal Ventures effective May 1. We acquired 38 centers in six states As part of the deal, we had to divest seven centers The partial year financial impact of this acquisition is already incorporated into our 2017 guidance Keep in mind that we'll incur some one-time costs to integrate the business Finally, we just executed an extension to our partnership with Humana to provide integrated care services to approximately 7,500 Humana members with late-stage CKD and ESRD The ESRD industry continues to move in the direction of integrated care due to the number of comorbid conditions that ESRD patients have Our strong clinical performance improves the quality of life for patients and puts us in a good position to partner with payers to reduce costs to the healthcare system As to outlook, we're reaffirming our 2017 Kidney Care adjusted operating income guidance of $1.525 billion to $1.625 billion As <UNK> mentioned on our last earnings call, we're in a period of greater uncertainty than is usual for our Kidney Care business given the efforts around repeal and replace and the impact those efforts will have on healthcare in our country and on our business We will continue to monitor political landscape and represent dialysis patients in those discussions Now, on to <UNK> <UNK> to discuss DMG Yeah, <UNK> As you know, there's a wide distribution of rate And what we want to do is make sure that we do what's right for the long term So sometimes, we have some of their outliers that we need to bring in, and we do have a small set of out-of-network rates, and so those are sometimes the one we're discussing here We are seeing the benefit as we expected And of course, we had to go down, wind down some inventory that we had, but we are experiencing the contract as we anticipated As it relates to the spike on the seasonal, of course, it's very hard to predict and isolate because of the flu season, it's sort of a moving target, if you will And with the prescriptions the way they are, meaning every physician gets to make their own, it's almost impossible to diagnose a number But if you had to put it in a range or you had to bracket it, I'd put it anywhere from $5 million to $15 million or so On that, it's just basically we're winding down from inventory that was purchased at the previous contract So, it's probably not worth worrying about Hi, <UNK> I did And we did not provide additional detail on the numbers We were just clarifying a number that was thrown out That wasn't a number that we had cited in the past There are some that are handicapped, which we always do for you We try to give the best stab in anticipating what's going to transpire during the year And then there are some that have been agreed to and have an effective date that hasn't been incorporated in Q1. Correct, it will be in our run rate Let me see I don't think I could give you any additional detail on that, <UNK> What have we disclosed? The trends on what, <UNK>? Yeah, we're seeing it moderate, I guess, to use your word, flat It's in the range but as we disclosed, it's not a very significant number for the year Yeah It's really hard to parse through what's going on And so why patients are doing what they're doing with plans, exiting and other things around it So instead of giving you a specific answer, let me just give you the total We're at 3,000, and we're at 2,500. And so we can't parse through with clarity as to why the number changed, but that's probably better just to give you where it ends – well, where it is as opposed to where it ends It's fair Well, <UNK>, I'll go first on this one It varies all over the map and not only by a private payer does it vary by contract, but also even within Medicare and Medicare Advantage, it differs geographically and it differs by what the baselines are that you start with So it's a wide distribution curve

2017_DVA

2017

MSCI

MSCI #Thank you, <UNK>, and hello to everyone on the call I'll start on slide 12, where I'll take you through our first quarter results As you can see, we clearly continued the momentum we had coming out of 2016. While Q4 had strong revenue growth of 7%, 8% adjusting for FX, and adjusted EPS growth of 23% year-over-year, Q1 is even stronger Let me take you through the numbers In Q1 we delivered an 8% increase in revenue, driven primarily by a 6% increase in recurring subscription revenue and an 18% increase in asset-based fee revenue Excluding the impact of foreign currency exchange rate fluctuations, total operating revenues increased 9% As a reminder, we do not provide the impact of foreign currency fluctuations on our asset-based fees tied to average AUM This is substantially billed and booked in U.S dollars; however, approximately two-thirds of the underlying assets are invested in securities denominated in currencies other than the U.S On a reported basis, operating expenses and adjusted EBITDA expenses increased by 3% each Excluding the impact of foreign currency exchange rate fluctuations, first quarter operating expenses and adjusted EBITDA expenses increased 4.8% and 5.3%, respectively The primary currency move that drove this benefit was the British pound, which was substantially weaker year-over-year We delivered a 15% increase in operating income and a 13% increase in adjusted EBITDA, resulting in a 280 basis point increase in our operating margin and a 220 basis point increase in our adjusted EBITDA margin to 50% Our effective tax rate was 28.2%, below the 33.5% effective tax rate in the prior year Q1. Diluted EPS and adjusted EPS increased 33% and 29%, respectively Q1 free cash flow was $27.4 million, a decrease of $4 million This was driven by higher cash operating expenses, higher interest payments of $11.5 million associated with higher debt levels, and higher CapEx of $4.2 million, primarily related to our data centers These factors were partially offset by higher cash collections of $37 million As we mentioned in our Q4 earnings call, we saw very strong customer collections in Q4 2016, with some clients paying early, which resulted in the bringing forward (23:36) of about $20 million in collections into 2016, which would've normally been collected in Q1, thus dampening free cash flow in this quarter In summary, this was another very good quarter coming off 2016, which was a banner year for the company We're continuing to execute our strategy, which is resulting in strong top-line growth We have very high levels of client retention, 95% across the company, and we're focused on continuing to deliver productivity and efficiency gains to free up more capital to invest and we're exercising very strong discipline in the deployment of that capital On slide 13, you can see the different drivers of EPS growth in Q1. Adjusted EPS increased $0.20, or 29%, from $0.68 per share to $0.88 per share Strong revenue growth contributed $0.17 per share Investments, net of efficiencies in our product segments and operations, reduced earnings by $0.06. And capital optimization, specifically share repurchases, also benefited EPS We reduced our average weighted diluted share count by 8%, which benefited adjusted EPS by $0.07, partially offset by higher net interest expense resulting in a net $0.03 per share benefit The positive impact of share-based compensation excess tax benefits and the ongoing progress in better aligning our tax profile with our operating footprint, as well as additional discrete tax items resulted in a lower effective tax rate in the quarter, which benefited earnings by $0.06 per share The positive impact of stock-based compensation excess tax benefits totaled $3.1 million in the quarter at $0.03, and reflects the required accounting change effective Q1 2017 on a prospective basis Now let's turn to the segment results We'll begin with the Index segment on slides 14 through 16. Revenues for Index increased 13%, driven primarily by an 18% increase in asset-based fee revenue and a 9% increase in recurring subscriptions We saw growth in core products, as well as our newer products, including factor, thematic and custom index products and usage fees Quarterly sales of $19 million increased 11%, and were driven by recurring subscription sales of $14 million The increase reflects our ongoing success in capturing the waves of innovation in the market such as strong demand for factor modules, as well as increasing demand for ESG Aggregate retention rate remained high at approximately 97% in the quarter compared to 96% in the prior year Index run rate grew by $81 million or 14% compared to March 31, 2016. This was driven by a $42 million or 21% increase in asset-based fee run rate and a $39 million or a 10% increase in subscription run rate We're continuing our track record of growth This was the 13th consecutive quarter of year-over-year double-digit growth in our Index subscription run rate The adjusted EBITDA margin for Index was 70.8% this quarter versus 69.2% in Q1 2016. The impact of FX on Index results was not significant In summary, this was a very strong performance for the Index product line, driven by strength in core product areas as well as a strong contribution from our newer Index product areas reflecting the benefit of the investments that we have made and continue to make This is a great start to the year Turning to slide 15 you have detail on our asset-based fees Starting with the upper left chart, overall asset-based fees increased $9 million or 18% over Q1 2016, driven by a $7 million or 21% increase in revenue from ETF linked to MSCI indexes and a 28% increase in average AUM and a $2 million or 13% increase in revenue from non-ETF passive funds The decline in our non-ETF passive product compared to the fourth quarter was principally due to higher revenue accrual true-up in initial fund fees in Q4 of $1.1 million So it can be lumpy from quarter-to-quarter Also, unlike ETFs, where the latest AUM is available daily to public market data sources, non-ETF passive assets are not public and are reported by our clients to us generally on a one-quarter lag As a result, the first quarter market appreciation which we saw for ETFs is not yet reflected in the non-ETF path product results Turning to the upper right chart, we ended the first quarter with approximately $556 billion in period-end ETF AUM linked to MSCI indexes, driven by both cash inflows of $38.5 billion and market appreciation of $36 billion for the quarter Cash inflows of $38.5 billion into ETF linked to MSCI indexes represented 26% of the cash inflows into the equity ETF market for the quarter Since the end of the quarter and through May 2, ETF AUM linked to MSCI indexes has further increased to $581 billion, driven by $11 billion in inflows and $14 billion in market appreciation, another all-time high As shown in the lower left chart, quarter-end AUM by market exposure of ETFs linked to MSCI indexes reflected our strength in developed markets ex-U.S where we captured 30% of the equity ETF inflows and in emerging markets where ETFs linked to our indexes captured 84% of the equity ETF inflows, further solidifying our position as a leading provider of indexes to ETF providers Lastly, on the lower right chart, you can see the average run rate basis point fee at 3.08, which has basically leveled off over the last four quarters I'd explain the year-over-year decline in basis point fee in more detail on the next slide On slide 16, we provide you with the asset-based fee run rate related to ETFs, as well as the AUM of ETFs linked to our indexes classified in three distinct categories, illustrating a differentiated index licensing strategy In the upper half of the chart, we highlight the growth of our asset-based fee run rate, specifically related to ETFs linked to MSCI indexes Year-over-year, our run rate increased 21%, driven by strong inflows as well as market appreciation, which drove a 28% increase in average ETF AUM linked to our indexes The difference between the 21% growth in run rate compared to the 28% increase in average AUM was driven principally by the product mix, as shown in the lower half of the chart Turning now to the lower half of the chart, you can see how we think about our ETF licensing strategy This strategy is designed to further expand our index licensing franchise for the ETF market beyond our flagship indexes, increasing the adoption of new Index Families and U.S segment index families Year-over-year, the flagship Index Families' total AUM decreased to 71% of total AUM linked to MSCI indexes from 75% in the prior year first quarter The new Index Families continue to grow at a faster pace, specifically driven by flows into core and U.S factor products For new Index Families, AUM increased 14% of total AUM from 10% in the prior year first quarter The faster growth in the lower fee ETF linked to our indexes was a primary driver of the year-over-year decline in the average basis point fee from 3.24 to 3.08. While we expect to have periods where product mix will impact the average fee we earn, through our differentiated licensing strategy, we're seeking to maximize revenue and optimize the price volume trade-off over the long-term On slide 17, we highlight the financials for the Analytics segment Revenues for Analytics increased 2% to $112 million Excluding the impact of FX, Analytics revenue increased 3.3% The increase in revenue was primarily driven by higher equity model revenue Analytics run rate at March 31 grew by $10 million or 2% to $457 million, and increased 3% excluding the impact of FX The year-over-year revenue comparison reflects the negative impact of the challenging back half of 2016, specifically the elevated level of cancels in the last three quarters of the prior year, which impacted our run rate immediately We believe therefore that the lower level of revenue growth in the quarter is more of a lagging indicator Adjusted EBITDA margin was 26.3%, down from 27.5% in the prior year The lower adjusted EBITDA margin rate was driven by the investments in strategic products and services While quarterly margin rates can be somewhat lumpy, we continue to expect the full-year 2017 adjusted EBITDA margin rate in Analytics to be flat or slightly better than the Q4 2016 exit margin rate for the product line, which was 28.7% Slide 18 provides you with the sales and cancels for the Analytics product segment for the last five quarters Our Analytics offering continues to be viewed as mission-critical by our clients, as evidenced by our very strong client retention However, challenging market conditions continue to impact select client segments The market is evolving and changing and this is putting tremendous pressure on clients This changing market is driving clients to focus on becoming more efficient, better integrating technology and data and also to look for more services and solutions from their partners We're evolving our Analytics product area to meet these new demands Q1 2017 recurring sales of $12 million were down slightly compared to Q1 prior year We saw strength in some client segments and continued weakness in others Specifically, the year-over-year decline in sales was driven by lower sales to wealth managers due to the lumpy nature of sales into this segment, combined with continued weakness in multi-strategy and macro hedge funds This was partially offset by strong growth in the asset management segment and the banking segment As a reminder, we had very low cancels in Q1 last year, but saw an increased level of cancels in Q2 through Q4 last year, which was largely driven by four clients Q1 2017 cancels are at recent historic levels and aggregate retention rate has rebounded to over 93% in the quarter, up significantly from 87% in Q4. The year-over-year increase in cancels was driven by multi-strategy macro hedge funds and is the result of the challenging market conditions for this client segment While we're pleased that the level of cancels is more in line with recent historic levels and retention has improved relative to the last three quarters, we remain focused on increasing the level of sales in the Analytics product line Importantly, the Q1 level of sales and cancels are in line with the planning assumptions we made for 2017 and the pipeline for the remainder of 2017 is strong However, until we see less cost pressure on clients and see a decline in closures of hedge funds, we expect to continue to see challenging conditions, and this is in line with our planning for 2017. Turning to slide 19, we show results for the All Other segment Revenues for All Other increased 6% to $25 million on a reported basis and grew 12% after adjusting for the disposal of the occupiers benchmarking business and the impact of FX First, in terms of ESG, a $2 million or 17% increase in ESG revenue to $13 million was due to strong ESG ratings revenue Growth in ESG continues to be driven by the increasing integration of ESG into the mainstream of the investment process Real Estate revenues decreased slightly to $13 million on a reported basis Excluding the impact of foreign currency and the sale of the Real Estate occupiers business, Real Estate revenues increased 8% Aggregate retention rate for the All Other segment remains high at 92% The All Other adjusted EBITDA margin was 21.8%, up from 11.4% in the prior year The increase in the adjusted EBITDA margin rate was driven by continued strong growth in ESG revenue, as well as lower Real Estate costs, primarily due to a reduction in head count and strong cost management, as we made continued progress toward improving profitability in our Real Estate product line Turning to slide 20, you have an update on our capital return activity In Q1 and through April 28, we repurchased and settled a total of 1.1 million shares Since 2012, we've returned almost $2.4 billion through share repurchases and dividends and we've repurchased 36 million shares of the company There was $0.8 billion remaining on our outstanding share repurchase authorization as of April 28. On slide 21, we provide our key balance sheet indicators We ended the quarter with cash and cash equivalents of $697 million This includes $250 million of cash held outside the U.S and a domestic cash cushion of approximately $125 million to $150 million, which as a general policy, we maintain for operational purposes Our growth leverage was 3.6 times at the end of the quarter, down from 3.7 times at the end of the fourth quarter Over time, we expect that we will return to our stated range of 3 times to 3.5 times as our adjusted EBITDA grows Lastly, before we open the line for Q&A, on slide 22, we are reaffirming our full-year 2017 guidance Furthermore, we are also reaffirming our long-term targets In summary, we continued to execute against the MSCI algorithm this quarter, delivering strong upper single-digit revenue growth We're investing for growth and creating a more efficient infrastructure, while at the same time, achieving productivity and efficiency gains, driving a modest 3% growth in expenses The strong operating results drove double-digit growth in adjusted EBITDA, which when combined with a 530 basis point decline in our tax rate and an 8% decline in our share count drove a 29% increase in adjusted EPS We are well positioned given macro tailwinds, and we're executing well against our strategy, and we're optimistic about our prospects for continued growth With that, we'll open the line to take your questions Question-and-Answer Session Hi, Bill, it's <UNK> Let me just add a couple of more comments to what <UNK> said Just to give you a little more specificity around the retention rate Sure, we're up versus Q4, as you'd expect to see that seasonality impact, right? But important to note that we're up versus each of the last three quarters from a retention rate perspective Now obviously, not back up to where we were Q1 2016, so we've got more work to do there But the way we're doing that is focusing on where we see pockets of strength, right? In particular, sales for Analytics in the quarter we saw strength in multi-asset class asset managers In fact, net new sales were up over 40% for that client segment in Q1. So focusing there, as well as demand in the banking segment for risk solutions Yeah, you'll see it ramp up, maybe slightly, but nothing very substantial here And I think the commentary with regard to Q1 was more around it being a heavily tasked quarter if you're referring to the comments from last earnings release heavy cash usage Well, look, as we continue to invest, you'll see it ramp up slightly as we go through the year Mid-to-high single-digits Yes, <UNK>, we track the reasons for cancels very closely And as <UNK> said, we are seeing the reasons particularly attributed to cost pressure, reductions across our clients, hedge fund shutdowns So that's what we're seeing when we take a look at that

2017_MSCI

2015

MHK

MHK #So I think the clarification on oil is that in our carpet business a large part of the materials are from oil but over time we've developed two large categories which are significant to our business. One is recycled polyester which the majority of our polyester comes from recycled bottles which doesn't follow exactly the oil prices. The second is that we have our SmartStrand category which comes from corn which also follows different ones. Now they're related, in some ways they're not related but they are not directly related. The second is that besides the improvement in the raw materials the investments we're making we're getting huge productivity improvements across the business. And then we spend a huge amount of effort differentiating our products and bringing new products into the marketplace to improve our mix relative to the marketplace. Now with that we had been selling more of the lower-priced pieces as something but we still have a much higher mix than the industry average because of all the merchandising and marketing we do. We are confident that we're going to continue improving our profitability in the business going forward. However, we're going to have to react to market pressures just as in every other category. We think that we're investing significantly more than most of the industry and we think we're executing better. So we're quite confident about the direction that we're going and where we're positioned. And just to clarify, <UNK>, one more time, the soft surface margins have shown improvement year over year. Expecting our margins in each of our three segments to continue in fourth quarter and through 2016. We've done a lot of acquisitions in the last two or three years. We've done significant ones this year. Even with that we generate a huge amount of cash as well as our EBITDA is going up both paying down debt and increasing our capacity. With those things we have the balance sheet to invest significantly more in the internal capital as well as acquisitions if we find the right businesses at the right values and we're aggressively looking for those things. However, we're only going to do it if we like the returns on the investment and the risk levels. On the free cash flow question, <UNK>, the third quarter was about $265 million. For the year we'd estimated to be $530 million or $540 million in that range. We have different salesforces going into different channels. Each of the businesses is different, so in my carpet business I have multiple salesforces selling carpet into specialty retail. I have specialized salesforces going into the builder and multifamily channel. I have multiple specialized business salesforces going into the commercial business and in all those things I have similar variations of that in the other businesses. We are increasing the salesforces in all of them, positioning ourselves to be more aggressive than we have in the past. We're confident about our position and products we're bringing to market and we believe that we can help our growth and profits by putting these investments in today. The pricing actions are related to competitive situations in the marketplace. We will remain competitive and as the market changes we have to change with it or our customers will find other alternatives. The market has been fairly disciplined up to now and given what's going on in the raw materials I think that the industry is doing reasonably well. And I don't see anything that's going to change it in the near future. And I would add, too, both on the raw material front and the pricing front for the quarter it was where we expected. It was in line with our expectations. Thank you. We have a distinctive culture that drives product differentiation, operational efficiency and customer commitment. We operate our business in a decentralized manner that creates competitive advantages while driving best practices across our total enterprise. Our capability to execute acquisitions and broaden our products and geographies provides unique opportunities to Mohawk. Our substantial cash flow and debt capacity will enable us to sustain both our internal and external expansions. Thank you for joining us. Have a good day.

2015_MHK

2017

ACN

ACN #Thank you, <UNK>, and thanks, everyone, for joining us today. This was another strong quarter for Accenture. We delivered revenue growth in the upper end of our guided range and again gained significant market share. I'm particularly pleased with our very strong new bookings for the quarter and year-to-date, which demonstrate that our services and capabilities continue to be both highly relevant to our clients and very differentiated in the marketplace. We generated very strong cash flow for the quarter and returned substantial cash to shareholders, all while continuing to make significant investments to drive future growth. Here are a few highlights for the quarter. We delivered excellent new bookings of $9.8 billion. We grew revenues 7% in local currency to $8.9 billion with broad-based growth, once again, across the different dimensions of our business. We delivered earnings per share of $1.52 on an adjusted basis, an 8% increase. Operating margin was 15.5% on an adjusted basis, consistent with the third quarter last year. We generated strong free cash flow of $1.7 billion, and we returned approximately $1.4 billion in cash to shareholders through share repurchases and the payment of our semiannual dividend. So we had another good quarter, and as we enter the fourth quarter, I feel very confident that we are well positioned to deliver our business outlook for the year. Now let me hand over to <UNK> who will review the numbers in greater detail. <UNK>, over to you. Thanks, <UNK>, and thanks to all of you for joining us on today\ Thank you, <UNK>. Our strong results for the quarter and year-to-date demonstrate that we continue to execute very well against our growth strategy. We are successfully driving the business transformation of Accenture while, at the same time, consistently delivering above-market performance. Today, the breadth of capabilities we provide end-to-end is truly unique in the marketplace, and we are well positioned to compete at scale in each of our 5 businesses, driving synergies across them to deliver value and business outcomes for our clients. We continue to rotate our business to "the New", digital, cloud, and security-related services, which again grew at a very strong double-digit rate in the quarter and now account for 50% of total revenue. I am absolutely delighted that we have achieved this significant milestone for our business so rapidly. Our rotation to these new high-growth areas, the differentiation of our capabilities in the market and the diversity of our business has enabled us to continue to gain significant market share. The need to go digital remains a top priority for our clients, and we\ Thank you, <UNK>. Let me now turn to our business outlook. For the fourth quarter of fiscal '17, we expect revenues to be in the range of $8.85 billion to $9.10 billion. This assumes the impact of FX will be negative 1/2% compared to the fourth quarter of fiscal '16 and reflects an estimated 5% to 8% growth in local currency. For the full fiscal year '17, based upon how the rates have been trending over the last few weeks, we now assume the impact of FX on our results in U.S. dollars will be negative 1% compared to fiscal '16. For the full fiscal '17, we now expect our net revenues to be in the range of 6% to 7% growth in local currency over fiscal '16. For operating margin, on an adjusted basis, we now expect fiscal year '17 to be 14.8%, a 20 basis point expansion over fiscal '16 results. We now expect our annual effective tax rate on an adjusted basis to be in the range of 22.5% to 23.5%. For earnings per share, on an adjusted basis, we now expect full year diluted EPS for fiscal '17 to be in the range of $5.84 to $5.91 or 9% to 11% growth over adjusted fiscal '16 results. For the full fiscal '17, we continue to expect operating cash flow to be in the range of $4.6 billion to $4.9 billion, property and equipment additions to be in the range of $600 million and free cash flow to be in the range of $4 billion to $4.3 billion. We continue to expect to return at least $4.2 billion through dividends and share repurchases and also continue to expect to reduce the weighted average diluted shares outstanding by slightly more than 1% as we remain committed to returning substantial portion of cash to shareholders. And finally, for the full year, we now expect to invest in the range of $1.8 billion in acquisitions. With that, let's open it up so we could take your questions. <UNK>. Yes, we feel good about our bookings position in the fourth quarter, and we expect to have another very good quarter of bookings. So we think that momentum does continue. No. I would say on that front, it\ Well, I think, and we've talked about this before, Ed, that we are fortunate that in that with the strength of our overall financials including our balance sheet, we have a lot of levers at our disposal as we manage our business really for many years to come. When we look at our need to acquire critical skills and capabilities in important growth areas in the market, we don't see that changing certainly over the next 3 years, and so we think that's going to continue to be an important part of our investment strategy. We think it'll be an important part of an engine for growth overall, and ultimately, for us as you know, this is all about quickly assimilating these capabilities and driving organic growth over time. So we really see more of the same with our acquisition strategy going forward, and we think we have the financial flexibility to accommodate that while also returning cash to shareholders. Yes, I mean, not much to add. I think we have an extremely clear strategy at Accenture, which is all about rotating to "the New," and in order to enable this strategy, we set very clear financial context we shared with all of you on how we\ Thanks for the question because it was clearly when we decided our new strategy of rotating to "the New", that was clearly a big question we had in front of us. We benefited from Accenture from a very strong culture, you know very well based on what we\ Yes, we carefully manage the retention of the people in these companies that we acquire, and our performance of really over the last 3 years in terms of retaining talent has been very good. As "the New" becomes majority share of your business, how should we think about potential changes in corporate revenue trajectory or particularly margin expansion. Do you foresee any inflection in either over the medium term. We\ Okay, just a follow-up then. Just as far as expanding addressable markets, interactive business I thought was a great example of getting new access into an area within the same office. Are there other areas that you're potentially looking at within client wallets that are logical extensions that you might be targeting. Security is another one with the business resulting with Accenture Security. Clearly, we are expanding our access to new leaders. Given the depth and breadth of our services, you're absolutely right. It is our ambition to increase the coverage of the leaders we might serve with clients from the CEO, the CFO, the COO, the CIO, now the Chief Digital Officer with the launch of Accenture Digital. They are new leaders under this terminology, and we want to be the partner of choice for the newly appointed CDOs, which should be a quite a natural act. You mentioned the CMOs with what we are doing with Accenture Interactive. So again, we have all the business leaders in the different part of the business. So if I'm looking at Accenture, we have now certainly with the 5 businesses we have, but in these businesses, you have other activities such as Analytics, Interactive, Mobility, Cloud, Security. I could mention Accenture Credit Services we have in the U.S., which is providing access in banks to credit part of the organization, and I mentioned [loss]. So I guess, and I would claim that we are certainly the organization in professional services, which today the broader access to any client leadership group. Yes, maybe I can start with providing you our strategic direction on this. We\ Double digit. Is double-digit and as well is driving significant growth in Accenture Technology and our platforms. If I\ Absolutely right, and I think we see ---+ and I\ Thank you, <UNK>. Yes, I think when you ---+ I\ Yes, that does materially change the number because obviously we were acquiring these. Let's say that increases more in the back of the last 3 months of the year. So that has more of an impact on '18 than it does this year. Having said that, we still think we're going to be at roughly in the ballpark of 2% for the full year. Previously, I said the back half of the year would be 2.5%. It will be just incrementally kind of above that, but not materially above that. So clearly. . Clearly, it's consistent with what I said before, slightly higher in the back half of the year than the 2.5%. Yes, in that zone. I was wondering if you can maybe comment on the North America piece of the business, what you're just hearing from clients just broadly speaking. Can you maybe just kind of give us a sense about whether the North America slowdown was purely isolated to the Health & Public Service or what are you hearing from clients generally and whether you expect that to kind of be a one-off, 1 quarter thing or it's something that could continue for a couple of quarters. Yes, first of all, as it relates to our expectations and then <UNK> may add some comments as well, but let me just deal with the results relative to our expectations. So we had seen slower growth in H&PS in quarter 1 and quarter 2. You'll remember quarter 2 was at 2%, which is where we ended up in quarter 3. We had expected, not based on hope, but based on what we felt was kind of tangible evidence in the second quarter, that we were going to see an uptick in growth in the third quarter and the second half of the year and that's what I called out 90 days ago. What we saw was that, that uptick, if you will, or that freeing up of initiation of new projects and let's say a return to more normal decision-making patterns on contracting new work, that just simply did not improve as we had expected. And so if you look at North America and the difference between where we landed and where we expected to land, the difference is the vast majority of that is in Health & Public Service for the reasons I mentioned in the script. It's the difference between North America growth being at 3% and 5% order of magnitude and it was the difference ---+ it was probably a point of growth. It was a point of growth at the Accenture level in total, so it was meaningful. Having said that, we have a very strong Health & Public Service practice, and at some point, the logjam will break and work will be initiated and we'll be right there in the game when that happens. And of course, broadly in North America, we feel that way as well. Yes, no, absolutely right, and I understand you\ And as I said, it's a perfect illustration though of the power of the diversity of our model where Europe and the Growth Markets, combined, in the third quarter grew double digits 10%. And so that's ---+ that is intentionally the way our business is constructed for this exact reason and so it is working as designed. And it's interesting to see ---+ sorry to elaborate, but I think it's important for all the people listening to the call because you might wonder is why things are going so well in Europe. We have 9% growth and it's been vibrant, but I think in Europe, you have less uncertainties now. I think we had ---+ having good prospect that probably Germany might re-elect Angela Merkel, so it's a pole of stability. I guess, the election of Emmanuel Macron in France has been recognized and celebrated by the market because he's pro-European, so it has created a very positive impact around whether Europe will disappear or not. Having Germany and France being extraordinary pro-business is recreating a very solid coalition. And the Brexit thing is moving at its pace, but at least we know it's going to happen. So it's not an uncertainty. The uncertainty is what exactly, is it going to be hard, soft, gentle. Probably, the European will figure out as they have all been figuring it out over centuries. But it's interesting. If you take China, China, I guess, not much uncertainty. The President is very clear on what it is he wants to achieve. He's driving this 5 years reform program. So you see what I mean. It's interesting that if there is one place, and it's a big place in the world where you have this kind of wait for the reforms to happen, it is currently in the United States, but I'm personally feeling very good that these reforms will happen and the business will pick up again. That's helpful. And just as a quick follow-up, going back to the M&A question for a second. If you look at the run rate for M&A that you're doing in Q4 of this year, would you expect that to accelerate incrementally from here heading into fiscal '18. And then I think, <UNK>, you made an allusion to using the balance sheet for M&A. Does that imply you're willing to put some debt on the balance sheet to finance more M&A at this point. I think as it relates to your last question, we said consistently for as long as I remember that we always ---+ I mean, we're well aware of that being an option, and given the right circumstances, we're ---+ we would have no concern about doing that. We would, as we always do, we would make very smart decisions as to when and at what level we do that, but that is certainly an option that is open to us and we have no concerns at all about using that option given the right circumstances. First of all, when you look at overall growth and when we provide a guidance of 5% to 8% at the beginning of the year, and of course, we're going to land very solidly within that range, we had said that growing double digits each and every year is just an unrealistic expectation. We work hard to drive as much growth as we can, but each and every year, we're not going to drive double-digit growth. And we think that we look at our growth rate against what the market is growing, and in a market that, let's say, generally has grown, let's say, anywhere in the 2.5% to 4% range, let's say, if you look over the last 2 to 3 years, if we're growing 7% as we are this year, we're growing 2x the rate of the market growth. And so, yes, are we lower than where we were double-digit growth the last 2 years. We are, but we're growing 2x the rate of overall market growth, which is clearly, clearly the indicator of a leader in the sector. And so that's what we're all about and growth in the 5% to 8% range and where we've got it to for the full year, 6% to 7% growth, is actually quite strong growth in the market. Right in the zone. Then the question might be is 7% good or not. The only way to understand whether 7% is good or not is to compare with the rest of the market. Yes. And we believe that at 7%, we\

2017_ACN

2015

HELE

HELE #Good afternoon, everyone, and welcome to Helen of Troy's fourth-quarter and FY15 earnings conference call. The agenda for the call this afternoon is as follows. I will begin with a brief discussion of forward-looking statements. Mr. <UNK> <UNK>, the Company CEO, will comment on the financial performance during the quarter, and key accomplishments of FY15, and then highlight areas of focus for FY16. <UNK> <UNK>, the Company CFO, will review the financials in more detail and provide you with the Company's outlook for FY16. <UNK> will take questions you have for us today. Before reviewing our Safe Harbor statements, I would like to let you all know that we will be hosting our Investor Day in New York on May 12. If you would like to attend, please contact Anne Rakunas of ICR, whose contact details are listed at the bottom of the earnings release we issued this afternoon, as well as on our website. The event will also be webcast for those of you who will be unable to join us. Now moving on. This conference call may contain certain forward-looking statements that are based on Management's current expectation with respect to future events or financial performance. Generally, the words anticipates, believes, expects and other similar words identify forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties that could cause anticipated results to differ materially from actual results. This conference call may also include information that may be considered non-GAAP financial information. That measures are not alternative to GAAP financial information, and may be calculated differently than the non-GAAP financial information disclosed by other companies. The Company cautions listeners not to place undue reliance on forward-looking statements or non-GAAP information. <UNK>, I'd like to inform all interested parties that a copy of today's earnings release has been posted on the Company's website at www.hotus.com. The earnings release contains tables that reconcile non-GAAP financial measures to their corresponding GAAP-based measures. The release can be accessed by selecting the Investor Relations tab on the Company's home page, and then the News tab. <UNK>. Thank you, <UNK>. Good afternoon, everyone. Well, time flies. We're already one year into the transformation work on Helen of Troy's business, its organization and its culture. We are pleased to report good progress on our strategic priorities for FY15, as well as our business. Our fourth-quarter results capped a successful fiscal year of top- and bottom-line growth. Fourth-quarter revenue rose 21%, and adjusted net income grew 35%, building on favorable third-quarter results. Our healthcare and home environment and our housewares segments led the way, both growing double-digits in the fourth quarter, driven by a favorable response to new product introductions, strong retail execution and a strong cold/flu season. Our nutritional supplements segment, acquired in June of 2014, performed in line with expectations, contributing positively to both our gross margin and our adjusted operating margin. Our personal care business slowed its decline in the fourth quarter, as we make progress towards stabilization. Despite foreign currency headwinds for the full fiscal year, Helen of Troy grew revenues by 7.9%, grew adjusted net income by 16.5% and increased adjusted EPS by 30%. These results are the product of diligent focus on the three strategic priorities we set in FY15 as the cornerstones of the early stages of Helen of Troy's multi-year transformation. Let me share a few details of the progress we have made on each objective during the fourth quarter and during the year. We made excellent progress on our first objective of building a winning organization and culture. In shared services, we are starting to see efficiencies and increased collaboration from our warehouse, logistics and sourcing operations. We also improved our information technology capability, including hiring a new CIO, Mr. John Conklin. Our new Global Leadership Council has united the business units with the shared services that support them globally, and with our corporate team. We have excellent leaders in each of the Global Leadership Council positions, including well-deserved promotions of internal talent, and new world-class players we have brought into the Company. In our business units, we are pleased with the addition of Connie Hallquist, President of Healthy Directions. And we have made a bold change in personal care, unifying the various businesses constituting this $400 million-plus global segment under one President, Ms. Leah Bailey, who joined us in March 2015. These new leaders each bring more than 25 years of experience in their respective fields, and have outstanding track records. I look forward to their leadership, and to the highly collaborative approach they bring to building our business and organization. Our new culture continues to take root, and becomes a powerful force, unifying and motivating our worldwide base of employees. Our second objective was to accelerate and sustain organic growth. In FY15, our core business grew by 2.1%, despite the $12.5 million impact of the one-time European distribution arrangement in FY14 that did not repeat in 2015. This growth was driven in part by new product launches and increased marketing support. As an example, in one of our core categories, we launched Febreze Air Purifiers to complement our market-leading Honeywell line. Over the past year, the result has been growth of our US market share in air purification for the ninth consecutive year, now topping 50%. In another category in our core, thermometers, we launched three innovative new products under Braun, further expanding our position as the number one brand in the market. The launches were helped by the strong cold/flu season, and a particularly strong level of pediatric fever in FY15. PUR water filtration also grew share in FY15, behind new packaging, new positioning and a new pitcher system. In housewares, OXO continued growing organically. Now nearly $300 million in sales, it is driven by product innovation, expanded shelf placement and international growth. In the fourth quarter, OXO launched its innovative green saver product which has been well-received. Our OXO top line continues to gain traction with consumers with sales up 30% for the full fiscal year. International expansion continues to be an important growth driver for OXO with international sales growing in the low double digit once again in FY15. In our personal care business where our primary focus is stabilization, we saw a decline of 3.7% in the fourth quarter. This compared to a 12.8% decline for the first half of FY15. We continue to work on improving the fundamentals of branding, quality, packaging and the more efficient product assortment with a better margin profile. During the quarter, we gained expanded distribution on our new Dr. Scholl's callus buffer in the United States. We also continue to invest in developing more differentiated and higher-margin personal care products for appliances and for other parts of the segment. In FY15 this segment generated strong adjusted EBITDA of $65.2 million. Our third objective is to continue to engage in shareholder friendly policies to drive shareholder value. A key facet of that strategy is to leverage a strong cash flow generation of our business to make accretive acquisitions as well as leverage organic growth potential of our existing businesses. The strategic acquisition of Healthy Directions last June contributed $100 million in revenue in FY15 and has been accretive. Healthy Directions expanded our footprint in healthcare and added additional branded proprietary high-margin consumables as well as a direct consumer capability to our portfolio. And as we recently announced, subsequent to be in the fourth quarter, we close two transactions that expanded our inhalant business in the United States. Adding Vicks VapoSteam to our Vicks VapoPads inhalants further strengthens our US humidifier and vaporizer business with consumable refills in both the liquid and pad form. The vast majority of Vicks VapoSteam and VapoPads are used in Vicks humidifiers, vaporizers and other healthcare devices already marketed by Helen of Troy. By combining the business of devices and consumables, we ere now able to give inhalants greater marketing focus and to invest in additional new product development. Overall, a good year and a good start to our transformation. As we look to FY16 we will continue implementing these themes and roll out additional strategic elements of our multiyear plan for transformation. I'd like to introduce strategies to you now. We look forward to providing more detail on each of them during our investor day in a few weeks. The first strategy is to invest in our core. In FY15 we increased our investment in those brands with the most promising potential for organic growth. In addition to investing in new product development and launches, we spent $5 million in incremental marketing and advertising in our core. In FY16 we will continue to make prudent investments in developing and launching new products, new go to market plans and marketing activities for brands with leading positions or with the potential to grow share. About 15 million incremental across the Company. This will include continued focus on sweetening our mix through the growth of product that feature consumables. The second strategy involves strategic disciplined M&A. Building on our track record of accretive acquisitions, we will continue to source and evaluate new strategically sound businesses and opportunities to expanding in categories and geographies where we believe we can develop a competitive advantage. The third is to focus on consumer-centric innovation. We have a long of history of developing or acquiring new technologies, new products that improve consumers' lives and new designs that differentiate our products from competitors. As we increase our focus on innovation, both in our core categories and also new adjacencies, we are increasingly applying best practices across all business segments Companywide. But forward is to update our organization and people systems. In FY15 transformed our organizational structure to improve capability and increase collaboration across the Company. We implemented best practices across segments and departments and began to better leverage our scale. We also adopted a new compensation program that we believe will promote greater accountability, better alignment with Management and shareholder interests and help us attract and retain talent. In FY16 we will continue to drive these initiatives Companywide and added emphasis on talent development. The fifth is to develop best in class shared services. In FY15 we installed a new COO, upgraded leadership and applied best practices. These actions have allowed us to better leverage our scale with vendors, improve warehouse efficiency and better manage our inventory. We will continue to drive these going forward and now begin to unlock further potential through improvements in information technology under the direction of our new CIO. The sixth is to attack waste. We kicked off the cost-saving initiatives in FY15, the results to date includes $6 million of savings between FY15 and FY16 primarily in sourcing, warehouse and distribution. We plan to reinvest some of these savings to grow our core, with the remainder of setting margin compression from foreign exchange headwinds. And the seventh is to improve access efficiency and maintain our shareholder-friendly policies. On the asset side, our emphasis is to improve accounts receivable and inventory. On the capital side, we are using the strong cash flow generation of our business and the financial flexibility of our balance sheet to invest in our core business first, search for accretive acquisitions, then consider return of capital to shareholders. We will continue the practices we began in FY15 a proactive investor outreach via investor meetings and attend relevant investor conferences. We believe these seven strategic elements will fuel the next steps in our multiyear transformation. As I mentioned, we look forward to discussing the more depth on May 12. And with that, I would like to turn the call over to <UNK> <UNK>. Thank you, Julian. Good afternoon, everyone. Before I begin discussing our FY15 results and our outlook for FY16, I would like to briefly discuss foreign currency as it had a significant impact of FY15 and we expect it to have an even greater impact in FY16. The recent weakening of many foreign currencies against the US dollar affects our Company's results in several ways. Similar to other US dollar reporting companies transacting in foreign currencies, when the dollar strengthens, our operating results are re-measured ---+ and our operating results are re-measured from foreign currencies, it reduces our US dollar reported net sales, operating income and net income. Unlike some other multinational companies, most of our sourcing is that in the US dollar. So there's little to no reduction in the reported cost of goods sold when foreign currencies weaken. Further, a large portion of our EMEA operating expenses are denominated in the Swiss franc, which actually appreciated fairly significantly as other foreign currencies were weakening. This resulted in higher US dollar reported operating expenses for our Company in the fourth quarter. Assuming the Swiss franc stays at today's rate, this will continue to impact our year-over-year results until the appreciation anniversaries next January. When thinking about the impact of foreign currency fluctuation on Helen of Troy results, it may be helpful to consider that for every $1 fluctuation in net sales from foreign currency, approximately $0.60 to $0.70 could fall to the bottom line. This is based on a recent fourth quarter experience, but of course this would depend on the mix of currencies and their volatility against the US dollar. There's also an impact from the settlement transaction and the re-measurement of the Company's monetary assets and liabilities denominated in foreign currencies, which is reported in SG&A as is the impact of settlements of any hedging transactions that the Company may enter into. The Company attempts to mitigate the impact of foreign currency fluctuations through price increases. But our ability to take price increases is limited by market conditions, and often we are not able to pass along the full impact, as is the case with many companies now reporting results for the first quarter of calendar 2015. The Company also considers forward contract to hedge against exchange rate risk. With that as a background, I would like to start by highlighting the impact that foreign currency had on our results for the fourth quarter. Foreign currency exchange rate fluctuations reduced our reported net sales revenue $5.4 million, or 1.7 percentage points year-over-year. Note that the most significant volatility with respect to the euro, Canadian dollars and Swiss franc occurred in January, which means that only a portion of the impact was recognized in the fourth quarter of FY15. We also had net foreign currency exchange losses of $2.4 million recorded in SG&A for the fourth quarter of FY15 compared to a $0.6 million loss in the same period last year. Now moving to my discussion. Consolidated sales revenue was $377.7 million for the quarter, a 20.9% increase over the prior-year period. Overall, our core business grew $27.9 million, or a 8.9% for the quarter, which includes the reduction of $ 5.4 million, or 1.7 percentage points from foreign currency fluctuations referred to previously. As <UNK> mentioned, core business growth was led by growth of 16.6% in our healthcare home environment segment and growth of 11.9% in our housewares segment. Healthy Directions contributed $37.3 million in sales during the quarter. While we did experience a sales decline in our personal care segment of 3.7%, or $3.8 million, approximately $1.5 million, or 1.5 percentage points of the decline was due to the impact of foreign currency. Consolidated gross profit was 43.7% of net sales compared to 40.2% of net sales in the fourth quarter of FY14. The 3.5 percentage point improvement was primarily due to three months of operations of the nutritional supplement segment which had a favorable impact of 3.3 percentage points on the consolidated gross profit margin. The core business improved by 0.2 percentage points compared to the same period last year, mostly due to a better mix partially offset by the negative impact of foreign currency which reduced our reported gross profit margin by approximately 0.7 percentage points. SG&A was 30.7% of net sales compared to 34.8% of net sales in the fourth quarter of FY14. The 4.1 percentage point improvement is primarily due to $18.2 million in CEO succession cost and higher share-based compensation expenses for the same period last year associated with our former CEO's employment and separation agreements. This improvement was partially offset by a higher relative SG&A ratio in nutritional supplements segment, higher advertising and other marketing expenditures in the core business and higher year-over-year net foreign currency exchange losses of $1.8 million in the core business. Operating income was $49 million compared to operating income of $16.7 million in the same period last year, reflecting sales growth, greater operating leverage as well as the items previously mentioned. Adjusted operating income excluding CEO succession costs, non-cash share-based compensation and non-cash intangible asset amortization expenses as applicable increased 26.3% to $57.3 million compared to $45.4 million in the same period last year. Adjusted operating margin improved to 15.2% compared to 14.5% in the same period last year despite the negative impact of foreign currency. Income tax expense as a percentage of pretax income was 11.5% compared to 22.7% for the same period last year. The year-over-year comparison of our effective tax rate was primarily impacted by shifts in the mix of taxable income in our various tax jurisdictions. Net income was $40.6 million, $1.40 per diluted share on 29 million weighted average diluted shares outstanding. This compares to net income in the fourth quarter FY14 of $11 million, or $0.34 per diluted share on 32.6 million shares, which included CEO succession cost of $0.50 per diluted share. Adjusted income was $48.1 million, $1.66 per diluted share compared to $35.6 million, or $1.09 per diluted share for the fourth quarter FY14. Now moving on to our financial position at February 28, 2015. Accounts receivable was $222.5 million compared to $213.1 million at the same time last year. Receivable turnover was 58.6 days based compared to 63.7 days at the same time last year. Inventory increased. $3.8 million to $293.1 million compared to $289.3 million at the same time last year and includes $7.4 million of inventory from Healthy Directions that was not in our inventory balance last year. Inventory turnover was 2.7 times compared to 2.8 times for the same period last year. Total short and long-term debt increased to $433.2 million in February 28, 2015 compared to $192.6 million at February 28, 2014. The increase primarily reflects borrowings incurred in conjunction with the repurchase of $273.6 million of common stock in the first quarter of FY15 and the acquisition of Healthy Directions for $195.9 million in the second quarter FY15. We ended the fiscal year with a leverage ratio of 1.93 times compared to 2.93 times at the end of the second quarter. We expect that VapoSteam and VapoPad transactions to further enhance the profitability of our healthcare and home environment segment add incremental cash flow to Helen of Troy at an attractive valuation and be accretive in FY16. The aggregate consideration for the two transactions was approximately $42.8 million, which implies multiple of less than 8 times adjusted EBITDA. We have details of our full FY15 results in our earnings release, but just a touch upon a few highlights. Consolidated sales revenue increased 9.7% to $1.45 billion, which included a foreign currency headwind of $ 7.5 million. Gross margin expanded by 2.3 percentage points, driven by 8 months of contribution from Healthy Directions. Gross profit margin for the core business was flat, despite the impact of foreign currency, which reduced our reported gross profit margin by approximately 3 points ---+ 3 percentage points. Consolidated SG&A as a percentage of net sales increased 0.3 percentage points, reflecting a higher relative SG&A ratio in the nutritional supplements segment and $3.6 million of acquisition-related expenses. SG&A as a percentage of net sales for the core business improved 2.2 percentage point due to the factors detailed in our earnings release. Adjusted diluted EPS increased 30% to $5.85 and includes an after-tax gain of $0.24 per diluted share from the amendment of a license agreement, an after-tax decrease in product liability estimates of $0.05 per diluted share and tax benefits of $0.15 per diluted share. Now I would like to turn to our outlook for the FY16. Please note that we have provided a reconciliation of FY16 projected GAAP diluted EPS to non-GAAP adjusted diluted EPS in our earnings release issued this afternoon. For FY16, we expect consolidated net sales revenue in the range of $1.485 billion to $1.536 billion in GAAP diluted EPS in the range of $4.33 to $4.73. This includes projected sales and GAAP diluted EPS from the VapoSteam acquisition in the range of $10 million to $11 million and $0.03 to $0.08 per share respectively for the 11 months included in our FY16 results. On the segment basis for FY16, we expect sales growth for housewares in the mid single digits and for the healthcare home environment in the low single digits and for Healthy Directions in the mid- single digits. For personal care, we expect to see a sales decline in the low mid single digits. We expect consolidated non-GAAP adjusted diluted EPS to be in the range of $5.40 to $5.85, which excludes after tax noncash share-based compensation expense and intangible asset amortization expense. This includes adjusted diluted EPS for the VapoSteam in the range of $0.04 to $0.11 per share. Our FY16 outlook assumes foreign currency exchange rates for the balance of the fiscal year will remain at current levels. This is expected to negatively impact year-over-year net sales revenue by approximately $28 million, net income by approximately $17 million and earnings per share by approximately $0.59. We expect our FY16 effective tax rate to range between 14% and 16% on an annual basis. The diluted EPS outlook is based on an estimated weighted average shares outstanding of 29 million for the full FY16. Further, our outlook assumes that the severity of the cold/flu season will be in line with historical averages. As a reminder, the recent cold and flu season was above average. The likelihood and potential impact of any FY16 acquisitions other than VapoSteam, asset impairment charges, future foreign currency fluctuations, including any potential currency devaluation of Venezuela or share repurchases, are unknown and cannot be reasonably estimated, therefore they are not included in our sales and earnings outlook. As a reminder, in FY15, the Company benefited from an after-tax gain of $0.24 per share from the amendment of the license agreement an after-tax decrease of product liability estimates of $0.05 per share and tax benefits of $0.15 per share that are not expected to repeat in FY16. These items negatively impacted year-over-year comparison of adjusted diluted EPS to FY16 by a combined $0.44. As mentioned, the year-over-year comparison is also negatively impacted by the estimated foreign currency impact of $0.59 per share in FY16. Finally, we believe our FY16 guidance reflects a balanced approach with respect to investment in organic growth and maintaining healthy margins. Our guidance reflects planned incremental investments in market research, innovation, new product development and marketing and advertising of over $15 million. I would like to make a couple of key points as you think about the cadence of FY16. First, a higher proportion of our total marketing and total advertising spend will be weighted in the first half of the fiscal year in support of key initiatives during our heavier selling season in the third and fourth quarters. Second, the first quarter FY16 will reflect the first full quarter impact of recent currency volatility, whereas the fourth quarter FY15 only had partial impact. And lastly, we expect our sales and earnings to be even more heavily weighted towards the second half of the year when compared to FY15. And now I would like to turn the call back over to <UNK> for some closing remarks. Thank you, <UNK>. We're pleased to see Helen of Troy delivering value to shareholders. We're winning in the marketplace on many of our core businesses, and we're making progress on our biggest opportunities for further improvement. Our strong cash flow and powerful brands continue to be among our greatest assets, as are our people, culture, and rigorous adherence to our strategic choices. With that, I would like to turn the call over to the operator to begin the question-and-answer session. Sure, so we've been on the long roll with OXO, continuity of management has been very important. And part of our strategy when we make that kind of acquisition that adds a new leg onto our stool, and they've done a wonderful job. In the case of the category expansion, it's true. As we move further and further beyond the original core of kitchen gadgets, we're now adding the ones that you mentioned and even others like [tots] and green saver and ones that we mentioned as well. So, as we look at the pots and pans that we did last year, we are seeing growth, and it is cooked into our FY16 numbers. Just as a reminder, that the royalty arrangement with the cookware company. And so that one has a profit impact, but not showing up as revenues as if we sold them on our own. In the case of the bakeware and now the very exciting new launch into electrics with the OXO online, we do have some included in our forecast already. And that said, as we're somewhat inexperienced and forecasting those new categories, we have been careful not to lean forward too far. <UNK>, I would say the operating income impact on those two new categories is relatively minimal in FY16. There will be a sales impact, but there's also some initial investment costs that will be incurred, and so before our operating income impact will not be significant in FY16. The only other comment, <UNK>, on that one, just from a margin standpoint, is as we grow OXO into these new spaces, some of those categories do not have the same margin profile as the highly premium kitchen gadgets. And while we're still going high premium in all of these categories, that's the very core of OXO. These are the keepers, and these are the high end products. We'll only play in the higher end, but nonetheless, not at the same average margins as we expand and make the investments to get traction in the new segments. Sure, the most penetrated segment of the Company on international is the health and home environment. OXO is probably third. I would have to check, after our personal care business, which does have a significant international presence, especially in the Americas and Europe. Americas North and South, meaning Canada, LA and EMEA. In the case of OXO, Europe is the primary area, especially in the UK. And we do have a business in Japan and the small business in many other countries for OXO. In terms of penetration we have a long list of whitespace opportunities and shelf opportunities versus some of the competitors in those spaces. For example, of the last year we just launched into Germany. We've increased our sales nicely and yet just scratched the tip of the iceberg there. And we're looking at other continental European countries as well. It's a long way of saying, just getting started overseas. That said, it's a nice chunk of the business today, and we see that double-digit opportunity continuing for some time. It will be affected by the currencies, just by the very nature of the comments <UNK> made about a US dollar -based company and, international exposure. Let me make sure I understand the question. I understand about testing the Kaz stuff, but the first part, just make sure I understand it. Yes, okay, thank you. On the first one first, Healthy Directions is experimenting with new categories and expanding some of its existing doctors into adjacencies that those doctors can handle. For example in the cardiac area, several new products in the area of cardiac enzyme co-Q10, but now with a feature that includes a weight reduction. So these kinds of adjacencies are possible. They're constantly testing new spaces looking at new formulas and even talking to some new doctors that are not in the portfolio today. On the subject of testing, the Kaz items, there has been some early tests. And while we've seen nice results on a percentage basis in terms of the amount of units that we're selling, at least with these very early experiments, we have not seen large-scale movement. So we're going to be looking at new ways so explain those kinds of products. In particular water purifiers and air purifiers with the intention of seeing whether that target audience will respond to different kinds of messages. So far while the response rates are interesting, the absolute volume of responses are not as high as we would like them to be. Yes, I we'll say more about this in our investor day as well. The ability to meet many of the features that you hear me talk about all the time, for example, being a strong brand. Meaning number one or number two in its category in a category big enough to make a difference, in a category where we believe there's a proprietary technology even better if it has a higher-margin consumable. So you can see that double profit stream, one for the initial sale, and then from the follow-on repurchase cycle of the consumables. Grants with international presence or the potential to be more global and go into multiple countries. And while we prefer to own the brands, and that is our primary criteria, we will license under the right conditions. And you saw us do a combination of purchase and license just now in VapoSteam. So those are many of the criteria, there are a few others. And in the end if it's a good business and it fits well with our machine, we like it. And as you mentioned the cash flow is important. One of the most important features of Helen of Troy is its ability to generate a strong flow of after-tax cash and that cash can be borrowed, at least in today's interest rate ---+ I'm sorry, leveraged in today's interest environment to make these purchases. And because of the flow, paid back quickly so we can do it again, accrete our earnings and accelerate. Sure, so we did find that the season was above normal. It was significant in the middle of the season, especially months like December where it peaked, and that peak was meaningful higher. I don't have a specific percentage, but think 10% to 15% above in that range on a total symptom basis, meaning cough, cold flu-like symptoms fever, et cetera. On the fever side on the other hand, it was an especially strong year, statistically outlier in a good way, and the number was 32% above year ago. And the reason I called out pediatric fever, that's the 32% by the way, not all fever, is because it especially helped the thermometer launches during the fiscal year. So as you think of 16, think of numbers like that 10% or 15% less total incidents to get back to an average year. And on the flu ---+ I'm sorry the fever side, especially for children, which is a primary correlate to thermometer purchases, we saw numbers as high as 30% higher than the traditional average. Yes, the new system has multiple features, first of all, it's metric based. And while did have metrics in our prior system in many parts of the Company, in fact, most had targets, there was quite a lot of discretion in the annual bonus as well. And here on the cash bonus basis, it's much more metrics driven now and tied to the same kind of numbers that we've just rolled out to you from guidance standpoint cascaded through the various divisions of the Company. Sales, profitability, asset efficiency, which means things like inventory and accounts receivable. So there's a direct tie to what we're trying to deliver in our own financials to you as a shareholder. To the long-term compensation, we're replacing options for most people in the Company, especially the senior ones, with a combination of longer-term, like three-year windows that have features such as cash and stock. Stock primarily in the form of performance units, PSUs, and some restricted stock that is also in the form of time-based. So more stock, less options, longer windows and metric space. Sure, no problem. And in terms of turning, I wouldn't yet use that word. I would say we're slowing the decline. As you saw in the fourth quarter, we also reported a slower decline in the third quarter after very strong decline in the first half. And while we're encouraged by what are seeing in the marketplace, we've got a long way to go. That's where the new products and the other fundamentals that I mentioned will help. In terms of which parts of moving in which direction, we are seeing stabilization, in fact growth in our brushes, combs and accessories business, that's the smallest part of personal care. We are seeing slower declines in the retail appliance business, which is the largest part. Stability but frankly, a little decline in some quarters in the professional appliance business, which is especially productive from in cash generation standpoint. And then the liquids and lotions business is also now starting to stabilize and is especially productive in terms of cash. So we're a few quarters away from being able to say that we're stable, lead the trend. And we also need to see the various pieces all performing, and we feel it a bit more confident to say that we're stable. Yes, in my remarks I did provide growth expectations broken down by the segments. So what you can expect for housewares is mid single-digits. For healthcare home health environment low single-digits. For Healthy Directions mid single-digits and then for personal care a decline of low single-digits. <UNK>, let me clarify that, mid to low single- digits. Correct. Yes, I think we have several options. One thing that we had done is that we had done some hedging transactions at the very end of the FY15. We've hedged some Canadian euro and pound exposure. It averages between 30% to 50% of our exposure in those currencies in terms of the proportion that we've hedged. And generally speaking, we've hedged it at a slightly higher rates than we re today. So we've taken a little bit of action there. We will continue to look at those hedging options. We will look---+ also continue to look at more structural type hedges. We will consider possibly some debt, some type of transaction that would allow for some debt in foreign currency. And then we are evaluating also some sourcing options where we can build in a natural hedge through sourcing. So those are the things we're looking at. As I also mentioned in my remarks, we are very actively trying to take price increases where we can. But a lot of those are limited by market conditions, and so we have to be careful, but we are definitely focused on that. The only build I would put on that one, <UNK>, is the expense efficiencies that I mentioned from the project cost reduction is playing a big role, and that's allowing us to provide guidance year-over-year that you saw despite all those foreign exchange headwinds. And nonetheless continue to invest in the core and have some money left over to offset enough of those exchange rate headwinds to continue to deliver growth despite those items that <UNK> mentioned such as the historical currency in FY15. That Honeywell transaction, the other non-repeating items such as the tax and the reduction in liability expense. Sounds good, <UNK>. Wonderful. Well, thank you, and thank you for joining us today and for your continued interest and for your support in Helen of Troy. We look forward to seeing many of you in a few weeks and speaking with you again when we report our first-quarter results in July. So thanks again, and have a wonderful evening.

2015_HELE

2016

SXC

SXC #Stability would be the way I would say the dialogue, I would say our customers are basically running their assets well, but I would say obviously we have two plants that we serve, both Granite City and Ashland, that the blast furnaces are at this point temporarily idled. I think both US steel and AK steel run the rest of their facilities, are running the rest of their facilities at high levels of utilization. I wouldn't say we have seen any marked poll for more coke. I would also say that we haven't seen any marked push back against coke. In other words, the adjustments we made in the first quarter to support our customers that are doing the job. I would note that we talked about hot rolled coil prices, and when I look at what has happened on Platts with the prices, net coke actually, it has increased sharply. We just have to see what happens with the utilization rates. But I would say sitting here today, I feel okay about stability. Thank you. 2017. Correct. Yes. Once again the customer accommodations do not make, do not impact our full year consolidated adjusted EBITDA guidance. That remains the same. But we did lower our adjusted EBITDA per ton guidance, and it reflects two things. The first is the shift of $10 million roughly from coal mining to domestic coke. That's related to the transportation coast of procuring coal from third parties, as well as the per ton calculation is also impacted by the production decrease at Haverhill 2. That's expected to be about 75,000 tons lower. That's what is driving the per ton calculation. The reclassification has zero effect on consolidated adjusted EBITDA, but it does lower your coke adjusted EBITDA for that segment, as well as per ton. Right. You are welcome. Thank you very much again for joining us this morning, for your interest and for your investment in SunCoke Energy. We will talk next quarter. Thank you, good bye.

2016_SXC

2015

ORN

ORN #Well, there ---+ you know, again, I think we're set up a little bit better. A lot of the work that we have in backlog that we've talked about in the past, some of the core work goes on, you know, comes into the first half ---+ first quarter in particular. You know, we're working on the big port project here in Houston, which will continue throughout the year. So again, I think we're set up to have ---+ you know, just going in a little bit better utilization than we did have in the first half of last year. We'd still like to see, you know, the work come out a little quicker from the Corps this year than it did last year. And we're hopeful on that. Then ---+ and the other thing, too, is that we've got a lot of private-sector work, design build type work that were pursuing and very excited about. But the timing of that can be, you know, pretty lumpy. And depending on how some of that work comes into play, that can affect the timing of some of the asset utilization as well. So again, we're optimistic about what we see in front of us, in terms of bid opportunities. But you know, again, some of that is going to depend on what the timing of some of this stuff is. But again, in general, I think we're set up, you know, a little bit better going into 2015, than we were 2014. I think it's about the same. I mean, it's very robust. We're pleased with it. Again, a lot of opportunities in all facets of the private sector for us. And you know, again, a lot of those are design-build type things in the private sector which, you know, can take on ---+ you know, can draw out the letting and award process, if you will, particularly when you're in the private sector, you know, realize that oftentimes there are no ---+ there are no hard bid dates. And many times, you know, it ultimately winds up in a negotiation-type setting, if you will. So that can ---+ you know, it's very ---+ net-net, it's a very positive thing for us. We like the design-build work. We think it provides us with good turnkey opportunities. And asset utilization across our fleet, so we're very pleased with that. But it does, you know, the duration of that letting process and award can oftentimes be a little lengthy. Good morning. Yeah, I think, you know, kind of what we were referring to there I think largely was focused around the corps of engineers and some of the assets that we would utilize for that type of work. Again, I ---+ I think better set up for '15 than we were '14, you know, just given the work that we picked up from the corps, some of which bleeds over into this year, and then also some of the ---+ private sector stuff and ---+ you know, port work that we're utilizing those assets with. If we're talking about the first half, we still have some gaps that we need to either fill with some of those private sector design build type work that I talked about, or certainly with some of the core lettings. Again, we're hopeful that the pace of lettings and the timing of lettings will be an improvement over last year. That, you know, again, looking at what we're tracking and what we see ---+ that we should be able to go after. We're hopeful that that will occur, that that will be better than what we saw last year, but, you know, we still have to ---+ to see what happens between those to fill some of the gaps that we talked about. So, but again, overall feel much better going into this year than last year and I think we've got a lot of good stuff out there that we're tracking, or bidding on, or, you know, in the design build opportunities. And so, you know, remain optimistic about improving 2015 over 2014. Well, I think it's just of a continuation of ---+ of what we've seen in the past. I mean, to ---+ to answer the first part of your question I think we're seeing, you know, steady improvement in all areas. I think it still remains uneven, it still remains, you know, certain types of projects or, you know, more turn key projects, design build projects where we're able to see some pricing improvement. You know, the ---+ some of the DOT stuff where, again, we kind of have the uncertainty because we don't have long term funding, remains stable, but not necessarily in an improving environment. And, you know, with some of the ---+ even with some of the corps work, you know, the lack of putting work out for a long period of time, you know, gives us some concerns about ---+ potential bid pricing environment there. But I ---+ I think in general, again, we're seeing improvement kind of on a steady basis, but not wide spread. And certainly, as I've said in the last several calls, in our view, bid pricing environment should be much better than it is today, you know, across the board. You know, again, I think as we kind of went into '14 with the backlog we had, you know, we've tried to use that to be a little more selective in trying to push bid pricing up. I think generally speaking, again, we've seen steady improvement in bid pricing, but, again, to what we'd like to see and what it should be, not as wide spread as we think it should be. So, but again, you know, continue to kind of see that incremental improvement year over year and quarter over quarter and, you know, we're going to keep trying to ---+ you know, as I said in the beginning of my remarks, keep trying to push that and keep trying to push forward in terms of bid pricing, execution, getting us back to, you know, our historic level of margins, but at the same time, keeping our focus on, you know, backlog and keeping backlog where we'd like to see it. Some improvement in ---+ you know, won't necessarily quantify, but there was certainly some benefit in there. You know, just as a reminder with fuel prices as with all of our cost structure ---+ we can see short term benefits or, you know, otherwise depending on movements. Generally speaking, though, we try to factor some of this in, whether it's moving up or down, you know, at the time of ---+ at the time of bids, so we definitely saw some, you know, benefit in the backlog that we had. But generally speaking, you know, as pricing with fuel or any other thing in our cost structure moves, you know, in that next bid we'll factor in that current pricing. So again, as we kind of move forward, you know, we don't expect to see any kind of windfall or anything like that. We're certainly ---+ you know, we're pleased with where we are, in terms of pricing that we have in our jobs relative to where fuel costs are. But, again, as time moves on, that's largely a pass through, so, you know, over time it's kind of a non event. Thank you. Well, you know, we can remain hopeful. It's just kind of like going into baseball season, you know, hope springs eternal. But we'll see what happens, You know ---+ I guess on the plus side, you know, just speaking strictly to the ---+ not getting into politics, but having, you know, both houses of Congress in ---+ in one party ---+ you know, should bode well for trying to get something done there. Generally speaking, I think a highway transportation bill is ---+ usual enjoys bipartisan support. But certainly there seems to be this kind of ongoing tension between, you know, the executive branch and the legislative branch. You know, who knows what's going to happen there. What we'd like to see is ---+ you know, again, long term funding like we used to see in the past with, you know, a five or six-year-long bill. I think, again, the more visibility that we see thee, again, that should do ---+ provide that visibility. Hopefully to the market place where it helps support bid pricing improvement. And, again, as I said, I think it, you know, all the indicators are there as we see it that we should see ---+ I think work should be going for ---+ for better margins today than it is across the board, including stuff in the DOT space. But we'll have to see. I mean, you know, we've got a few months here. There's a lot of other stuff on the calendar it looks like. So, hopefully we see improvement in a ---+ in a long term bill but we'll stay tuned on that. Yes, that's exactly what we're talking about. Well, it was ---+ it was really better utilization of the assets, that is the primary driver. We did have a couple of larger jobs that just had a little bit better production. But generally speaking, it was just that ---+ that better utilization overall that kind of helped it out. You bet.

2015_ORN

2018

APEI

APEI #Good day, ladies and gentlemen, and thank you for standing by. Welcome to the American Public Education First Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded. At this time, I would like to turn the conference over to Mr. Chris <UNK>, Vice President of Investor Relations. Please go ahead, sir. Thank you, operator. Good evening, and welcome to American Public Education's discussion of financial and operating results for the first quarter of 2018. Presentation materials for today's conference call are available via the Webcasts section of our website and are included as an exhibit to our current report on Form 8-K furnished with the SEC earlier today. Please note that statements made in this conference call and in the accompanying presentation materials regarding American Public Education or its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates and projections about American Public Education and the industry. These forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Forward-looking statements can be identified by words such as anticipate, believe, seek, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitation, statements regarding expected growth, amount and nature of anticipated charges, expected registrations and enrollments, expected revenues, expected earnings and plans with respect to recent, current and future initiatives, investments and partnerships. Actual results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors, including the risk factors described in the risk factors section and elsewhere in the company's most recent annual report on Form 10-K and subsequent quarterly report on Form 10-Q filed with the SEC and the company's other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason, unless required by law, even if new information becomes available or other events occur in the future. This evening, it's my pleasure to introduce Dr. <UNK> <UNK>, our President and CEO; and Rick <UNK>, our Executive Vice President and Chief Financial Officer. Now I'll turn the call over to Dr. <UNK>. Thanks, Chris. Starting off with Slide 2, recent results and highlights. I'll begin our call today by discussing our recent operating results and reviewing the progress we have made with respect to our strategic goals. Our CFO, Rick <UNK>, will then report on our first quarter financial results and provide additional perspective on the company's outlook for the second quarter of 2018. In the first quarter of 2018, net course registrations by new students at APUS declined 11% and total net course registrations declined 4% compared to the prior year period. <UNK>ver, net course registrations by returning students only declined by 3% year-over-year. We believe that the difference in the rate of decline of registrations by new students and that of returning students relates, at least, in part to continued improvements in student persistence and our quality mix of students. The continued increase in student persistence suggests that the course and retention initiatives we have launched over the last few years appear to be improving student success and the overall quality of our offerings. The overall decline in net course registrations by new students at APUS was largely driven by a 24% year-over-year decline in net course registrations by new students utilizing Federal Student Aid as well as by a 13% year-over-year decline in new students utilizing cash and other sources and a 9% year-over-year decline in net course registrations by new students utilizing Military Tuition Assistance, or TA. The decline in overall net course registrations by new students at APUS was partially offset by an 8% year-over-year increase in new students utilizing Veterans benefits. We believe that net course registrations by students using TA were adversely impacted by the short-lived government shutdown, in particular, for net course registrations during the month of March. I am pleased that we are currently experiencing a strengthening of net course registrations by students utilizing TA in the second quarter of 2018, although enrollment for this period is still ongoing. I'm also pleased by the start of our second cohort of doctoral students, who began their studies in strategic intelligence and global security this past weekend. This start follows on the heels of the recent announcement that APUS was recognized by the National Security Agency, NSA, and the Department of Homeland Security, DHS, as a National Center of Academic Excellence in Cyber Defense Education. With this designation, APUS joins an elite group of regionally accredited institutions that have also received the distinction. We believe third-party recognition, especially specialty accreditations and our new doctoral programs further enhance the academic reputation of APUS. We are working diligently to improve the student onboarding process at APUS, including by implementing processes that foster even greater customer engagement and by expanding student service hours. In our outreach to prospective students, we plan to broaden our message of affordability among prospective students in targeted geographies and through an increased number of digital channels. For the 3 months ended March 31, 2018, or winter term 2018, total enrollment at Hondros School of Nursing (sic) [Hondros College of Nursing], or HCN, increased approximately 11% year-over-year, driven by a 19% year-over-year increase in new student enrollment. Although the status of HCN's accreditor, the Accrediting Council of Independent Colleges and Schools, as a recognized accrediting agency was recently restored by the Department of Education, HCN continues to seek additional accreditation and has an in-process application for accreditation by the Accrediting Bureau of Health Education Schools, or ABHES, a national accrediting agency that is also recognized by the Department of Education. ABHES indicated that it will take action on HCN's application at its late May 2018 meeting. We remain excited about HCN's long-term prospects as well as the opportunity for nursing and healthcare education more broadly, as we believe nursing schools turn away thousands of qualified applicants each year from undergraduate nursing programs. Over the last decade, nursing schools have annually rejected around 30,000 applicants who met admissions requirements according to the American Association of Colleges of Nursing. This supports our decision to keep access to nursing and healthcare education as a focus of our long-term strategic plan. APEI's second quarter outlook reflects our belief that overall net course registrations at APUS may be approximately flat year-over-year. In future quarters, APUS expects continued volatility in net course registrations. <UNK>ver, the second quarter outlook for net course registrations, combined with the benefits of improved completion rates at APUS and revenue growth at HCN, are expected to result in a year-over-year increase in the APEI's consolidated revenue compared to the second quarter of 2017. In summary, we plan to maintain our focus on enrollment stabilization and student persistence at APUS, while building on HCN's recent successes. We anticipate launching several new degree programs at APUS in 2018, and we plan to open a new HCN campus in late 2019, subject to regulatory approvals. At the same time, we intend to increase our emphasis on workforce development and competency-based learning as well as expand our strategic relationships to strengthen our long-term competitive position and fulfill our institutional mission. At this time, I will turn the call over to our CFO, Rick <UNK>. Rick. Thank you, Wally. American Public Education's first quarter 2018 consolidated financial results include a 1% decline in revenue to $75.0 million compared to $75.7 million in the prior year period. The decrease during the period is attributable to a 3.6% decrease in revenue in our APEI segment, partially offset by a 23% increase in revenue in our Hondros segment when compared to the prior year. In the first quarter, our APEI segment revenue decreased to $65.7 million compared to $68.1 million in the prior year period. The decline in APEI segment revenue is primarily attributable to a decrease in net course registrations. Hondros segment revenue increased to $9.3 million in the first quarter compared to $7.6 million in the same period of 2017. The increase in Hondros segment revenue was primarily due to increased enrollments. On a consolidated basis, costs and expenses increased 2.1% to $68.8 million compared to $67.4 million in the prior year period. The increase in costs and expenses was primarily due to increased employee compensation costs in both our APEI segment and our Hondros segment, including costs related to the voluntary reduction in force program, or VRIF, implemented during the 3 months ended March 31, 2018, and additional stock-based compensation related to certain employees reaching retirement eligibility in our APEI segment. For the first quarter, consolidated structural costs and services expense, or ICS, as a percentage of revenue increased to 39.6% compared to 38.3% in the prior year period. Our ICS expenses for the 3 months ended March 31, 2018, were $29.7 million, representing an increase of 2.5% from $29.0 million for the 3 months ended March 31, 2017. The increase in ICS was primarily due to an increase in employee compensation costs in our APEI segment and Hondros segment, including costs related to the VRIF in our APEI segment, partially offset by decreases in instructional materials expense in our APEI segment. Selling and promotional expense, or S&P, as a percentage of revenue increased to 20.8% of revenue compared to 20.4% in the prior year period. Year-over-year, S&P costs increased 0.9% to $15.6 million compared to $15.4 million in the prior year. The increase in S&P was primarily a result of an increase in employee compensation costs related to the VRIF in our APEI segment, partially offset by decreases in advertising costs and marketing support materials expense in our APEI segment. General and administrative expense, or G&A, as a percentage of revenue increased to 25.2% from 23.4% in the prior year period. Our G&A expenses increased 6.4% to $18.9 million compared to $17.8 million in the prior year period. The increase in G&A was primarily related to increases in employee compensation costs related to the VRIF and additional stock-based compensation costs for retirement-eligible employees in our APEI segment, partially offset by decreases in bad debt expense in our APEI segment. Bad debt expense for the 3 months ended March 31, 2018, was $1.1 million or 1.5% of revenue compared to $1.4 million or 1.9% of revenue in the prior year period. The decrease in bad debt expense was primarily due to changes in student mix, prior changes in admissions and verification processes and changes in other processes. Depreciation and amortization was $4.5 million for the 3 months ended March 31, 2018, compared to $4.7 million in the prior year period. Our effective tax rate during the first quarter of 2018 was approximately 29%. In the first quarter of 2018, we reported income from operations before interest income and income taxes of $6.2 million compared to $8.3 million in the prior year period. In the first quarter of 2018, we reported net income of $4.6 million or $0.28 per diluted share compared to net income of $4.5 million or $0.28 per diluted share in the prior year period. Adjusted net income, a non-GAAP measure, for the first quarter of 2018 was $5.9 million or $0.35 per diluted share. Adjusted net income for the first quarter of 2018 excludes approximately $1.7 million in pretax expenses associated with the VRIF as well as the applicable tax effect of the adjustment. The workforce reduction was substantially completed on April 1, 2018, and was not contemplated in our first quarter outlook. For additional information regarding adjusted net income, a non-GAAP measure, please refer to GAAP to adjusted net income reconciliation in the financial tables in the earnings release we issued earlier today. Total cash and cash equivalents as of March 31, 2018, were approximately $186.2 million compared to $179.2 million as of December 31, 2017. Capital expenditures were approximately $1.4 million for the 3 months ended March 31, 2018, compared to $1.7 million in the prior year period. For the 3 months ended March 31, 2018, the company made no estimated tax payments compared to $6.1 million in aggregate estimated tax payments during the 3 months ended March 31, 2017. The company expects to make estimated tax payments in the aggregate amount of $5.5 million during the second quarter of 2018 related to tax extensions and first quarter estimates. In connection with the voluntary reduction in force, the company expects to pay $1.7 million in employee severance costs during the second quarter of 2018. Effective January 1, we adopted FASB Accounting Standards Codification, or ASC 606, revenue from contracts with customers, using the modified retrospective approach. Adjustments to our financial statements resulting from the adoption of ASC 606 were not material and are described more fully in our quarterly report on Form 10-Q filed earlier today with the SEC. Going on to Slide 4, second quarter outlook. Our outlook for the second quarter of 2018 is as follows: APUS net course registrations by new students are expected to decrease between 8% and 3% year-over-year. The change in total net course registrations is expected to be approximately flat year-over-year. For its spring term, which is the 3 months ending June 30, 2018, new student enrollment at Hondros increased 5% and total student enrollment increased 17% year-over-year. For the second quarter of 2018, we expect consolidated revenue to increase between 0% and 2% year-over-year. Net income for the second quarter of 2018 is expected to be in the range of $0.29 to $0.34 per fully diluted share. In closing, we are encouraged by the stabilization of total net course registrations at APUS. Furthermore, I am pleased by our emphasis on cost control as we take appropriate steps to stabilize APUS net and total student registrations, while maintaining our focus on quality and affordability. Hondros continues to show growth and margin improvement. Its plans to expand strategic relationships and the opening of a new campus location in late 2019 should help fulfill its mission and address the critical nursing shortage in Ohio. We believe these efforts, combined with existing and future workforce-focused initiatives will enable us to reach our long-term goals. Now we'd like to take questions from the audience. Operator, please open the line for questions. (Operator Instructions) And our first question comes from <UNK> <UNK> with Piper Jaffray. So Wally, you mentioned TA hurt by the government shutdown, seeing some strengthening recently. Can you talk about the trend in that business, the base access issue if that's been resolved and whether you think the TA business gets back to positive territory over the course of the year. I think, we're optimistic short of another government shutdown the TA business will get back to normal. We ---+ I think the bigger impact for the first quarter was the few days' shutdown, but at the same time, there have been some systems glitches with the Air Force, and the base access issue has not yet been resolved. We're hoping to possibly hear resolution sometime in the near future, but we just can't predict that. Okay. The negative 2% to positive 2% in 2Q registrations, I think, the way the arithmetic works is that would require some pretty dramatic improvement in persistence. Is there something that's informing that forecast that would give you confidence that the numbers could move that meaningfully. Well, April is done, and we are very close to finalizing May registrations, and so we look at our ---+ we do monthly starts. So it's simply taking 1 month that's actual 1 month that's close and forecasting what June is going to look like. But, essentially, we have continued to improve our first course completion rates for FSA students. That was our bellwether indicator for whether or not the students who were coming through in the pipeline were legitimate students, were students who had intentions to complete, at least from an academic perspective, complete a course and hopefully move forward in their programs. That continues to increase, and that's really the big driver here. All right. Got it. Okay. And then for Rick, you mentioned another $1.7 million in severance cost in 2Q. Is that the end of the severance cost, number one. And then number two, can you give us any estimate in terms of the annualized cost savings you expect from this. Right. So let me be clear when I made the reference to the second quarter, I was making reference to the cash that we're going to be paying that. The VRIF was completed ---+ substantially completed on April 1, and so the cost associated with that is recognized in the first quarter. In terms of the expected savings, that's in the 10-Q, and I'm looking for the number. I believe, it was $1.7 million to ---+ Chris do you have the number. $1.7 million to $2.4 million. Let me. I have the number. So the savings would be ---+ no, I don't have it, so sorry. Go ahead. Actually, that's not our expectation. We haven't announced where it is, but we have researched and actually, in one case, applied ---+ formally applied. So we are not allowed to get approval for it until we've moved over to our new accrediting body and taken off of provisional status with the Department of Education. So once we get that status and can formalize it, we'll make our announcement. So the savings is on Page 21. It's $1.7 million to $2.1 million for this year and the annualized is $2.1 million to $2.8 million. Well, I think aggressive is probably a tough word to pursue. I mean, as much as it's been a nice turnaround in our investment the nursing business is highly regulated. You have both the NCLEX pass rate that you are monitored on and regulated state-by-state as well as your placement rate that you're regulated on in most of the states as well as your accrediting body. So pushing for aggressive campus additions, while you have to make sure that you are admitting the right quality student who can both pass the NCLEX and then be placed generally within 60 to 90 days after passing the NCLEX. While I would like to say that we will do that, we need to maintain our quality. So if I were saying an aggressive year would probably be organically adding 2 locations. We continue to look for opportunities for that, <UNK>. Yes. I think we've stated our interest in healthcare. And at the same time, we're much more interested in nursing than we are in some of the other ancillary areas of healthcare that have tough times with gainful employment. The final gainful employment regulations haven't been issued. So we'll take a look at that and see if that might change our perspective, but at least at this point in time, it's healthcare with a nursing emphasis and I think we scale so nicely in APUS, there's no real reason to try to find another online provider. Well, so we've said that our new FSA students were down 23.6% in the first quarter, the returning FSA students were only down 6% in the first quarter. I think the difference between that new and returning number shows that the change in our mix has paid off because even though the new FSA numbers are still declining in double digits, we've got a single-digit decline in returning FSA students. I don't believe we gave you a specific time for transitioning for FSA students specifically. But as you can see with our guidance for the second quarter, overall, the impact to returning students from FSA is quite diminished, and we do believe that over time, it'll balance itself out. Well, we hope the weakness in TA is not permanent, but TA, we continue to have a great brand with AMU, a great reputation, reputation is pretty important in the military market, meeting the needs of our students, being military-friendly in terms of recognizing their training for academic credit, having degrees that match up for both their career in the military and their career post-military. And while we love our VA students, they actually generally don't persist with us to a degree unless they left their active-duty lives close to a degree because Congress has deemed that if you're attending a 100% online institution, you only get 50% of the housing allowance. So I'm grateful that the number is up 23% for the quarter, but at the same time, we always know that we have a quicker dropoff in the lifetime number of courses for a VA student versus a TA student because of that housing allowance anomaly. So well, first of all, we ---+ you have to go to the state that you're applying for a new campus in. Our last one that we added, Toledo, was in Ohio, where we already are. I stated that we're looking at 2 other states. And we have a formal application in at one of them, and our approval is subject to approval of both the U.S. Department of Education and our accrediting body, and until either the issue with our ACICS accrediting body is lifted and lifted by the Department of Education and while they said that they've reinstated them, they haven't lifted the ---+ they have not lifted the provisional participation agreements that every ACICS schools had. Until that's lifted, you can't add degrees, you can't add campuses. And until we get a new accrediting agency, we can't lift the [PPIF] either. So once that is lifted, we will be able to make our application first with the accrediting body and the last ---+ the last entity you get your approval from is the U.S. Department of Education. I ---+ we typically lease space from owners of office parks. So ---+ but it will be a brand-new campus, I mean, for us, but it may be in a building that is not brand new, but has a special-purpose location or floors for our nursing school. Let's see. I think we ---+ with our Toledo location, it's approximately 20,000 square feet. So I'd assume it'd be similar size. Thank you. That will conclude our call for today. We wish to thank you for listening and for your interest in American Public Education. Have a great evening.

2018_APEI

2017

MDLZ

MDLZ #Yes, in terms of equity income, I would assume we're planning on relatively close to what they did this year, maybe a little bit better. Not significant improvement. They're facing into green coffee inflation, especially in <UNK>usta. So it's a bit of a challenge that they're working through. And Steve, what was your first ---+ Oh, SKU rationalization. All I said, and what we'll continue to say, it's smaller than we would have had in 2016, and we're not going to specifically break it out. Great.

2017_MDLZ

2016

KEM

KEM #Yes. [Let's go with that]. I'm guiding up. We did $177 million, so I'm guiding up to where we ended this quarter. And I ---+ But it is ---+ I can see what the Asian orders look like, of course. And if I take that out, we still have strong order growth at this point. So I do believe that the markets that the Q1 will be stronger, and I am putting out maybe cautionary guidance here, but I do think that we will see revenue growth in the quarter. We will see the distribution channel returning to more normalcy, and we will also see the margins improving slightly. The book-to-bill now, of course, since the bookings are very, very strong right now, and I say we are actually 21%, actually, if I were to be more precise, ahead of last quarter. So the book-to-bill is kind of very high at this point. But I'm discounting that a little bit because the bookings may come in a little early. But I see continued activity, I see very strong design activity across the board, and I feel better about our prospects in this quarter than I did in the past. So all these things I think are adding to a more optimistic view of where we see business going. For ---+. The segment is actually right at maybe a couple ---+ $10,000, $20,000 below breakeven. But we expect that that will ---+ we will get to a breakeven position this quarter. I think we are seeing revenue growth in that segment, and Europe actually is one of the areas where we are seeing revenue growth coming in. And you're going to see some of these activities that we have taken in the F&E space have of course rolled into inventory. So that's ---+ as they roll out inventory that will come and hit the bottom line as well. I can't go into the detail on an individual basis, but of course what's left, if you looked at what's been announced between the US and Taiwan, of course we have the EU remains, Japan remains, China remains, Korea remains. Brazil and Singapore remain. And so the reserve estimate does take into account what the advisors are advising NEC TOKIN in regards to the potential liability associated with those jurisdictions that have not yet formally replied to the company. So they have taken that into account when they've looked at this entire process for reserves. No, if you add the ---+ what we actually added $20 million to the reserve ---+ or they added $20 million to their reserve this quarter. They added $30 million originally in March of last year. So that's in total reserves in dollar terms is approximately $50 million. This accrual, of course, of $20 million is included in their results for the quarter, so that's a big piece. They also have continuing legal costs as well that has been in every quarter throughout the fiscal year. Let me just add some color to that. Operationally, they continue to perform well, but of course the legal expenses are very high, as you can imagine. And of course, the accrual hit is also substantial. So the underlying operational performance is still as we expected when we started the year. So that's a bit of good news in this whole spectacle, if you like. Let me start trying to answer that. We've seen of course an inventory correction, and what that actually means is that their POS sales are actually performing better than what we were able to stock into the channel. So they haven't been stocking at what we would call POS levels. But as the business now starts to stabilize, and actually we believe the POS is heading in the right direction for this quarter, that destocking process can't continue. And in our conversations with our distribution partners, we definitely believe that our distribution business this coming quarter will improve. And that is driven by stabilized to slight improvement in the POS and an inventory correction returning to more ---+ the inventory activity returning to more normal where POS and POA needs to be in balance. So our comments are all based on POS/POA balance going forward. And thus we can see an improvement in our distribution business coming relatively quickly here. I gave you some dollars numbers as well to help you understand where those numbers are coming from. But clearly if you look at a year ago, our distribution business was 43% of our total revenue; this quarter, it was 40% of our total revenue. So you can clearly from that sense that the destocking process has occurred ---+ is occurring. No, I think we are a very distributor-friendly organization. We have excellent relationships with our distribution partners. And we've been working with them for a lot of years, and we pride ourselves of being a real good partner to them in all areas across the globe. We have made one change in how we approach this, and we have given the regional directors or the area directors, vice presidents across the globe, a more direct responsibility for their POS business. Meaning that we will make sure that what the people in the field is pushing is not the POA of this business, but the POS. And of course that will drive our POA business as well. That was a volume issue. Only volume issue. You're going to see that returning again next quarter. I think we will hear from one major country very shortly, and another major country within a month or so. So I think we believe that the current accruals that we are taking is based on a lot less guesswork than maybe people will believe. So I think we feel that these accruals are correctly placed. And I don't know if we talked about that, but also in the Taiwanese case, that $18 million in fines will be paid out over time. We see this ---+ the change in the tantalum business from Mn02 to polymer is of course happening, and then we see our polymer business growing and our Mn02 business declining slightly. And I think we've seen that over the past quarters. We think the Mn02 decline is somewhat stabilizing and the growth ---+ but the growth we will see will happen in our polymer business, which now account for more than half of our tantalum business. I think the ---+ any power management solution is of course where we play best. So anything that has to do with the cloud, anything that has to do with new applications in the automotive sector I think are areas where we are going to be very strong going forward. Outstanding is the same amount that we actually had in the prior quarter; we didn't use any of the revolver for the year. So it's about $38 million was outstanding during the quarter and about $22 million of availability. It actually does assume some paydown of the revolver. We are working on how much that will be as we approach the end of the fiscal year. But yes, we expect to pay down some on the revolver. First we have a few more jurisdictions that have to report and we get the final ---+ the final judgments on that. And of course, it's a little hard to predict how long that will take. We are seeing that happening sooner rather than later, but it may take more than a couple of months. I think as we get clarity, which is the word we have used, we have a clear path to making the merger happen. But for me to say more than I've said before that I think it is months rather than years, but exactly when that can happen will depend on what happens in the regulatory areas. I certainly hope that we can close this in the calendar year. We did. I said that we thought that the full year would be somewhere between an $18 million to $21 million number. We were at a little excess of $14 million year to date. So somewhere in that, call it, $4 million to $6 million range for the fourth fiscal quarter. We do. We will plan ---+ we are planning to be in the same range next year. That's correct. We had, as you recall, if we go back to at least the first half the fiscal year, we had substantial amount of restructuring expenses, severance expenses, moving costs of equipment, etc. , that did absorb quite a bit of cash. That will not repeat in the next fiscal year, so we do expect to build more cash next fiscal year. I won't say whether it's purchasing debt at discount as much as it is I think we need to be in a position ---+ we would like to be in a position I think as we go into the next round of restructuring of the balance sheet to have less debt on our balance sheet. How we accomplish that is of course we will look at that at the time, but the goal would be to have less debt than we have today. You know, there's always a lot of discussion about whether buying back stock is the right thing to do or not. I think while we are at the level we are with our cash balance and with our debt balance, and with the cost of that debt, it may or may not be to the Company's best interest to do that. But it's ---+ everything is always on the table. So I'm not going to say the Company won't, but I am not going to put us in a position where it's something that I think shareholders should count on either. It's certainly ---+ again, we always have those discussions, and it's a matter of looking at our cash and our cash flow. And I think it ---+ since we haven't done it, I think you conclude that at the moment we've concluded that it's better for us to build some cash as we come out of a year where we had to have fairly significant demands on our cash from restructuring, to get out of that situation, built some cash and then determine whether ---+ what's the best direction for the use of that cash that we have on the balance sheet. And I think we will determine that as we build some additional cash and take a look and see what's the best ---+ what creates the best value for the use of that cash. Whether it's buying back bonds, whether it's to the previous questioner's ---+ to <UNK>'s question, is it stock, is it another investment. What creates the best value for the Company for the use of that cash. And also I think also when you look at all these things, what of course we take into our calculus is our view of the upcoming NT merger. So that's always plays into all of these questions whether we should ---+ how we should spend the cash we have. We believe at this point that we have a playbook, and I've said that I can't go into the details of what the playbook looks like. But clearly it is our view that we do not need the capital markets to take the next step in this process. I think we've said all along what our tantalum model is and what we need to ---+ we want to get our gross margins up to a 25% level. And there is still stuff to do or stuff that will hit the bottom line coming into the F&E business. And we are seeing some additional revenue opportunities in F&E coming to fruition. The design activity is very intense, particularly in that space. So I think we are seeing a path in our F&E business to improve that gross margin to what we previously have been expecting. There are more stuff that will hit the P&L clearly. Some have already been implemented, but have ---+ you know, has not made its way to the bottom line as yet. And there are other activities that are being planned for the next couple quarters that will also have a positive impact on our F&E business in particular. And I think the move from Mn02 to polymer is also positive track for us. The polymer business is more profitable than the Mn02 business. And therefore as we see the polymer business grow, that's going to have a positive effect on our bottom line. Also we are now at a little less than 70% of usage of our vertical integration process for the [anos] that we need. And we still believe we have at least another 10 percentage points of activity in that area that will come to impact our bottom line as well. So I think we will ---+ yes. Clearly when we look at these projections, we need to look what is the new normal revenue rate that we are going to see, given the FX situation in Europe and whatever we see in the market. And as you can probably tell, at these revenue levels, A being profitable, B having a gross margin over 22% of these rates, and the new actions coming, we believe that we can get to a 25% gross margin level as ---+ with some revenue growth, but not significant revenue growth. All right. Thank you very much for being on the call and thank you for your interest in the Company. And we are looking forward to this quarter; we are looking forward to seeing some increases in the demand across the board and an improvement in our bottom-line performance as well. And hopefully we will close out ---+ we believe we will close out the year strong and looking forward to our next fiscal, when we hope many good things will happen to the Company. So with that, I wish you all a good day and thank you very much.

2016_KEM

2016

WBS

WBS #Given today's curve and if there is more downward pressure on the long end, you would see more pressure on NIM going forward, beginning even in the second quarter. I mean, we haven't seen it all flow through yet. So the first quarter we feel pretty good about. But there is still ---+ the impact of the current curve is not fully impacted or is not fully factored into Q2 to Q3 and Q4. So floating rate assets, which we have talked about a lot. So C&I, CRE, home equity, those are a big part of the expansion. Growth in our consumer personal portfolio is another component. No lift in deposits. We have seen some pressure on only the government side. But, for the most part, all our retail deposits are still at the same costs. We do have slightly higher borrowing costs. And, the wild card, Mark, as you know, is always going to be the betas on the retail side and how the market reacts to it. But what is encouraging is, no one is moving right now. So the bigger driver, the biggest driver comes from our floating rate assets. So if we are 5 to 7 basis points, that is the bulk of that expansion. And then, obviously, it assumes no move on the retail deposits. Yeah, sure, Mark. This is <UNK>. First of all, we are sort of underweight when you look at our commercial real estate exposure against our capital base. And I think you know our portfolio on the commercial real estate side tends to skew institutional, so we have sort of larger higher-quality buildings with strong sponsors, and that has always been our modus operandi. And our portfolio credit asset quality is in pretty good shape. If you talk to Bill Wrang, who runs our CRE group, and you try and get out of him a comparison to pre-Great Recession to now, he still thinks that the underlying fundamentals, as long as you are dealing with good real estate and strong sponsors, are much stronger than they were heading into the last cycle. So I think we are cautious, but we are bullish and optimistic that we are not on the precipice of another bubble in real estate. And we underwrite ---+ for instance, we love apartments, we love multifamily, but we are not a participant in a lot of the broad metro multifamily programs. So we look at specific sponsors, specific properties, and specific real estate, and underwrite to those circumstances. So I would say we are aware. We are cautious. We kind of are aware of where we are in the credit cycle, but we are not too nervous about the underlying fundamentals in real estate right now. That is a loaded question, Mark. You know, I think competition is fierce, and so I think when you go from the very top in the sort of corporate space and the institutional space all the way down to community banking real estate and where values have been, a lot of people are putting a lot of money to work in the real estate space. And, obviously, I just think you have to be careful about the quality of the portfolio, where rents are going, what the tenancy looks like. So I am sure people are being more aggressive than we are, but I can't really comment on seeing significant trends in the market. I think from a deposit standpoint, it is probably about $600 million ---+ $650 million. And then there is corresponding loans with that as well. So we are saying ---+ for example, <UNK>, we are saying, if you get $1 billion over five years, you are going to front-end a lot of that. So you would be halfway or more by the end of the second year, and that is the way to look at it. And then you are going to find loan support coming along. Private banking is going to be in there generating some revenue. This is a great opportunity for all of our businesses. So it is going to be deposits and loans and fee income as well that will get us to breakeven in 2017. I think it would be good with Q1. It would impact Q2 more. That is why we give them a range. Yes. And we give you a range, and I think it generally takes about 90 days to move through. I think we feel pretty confident in Q1 right now, but Q2 would obviously be the one. I think as far as the level, we will probably be flat on the securities. I mean, our capital ratio suggests that we should be growing more 100% risk-weighted assets as opposed to zero or 20% risk-weighted assets. From a reinvestment standpoint, generally, what we are buying is NBS, say, a term of four to five years at [250]. Munis to some smaller extent, a term of eight to nine years at kind of [450]. And then floating rates at CLOs and CNBS, which has which has been more of a challenge lately, but those reprice basically one month ---+ they are about LIBOR plus 200. And then, some agency MBS, which is ---+ we've been generally by fixed rate and with a duration of four years at, say, a rate of [275]. That is kind of what we are doing going forward. Sure. I will just say we can't speak for why they have made their choices, but we have said before, this is a business of scale. Unless you have significant scale, it is hard to really make a go of it. So that is a significant advantage that we have at our size. We also think that there is lots of institutions that have decided it isn't a strategic focus for them and they are not going to devote the resources that are required to get people into it. So in some cases, they are an offloading. We have looked at a couple of transactions. And we also always keep our eyes open and try to stay on the pulse of the market. At least one of those recent transactions was based on a long-standing relationship that already existed, whether it was sort of a joint operation there. And then, in other cases, banks are just saying that that is not their primary strategy, nor can they make it profitable to the extent that we can, and that is what is driving their decisions. And we think that does represent opportunity for us going forward. I want to reiterate that ---+ and we have said this over and over, that our number one responsibility is to make sure that we have a smooth and orderly transition of the JPM acquisition, and that is what is occupying 99.9% of our time. Now that we are getting through that, we are going to be looking outward more than we were before, and we will be taking a hard look at some of those opportunities. I mean, in terms of what we would see is when, obviously, proceeds get aggressive or amortization schedules or tenors, and we try not to obviously chase out of our underwriting box. And I think, right now, I think if you look at it ---+ as I said earlier, if you look at the underlying fundamentals, as long as you are picking the right real estate with the right borrowers, we are not into that red flag warning zone yet. But I just think you have to really stay disciplined, and that has been our mantra. And, right now, if you look at the profile of our commercial real estate portfolio under any metric, whether it be LTV, whether it be proceeds, the way we are underwriting and sensitizing our underwriting, we are not stretching the bounds, and I think when you have to do that to compete in the market, that is when you start to raise the red flags. And then I just want to say one more thing. When you look at the radar screen here and what the regulators are primarily focused on, they are looking at the growth rate in the portfolio, and they are looking at the portfolio as a percentage of capital. And we are well under the target ranges that were included in some of that guidance. And so that gives us a lot of comfort. But mostly what we are comfortable about is the quality of our underwriting standards. And when they get in there and say, well, how much I/Os are you doing I/O and what are you doing with your tenors and the like, that we are going to come out in a very strong position. So however you look at it, we are highly confident in the quality of our CRE operations. And one last point to put a finer point on that, Matt, is we size our loans using a higher interest rate than actual rates because we understand that that is some risk. And so we are willing to walk away from deals if we don't have that amortization cushion and that cash flow cushion, and that would be another red flag. If you are fully sizing the loan to today's interest rates, you are ---+ potentially could be asking for trouble. So I hope that is helpful. Yes. I mean I would say, the good news is, in terms of our expansion and significant originations in the fourth quarter, the percentage of share national credits in our portfolio actually went down period over period. So it evidences a lot of direct underwriting and bilateral underwriting. We don't have a concentration in any of those sectors you are talking about, the broader industrials, chemicals, commodities. Our strategy in shared national credits is really in our footprint to the local companies that we can cross-sell HSA Bank, cash management, private banking to, or in some of our industry specialties, and our industry specialties right now are things like TMT, environmental services, healthcare. So that is where you would see them. And, fortunately, in those service companies, they are not being impacted from an industry perspective like some of the ones you are mentioning. So I would say that it is not an issue for us right now. Yes. No. Maybe I wasn't as clear as I could have been, but that is the primary driver of the NIM expansion. So it is dropping down. I don't think it has been evident yet. I mean we have been saying it all along that not only is distributor remediation in that market not impacting us because we don't have a lot of credit exposure, but it surely must benefit most of our other commercial customers. We really haven't seen changes in behavior or any specific information that indicate that benefits flowed through their P&Ls or that they are investing in other ---+ those savings in other areas. We have seen our retail deposits go up, so that could be one offshoot of this. We haven't seen ---+ and it might be early. We haven't seen much of an increase in interchange transaction volume besides the normal seasonality. It is hard to sort of pull that out because the fourth quarter has holiday shopping and things like that as well. So we may see it, Bernie, going into Q1 or more of it going into Q1. Our debit card transactions, if you were to just look at it quarter over quarter or year over year, they are up 4%. So that may be an early indicator of some ---+ maybe some additional volume. But it is too early to tell. One thing we know they are doing with it is they are buying more cars, but we do think they are saving more. I want to thank you all for joining us, again, today. We think we have produced a sound report here for the quarter as well as for the year. It is a tough operating environment, but we are very positive about our position and our potential to generate economic profits. Thank you all very much.

2016_WBS

2017

DVA

DVA #Thank you, <UNK> For the second quarter of 2017, DaVita Medical Group had adjusted operating income of $34 million As a reminder, this business has a disproportionally high amortization load, $44 million for the quarter, which includes roughly $7 million related to the acceleration of our branding initiative Therefore, this quarter's adjusted operating income of $34 million translates into an adjusted EBITDA of $94 million for the quarter Now, with respect to our value conversion We're on track to our plan since our last update We've signed a contract in Colorado, one of our newer geographies, and expect to add value contracts in New Mexico and Washington State by the end of the year We had a fairly active quarter in closing tuck-in acquisitions of new groups in our existing geographies We believe that these transactions are a capital-efficient and low risk way of acquiring new physicians and patients Collectively, the groups we acquired in recent months consist of approximately 140 providers serving nearly 200,000 patients, of which about 20,000 are currently capitated Regarding guidance for DMG, we're leaving our 2017 adjusted operating income guidance unchanged at $110 million to $150 million and we still believe it's more likely that we will be in the bottom half of this range This operating income range includes an estimated $240 million in depreciation and amortization for 2017. Now, to International International operating losses in the quarter were $13 million, which includes approximately $4 million of prior period adjustments and a $1 million foreign exchange loss For the full year in the International business, we now expect adjusted operating income loss in the low $30 millions plus or minus a bp This excludes the impact of currency and one-time expenses We're disappointed in this change in guidance, which is the result of lower than anticipated clinic acquisitions and slower operating ramp of acquired clinics These changes in outlook is incorporated in our adjusted operating income guidance for Kidney Care and the enterprise Looking forward, we expect to reach breakeven internationally during 2018. Whether we achieve breakeven for the full year of 2018 will largely be a function of our acquisition pace for the rest of 2017 and early 2018. Finally, some comments on cash flow and capital deployment Second quarter operating cash flow up of $146 million was adversely impacted by the timing of cash tax payments associated with our settlement with the VA that was announced in the first quarter and by an increase in accounts receivable DSO Year-to-date, we generated operating cash flow of $1 billion and our operating cash flow guidance for 2017 remains $1.75 billion to $1.95 billion As we discussed at our Capital Markets Day, we expect to be using some of this strong consistent cash flow as part of our long-term strategy to repurchase stock over the coming quarters In the second quarter, we repurchased nearly 3.6 million shares or more than 1.8% of our shares outstanding for $232 million Now, over to <UNK> for a few closing comments So, we don't disclose the specific capital that we've allocated internationally In terms of China specifically, it's a fascinating market It's growing incredibly rapidly from a patient standpoint That said, we have learned the challenges of entering China as a multinational corporation We are looking at our strategy going forward thinking about partnerships as an opportunity for entering the market specifically The other aspect of this question is the SI line

2017_DVA

2017

CUBI

CUBI #Yes. Thank you very much <UNK>, and good morning ladies and gentlemen, we are delighted to welcome you to the second quarter earnings call. As you know our net income to the common shareholders was $20.1 million during second quarter 2017, then that's up 15% and 15.4% over Q2 2016. Now this $20.1 million number includes $5.2 million loss from discontinued operations that we will talk about later on. So the earnings, we are so pleased to report to you that the earnings were very strong. And for the first 6 months as a result of this, our net income to common shareholders was $42.2 million, and for the 6 months earnings per share were 1.29%, also our margin improved during the quarter by 5 basis points, and over the last couple of years we've shown consistently increasing our book value per common share. As well as positive operating leverage, our asset quality improved, so this is a very good quarter for us. To get into the details of the quarter, I'd like to hand it over now to Bob <UNK>, our Chief Financial Officer. Thank you, <UNK>, and good morning everyone. As noted by <UNK> and as described in our second quarter 2017 earnings release the last evening, customers as reporting Q2 2017 net income of $20.1 million or $0.62 per fully diluted share. Net income to common shareholders for Q2 2016 was $17.4 million or $0.59 per common share. So the Q2 2017 net income to common shares ---+ common shareholders is up 15.4% over 2016, and earnings per common share is up $0.03 or 5.1%, Q2 2017 compared to Q2 2016. Excluding the effect of the BankMobile business that is reported as discontinued operation, customers Q2 2017 net income to common shareholders from continuing operations was $25.3 million, up 28.5% over Q2 2016. Customers Q2 2017 earnings per common share from continuing operations was $0.78 per share, up 16.4% from Q2 2016. The earnings calculation for GAAP in our view is a good measure of the ongoing performance of the business, but it may overstate the performance of the bank and understate the discontinued business, earnings a little bit by the amount that the bank pays BankMobile for deposits of approximately $2.7 million or something short of $0.08 per share. For Q2 2017, customers produced a return on average assets of 93 basis points, a return on common equity of 11.84% and an efficiency ratio from continuing operations, so the banking business efficiency ratio of 40.5%. In the same quarter a year ago, customers generated a return on average assets of 85 basis points, a return on common equity of 13.07% and efficiency ratio from continuing operation for the banking business of 46.5%. In summary, customers Q2 2017 earnings performance is viewed by management as very strong and trending upwards. The second key set of numbers watched by our investors, regulators and we focus on as managers are our capital ratios. As noted in previous calls, during 2016, the full year 2016 customers increased its capital by over $300 million or over 50% by retaining earnings, issuing preferred stock and issuing common stock. Over the past year that is from June 30, 2016 to June 30, 2017, customers increased its capital by $230 million or 33% to over $910 million. Our preliminary capital ratio estimates as of June 30th were 8.7% for the leverage ratio, 8.27% for the CET1 ratio, 10.94% for Tier 1 risk-based capital and 12.46% for total risk-based capital. The Q2 2017 capital ratios were on average 22.6% higher than the regulatory capital ratios as of June 30, 2016 and those ratios include the summer seasonal expansion of the mortgage warehouse business, which brings those ratios down by as much as 40 basis points. In summary, customers amount of capital is up by 1/3 over a year ago. Our capital ratios are up by 1/4 and they are very ---+ and they are approaching industry averages. And yet we still increased earnings per share to common shareholders by $0.03 in 2017 compared to 2016. As we're not expecting to be as active in the capital markets over the next year, according to our strategy going to bank a bit more modestly, we anticipate even a greater amount of future business growth benefiting the existing shareholders. Our third set of numbers, customers as watching very carefully, relate to asset quality, especially now that there are early indicators in the industry, the credit quality may have seen its best days in this business cycle. Customers nonperforming loans as of June 30, 2017 was only $19.1 million or just 21 basis points of total loans outstanding, compared to $14.6 million or 17 basis points of total loans outstanding as of June 30, 2016 and 33 basis points as of Q1 2017. Our June 30, 2017, nonperforming loans as a percent of loans outstanding of 21 basis points is less than 1/4 of our peer group level of nonperforming loans of 90 basis points, and it is only 1/7 of the banking industry level of 150 basis points. Our June 30, 2017, 21 basis points level nonperforming loans is very comparable to the 17 basis points as of June 30, 2016 and 22 basis points in 2016 ---+ December 31, 2016 indicating stability within that portfolio. And our charge-offs continued to run at a very low and what we believe is a very low rate totaling just 2 basis points of total loans for the first 6 months of 2017, and it was only 2 basis points for all of 2016. Customers attributes its loan quality to unwavering dedication to loan underwriting standards adopted at the depth of the 2008 economic downturn. Customers borrowers have consistently demonstrated their sustainable ability to pay in accordance with the contractual terms of the loan. Customer strategy also incorporates the objective that lower than peer and industry net interest margins, which we do have at about 278 basis points as <UNK> noted will be more than offset by lower than industry operating costs. Customers efficiency ratio from continuing operations reached an all-time customers low for a quarter of 40.5% for Q2 2017. This strong efficiency ratio reflects many elements of our nontraditional business strategy, especially that our branch lite strategy results in lower branch cost in much of the industry, while still generate significant deposits. Our operating expenses from continuing operations in Q2 2017, totaled $30.6 million actually down $1.5 million or almost 5% from Q2 2016 operating expenses of $32.1 million, while total losses were up $1.2 billion or 12.4% as of June 30, 2017, compared to June 30, 2016. Customers, business strategy says will pay a little more for deposits and accept a little less net interest margin than our peers and industries and offset that tighter net interest margin with the lower cost to help us analyze our cost structure relative to peers to see whether we are achieving that strategy, we examine operating expenses as a percent of assets to generate ratio that is somewhat comparable to an interest rate. For Q2 2017, customers net operating expenses from continuing operations as a percent of assets was only 1.23% and I compare that to our peer group and industry operating cost as a percent of assets of 2.53% and 2.51% respectively. This relationship indicates the customers cost as a percent of all assets is less than one half of the industry and peer costs for providing banking services. Customers believe this is a sustainable competitive advantage of our peers and we will continue to develop strategies to further enhance our operating costs and exploit this competitive advantage. I'd like to highlight just a few other things that happened during the second quarter. First, we completed a senior debt offering for customers bank in the amount of $100 million at a rate of 3.95% with all proceeds being contributed down to the bank as capital, double leverage into the bank. Second, total assets reached $10.9 billion as of June 30, 2017, compared to $9.9 billion as of March 31 and $9.4 million as of December 31. While the asset amount is pushed up a bit by the seasonal high balances in the warehouse lending businesses, we do expect at this point that total assets will exceed the $10 billion for the next DFAST measurement date. Third, the bank ---+ the BankMobile business segment continues to be held for sale and is reported as discontinued operation. It generated noninterest income of $11.4 million in Q2, seasonally the second quarter is BankMobiles' most challenging quarter as students are finishing up its school year and not receiving their federal loan disbursements. Operating expenses for BankMobile were $19.8 million and we reported on our segment reporting a loss of $3.2 million for the business and a loss of $5.2 million on a GAAP business, because the segment ---+ for the segment reporting they do receive the benefit of the bank borrowing and paying to that business interest for the ---+ for the use of those deposits. In summary, Q2 2017 was an outstanding quarter for customers and further demonstrates the sustainability and the advantages of the customer's business model and our strategies despite the challenges that we do have. I do look forward to the day when the Religare stock is sold, which we do expect it to resolve by the end of this year, and the BankMobile business is sold or otherwise disposed of also hopefully by year-end. That will leave us with earnings report that is much less complicated and the inherent strength of customers\xe2\x80\x99 performance, which we're trying to bring out to you today, but that inherent strength of the customer's performance standing out. <UNK> that [includes] (sic) [concludes] my comments, and I'll hand it back to you. Thank you very much, Bob. I'd like to go over 4 things now before we open it up for questions and answers. Number one, is where do we stand on our core business. Number two, is shared with you the status of the BankMobile divestiture, and number three, is review with you our strategy, since as Bob indicated we crossed the $10 billion mark this quarter and like every other institution we are in the process and have completed a strategic options review for ourselves ---+ over the ---+ before we made the decision to cross the $10 billion mark, so I'd like to review with you our strategy. And then (inaudible) make some comments in terms of looking ahead. As far as the core business is concerned, as you noted that our C&I business is our biggest growth business. Our C&I loans increased by $305 million this past year and that's approximately a 25% growth rate, that business is the main focus, because we are a business bank and we have a very, very strong teams that we've recruited over the last several years and we continue to recruit those teams, and our single point of contact model is really working, and we have expanded and now that same model this quarter, starting this quarter into Washington DC and the Chicago market as such. So you should expect the continued strong growth rate in the C&I business without any deterioration of credit quality from those folks who normally stretch to make these kind of loans, so the credit quality risk management will remain top of our minds all the time. In looking back over the last 5 years, I just looked at what we told the investors, we pulled out our investor deck and the strategic position of the company is exactly what we shared with you 5 years ago, and that was that we are going to be focused on strong organic growth, we would be continuing to properly manage the resource allocation from a capital point of view and have a branch lite strategy in attractive markets. So as a result of that being our #1 focus that's where we were now for over the last 5 years have become a bank in C&I business all the way from Boston to Philadelphia. And we are pleased to share with you that we have learned from those experiences and we are very confident about the quality of the teams and the opportunities that we see in DC and Chicago in addition to continued growth in New England, New York and the Philadelphia market. The #2 strategy that we had shared with you 5 years ago was strong profitability growth and efficient operations, we were operating 5 years ago with an efficiency ratio of about 78% or 80%, today we brought that down to 40%, 5 years ago we were operating with an ROA in the 22.3%, today we are close to a 1% if you take out the discontinued operations from that point of view and all that's been done by us ---+ by taking the bank, which was below $2 billion in size, 5 plus years ago and today crossed the $10 billion mark. From a credit quality point of view, again we said 5 years ago to you, that we would never compromise in underwriting standards, we would have a loan portfolio performance that consistently better than industry and the peers and that we would not take interest rate risk in building our company. So 5 years ago our nonperforming assets were ---+ nonperforming loans were 75 basis points of our total loans, today they are down 2.2, 5 years ago the industry was at 3.3%, today that industry has come down to 1.5%, but we have a significant advantage over the rest of the industry. Our charge-offs for the last 2 years has been practically zero, it's like in the less than 0.05%, so we remain much better than the industry average, and that is a major, major strength of Customers Bancorp, we are not stretching, we'd rather be in the lower margin high quality business than stretch, because of the high overhead ratios to be in the higher margin, higher credit risk businesses. We also talked about the efficiency ratios 5 years ago, total costs as a percentage of our assets were 2.2%. Today we brought that down to 1.2%, that 2.2% 5 years ago, compared to 2.75% of our peer group and 3% for the industry as such. Today our peer group is still at 2.5%, they are somewhat improved from the 2.7% where they were at, and nationally all the banks have also improved their efficiency ratio from 3% down to 2.5% at June 30, but we brought ours down from 2.2% 5 years ago down to 1.2% at June 30. Another measurement we look at is assets per employee and the total revenue per employee, we measure that effectively to talk about the productivity, because banking industry isn't very inefficient industry. And 5 years ago our revenues per employee were $400 million ---+ $400,000, and that compared with the industry average of about $200,000. The industry average unfortunately is still about $200,000, while we've taken ours up to $540,000. So the efficiency improvement in productivity is definitely go through, because we believe in having fewer higher quality better paid people then lots of people as such. So in essence talking about our loan portfolio today 40% of our loan portfolio is what we consider to be C&I loans and they happen to be in manufacturing, service, technology, wholesale, equipment and commercial loans to midsize mortgage companies. Another 40% of our loan portfolio is in multifamily loans with an average duration of 3.5 years and that happens to be majority of it in New York City and Philadelphia, Baltimore area, and then our commercial nonowner occupied commercial real estate loans are only 14%, and our consumer loans are only 6% of our loan portfolio. Over the last 5 years, the shareholders of Customers Bancorp had seen their (inaudible) increased, now their valuation increased by 214% compared to KBW regional bank index over the 5 years going up by 97%. So the question that you can see is our ---+ what our Board of Directors and management as we look at $10 billion mark is can we repeat what we did in the last 5 years or is there a better strategic option for us, and we look at all of those and we continue to look at that and we will do anything and everything that is in the best interest of our shareholders, because we are large shareholders of Customers Bancorp. So let me now talk a little bit about BankMobile. BankMobile as you know is reported a $5.4 million GAAP loss, and as Bob mentioned that somewhat related to seasonality, but also we are experiencing lower adoption rates as a result of the Department of Education Rules and all we've done this last quarter and the last couple of months has been systems conversion to get to take it completely off of the old antiquated systems that Higher One had and put them into the cloud-based data center with the business disruption systems in place and converted the entire $1.7 million students on to a brand new system, which was done this year and expensed all those systems conversion costs this past quarter. Even though the number of new accounts is running around 50% of where they were 45% to 50% of where they were at last year, we believe that over the next 2 years that's going to change and as we present to our students, the full service bank 85% of all the students surveyed by BankMobile say that they are very likely to ---+ likely to keep this bank accounts that they opened up as a student as their account for life, and we are noticing that taking place right now. Our organic deposit growth which is deposit growth other than student loan disbursement is very strong. So in spite of lower number of accounts our deposit levels are about the same as where they were last year. Even though we have yet to introduce our new app to the students, which will present the total bank to those students. So looking ahead how do we improve the performance of this business. Besides the student business BankMobile strategy has been to get into the white label banking business and we have signed up ---+ account in the nation as our white label partner, we expect to get that announcement out in the marketplace within the first quarter of next year. We have ---+ already spend about couple of million dollars into preparation for that and that will add a lot of value to the BankMobile business. Another business that BankMobile has started is called [Perks at Work], which is banking at work and that is a business which we believe will be much better than any of our competitors that they are doing ---+ it include student loan refinancing, it includes lending packages through digital means to employees of large and small companies, and of course it includes all the benefits of having BankMobile accounts, which are ---+ which offer free access to ATMs all over the country and the like as an HR benefit to large employers and we have already put together a team that is starting to market that and we are close to signing up a very large national account in that, plus the direct to consumer, and direct to consumer we are opening up somewhere between 50 to 100 accounts per day of consumer accounts. So the bottom line we ---+ the Board of Directors is very focused and within the month of August, we will announce a decision as to the future of BankMobile, it will be ---+ we are continuing in negotiation with an unsolicited proposal we receive from a top 50 bank in the nation, and that ---+ we are negotiating it, but we are not relying 100% on that being the way it will get to ---+ we cannot tell you that whether we will be able to get an effective way to a purchase and assumption agreement on that. #2 option, as we shared with you is that we believe spin-merge and we are pleased to share with you that the obstacles that we saw in the spin-merge with SEC on the lack of 3 years of audited financial statements, we've been able to overcome that obstacle, so spin-merge has become a real opportunity for us and we believe that even if spin-merge is the option that we execute and announce within the month of August, it will still add and bring in excess of $100 million in value to our shareholders. So both sale or spin-merge will result in excess, well in excess we believe of $100 million for our shareholders and the spin-merge will be tax free and the sale is going to be taxable. So it is something which the shareholders today have put zero value on, I am sharing with you that you will see its value to be well in excess of $100 million. We are very focused on building the business and very focused on finding a way to continue building this business and divest this business, so the digital banking continues to be built by BankMobile and BankMobile today is already the #1 digital bank in United States of America based upon the checking accounts it has and the total noninterest income revenues it has, and we believe that the future will look very good to whichever option we end up announcing to you and you should expect that to happen for sure based upon where we stand this quarter announcement in detail in line what Bob said, that this will be resolved this year. Looking ahead, we believe the industries facing challenges from flat yield curve that escapes nobody, but we are very, very focused on the interest rate risk management and asset quality as I've covered with you. We believe that we have an advantage over the rest of the industry, because of our efficiency ratios being in the low-40s, we believe within the next 12 to 20 months, 24 months we ---+ our efficiency ratios are going to be in the high-30s, and at the same time we are very focused on improving our funding base and very focused on improving our returns, so the end result is higher shareholder value creation over the next medium-term to long-term. So with that Dixie, I'd like to ask you to open it up for questions and answers. Sure, <UNK>. Our teams that we already have in place and we are adding have 2 roles, one is ---+ 3 roles actually, one is attraction of core deposits, #2 is on high quality earning assets, and #3 is serving our existing customers in a way that the customers see a huge value, and so its portfolio management as such. So the way the teams are compensated also is aligned with the strategy and we compensate our teams very well for attraction and maintenance of noninterest bearing and other types of DDAs, that is DDA is our definition of a core deposit. So you should expect us to continue to show strong growth in core deposits going forward. You should expect us to continue to show strong growth in C&I lending, it does take the teams sometimes between 6 to 12 months before they start to show results. However, we have very experienced teams in very attractive markets, so that even though Chicago and DC results won't become apparent to you until about this time next year. But we are very confident that in the New England market, New York market and the Pennsylvania market, the deposit growth first, lending growth second philosophy remains. The market is becoming for higher quality loans rather competitive. Banks are ---+ starting to do very stupid things, which some of us who have been in this business for a long time remember so done greatly \u2013 so done clearly, that they always do it. We are seeing the same thing happening right now in terms of terms, as well as pricing of C&I loans. We have told our teams, it is more important to get core deposits and higher quality loans than just to get volume of stupid loans. And let the competitors pick up those stupid loans and they are going to pay for it over the next year or 2, that is how we see things. I think good quality banks should see between 15% to 20% of their deposits to be in noninterest bearing deposits in different cycles. What you've noticed in this last cycle of 0 interest rates is unusual and you're going to see in our opinion a huge exodus from noninterest bearing DDAs into interest bearing DDAs or exiting the banking sector. You are not going to see that at Customers Bancorp. We have been very mindful of the quality of our funding base and we are ---+ we've actually recruited a team of product managers from a top 50 bank ---+ top 10 bank actually in the nation, and they are developing the state of the art cash management and technology driven products for us. And so you should expect continued strong growth in DDAs, interest bearing and noninterest bearing from us. Yes, sure. The yield on the mortgage warehouse portfolio today are running ---+ Over 4%. Over 4%, it's 4.2%, 4.3% plus the profitability of that business is plus (inaudible) fees plus you get approximately 10% noninterest bearing deposit compensating balances. So you can figure out that, that business to us is approximately a 2% ROA business. And that is the 2% ROA, even with funding it at with core deposits. So at June 30, our yield was 4.8% with the increase in the prime rate, fed funds rate, so that's how, according to. Is there a different number, Bob. Yes. It's 4.15%, I circled the wrong number, my apology. Okay. So it's 4.2%. And so going forward what happens with this businesses the last couple of days in the quarter, you see a 20% increase in balances from wherever they were in the last 3 to 4 days prior to the end of the quarter that's why our average balances for the second quarter were $10.4 billion, but not preview then toward $10.9 billion. Looking ahead, we expect the mortgage business, because we have core customer relationships. Our customers have been doing an average of 70% of their business is purchase activity, we see with higher rates as such, especially if you see a steepness in the curve as such but you will still see us having between $1.75 billion to $2.2 billion over the next four quarters in mortgage warehouse business, because it's a very core business and we just don't see how the balances are going to go below that. You are absolutely right, we are funding short term 2 week loans with core deposits. If we were match funding it, our margins would actually expand over here, but we are looking at this as a core business rather than just as a true business, which would indicate if you have loans for sale, then it's not necessarily a core held ---+ loans held for portfolio, but it's more of a technicality why we have to classify it as loans held for sale, but it's a core ongoing net interest income portfolio for us in a way. We have strategies of expanding our market share in this business, so that even if you see a very steep curve and for whatever reason you see the long-term rates, and the tenure going to let's say 3% to 4%, and we've gone back over the years and looked at it and we still firm love this business and feel highly confident that you're going to see us having on an average about $2 billion plus-minus percentage in this portfolio. As we grow the balance sheet, the percentage of these loans as a percentage of the balance sheet is not going to be maintained. We will see C&I business becoming a faster percentage of this portfolio compared to more C&I to the mortgage companies. So the C&I should be the fastest growth business for us followed by continued multifamily and then we will look at certain sectors of the consumer portfolio from a diversification of assets as well as net interest income, and so that is the way we are looking at it in terms of our strategy for the next couple of years. Mike in regard ---+ in regards to the portfolio in regards to the new volumes, we had total new volume loans coming on was $778 million with an average yield of approximately 4%, and that is, so the new loans are coming on at a little bit higher yield than what they had been previously, but I think mostly it is in terms of the increased margin. We have the significant growth in the warehouse portfolio, which is very strong, yielding in the strong margin portfolio and the growth in that portfolio really hold up that the margins overall in that portfolio. The Warehouse portfolio and there is a disclosures in our Q that go through the pricing, but the warehouse portfolio was 100% repriced immediately with change in ---+ within the month within the change of interest rates. And that's predominantly loans held for sale is that ---+ it's not mortgage banking it's not anything else. Well, the held for investment book, the C&I portfolio is a variable rate, is largely a variable rate portfolio about 2/3 of it is variable rate, but it does change within the ---+ whether it is 1 month, 3 months, 6 months or 1 year variable rate will vary, and I can't give you that statistics, but don't think ---+ it should (inaudible) down this call, Mike. Yes, Mike. Absolutely correct that the systems conversion have to become a higher priority to make the divestiture happen, and so that the front-end system, which would be related to the retention and adoption rates that became a lower priority for us to make this happen because thank mobile divestiture is going to happen and it's going to add. We believe in excess of $100 million to our shareholder value. So with that, it became pretty clear to us that systems conversion had to become a higher priority. In regards to spin-merge ---+ just to walk through the steps, at a high level, Mike, is that the assets related to the business will first need to be placed into a separate legal entity ---+ that ownership of that legal entity would be ultimately at the holding company. The holding company would then declare a dividend and would pay or would issue to the existing shareholders an interest in each of the ---+ an interest based upon prorata ownership of customers' bank, and interest in this new company, which would be a share interest, that would be the spin-off, that\u2019s step #1; and so you have the customer ---+ existing customer shareholders that would on 100% of the spin-off entity. The second, the next major step since there are several steps to get to that fee, but the next major step within the acquiring entity would then issue their common shares to the customers common shares in which the customers common shares will end up owning more than 50%, and that's necessary to qualify for the tax rate treatment, would end up owning more than 50% of the new entity of the combined entity, and that is it in a nutshell at the very high level. I\u2019m sorry. So when you're issuing the shares they have ownership, so they have ---+ there's common ownership of the multiple entities and then they're merged together. So that would be the next piece, but getting the ownership and to the acquirers, so you have acquirer and the acquiree under common ownership would be the key step and then after that the merging of the entities would be the next step, but that would be relatively easy once you get there. Yes, to make things again very, very clear on spin-merge our partner will be flagship, because flagship is the one which we've already shared with the market that is partners to get into the restructuring that potential deal, that's the way we put it out in our 8-K. So as Bob mentioned, we would spin-off the BankMobile business, then the BankMobile business spun out 100% owned by the shareholders of (inaudible) then what enter into a merger agreement with this privately owned bank called Flagship. And then the company shareholders will own between 50% to 60% of the combined company and then there would be a sale of deposits related buy from (inaudible) to this new entity, and when you get all that done, so you have the ownership held by (inaudible) shareholders in this new BankMobile will be worth well over $100 billion, that's what we are sharing with you. That's correct. BankMobile will not acquire its own bank charter, at this instance, Flagships bank charter will be the surviving charter. It's Bill <UNK> with Tieton Capital. The securities on the balance sheet increased by roughly $0.5 billion in the quarter. Would you talk about that change and how you foresee that unfolding in the coming quarters. Bill, we ---+ if you look year-over-year, I see a significant increase in the securities and we made the strategic decision when the warehouse business had its seasonal contraction during the first quarter that we replace a lot of that contraction with investment securities. And so there was a significant investment made during the first quarter, which we didn't finish that up until the second quarter. We had been running historically with a low investment portfolio and we also added as part of that strategy we added to the investment portfolio to provide us with additional interest earning liquidity resource. So on a go forward basis, this is really more the way you want to be structured as opposed to really to fund the warehouse business. No, no, no. This has nothing to do with the funding of the business, this is to manage the overall net interest income so that you minimize the fluctuations and you decrease the volatility. So these are very short-term securities that we've put on, we're not adding on to the interest rate risk, we are funding the mortgage warehouse business with our core deposits and borrowings combined, and you should not see a significant change in our investment portfolio and in our investment strategy going forward. Frank, we are adding somewhere between 50 to 100 new accounts outside of the student channel every single day. But from the student disbursement channel, we are adding on an average somewhere around 5,000 to 10,000 accounts every week. So, it's immaterial what we are adding through the direct to consumer sector. Within the next 3 years, we believe our BankMobile has a potential to look like will be that the current student business will be about 50% of the business or customer acquisition. And the white label banking and [perks] at work will make up the other 50% of the customer acquisition. And that BankMobile could be the #1 customer checking account, customer acquirer in the United States of America, more than Bank of America's checking account customer acquisition. That is the potential we see in BankMobile. Frank, in terms of the conversion to and going to the $10 billion mark in the build expenses, we have stated in the past that we expect those would be between $2 million and $5 million. We have already begun the process and so you see those expenses ---+ those expenses coming through during actually the first and the second quarter. So that's embedded in the expense run rate in terms of those conversion expenses. On an ongoing basis, we think that the expenses will be ---+ marginal increase in expenses will be $2 million to $3 million on an annualized basis and that's going to be in line with what we're seeing in these transition costs. So I haven't thought about it quite like this the way you're asking the question, but I would say if you're looking at the first and the second quarter that our conversion costs are embedded within that run rate, and I wouldn't expect to see a significant jump when we move over, because now we're incurring some of the transition costs and those will be replaced by ongoing costs later on. Okay, well, thank you very much, ladies and gentlemen for joining the call and if there are any other questions, please give us a call. Thank you and have a good day.

2017_CUBI

2016

UIHC

UIHC #Thanks, <UNK>. This is <UNK> <UNK>, President and CEO of UPC Insurance. With me today is <UNK> <UNK>, our Chief Financial Officer. On behalf of everyone at UPC, I want to thank you all for joining us today and for your interest in our Company. Continued strong organic growth and diversification were the hallmarks of Q1 for us. We wrote over 30,000 new business policies during the first three months of the year, a 28% increase from last year's first quarter. The policies were spread across our geographic footprint but over 85% came from outside Florida. Average premiums on our new business policies were up about 4% compared to last year's first quarter. We ended the quarter with over 49% of our policies in force outside Florida and total premium in force of just under $600 million. For the first time ever this quarter we reported net earned premium of over $100 million. The increased scale and diversity of our book are paying dividends for our Company. As you well know Q1 was a very active weather quarter. We note especially the highly unusual tornadic activity in Florida. One report we saw noted 29 tornadoes in Florida during Q1 versus a 15-year average of eight. And the hailstorms in Texas, one of which Allstate reported to produce the most losses of any hailstorm in its history. These events caused us to suffer in total more than $15 million of catastrophe losses during the quarter, about the same as last year's first quarter. Yet, this year, we were able to produce profits in every month of the quarter and report total pre-tax income for the quarter almost $4 million higher than last year. For the remainder of the year, the catastrophe aggregate reinsurance program we put in place on January 1 should eliminate any further impact on our financial results from non-hurricane cat activity. That is also a significant difference from last year. We're moving forward operationally as well. This month we began the conversion of our book in Texas to our new policy processing system and the conversion of Florida will commence soon. We are already using this system to bring new business in five states and as the conversion of other states progresses we will realize significant savings while delivering a greatly enhanced experience to our agents and policyholders. This is just one example of the many infrastructure investments we have made to help prepare us to become the leading provider of property insurance in catastrophe-exposed areas. Mostly, though, those investments have been in people which are the core asset of UPC Insurance. This quarter we named Paul DiFrancesco our Chief Underwriting Officer. In a very short time Paul has helped us advance many underwriting and product initiatives which are furthering the quality growth of our Company. I'm grateful to Paul and to all the men and women of UPC who work so hard every day to help us continue to move forward on our journey. At this point I'd like to turn it over to <UNK> <UNK> for his remarks. And when <UNK> is done we will both be available to take any questions that you may have. <UNK>. Thank you, <UNK>. Good morning. Before we get to the financial highlights I would like to encourage everyone to review our press release from April 27th and our Form 10-Q that we plan to file on May 4. Highlights of UPC's first-quarter 2016 included gross written premiums of $136 million, 28% growth year over year; gross premiums earned of $147 million, 27% growth year over year; net income of $3 million or earnings per share of $0.14 despite $15 million of catastrophe losses; an underlying combined ratio of 83.8%, down 60 basis points year over year; book value per share increased to $11.35 per share, up 12% year over year; and return on average equity on a trailing 12-month basis of 13%. As <UNK> mentioned, UPC saw continued solid organic premium growth during the quarter. Total revenues grew 31% from $82.4 million last to $107.6 million in the most recent quarter. Direct premiums written increased approximately 30% year over year, primarily from balanced organic growth, which was derived 49% from Florida, 22% from the Gulf region, 14% from the Southeast and 15% from the Northeast region. Florida grew a modest 3.2% on a direct basis but contracted slightly net of return premium obligations related to business assumed in prior quarters. Total policies in force at the end of the quarter grew to just under 365,000, up approximately 38% year over year with a policy mix inside versus outside Florida of roughly 50/50 compared to about 64/36 last year. UPC's Q1 numbers do not yet include Interboro Insurance Company but that will begin next quarter. The Company did receive its regulatory approval from the New York Department of Financial Services last week. And that transaction is expected to close this Friday, April 29. Moving on to loss results, UPC's loss results for the quarter on an underlying basis were almost unchanged year over year with the ratio up about 30 basis points on a gross basis and down 40 basis points net of reinsurance. As I mentioned, unfortunately, the Company did have approximately $15 million of catastrophe losses and $3.2 million of reserve strengthening during the quarter which ultimately drove the combined ratio to 101.8%. A little more color on the cat losses. The Company had 10 different events, five in Florida, three in Texas, one in Louisiana and one in Massachusetts and Rhode Island. Four of the Florida events were tornadoes. We had one hail event in the Orlando area. The three Texas events were all hail driven. One event in Louisiana was a combination of wind and hail and the Northeast Winter Storm Olympia added to the losses for the quarter. As for the reserve development, we did some reserve strengthening primarily on accident year 2015, the most recent accident year which is still very immature. So we would encourage everyone not to read too much into the adverse development for the quarter. Some of that was, about half of it was related to cat, half of it was related to attritional losses. The cat was mainly the Texas event from 2015. On the non-cat side it was a mix of Florida and Texas. We had opportunities to probably release more IBNR but given the limited time and quantity of information and data we chose to take a more conservative route and hold up some of that IBNR on accident year 2015. Management's expectations for profitability in each state remain intact with virtually no trace of adverse selection as evidenced primarily by the solid underlying loss and LAE ratios. During the quarter the Company saw its non-loss operating expense increase approximately $8.8 million or 29% year over year. $7.8 million or 89% of the change was driven by policy acquisition costs. $5.7 million of that are agent commissions which mostly vary directly with premiums and continue to reflect UPC's change in mix. The remaining $2.1 million of the change impact was related to policy administration fees and premium taxes. Policy administration fees totaled approximately $4.4 million during the quarter which is up approximately $1 million year over year. Our system conversion efforts designed to significantly reduce most of these costs are progressing with our first conversions on Texas renewals occurring this month. All other operating expenses increased approximately $900,000 year over year due to our continued growth but actually declined about 140 basis points to 8.1% of gross earned premiums. Lastly, the net expense ratio of 38.4% was a slight improvement of approximately 20 basis points year over year. Our balance sheet remains very healthy as UPC ended the quarter with total assets of a little over $0.75 billion and nearly $0.25 billion of shareholders' equity. Our liquidity remained strong with cash and investment holdings of just under $600 million, unrestricted cash available to the holding Company remained approximately $60 million and finally the combined statutory surplus of our group at the end of March 31 was mostly unchanged at approximately $152 million due mainly to the catastrophe losses during the quarter. And now I'd like to reintroduce <UNK> <UNK> for some closing remarks. Thank you, <UNK>. As I noted on our last call we learn from the past but we live in the present. From that standpoint things look very good for UPC Insurance. We've had a terrific month in April from a top line and from a loss standpoint. We were so pleased to receive regulatory approval from the New York Department of Financial Services to close on the Interboro transaction, which should occur tomorrow, and we look forward to welcoming 11 new associates from Interboro into the UPC family and growing that already strong book of business as we move forward. With the catastrophe reinsurance program that we have in place we feel good about our exposure to non-hurricane cat activity going forward and we are in the process of putting in place by far the strongest hurricane cat reinsurance program in the history of the Company. For all those reasons we are really excited for the journey ahead. At this point we will conclude our remarks and we will take any questions that you may have. I think the appropriate answer to that question is yes in that future non-hurricane cat events in 2016 would not have an impact on our financial results because of the cat reinsurance program that we put in place. With that said, I guess one important caveat to that is that cat reinsurance program has a limit of $20 million above the $15 million. So to the extent that those losses aggregated above $35 million, we could report additional losses from that. That would be a very extreme aggregation and we don't anticipate that. So the activity ---+ there has been some activity and April, obviously mostly in Texas but it won't impact our results. Immaterial amount, <UNK>. This is <UNK>. It was mainly Texas both for cat and non-cat. A lot because we really haven't started realizing any of the savings yet. The benefits of scale coming from the Interboro transaction and expense synergies will also help Q2. But the second half of the year is when we finally expect to start reaping the benefits of our investments in these new systems, so there's virtually no benefit that's been realized yet by UPC on the expense side. So as we've guided in the past we think there's at least a couple of points there in the next 12 to 24 months. But it's going to come in ---+ Yes. I don't know if we would guide you towards that. I think we're still guiding towards our target combined ratio of 85%. We're going to get there in different ways in different states and to the extent that we have opportunities to realize savings on a reinsurance program, we may buy more reinsurance that makes the ceded ratio not change. We want to make sure that our Company is anti-fragile and that we get stronger when events do occur. So we're not going to try to cut corners on that to realize savings on our ceded premium ratio. But we are still seeing very attractive pricing on reinsurance programs and we're looking to put some creative things in place that just further the strength of our Company. Yes. We're writing about 50 policies a day with Geico and we are looking forward to growing that partnership even further. That's all outside of Florida. Well it's certainly unnecessary in the short term and our growth outside of Florida and the quality growth that we've had outside of Florida demonstrates that. But we're building this Company for the long run and we think an A. M. Best rating down the road will certainly help us access other markets that we could not access without it. So we're still positioning the Company to achieve an A. Best rating while keeping an eye on the changes that they are making in their modeling and rating process which we have not fully digested yet. So, yes, it's still on our radar to do that at some point. We still continue to see strong growth in our Gulf states. Texas and Louisiana have been very strong sources of growth but we're also seeing growth in the Carolinas and we're seeing growth in the Northeast. We started to ramp ---+ we started to write in a couple of new states recently, Hawaii and Connecticut, those have started slowly. Like all of our states have we haven't burned our way into any state and started writing a lot of business right away. It typically takes us six months to a year to tweak our product and earn the trust and respect of agents and start writing business. So we like to start slow and we've done that. But in states once we've established a foothold there for a year or more, we become a trusted part of the insurance landscape and agents believe in our product. So we're seeing really very balanced growth in the Gulf, in the Southeast and in the Northeast. Our perspective is that that was a highly unusual, very extreme series of winter storms that occurred in Massachusetts and we took a lot of losses there as did many other carriers. I think we've discussed previously our reinsurer there showed us some data that suggested that our loss experience was less severe relative to our market share than their other cedents. So we felt good about our relative experience but nonetheless wanted to learn some lessons from it, so we changed some underwriting criteria and we took some rate in Massachusetts to help us prepare for the future. Sure. Well Interboro is a little more capital efficient, using less underwriting leverage than the rest of our group. So that will help, they will bring in approximately $34 million of additional statutory capital boosting the number closer to about $186 million in total. So net of their writing ratios and net of what we're doing with our aggregate reinsurance, our core reinsurance I think from a writings ratio perspective obviously we never want to exceed 3 to 1 on a net basis. That's absolutely the red line for us but the goal would be probably somewhere closer to 2 times statutory capital net of reinsurance. Gross is about double that so I think our gross writings ratio last year was about 3.6, up 360%. So if you think about a 400% gross, 200% net those are good general targets. We are continuing more or less at that pace. Through the end of March we were ---+ we hadn't even gotten into that treaty yet. But with IBNR and obviously continued development in April, we knew we were going to get there. So we booked the full 15 which exhausted our retention in full. But the gross loss as of the end of April is just under 17 million. So 16.7 million to be precise. We don't expect to come anywhere close to exhausting the limit but we certainly do expect to see some loss to our partners on that treaty. What was the last part of your question, <UNK>. Yes, I would say we don't have any of those limitations at the present time. So every event has met our franchise deductible of $500,000, so the smallest event we had was just about $500,000 which means 100% of that counts towards the aggregate. Our largest event was about 4.4 million of the total. But I really would prefer not to go through all the individual losses from each individual event. The PCS numbers associated with those events were 16, 16, 16, 20, 16, 21. Those should give you a broad sort of estimates as to how our Company and the industry were impacted. But I would just say we have no ---+ the only at limitation we have in the cat aggregate relates to Florida where we only placed the coverage at a rate of 86.5% whereas everything outside of Florida was placed at 100%. Sure. Well, in Florida we just did our annual rate filing and our rate indication was flat overall. That doesn't mean it was flat in every rating territory. We were up some, down some but overall it was flat. So that's where we are in Florida. Outside of Florida there is no generalization that you could make. Every state is different. As I said the new business that we wrote in the first quarter had premiums up about 4% from the new business that we wrote in the first quarter of last year. We did take some rate in Massachusetts and Rhode Island and North Carolina made some adjustments. So we take it state-by-state. We are focused on rate adequacy. We are not trying to be the low-cost provider. And we take that very seriously in every state. And as I mentioned in my remarks, Paul DiFrancesco has built onto an already strong team and added some new people and product so we have great resources to stay on top of all of our states and make sure that our products are positioned right in the market, are competitive but are rate adequate. I think everybody's seen an increase in AOB in their Florida book. I think we have been less affected than some others for a couple of different reasons. One, it is primarily a Dade and Broward phenomenon, not exclusively but primarily, and our concentrations in Dade and Broward are less than some others because we don't do a lot of takeouts and that's takeout country down there. The second reason is the approach we take to AOB which is something I'm not going to share a lot of details in. But we have our General Counsel Kim Salmon before she joined us was an insurance defense litigator and the thought leader in Florida on AOB for a long time. So we have very good strategies for dealing with AOB. It doesn't mean we don't suffer losses from it. We do like everybody else. We're continuing to try to increase strength and the language in our policy forms and we saw it with Citizens (inaudible) and we followed suit on that. So it's a war out there in Florida and we're fighting the good fight every day. Yes. It will. We don't see prices increasing. The pricing environment is very attractive. I will say we view our reinsurance counterparties as partners. We're in this together for the long run, so we're not trying to take every last nickel from them. We want to have a fair price that is low but also gives us a high-quality panel of reinsurers who are committed to us for the long term. So that's how we approach our program every year. We are. We're in the market right now and our goal is to have the program largely done within a week or so. So we're be done well before June 1. Well, and certain equities ---+ this is <UNK> <UNK> ---+ and first I should say thank you for recognizing our underlying combined ratio. We appreciate that very much. As far as our investment strategy and philosophy is concerned, we really want to minimize asset risk for shareholders. We write short-tail property insurance whereby 90% of our policyholder obligations are going to be paid out in less than a year. So we've been very consistent in our approach to having short durations, high credit qualities, highly liquid investments both stocks and bonds. So the stocks we've invested in are typically your blue-chip, equity income, solid dividend payers. The bonds are a mix of government, municipal and corporate issues that are best-in-class if you will. So we really want to avoid any surprises, be responsible. Investment income is an important part of the overall operating returns for our Company. But you don't want to be a forced seller of securities after a major catastrophe loss. And that's ---+ we intend to hold everything we buy to maturity and paying proper amounts for liquidity to manage through our net cap retentions. Generally individual companies. We have used mutual funds, some very ultra-short term bond of funds to part cash to earn, keep every dollar working. But we have largely avoided ETFs and mutual funds as it relates to equity. Yes, they are. Interboro has maintained their book and in fact grown it a little bit. Yes that's been solid profitable business in Q4 and Q1. So the results have been great, their balance sheet is an intact, purchase price is fixed as is the minimum equity they will deliver to us tomorrow. Approximately 30,000. Thank you, <UNK>. We appreciate your support very much. You're talking about loss in LAE the number we reported was $64.3 million. Underlying excluding cat and reserve development was $46 million. So the $46 million is about 55% water related, about 15% fire, 10% liability. That's the general mix by cause. So you know, we've got very little change in terms of the mix by cause either over year. It's been very, very consistent. Thank you very much. We appreciate all of your time and your interest in UPC Insurance and your support for our Company. We look forward to talking to you again next quarter.

2016_UIHC

2017

WCG

WCG #That's a good question. There's a lot of things to play out still for 2017, obviously. But I am pleased with how we ended the year strong in Medicare Advantage and being able to see cause-and-effect in terms of initiatives that we embarked on in 2015 and through 2016 and having that show up in the results, not just in the MBR but also in the value proposition to be provided to seniors and then ultimately growth. So we'll have to see. We're certainly in a good position having exited the year strongly, but we have to see how 2017 kicks off. And now PDP, there's more mechanics in getting those reset to the low 80%s. So while I am thrilled that we were able to outperform our targeted cost structure for 2016, there's only so many things you can bet on prospectively, and that is not one of them. So we will have to see with the new business coming in and how that kicks off after the first quarter. We do not have any California Medicaid lives. Okay. Let me take the first part of your question. Fair question on terms of guidance, but as I laid out in the prepared remarks, you have to look at the sources of the Q4 beat because there is a sound basis for $6.00 to $6.25, as we laid out on December 19. And the source of the Q4 beat tilted significantly towards PDP, which gets reset, and there are certain things [you don't bet] on recurring in PDP. And then second, tax rate, and that gets a lot simpler for 2017, and there is nothing we see that 2016 tax rate that changes our view on the midpoint of the 2017 guidance. So that's where the analysis it goes into, okay, as we look at 2017 guidance, where are we at. And we do not even have January closed, so there is no ---+ I think some might view it irresponsible to increase guidance off of a zero-plus-12 forecast. So let's see how the first few months go. I think we are well-positioned exiting the year and thrilled that we could deliver an outstanding 2016 and feel good about our positioning with the current guidance that we have reaffirmed. So <UNK>, we certainly painted a picture back in the Investor Day of a trajectory which had us growing our margin. And we have also discussed, in different forms, doubling the size of the business. What I will tell you is that, based on the line of sight that we have into 2017, we feel good that we are on track. But there are lots of moving parts between organic growth, between changes in the mix of business and M&A, such that I do not think it would be sensible for us to try to get more granular on a year-by-year basis. Hopefully, we are establishing the credibility of a team that executes on its commitments. And part of that is being very thoughtful about not getting ahead of ourselves. So we are pleased with the year. We like the fact that we are ginning up the growth engine, but we're not going to start making predictions out into future years. <UNK>, let me just give a little bit of context for those that might not be familiar. We are talking about the state of Florida, and the governor has been very active in trying to ensure the sustainability of the Medicaid program and most recently has introduced some statutory regulation that would put a certain cap on hospital reimbursement. We think it will benefit the taxpayers in a state of Florida. We see this as essentially a pass-through relative to ourselves, so we are not looking at this as somehow an opportunity to improve our own margins. But as states gain what we expect will be a little bit more autonomy and an opportunity to make more decisions about the program, I think what Governor <UNK> has done is one example of ways in which they will be innovative and find ways to drive better value to the Medicaid programs. And we are extremely supportive of that kind of fresh thinking because these beneficiaries certainly need the care, and driving toward fiscal discipline is something that we support, but it has to be done in the right manner. So yes, we are encouraged by what we are seeing come out of Governor <UNK>'s office. I do not want to speculate or guess. I think that the governor and legislature have had a pretty good track record of running an effective program. They are good partners to us. But I think it's too early to say and to try to gauge whether or not this is going to be finalized and get approved. You are right. That is a good question because the state's value is an 85% minimum MBR, but as you know and many others, there are adjustments to both the numerator and the denominator when you calculate that, including some pretty large adds to both the numerator and denominator, which effectively put in a priority position the risk corridor with the paybacks to CMS, which are already reflected in our GAAP results before you would even pierce the minimum MBR, which is a nuance in PDP. So we are not at that minimum for the payback, but we certainly are at the ---+ we have got a large payable accrued for CMS for the risk corridor because of our performance this year. Yes, that and the adjustments to the numerator and denominator combined, but the risk corridor payable trumps the minimum MBR. <UNK>, as you might suspect, we are monitoring those developments really closely. Remind everyone that we actually built out this capability as it relates to the exchange, so we were running an exchange product in both New York and <UNK>tucky. Now we have since terminated those. They had de minimis membership, but the goal there was to make sure that we had the operational infrastructure and capability so that we would have the optionality in case that became a popular forum for managing Medicaid beneficiaries or managing that strata which we now see on ACA exchanges. So we've got that functionality, and we are looking to see which way things head based on the changes in Washington and changes in the ACA law. Yes. We do not see that we would have to buy something in order to pivot and take advantage of that new direction. Essentially upon closing, we expect to use about $100 million of their parent cash to help fund the acquisition. So it's an $800 million approximate total valuation, and WellCare would need to come up with $700 million. That is what we are planning for, plus some expenses we have to pay. In terms of the capital then in addition ---+ that's their parent cash, and that is their public information from the last time they reported. Then we look at their underlying subs, and their risk-based capital is in the zone of ours, which is a pretty efficient level. And so wouldn't expect any meaningful upstream dividends from their existing capital position. Obviously as a business generates profits, there is future dividend opportunities. But that's how we evaluated the capital structure. That is a heck of a hypothetical, <UNK>. We've got a New York business also, and we are excited to combine those footprints. Right. So let me make it clear. As we are reporting, we are reporting on WellCare Health Plans, Inc. 's results, not Universal American. They are still a standalone public company until we close the transaction, so all the figures that we are providing, including the minus 1%, that is for WellCare's existing book of business. You are right to point out that Universal American, once again, public information, their private fee for service was down half a Star, but you should also look at their Houston HMO, which went from a four to 4 1/2. So all of that was public information before we announced the transaction. So the minus 1%, <UNK>, the difference between that and the plus 0.25% in the CMS publication is really WellCare-specific due to WellCare's Star rating change and a couple of 3 1/2s that are now threes. <UNK>, in my prepared comments I mentioned that we did get the termination of the Hart-<UNK>-Rodino filing on December 30, so that was a major step forward. We still have significant regulatory approvals that we need to obtain, including the states of Texas and New York. And we remain with the second-quarter close as our best estimate, recognizing that we do not have control over the regulatory approval timing. But second quarter we think continues to be a very reasonable estimate. That is correct. Since it closed literally the last second of the year, membership would be in there, but there is really no significant P&L activity.

2017_WCG

2015

CL

CL #No, no, <UNK>, that is straightforward leverage. Our overheads, our dollar overheads, were actually down year on year, with the benefits we're getting from the restructuring program. But there is a lot of overhead that is dollar-denominated. And when you have the downward pressure of 13% foreign exchange on the top line, you end up with a leverage negative, and it is entirely traceable to that negative leverage. I don't know. The only other mix in it is the mix of countries. So it may have been a country mix issue. We'll have to get back to you on that. I don't have the answer at my fingertips. The ---+ what do you call it ---+ corporate overhead is flat. So as I answered before, on this quarter, it's definitely leverage. And your question on spending is. The oral care organic sales were better than the Company average, number one. Number two, in terms of total spending, you're right. The trade spending as a ratio is a multiple of over 3 times the traditional advertising spending. And relative to the category growth rates, <UNK>'s question was to do with volume. And my answer to the question, this balance between volume and price. And he was asking whether the volume was bottoming out, and would come back. And I think the answer we gave was, you would expect that balance to come back, once the higher pricing that has been taken had worked its way through, and that we didn't expect that to be earlier than 2016. And the answer is, we're not going to get into that level of detail. Hey, <UNK>. We have both. The local tend to be more country specific, Columbia and Mexico. So they tend to be both. And if I said it, then I apologize, I didn't mean to say it. We're not waiting on anybody. We have been taking pricing in Latin America. And I would further say, when you look at the breakdown of raw materials in today's world, many of those raw materials are dollar-denominated. So even the local competitor is going to be hit with the local currency transaction impact of raw materials coming into the country. So I would say that the incentive to price is fairly elevated, across the board. No, we don't ---+ again, we're not going to get into that level of country-by-country detail. Yes, I think when you look at the European environment, obviously, it is our lowest-growth area of the world. I think the good news is that, although pricing has been consistently negative in Europe, if you look at the three quarters this year, it has become positively less negative. Unfortunately, we had the volume negative in the third quarter. And I would say, we would say that that is going to come back. And we're certainly planning for positive, organic growth, going forward. Yes, the only thing I would comment to, <UNK>, is that we had a situation in our Europe West grouping, which is essentially our Germanic grouping. Which had to do with the transfer to a new distribution center, which disrupted the shipments of that operation specifically in the quarter. So I think ---+ I know Europe was in part affected by that, on the volume side, which we see A, is a one-time, and B, already corrected and coming back in the fourth quarter. But it did have an effect beyond the usual market travails in Europe. Yes, I ---+ again, you're right, it has to do with the pricing. You can see that the pricing, of course, is more elevated than the prior two quarters in Latin America. And we took strong pricing in Brazil, which had an impact on volume. And usually the way that works is that, as I said earlier, once the pricing works its way through, then the volume comes back. The categories are still growing mid-single-digits, so we hope things stay to the normal cycle of events. No. The ---+ okay, so third quarter, the prior-year gross profit was 58.6%. We got 140 basis points positive from pricing. Between our funding, the growth savings and the restructuring, we got favorable 270 basis points. So funding the growth, continuing to do very well on material pricing, there was a headwind of 390 basis points. And so the offset of the resulting 120 basis points negative, to the 140 on pricing, gets you the plus 20. And meaningfully, over half of the 390 basis points negative was to do with the transaction impact of foreign exchange. Hey <UNK>. No, <UNK>, sorry. What I said was, the official price increase that we were granted was 74% in the fourth quarter of last year. So ---+ on some businesses. So that is (multiple speakers). Yes. I'm not sure I would go all the way there, <UNK>. I think we're comfortable with the 4% to 7% range. I think your sense of pricing is right. We still have a recovery to move the gross margin. Because to get to flat on the year, we have to be, as you will calculate from the squeeze, we have to be up on the quarter. So it will be within our range. I think we're thinking, if you take the nine months, it would be around there. Hey, <UNK>. On the first, again without being glib, the answer is a simple no. Particularly in our segment of the pet nutrition business, which tends to be the more premium end. So we have not seen it creep into speciality. Cash repatriation, Venezuela is Venezuela. Absent Venezuela, it's the same as it has always been. So we have the ability to repatriate. Sometimes timing is variable, country by country, but no change from prior. Sure. Hello, <UNK>. Yes. I probably could, but I'm not going to, I don't think, <UNK>, because we're not going to get into that level of detail. I would say to your general point on digital, it's less category specific, although the category may be linked to the user. It's more, which user you're trying to get to, and how they access. We just went through an extensive review, for example, in Latin America. The majority of viewers, millennials, they happen to be a growing majority of parents. They happen to do an awful lot on Facebook, and they happen to be avid viewers of YouTube videos. So if you want to connect with that group, then the best way to get your advertising message to that group is YouTube videos, and to do so in a way that is purpose-driven. So if you were to Google all of that, you would see some pretty interesting work, from our point of view. But it tends to be more driven by the viewer than it does by the category. Okay. Good ---+ sorry, is that it. Okay, then thank you all for your questions. And thanks to all the Colgate people around the world that deliver the results. Thank you, everybody.

2015_CL

2016

IIVI

IIVI #Well, first of all, I do think that we will have the one-time items continue into the next quarter, simply because we only had EpiWorks for two months and ANADIGICS even shorter, 15 days. But I don't know that we will have one-time items every quarter or for many, many quarters. That's the first thing. The second thing is ---+ Fran put it very well ---+ we have, with both our acquisitions, an increase in our level of expenses higher than we're used to carrying. And we've been pretty focused on earnings company for a long time. So, while I expect that it is not an overnight sensation to figure out how to improve the operating results here, we are committed to making sure that we have the best utilization of these assets and can, to the best as possible, really see them contributing to the profile of II-VI. Well, certainly, in this past quarter, we had quite a lot that were just the transaction costs. But I think going forward, we do a lot of things that ---+ just think a lot about the whole spectrum of things that can be done, from utilizing space better to looking at the supply chain, et cetera. So, I think it could probably run the gamut more along the operating line and precisely having to do with transaction expenses. Yes, <UNK> ---+ this is <UNK>. I would say as expected. And we've seen a similar pattern with other acquisitions. Customers can settle down, and the teams also are able to stay focused or regain their focus on the business. And I'd say it's been pretty much business as usual. Thank you. If there are no further questions from any of you, this concludes our prepared remarks. We ---+ I'll remind you that any of the answers to the questions that we've given today may have contained some forward-looking statements, which are just based on the best of our knowledge today, and for which actual results could differ. We want to thank you all for joining us. And, Fran, for closing comments. Yes. Thanks, everybody, for joining us. And I hope you get the flavor of the project that we've undertaken with our VCSEL platform, and how we've gone about it quite aggressively to put together these pieces. And it will take us some time to play out, but we're quite confident that we've got a good strategy. Thanks, everybody. All right. Have a good day. Bye bye.

2016_IIVI

2016

LH

LH #Nick, it's <UNK>. On BeaconLBS, the strategy across the enterprise is consistent. It's new customers, new channels, new markets. So for BeaconLBS, the expansion opportunities in 2016 are new markets with the existing customer, which is United. New customers, which are other organizations that may be interested in subscribing to the tool. And new channels, which is the addition of more capabilities such as molecular diagnostics to the menu. And all those things are underway. And we feel very good about where we are with BeaconLBS, and it has been a ---+ this is a service that the BeaconLBS team within LabCorp has really invented, created, designed and implemented. And I'm really proud of them; they should be really proud of themselves about what they've accomplished because it's terrific. And it's generating a fairly significant amount of revenue now, and we see the opportunity for great growth there. On capital allocation, we have said many times that our target leverage is 2.5 times; that is only a target. We are always going to be flexible in terms of looking at how we allocate capital. We do expect that by the second half of the year we will certainly be in a position to consider returning capital to shareholders through share repurchase. And, again, it depends on the M&A pipeline. It depends on how the cash flow stacks up. But we will always be evaluating that opportunity. As you know, I think we've had a pretty consistent history of share repurchase as a way of returning capital and creating value for shareholders. <UNK>, what we said was that we expected to generate $100 million in incremental revenue for the enterprise by 2018. So we haven't talked about the run rate of the companion diagnostics business specifically other than to say we had double-digit growth in 2015, which we were very pleased with. But we don't want to confuse the $100 million in incremental revenue, which was the initial target that we set out a year ago for the companion diagnostics growth with the size of the business. Because the size of the business is already actually quite close to that number. No. I just go back to what Debentures said; I think she covered it quite comprehensively. There's billions of dollars in cash on the balance sheets of biotech. And when there's a good compound that a company is looking at, it doesn't get canceled because of lack of funding. There's always a way to find funding for it. Compounds or studies get canceled because of adverse events or because of a change in focus. But we don't see the, quote unquote, funding environment as having any near-term effect on where we are with Covance at all. And, again, as Deb highlighted, 85% of our revenue is coming from what we would characterize as large pharma. So the exposure to biotech is only about 15% of total Covance revenue. <UNK>, all the revenue streams that we have obviously flow into the two segments, so everything has been accomplished there. No. The 31% is the Covance business. The nontraditional ---+ so the way it source out, Bob, is that anything that reports into diagnostics is reported as part of diagnostics. So, the forensics, the (inaudible) ---+ all that stuff reports in through diagnostics, and that's part of what we report as diagnostics. The only thing that has changed in the way that we have historically reported is what used to be reported as part of LabCorp in the clinical trials business, which was our central lab, has moved over to Covance. And what used to be reported as the Covance food safety and nutritional chemistry business is now reporting up through LabCorp. And you think of that in approximate terms as we put a little more into Covance than has come over to diagnostics but not materially so. To take a first cut, I think maybe what you're getting at is with the acquisition of Covance we picked up a lot of pharma and biotech customers that we didn't have that now represents, call it, around 30% of our total. So by definition, call it, the government reimbursement side is a lower percentage given we've added a new customer base. Yes, we can ---+ I think we actually published this chart that shows those percentages, Bob, and we'll get that up. But my recollection is pure government went from 17% to 12%; and managed care went from a little over 50% to about 30%. So, say we went from approximately 67 to approximately 42 in terms of managed care and government payment across the enterprise. Does that help. I guess there was a lot in that question. So let me start by saying that monetizing the data in and of itself has never been something that's been an aspiration for LabCorp. We don't view data sales as ---+ it's not going to generate enough revenue to materially help us, and it's not what we want to do strategically. What we want to do is we want to use the data to further the strategy. And the strategy, obviously, is to execute on our three core goals, which is delivering world-class diagnostics, bringing innovative medicines to patients faster and using technology-enabled solutions to change the way the care is delivered. What I see in getting patient consent through the patient portal is we have patients who come to us for lab testing; they come to the patient portal to get their results. When they come to the portal, we are now addressing the patient population in a place that we've never addressed them before and that no one else is addressing them to say, given your diagnosis, given what we know about you, would you be interested in being contacted in the event there was a study that could potentially improve your own health or could improve the health of the population as a whole. And the response has been very positive. And as I say, we launched it in 4Q. Tens of thousands of patients have encountered the prompt. A lot have said yes; some have said no. We are working on figuring out how we can improve the response ---+ the yes rate. And, again, this is not as simple as when you go to download an update to your Apple phone and you either say yes and you get it, or no and you don't. There has been a rigorous compliance review. There are protections around how we present this to the patient and what we ask them. And we've gone through a very thorough review to make sure we're doing this in a way that is going to be protective of the patient's privacy and our responsibility to honor that. Now, again, what does that lead to. It leads to a large database of patients which can be accessed for a variety of things ---+ clinical studies, Phase IV, observational studies, reaching out to patients to ask them questions about medication use or medication adherence. So just a whole variety of areas in which we think this becomes a differentiating factor because we have the patients' consent to recontact them. So I would contrast that with an anecdote that was told to me recently which is, a patient got a letter in the mail from a pharmacy saying since you're taking this drug would you like to be in this trial. The patient was taking the drug for a completely different reason and was annoyed by the letter because the patient had never given the pharmacy permission to write them letters and ask them about what they want to do because of their use of drugs. We get the patient's consent beforehand, before we ever recontact them and we ask for it. And as a result, I think we're going to have a very ---+ a cohort that's going to be very interested in how they might participate. And, sure, in the long run the goal is that would lead us to more bookings, would lead us to more opportunities to show sponsors that we have a good patient cohort available when they start recruiting and would lead to more revenue and growth. When you say the integration ---+ we have costs from integrating the business as well as primarily relating as well to the Sanofi site support agreement that's now expired, and we're going through a restructuring there. So we still anticipate having integration restructuring costs in 2016 but a much lower level than what we've had this year, and then those ultimately will go away. The biggest areas of growth in esoteric is probably women's health, NIPT; continuing to see good momentum with BRCA and infectious disease. So those are probably what I would highlight as the four top areas. How much of it is acquisition-driven. The acquisition pricing benefit actually mostly came from anatomic pathology as opposed to specific tests ---+ specific test acquisition. So, most of what I would characterize as the core ---+ sorry, the growth in esoteric just came from excellent execution on sales priorities by the organization. Sure. Good morning, <UNK>. One of the things I highlighted in my opening remarks is that we're competing in a much bigger space than just the core lab business. So now we're competing in the core lab business but on a global basis. We're competing in drug development. We're competing in market access. We're competing in food safety. So you should think about our appetite for acquisition as spanning all of those businesses potentially. Now, a couple of caveats ---+ the likelihood of us doing a sizable ex-US clinical laboratory acquisition is relatively small just because we're much more likely to think about doing that ---+ doing ex-US clinical laboratory now that we have a global footprint by building as opposed to acquiring. So we certainly are looking at global expansion opportunities in the clinical lab business, but I wouldn't put that at the top of the list from an M&A perspective. What I would put at the top of list is tuck-in acquisitions in the clinical lab business, acquisitions in the food business, acquisitions in drug development, acquisitions in market access ---+ all of which we'll look at through the lens of what's our return on invested capital. How does it strategically contribute to our key priorities. And what are the valuations relative to other opportunities for deployment of capital. Thank you for the question, <UNK>. As far as any of our backlog burn, we've seen it stabilize. It started out the year, as you said, a little bit slower than expected. However, both in clinical and central labs, we saw it stabilize throughout the year kind of similar to the trend that we've seen in the last 10 years. It's just leveled off similar to the trends that we've seen in the last 10 years is how I would say that. We are at about the top of the hour. We have six more questions in the queue, so I would encourage people to ---+ let's try to ask one, and also let's try not to ask things that have already been answered, please. We would like to be able to answer everybody's questions today. Bad debt improved throughout the year, and the team did a terrific job in terms of both reducing the bad debt rate and recapturing additional revenues that previously was going to bad debt. The issue on self-pay is we're seeing ---+ as you see more patients come through exchanges ---+ exchanges do tend to have higher deductibles, higher self-pays and now we're experiencing something, although in a limited way, that you've heard other providers talk about, which is people who are on and off the exchanges. So they are on the exchange and they are off the exchange, and they sign back up again. There are 29 different reasons right now why people can get on an exchange even outside the enrollment period. So we're seeing some of that, and it does mean that more bills go to patients. So for now, we feel like we have the situation well in hand, but it is something that we're keeping a close eye on. A. J. , it's <UNK>. On PAMA, we have not heard anything further. We continue to believe that the inclusion of key hospital adds is absolutely vital to accomplish the congressional purpose, which was a market-based price for meta-care. And realistically, we're at the end of February; the rule has not been finalized. It's hard for me to imagine how this could be implemented in January of 2017 in a way that would be fair to our industry. On FDA, we continue to work closely with Congress, and attempting to work with the FDA as well, on a solution that would be a legislative solution that would bring clarity to whatever regulation there is going to be of lab-developed tests. And it would not be dependent on sub-regulatory guidance a proposed long-term solution. And we feel ---+ again, we've been very clear about this, we feel very strongly that guidance is the wrong way to go about this and that we will continue to oppose that path. I don't think we have anything to say beyond what we've already said, which is we're going to look at all opportunities and evaluate the strategic fit and the returns and the valuations in comparison to what other opportunities there are. To the first question, <UNK>, before we introduce a test to the market ---+ and some of these tests are kits, which obviously have been approved or cleared by the FDA. But before we introduce a test to market, there is a very robust validation process within our laboratories to make sure that the tests are ---+ that they are valid, that they report what they are supposed to report and that they have appropriate clinical utility. So, we've followed that path for years. We've been very disciplined about it and we will continue to follow that. And, again, our exposure to the LDP ---+ the potential of at least the initial stage of what FDA has proposed from an LDT perspective is relatively low as a percentage of revenue. But this is important as an industry matter and it's important from an overall perspective in terms of innovation and development in the diagnostic industry. For the weather impact from the January storms, I'm going to turn this over to <UNK> to respond for the diagnostic business. Thanks, <UNK>. <UNK>, the weather ---+ obviously, we are always concerned about weather at this time of year. Fortunately for us it was comparable to what we experienced last year. I think most of the weather in the areas that would have been impacted was fortunately on the weekend. So at this point we view it as inconsequential, and we're keeping our fingers crossed for the remainder of the first quarter. This is Deb. You are right; the demand is increasing. It has great incremental drop-through. What I would say is that we are ---+ where we see the utilization getting tighter in US and China, it is driving some modest price increases in those regions. I think, as we've said, the biggest factor that's contributing is the annualization of contract wins. And I don't think there's enough going on in the high-deductible plans or hospital competition to really change that. I think the reality is that the high-deductible plans and high co-pays have more of an impact on bad debt and collections. It doesn't stop the patient from coming to get the testing done; it just stops us from getting paid for it. So I don't think that has a significant impact on volume. We've always faced competition from hospitals. I actually think that it's been really about three years since we saw the huge shift in hospitals buying up physician practices and in-sourcing them. I think we're doing a terrific job on organic volume. I think the diagnostics team has done a great job. We're clearly outperforming, from my perspective, the competitive market with organic volume growth. I think we're outperforming the other healthcare services providers in terms of organic volume growth. So in spite of ---+ and, again, if you look at that what you've characterized as a slight deceleration on a per-day basis, 3Q over 4Q, it's actually essentially flat from an organic volume perspective. So we're very pleased with it. Well, once again, we are very pleased with the year that we've turned in in 2015, and I want to express my appreciation to my 50,000 colleagues and to our leadership for really an exceptional performance. We're excited about 2016. We look forward to talking to you again quarter to quarter with updates, and hope you have a great day. Thank you.

2016_LH

2015

TFX

TFX #So there were some modest headcount increases in our vascular business, as a result of the Vidacare acquisition. Surgery really has remained largely constant at this point, although it's a targeted area for some modest expansion, as we roll out the Percuvance product line. The adjustments that we've made, in terms of cost control, really come more at the expense of eliminating some smaller divisional managerial headcount, versus sales headcount. So we haven't really changed the headcount, we've just reapportioned it. And we think that it's actually better to have a smaller sales force, exclusively focusing in on the respiratory therapy business. That's a very GPO-oriented, IDN-oriented sale. And have that remaining sales force in the anesthesia product lines really just focused on their products, and their call point. And so far I think the response to that has been quite favorable. So we have not, other than the small addition that came from Vidacare, changed our headcount. I think <UNK>, it's as much due to having a more exciting product line itself to sell. And that helps sales commissions, it helps attract a better group of talented salespeople to the organization, and all those things are paying off. And I would say for the last several years, we've been focusing a lot on sales force effectiveness. Yes. So it's probably ---+ so they're very different sizes and very different numbers. I think the best answer I can give to that question is, we've generated around 100 basis points of improvement, in terms of our numbers over the past couple years, as an average. We certainly have a pretty clear line of sight over the next couple years, and I think what you've seen in the last couple years as an average is what you're going to see over the last couple years. Mini-Lap was about 30 basis points of surgery. So it was a very small contribution to the 9%. $700,000. So 30 basis points out of that 9% increase. No. The short answer is yes, we've thought about it a lot. There's a wide range, in terms of what the performance of this product line can be. Right now, we're in fairly intensive clinical use opportunities in leading institutions around the United States and in Europe. And getting an understanding from the early, highly experienced laparoscopic surgeons, where they where they see this most applicable. And they're trying to understand what percentage of the traditional laparoscopic procedure rate it's going to be able to, I think, be able to encroach into. At this point, the feedback we're getting from the physicians that are using this is quite positive, and again, we'll have more information to be able to share with you at the analyst day. We'll have one of the leading surgeons in the US that's working with us on this, to give you his viewpoints. Yet. So just answering the question about Vidacare as a pull through item, so I think the short answer is yes. It's an exciting product to sell. We made really good inroads into the hospital segment, in the first quarter. The growth within that unit was right at 31%. It was one of the key reasons that we purchased Vidacare, was we thought we could really do a really good job with that in-hospital customers and beyond the emergency room of the hospital, getting right down into their crash cart situation. I don't know that we have a completely exact number, but I would say it's somewhere between 6.5% and 7% of vascular growth without Vidacare, so still pretty strong growth even with that accepted. What I will tell you this growth isn't happening by accident. Is taking sales time and sales energy to be able to move into that segment, and every time we sell a Vidacare unit, it's the highest gross margin product we have. So we're certainly not discouraging them from spending a lot of time on it. <UNK>, <UNK>'s right. For the first quarter, vascular North America revenue grew 6.9%, excluding Vidacare sales. Yes. So CVCs grew around that rate. Around that 6.6% constant currency rate for vascular North America. And PICCs were a little bit lower than that in the vascular North America area, although I would say globally, they grew about 18%. Not yet. Those agreements really didn't have any significant impact on our first-quarter results. Luckily, we are in a position to supply from a demand standpoint, we have been quite aggressively ramping up those, and we are just doing our best, actually, to respond to a critical situation here. But we're certainly leaning in favor of those institutions and groups that are willing to give us a long-term contract with the product, particularly given the uncertainty of when the issue may be resolved. Correct. Yes. So we could go up to that size of our when and still be within our comfort range, in terms of total leverage. So that's what readily available on a revolver. We've got opportunities to be up to expand the revolver as well by another $250 million, if we were to choose that option. That would take some time to get in place, but not too long. Yes. So the short answer to that is no. We don't change our pricing in OUS markets based on currency, for the most part. We take the hit as opposed to our goods becoming more expensive over there. Europe actually exceeded our expectations. I think there continues to be a fair amount of economic uncertainty in Europe, so as we look at it, stability as being good. Our revenue in Japan was really quite good for the quarter. Australia is now, since our Mayo acquisition, is a bigger part of our Asia business, and they tend to be a slower growing developed market. I think for us, our slower performance in Asia was quite limited to China, and quite limited to a timing issue, I think. So I don't know that we are representative of what's going on with other countries. Okay. So on the interest expense, we're assuming that we're going to save about $0.08 to $0.10 from an adjusted EPS impact. Interest expense will go down to about $51 million for the year. That's on an adjusted basis. It will go down to $51 million for the year, on an adjusted basis. So ---+ So we are still obviously trying to get the best bead on where this should be priced. There is an inherent savings, just from one to another for the hospital, because they don't have to use trocars in the procedure. The time it takes to finish off the procedure is shortened, so in a busy OR, that's another issue. The potential for complications is reduced, which is also a cost savings to the hospital. Why are we doing a gradual launch. This is, I would characterize it as a major upstream for Teleflex. My past experience is that you learn a lot in the first couple of months, in terms of actual user experience, in terms of what the benefits are to highlight, what the actual training might be, to be able to get this introduced. And also have a better understanding, in terms of the best initial procedures to target. And all that, in my past experience, leads to a much better launch, when you have a little bit of that ground work behind you, so this is a big opportunity. Our sense is we want to do this right. And make sure we're deploying those resources in the best way possible. Yes. You're absolutely correct. It was in January's numbers, so there was a month there. In terms of your question about, are they nice to have, or need to have them. They generally tend to make small overall contributions to our overall gross margin picture. However, it really changes the profile of some of those products from one that's not particularly worth the sales person spending a lot of time to one that is worth spending a lot of time to, so they're quite helpful from that standpoint. And there's often other benefits associated with that, as we are able to take over the manufacturing of the product. And some of the benefits take several years, actually to get integrated into our system. But it means that as we look forward to the future this is a product we really want to devote resources and selling time against, as opposed to being a marginal product for us. And I forgot, you had another question, and I forgot what it was. Most of our footprint consolidation moves affect our vascular product lines. And so, the real opportunity for improving any of those product lines really is going to come from the completion of this footprint consolidation. So once completed, yes, those would be an attractive product for us to sell. Just a little more color on the impact of distributor M&A, et cetera on gross margin. So as we think about the 2015 gross margin expansion, there's only three key areas that are driving that expansion. The first is operations efficiency, and I'll include the footprint consolidation in that. That accounts for about half of the gain we are looking for this year. We also then have collectively a number of acquisitions smaller M&A, as well as go directs and that includes the M&A, Mini-Lap, Truphatek, Korea distributor, Japanese distributor. Those collectively account for another quarter. And then finally as we look at it mix, that's the third leg in the stool. That's the final quarter, and that would be driven largely from things like Vidacare growth. We're also looking at winding down our surgical repair business. We've got a focus in Latin America on mix improvements. Same thing in anesthesia and respiratory, where they're focusing on some higher-margin atomization, as well as laryngoscope products. So as we think about it, our gross margin drivers are largely being driven out of operations efficiency footprint, but M&A and go-directs are help, and mix is a help so it's coming from a variety of different angles and the rest is kind of a number of pluses and minuses that collectively aren't that significant. If that helps. Thanks, operator and thanks to everyone that joined us on the call today. This concludes the Teleflex Incorporated first-quarter 2015 earnings conference call.

2015_TFX

2016

BRC

BRC #No, I was absolutely coming at it from the perspective of less of an improvement. Thanks, <UNK>. We are not breaking that split out. We have given you some guidance about growth in the past, and we will continue to do so. But I will say this: we believe that there are typically step functions in change as you go from one model to the other. They are somewhat based on technology changes, somewhat based on generational changes. And so we do expect to see platforms of change or steps of change in the future as we go through literally the next decade. And so you will see a continuing shift in models to a much more real-time interactive approach as opposed to a more reactive catalog approach as we go forward. Right. So we clearly continue to spend in that area and will continue to invest in that area, but as you noticed, we had to turbocharge it in the beginning of the process as we were converting a number of our sites and making some very dramatic changes. I believe just a couple of years ago we were behind the curve in our digital resolve. I believe we are now in some cases ahead of the curve, although we have a lot more opportunity. So you will see us to continue to invest in this area, but we are not investing at quite the rate that we were in the past. Yes, actually we did. And I will actually just go right back to the script, because effectively our comment was that we expect our segment profit to be in the upper teens as a percent of sales, which of course would be a slight expansion over what we just saw this year. Oh, no, it's okay. Don't worry about it. I just didn't want to misquote it. Well, I think historically our second quarter is always our most challenging quarter for revenue, and that definitely has a margin impact. So I would look at it from the perspective of we typically have a very strong fourth quarter, although as an overall company, in IDS we also have a reasonably strong fourth quarter; whereas our second quarter, because a variety of timing issues in our industries, is our slowest revenue quarter, hence our most challenging margin quarter. We were making significant improvements that were able to offset that this year. Yes, we continue to expect good results in our margins in the first quarter. If you go back to my very first guidance, I believe I spoke about the need to reinvigorate our product development pipeline. I also spoke about the fact that that would take an extensive period time, in the range of three years. We are on track. We are in industrial segments where new product development, and more specifically the revenue stream coming from new product development, takes longer. The positive of that is the revenue streams last a lot longer. So once we do invigorate that pipeline, once we do start developing those streams, which we are, it will take ---+ it will have a longer-term benefit. I will say that we did not anticipate the challenges at this point from the overall industrial economy that we are having. And I am pleased that we are able to overcome those, but there is no question that the economic environment that we are in today is a challenging one. The good news is despite that, I think you have seen some changes and some turnarounds in the area particular of a WPS, but overall in our approach. And some of that comes from a better focus on what we are really good at, and some of that comes from the fact that we are creating a stronger, more exciting product line that ---+ I think you're going to continue to see more significant results down the road. But it is going to take a while, as I have said. Correct. <UNK>, you hit it on the head. We continue to expect our efficiency and effectiveness efforts to garner improvements in our profitability, but the most significant factor, we believe, in the longer-term that is really going to impact us in a positive way is the innovation initiative that we are in the middle of right now. We are very excited about the products that we are working on and the opportunities that we are working on. But those obviously take longer. And as I mentioned, looking at that longer-term horizon, you're going to see, therefore, a bigger benefit from those. And given that we expect to those products to garner better margins being newer products for us, that should have a very solid impact on our earnings. <UNK>, I will handle that question. So the first part of your question, with respect to G&A expense being up in fiscal 2016 versus 2015, that certainly is true. And there is really two primary drivers ---+ actually, two primary drivers offset by one item. First would be our equity-based compensation, which you can see is up this year versus prior years. And it is not that we have issued more equity. In fact, that's not the case at all. It comes down to the fact that in prior years, we actually had some reversals due to turnover in executive team, et cetera. So that's a piece of it. Another piece of it is our bonus expense is actually up this year as well. As you know, in 2015 the bonuses were pretty ---+ I will say modest, but basically nil throughout the organization. And a piece of that has come back. And that has been offset, at least partially offset, by the efficiency gains that we've been talking about that, like I said, have clearly now garnered some traction. So that's the reason that G&A expense was actually up slightly in 2016. And as far as F 2017, I don't want to get too granular with respect to that level of detail what we expect. Now, switching to the normalized SG&A, so looking out into many, many years, so the hypothetical question that you raised: I really struggle to answer a question like that, to be quite candid. The guidance that we just laid out that we slightly modified with respect to our three-year plan ---+ you can see that those targets are 33.5% to 34.5% of sales for SG&A. And frankly, we also look at it the same way you do, <UNK>, and that is: it is lofty compared to our peers. But the reality is that we can't pull it down overnight without having a very significant impact on our customer experience, et cetera. So we will continue to chop away at it. We will continue to drive efficiencies everywhere that we possibly can within the organization. But beyond what you see in our three-year plan, that's basically what we are willing to commit to at the moment. But rest assured we are pushing efficiencies everywhere we possibly can. You know, that ---+ an important point as we take a look at how we are configured and the complexity of our Company: we are more complex than some of our peers. That provides us with some great benefits. In addition, it provides challenges in the area of G&A. The benefits being that really we come at the market in many different ways and are in many, many different markets that often our peers are not. That's a great foundational strength we have, and that makes us a very robust company year in and year out. As you noted, though, the result of that is we are going to be challenged to hit best practices rates or peer rates of G&A. That does not mean that we aren't going to work hard to drive to that effect. One of the mantras that I think you have repeatedly heard me say is: we are driving decisions down into our organization by creating a structure they can work within. By doing that it will inherently drive our G&A down. And that's one of the big focuses we have. If they know the limits with which they can run and they can make the decisions, we don't have to have a larger overhead structure, particularly in our corporate area, to accommodate that. I think that had a very modest factor. In fact, it was extremely modest. Effectively, we're at employment rates that are similar to when I arrived two years ago. We are not doing this by attacking people directly. We are doing this by truly making ourselves a much more efficient and effective organization. I think when you delay hiring in a significant manner, or have temporary riffs or things of that nature without a huge disconnect in the economy, it really is counterproductive to our long-term goals. So our efforts really are designed to two always look at the long-term as we make the short-term decision. So yes, we did have some limited delayed hirings, but we don't believe in any way did that impact our ability to grow in the longer term. Well, obviously, volume has a solid impact in our ability. If we can get a little help from the economy, it helps us disproportionately, without question. That said, we regularly and carefully look at our pricing models. We do a lot of beta testing of those and making sure that we are at a price point that is positive for our customers and positive for us. You know, we try not to break out our different segments below that point. However, as you know, healthcare is a little healthier at the moment. Admission rates are down, but there are opportunities there. In addition, any time that you're looking at legislative changes, that helps us. And those segments that are involved in some of the legislative changes out there certainly are able to do better, because despite the economy, people have to respond to those type of factors ---+ health and governmental requirements. Well, let's start with: yes, it is hurting us today. There is no question about that. I think the real factor involved in that has so much to do with the macroeconomy that I am reticent to make unequivocal statements. Clearly, our history is that as a economy turbocharges and capacity ends up running out, we end up benefiting more at the end of that cycle than the beginning, because people are changing the configurations of their factories; they are expanding; so on and so forth. So I think as you look at us, and you see construction or the capacity issues coming into play, that is a good sign for our future. That said, right now we have ---+ and you have, and you can read, just as I do, all the models; and we can look at our customers ---+ so many different indicators in the economy right now. I would not plan on forecasting a stronger model in the near future. I would actually prefer you entering your own questions, but I certainly will do that for you if you'd like. It is so market dependent at this point. I mean, giving you a great example, oil and gas ---+ that is a huge segment of the US economy, the Canadian economy. You look at a couple of the Scandinavian countries, like a Norway ---+ it had a huge impact. You look at mining industries and things like that in Australia, where those are significant, not only to their economy, to us. And there is no question those are in a moribund state in some cases. So in the future you would hope and expect that those could improve. But there are other cases that are unrelated that we may see different trends coming the other way. But some of the major ones that we are really being hurt on right now ---+ there is very, very little movement in those spaces at all. So you would hope in the next couple of years, as things work out to a more normalized state, you would expect that those would improve. I would have preferred you entering the question, though, but hopefully you're happy. Sure. I think the key to us moving the margin over the long-term has to do with the products we innovate and how we innovate them. We are unequivocally putting more effort, more consistent effort, and I think really more focused effort ---+ I know more focused effort ---+ into how we develop our products and what products we are developing. Receiving a lot more customer input into what their problem sets are that allow us to be much more creative in our solution sets. So I am very excited about that. But that excitement is not just a revenue excitement. My history and the history of this Company is the newer ---+ and most companies ---+ the newer the products, of the better you can gain margin traction. So I would say the most significant way we can change our margin mix in IDS is to have a fresher, more vibrant product introduction. Unequivocally. So the 1.5% ---+ two things to comment on. First of all, it is based on exchange rates as of the end of our fiscal year, so as of July 31. So that is item number one. And then item number two is it really comes down to where our business is. So, for instance, we have a very vibrant business in the UK, as an example. And if you look at what happened with the pound, I think it was probably $1.46 at the end of our third quarter and somewhere in the $1.32 or $1.33 range at the end of July. So, you look at a big market like that ---+ clearly, that will provide a headwind. You look at the euro, on the other hand, and the euro has been somewhat stable, frankly. But it really comes down to the basket of currencies where our revenues ultimately come out at. So it is a very calculated number. I don't want to get into the revenues, but I will say this: it is a very nice-sized business for us in Europe. But I don't want to give the exact revenues. No. No, it is not.

2016_BRC

2016

WCG

WCG #Well there's dozens and dozens of factors that go into the construction of the bid, not the least of which is your trailing performance, and more importantly, how you expect to perform prospectively. So that's one of many inputs into a pretty complex bidding process and strategy, which we'll be wrapping up in the next month or so. Yes, that is the gross number. That's the actual development from prior year. And so let me put this in historical context. In 2013 the Company had $3 million positive, 2014 minus $48 million. Then, as we started to perform better and execute better, $78 million for the full year of 2015 of prior-year development. So the $65 million in the quarter ---+ in a steady state, you really should get the majority of the prior-year development early in the year, so in the first quarter. So, that is the gross number. And you're right, there is ---+ I can't tell you until three or four quarters from now what the actual net would be, but the same processes and approach that we use to set reserves at the end of 2014, at the end of 2015, were in place at Q1 2016. Well the guidance changer would have been Medicaid performance, including the pharmacy cost structure, so that was an important element. In the PDP business, the improvement in that MBR in the guidance was driven by rebates, separate from the cost structure, but still pharmacy related. Then the offset would be the 5 bps of SG&A, and a little bit better tax rate, which is really just the math of the blend between your core operating earnings and the ACA fee. Well, <UNK>, there's a lot to worry about in this chair in terms of ---+ and forward trend being one of the most significant drivers of the Company's performance. So we're not satisfied and we're not complacent with respect to the trends, which is why we've got some pretty significant initiatives that we've been after for the last year and a half. There's still a pipeline of those. So it's our job to manage and bend that trend. But with respect to the first quarter specifically, relatively stable in terms of what we're seeing when we look at drivers on a rolling basis historically. I was just going to say that's right. Yes, certainly given our footprint with full duals versus partial duals, as you would expect when CMS sets the revenue more precisely, that would track with our membership. Having said that, you'll recall that the Advance Notice we had calculated at a slight decrease year over year in terms of revenue, largely driven by the fee-for-service normalization factor. When the Final Notice came out, there were some corrections made, especially to that mechanic, which improved it, but didn't put that all the way to a positive with respect to the fee-for-service normalization factor. So we went from slightly negative up 130 basis points to that 0% to 1% positive range, with respect to the pure rate change. Now that excludes typical coding trends and that excludes the impact of the ACA holiday. Well, <UNK>, the ---+ Nebraska, there was one particular section of the scoring that looked like it was ---+ there was an anomaly. So that was the significant area of protest, and one that the state agreed with. They went back, rescored using the instructions that had originally been provided. That resulted in a win for us, and we were able to supplant two of the incumbents. As a relates to Iowa, we've talked about that at a fair amount of length. There were certainly some lessons learned in terms of responding to the spirit of the question as opposed to a more literal interpretation of the question. We have done an awful lot to strengthen our business development team. And when you hear me talk about people, processes, and tools, I actually think all three of those investments apply quite nicely to the new business development team. So we've strengthened the team. We have some new processes in place where we can better mine our experience and our data and our proof points. And we've provided better tools for them to work with so that we can quickly turn around some of that best practice and build that into our bids going forward. So I think we are well-positioned. We have no illusion that these are highly competitive bids, but we are confident in where we stand right now. Yes, you won't be surprised to know that we have done exactly that. We've modeled these changes. If I break it up into two buckets, there's the change that's relative to the HCC risk scoring, and those have some real tangible benefit going forward. While we are pleased with the recognition of the health disparities as it relates to Star scores, when we did that modeling, it had a fairly minimal impact on the Star Ratings. Which is why in my prepared remarks I said, it is a victory that there is an acknowledgment of the reality of the socioeconomic disparities. But the solution, while a appreciated first step, we've got more work to do so that it fully and adequately reflects the difference in serving this population. Sure, let me see if I can give you some insight into the process. We are looking to build a robust pipeline. We want to be proactive in pursuing potential opportunities. But let me be clear, we're going to be very disciplined about only ultimately acquiring those assets that we think can be complementary, where we can be profitable, and fit our strategic blueprint. So there are many many more that we will look at than that we will actually move forward with a purchase. I'm not going to get too specific about the opportunities. From our perspective, we took a forced hiatus from this activity as we built out our infrastructure, as we developed some real momentum around our margin progression. So it wasn't until we had that in hand that we even started to embark on growth opportunities, specifically acquisitions. So we're relatively new, newly back in that space starting with the back part of 2015. We like the level of activity that we're starting to see. But it's a long-term proposition, and we believe there will be both Medicaid and Medicare M&A opportunities in the years to come. Yes, we're already looking now at expansion because of the lead time that's necessary for filings, for network development, is more than six months, obviously. So we've already got a team looking on expansion for the future. We're going to be ---+ start out cautious and then we're going to ramp that up. And then also depending on what assets are available for acquisition, that will play into our calculus in terms of expansion opportunities as well. But you're right, we will ---+ it's more of a 2018 and beyond discussion in terms of executing on new markets, but we're looking at that already. Well it's noticeable. Right. The good news is we knew it was coming, so we were able to plan for it. And so yes, you can trace it back just factually. If you look at a calendar, there's an extra Wednesday in Q1 2016 versus Q1 2015. You'll notice that it was noticeably absent from our comments because it was planned for. Well it's a range that depends on the mix of our business, and so we think a 1% range is sort of the right way to frame that for investors. Yes, consistent with our multi-year plan, we would expect continued progression. I mentioned that in my remarks. We absolutely are planning on continued improvement in Medicare Advantage, until we get to a reasonable and sustainable for the long run margin for that business. <UNK>, that might be a bit of an overstatement. There were minimal changes in just a couple of plans. So there was a tiny bit of movement, but didn't really move the dial much. Which is why we've characterized as a step in the right direction, but much more work needs to be done in collaboration with CMS and others to more fully reflect the disparity due to socioeconomic status. Yes, good question. This Q1 will be the last quarter for both the PBM transition costs being outside of adjusted earnings as well as Iowa. And so what we're left with is any remaining tweak of the Sterling transaction item, which would likely be pretty immaterial. Then ongoing amortization of acquisitions consistent with the industry, and then the investigation legal costs, which are continuing until that's resolved.

2016_WCG

2016

AHL

AHL #Good morning, and welcome to the Aspen Insurance Holdings Limited second-quarter 2016 in earnings conference call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to <UNK> <UNK>. Mr. <UNK>, please go ahead. Thank you and good morning, everyone. On today's call we have Chris O'Kane, Chief Executive Officer; and <UNK> <UNK>, Chief Financial Officer. Last that we issued our press release announcing Aspen's financial results for the second quarter of 2016. This press release, as well as corresponding supplementary financial information and the slide presentation, can be found on our website at www.Aspen.co. Today's presentation contains, and Aspen may make from time to time, written or oral forward-looking statements within the meaning under, and pursuant to, the Safe Harbor provisions of US federal securities laws. All forward-looking statements have a number of assumptions concerning future events that are subject to a number of uncertainties and other factors. For more detailed descriptions of these uncertainties and other factors, please see the Risk Factors section in Aspen's annual report on Form 10-K filed with the SEC and posted on our website. Today's presentation also contains non-GAAP financial measures which we believe are meaningful in evaluating the Company's performance. For a detailed disclosure on non-GAAP financials, please refer to the supplementary financial data and our earnings release posted on the Aspen website. I will now turn the call over to Chris O'Kane. Thank you, Chris, good morning, everybody. In the second quarter of 2016 we achieved operating earnings per diluted share of $0.40 and an annualized operating return on equity of 3.2%. Through the first six months of 2016 our operating earnings per diluted share were $1.68 and annualized operating return on ROE of 7%. Diluted book value per share at June 30, 2016 was $49.53, up almost 8% from year-end 2015. The movement reflects the positive impact from earnings and mark-to-market gains in both our fixed income and equity portfolios. Gross written premiums for the group were $802 million, an increase of 11% compared with the second quarter of last year. Adjusting for some changes in timing, some contract adjustments and the inclusion of AgriLogic, underlying gross written premiums were up 4% and I will give more color on this in a moment. The loss ratio of 65% was impacted by $65 million or approximately 10 percentage points of net cat losses in the second quarter, of which $49 million was recorded in reinsurance and $16 million recorded in insurance. This compares to net cat losses of just $12 million in Q2 last year. The accident year, ex cat loss ratio was 58%, an improvement of more than 4 percentage points from a year ago despite a number of mid-sized non-cat losses. Total reserve releases across the group were $21 million for the quarter, of which $14 million was from reinsurance and $7 million from insurance. For the first six months of the year we recorded $43 million of releases with $32 million in reinsurance and $11 million in insurance. Let's look at the reinsurance results first. Reinsurance gross written premiums increased by 28% on a reported basis to $333 million in the second quarter, but the underlying growth was around 6% compared with the prior-year quarter. There are a few items this quarter that elevated Aspen Re's reported growth rate, including AgriLogic, changes in the timing of a number of renewals and contract adjustments which impacted primarily property cat and specialty re. The property cat top-line growth included one of the items that I just described. Given these items, we believe that it's more helpful to look at the net written premiums for the first half of 2016. On this basis, net written premiums actually decreased 5% compared with the first half of 2015. This reflects continued management of our cat exposures through the use of Aspen Capital <UNK>ets vehicle and the purchase of additional retrocessional reinsurance which has reduced our PMLs across most perils. Specialty reinsurance premiums were up $33 million compared to the second quarter last year. Of this, $12 million was from the inclusion of AgriLogic while the remainder was largely due to favorable premium adjustments from prior years. In the second quarter, Aspen Re delivered underwriting income of $29 million and a combined ratio of 91% compared with $66 million of underwriting income and a combined ratio of 75% in the prior-year quarter. The difference can be largely explained by $49 million or just over 17 percentage points of net cat losses, primarily due to the Canadian wildfires, weather-related events in the US, and the Japan earthquake. This compares to 1 percentage point of net cat losses in the prior year. We had $14 million, or 5 percentage points, of primary loss reserved development in reinsurance in the quarter which releases predominantly in our short-tail lines. This compares to reserve release of $24 million in the second quarter last year. The accident year, ex cat loss, ratio was an impressive 47.7% compared to 51.4% in the year ago period, highlighting favorable underwriting results. Turning now to our insurance segment, gross written premiums increased 2% in the quarter to $469 million. Similar to recent quarters, growth is driven primarily by financial and professional line sub-segments, as we continue to see pockets of attractive opportunities in areas such as accident and health, credit and political risk, and US professional liability. However, this is partially offset by continued decrease in our marine, aviation, and energy sub-segment. The insurance results were broadly in line with those of Q2 2015 with an underwriting loss of $13 million and a combined ratio of 103%. The current quarter reflects $17 million or 4 percentage points of net cat losses related to weather events in the US. Our accident year, ex-cat loss, ratio improved by almost 5 percentage points from Q2 2015 to 66.1%. During the quarter we recorded $26 million in energy-related mid-sized losses, primarily attributable to the damaged vessel in the Jubilee oil field and the Pemex petrochemical plant explosion. We also recorded $12 million of fire-related losses and a $4 million aviation loss. The insurance segment had $7 million or about 2 percentage points of prior-year favorable development in the second quarter, in line with a year ago. Reserve releases in both quarters were mainly due to favorable development on our short-tail lines. Turning now to expenses for the group, as we said previously, we expected the G&A expenses to be higher in the first half of the year. The G&A ratio was 17.1% for the quarter, reflecting growth and investment in the business with 40 basis points of the increase attributable to the acquisition of AgriLogic and 90 basis points attributable to reorganization costs. Excluding these two items, our G&A ratio would have been 15.8%, in line with the prior-year quarter. We still expect the full-year G&A ratio to be broadly in line with last year's full-year ratio. Lastly, the acquisition ratio was essentially unchanged from the second quarter last year I'll now move on to investments. Net investment income was $48 million in the second quarter, up almost 3% from the prior-year quarter. The increase is primarily due to hiring comp from our fixed income investments. Total return on our aggregate investment portfolio was 1.44% in the quarter and the total return was 3.5% for the first half of the year. The fixed income book yield was 2.5% while the duration of the fixed income portfolio was 3.6 years. Lastly, I'll make a few comments about capital. We repurchased $19 million of ordinary shares in the second quarter of 2016 and a further $6 million since the end of the quarter. This takes our repurchases to $50 million through July and leaves approximately $366 million remaining on our current share repurchase authorization. With that, I will turn the call back to Chris. Thanks, <UNK>. Since our last call we have appointed new leaders for our segments. Steve Postlewhite moving from reinsurance become CEO of insurance, and Thomas Lillelund taking over as CEO of reinsurance. Steve has left the reinsurance business in great shape and Thomas is ideally suited to build on this. I am extremely proud of what the reinsurance team are achieving. Our team continues to stay disciplined and walks away from business that does not clear our underwriting hurdles. We are pursuing opportunities in areas where pricing is under less pressure. We continue to add value to our [brogan] clients, which makes us an important business partner, and as a result, we often get the allocations we ask for. One of the burgeoning benefits of the investments in our business that we have made in the last few years is the widespread regional network we've developed. Our recent strategy provides us with another avenue for growth over the long term. We continue to see select new business opportunities in Asia Pacific, Middle East, and Africa, and in Latin America. Through our newly opened Dubai office, we continue to see good momentum in the Middle East and Africa region and we capitalize on some duplication on select new and renewed business. We also continue to see momentum in further developing our Shanghai and Australian operations. Steve now leads an insurance business that has achieved scale and is pursuing growth on a very targeted basis in his next phase of development as leading specialty insurance. We have continued the roll-out of our global product line strategy with the recent appointment of heads for surety and credit and political risk. We remain committed to developing our businesses in Asia through our Singapore operations. While it is relatively early days, we have received a good showing of business and this is an important long-term strategic growth opportunity. Over the first half of the year we also benefited from some disruption in the market selectively adding underwriting talent. As learned earlier on this call and on even previous calls, we're very pleased by our success in adding to and upgrading our underwriting talent, broadening our underwriting capabilities and enhancing our product offerings. These achievements bode well for the future and it is important to note that this process is now largely complete. Hence, we do not expect any additional impact on our expense ratio from this initiative. While we see more business, we're being very disciplined in our approach to growth. As we have done for some time, in lines where competition is intense and rate remain unfresh, we've taken action. We've continued to deploy capital away from marine, energy, and aviation sub-segments and into other more attractive lines such as accident health, UK regional P&C, global casualty, US professional liability lines and cyber, where we're seeing better prospects, rates are under less pressure and experience is less volatile. Before we open the call up for questions, I would like to follow up on last quarter's commentary on Brexit, the British decision to leave the EU. This is an unprecedented step and one that will take some time to work through. I would reiterate, however, that we do not expect to see any material impact to our business, although premiums from the EU, ex UK, were less than 7% of our total 2015 gross written premiums. We are working to establish the best routes to guarantee that all of our stakeholders continue to enjoy the benefits that flow from our small but highly regarded EU client base. We remain fully committed to ensure the smooth transition to service our clients in the region. Ahead of Brexit occurring, we expect to have effective distribution channels in place. That concludes our prepared remarks and we are now happy to take your questions. Good morning, <UNK>. I think you are talking about the catastrophe exposures in major zones and minor zones. Right, <UNK>. Okay. The general trend in pretty much all of those areas in terms of cat is downwards and has been so for some time. The downward trend is a bit faster at net level than it is at a gross level because there are still some risks, which are okay risks. We wouldn't want too much of them, but many of our Aspen Capital <UNK>et partners actually can make a return out of prices that are available. So trending down, as I say, a little faster at a net level than a gross level. I do talk, and you've heard me, just now, talk about Asia Pacific, about Middle East, North Africa, Latin America, et cetera. Most of those growth initiatives are not targeting property cat business. Property cat business is one of the most highly-commoditized business of all. And while I think there is still some money to be made in it, it's really not one where we want to carry a lot of stakes. So, generally speaking, it's try to open up the specialty casually end of things, looking at fire risk, maybe construction risk, not the sort of stuff that carries a significant cat load. In terms of the difference between peak zones and minor zone, I don't think there's anything material to say. I would say we would like a little less cat pretty much everywhere. Sometimes post an event you might get a chance to write a bit more, so we will see what happens to Canadian rates post Fort McMurray. Clearly as the prices go up by 50% or 100%, then we may have to take a different approach in terms of our risk appetite there. But in general, this is not the time of the cycle for cat, peak zone or otherwise. Questionable whether you find a different ROE. What you find is different loss ratios or different expected, even combined ratios. But capital is allocated based on the size of the exposure. So if you are looking at really major exposures, I don't know, say Florida for example, yes, it might be that in one measure you've got a higher price, you've got a higher margin over the expected loss. But you've got to allocate so much capital to a peak zone like Florida that it brings the ROE down and you might actually find that somewhere else some less-exposed part of the world where you write less business carries a lesser capital load and that the ROEs are actually broadly similar. That is generally the way it is. <UNK>, thank you very much, thanks for your questions. I am looking at the CFO, <UNK>. Thank you for your question. (laughter) Gee, thanks, <UNK>. That is pretty helpful. It is around about the $60 million mark, <UNK>. An excellent question, <UNK>. I think, first of all, this quarter we just had is exceptional in terms of both the frequency and the severity of these medium-sized losses. I would say none of them are colossal and a lot of them come from energy-type situations. And not just this quarter last year, but I would say over our lifetime as a public company, somewhere around every four to six quarters I have been saying it's been a bit lumpy in energy this quarter. But don't expect energy to lose money for the year, it's just the nature of it. You get these long periods of quiet with very nice returns and then you give a lot of that back in a bad quarter. But overall it works out well. I am not really aware of any kind of underlying cause that says there should be more loss activity connecting Ghana with Mexico, I don't know yet. I don't think the price of oil, that's making the prices low, business is not that attractive. But I don't think it actually in itself gives rise to more loss activity. So at one level you would say this is one of those kind of random fluctuations you expect in a P&C business; it poses some volatility. But there is another point I want to make and it is quite an important one. It is not one I talked about in the prepared remarks. You may recall, <UNK>, we talked a few years ago about the IRVV retaining its share of our reinsurances. We started doing that three or four years ago because we thought there was a wide discrepancy between the price we could write business at and the price we could reinsure it. We thought by retaining more risk we would improve our net income. And we did. That was a great course of action through 2013, 2014 and even in 2015 it made a lot of sense. In 2016 it makes a lot less sense and in 2017 and make may make no sense whatsoever. While most growth losses (inaudible) growth basis, what we're in the process of doing is buying a lot more quota share, some really quite chunky months of quota share across areas like marine and energy. But also our primary casualty, our excess casualty, our professional liability, our management liability and so on. [Lot quota] share and indeed on our excess basis, taking a smaller retention. That is largely because we are intending to cancel the additional retentions that we had on reinsurances and actually cede those over to the outside world. The effects of that is that basically our net retentions are trending down. This process is actually complete now for the marine and energy programs which we combined. We do have some very capable people working on the casualty, professional liability, et cetera and we expect that to be complete before the end of this year. So I think the first part of my answer is give you my view on the gross loss exposure. The second part is telling you that I think we will be retaining a lesser share of volatility as this year goes on and certainly into next year and beyond, given the current differences in price between the insurance and the reinsurance products. I expect we will do, yes. <UNK>, it is <UNK> here too. Let me qualify what I talked to you about earlier in terms of the gross losses on the cats as well. I gave you the actual reinsurance number, or the number in our reinsurance segment. The actual gross numbers are about $75 million if you include the insurance side of the house as well. (laughter) Well, the whole nature of this business has always been where there is fear, there is pricing power and there is opportunity. So there is never been much of a market for, let's say, Swiss political risks, either. So clearly it's always been the case that the more danger in the world ---+ over my career it's been Russia, it's been China, it's been Angola, it's of bits of South America. So what are you doing in there. You are looking at essentially the degree of risk, the level of hazard, and you're looking at the price you can debt and you're looking at the quota or the collateral. So, our view for a lot of what we do is if there is a good client, with good money from sources we understand, prepared to offer a sensible amount of collateral to cover their exposures. We believe our right to recovery, if there is a loss or actually very significant and that's where we can get into these more hazardous zones and activities. Most of what we are doing is backing North American European, occasionally Japanese, exporters and project finance in areas of the world that do indeed carry a bit of political risk. This is a business that has performed incredibly well for us since we have been in it. The top line has been up and down and up and down. I think it is always going to be like that. It's a little dependent on deal flow and we just happen to have had a good couple of quarters. And if people stop investing or something else happens then we may be telling you next year that we are not writing so much with that. <UNK>, sure, thank you for your time. Good morning, <UNK>. <UNK>, it is <UNK> here. You are absolutely right, you heard right. There is 90 bps in the quarter from some reorganization costs. It is a combination of some changes in senior management that we talked about in the prepared remarks. In addition to there's still a little bit of tail-off from the insurance initiatives that we have been discussing through the first half of the year as well. Certainly, the costs attached to the changes that we have made are it with regards to the individuals. But beyond that, I think we are largely comfortable with our position. I do not think so at this point. I have tried to give some color on where we think the key levers are. I have certainly gave some color on our expense ratios and where we expect those to be. Acquisition ratios, as well to a certain extent. So I think the losses are going to be the losses, but we are continuing to control the expense side with vigor. (laughter) <UNK>, that's a great question and one that is pretty difficult to answer. I think you've got to step back and you say on and ROE basis, what are the big challenges. Clearly we've got continued low investment income environment and that has continued. There is some pressure across the business in the pricing but there are pockets of opportunity as well. So, I think we continue to work very hard and execute on what we do on a day-to-day basis and the ROE will come as a result of that. Obviously we have got our levers, I was just going to say. Clearly expense lever is an important one. We have also got the capital management lever that we have pulled through the first half of the year; we bought back 50 million of shares. We are always committed to giving that capital back if we can't find an opportunity to put it to work in the business. <UNK>, neither <UNK> nor I would blame you for asking these questions, but as you know very well, and we've told you, we no longer provide these guidance or ROE guidance. We can not be tempted to give you a number by one route or another route. What I would say, which may be helpful ---+ but I still can't give you a, ROE number ---+ is in all of the bad news in terms of investment returns and underwriting pricing, there is a bit of good news is that the cost of money has come down. So we in common with everyone in the industry, now have some of the lowest cost of capital that we have had in the history of our organization. As you know, the capital market may come out with different numbers. But I think that cost of capital probably could be less than 7% these days. Now, if we were in any danger whatsoever of producing a return that was equal to or less than the cost of capital, <UNK> and I would say what are we doing, we make more money off our own investments if we didn't come to work every day. So we would not want to be in that zone and we are not in that zone. We feel that there is a good buffer over the cost of capital. But the persistent low interest rate environment which is reducing the cost of capital is part of the reason why it's hard to get the ROE up. I would say on a normalized basis ---+ I won't speak about Aspen ---+ I would say any company with an Aspen-type business mix, it is going to clear into double-digit ROEs in the next couple of years is doing exceptionally well. That is a very, very, very tall order. That said, <UNK> and I both feel that we are operating a business that is, on a normalized basis, well in excess of the cost of capital. I think that is really about as far as I can go and I think my lawyer is probably kicking me under the table for going that far. That as well, yes, it is terrible here. (laughter) I am not privy to all of the reasoning that is going on at EVEREST Re and I respect their decision. I think there were different ways to be in the crop business. In general, by the way, I agree with something you said, the days of excessive outsized returns for the crop insurers are probably behind us. I think the way pricing, the way the schemes have evolved, means that those glory days are in the past. But that's, in a way, not the comparison. The comparison is probably to tough to capital and to what's available for your capital elsewhere. Our view still is the crop business underwritten intelligently, which is something we think the folks at AgriLogic are very good at, can make a good return. Why do we make a good return. By having better data, better loss expectancy data, better views of how crops in which locations ---+ and I'm not even talking about in the states, but I'm talking about what part of the states [crops] are in. AgriLogic have invested heavily in having that data which means they know which risks to take. Even admitting they're charging the same price, I think their risk selection is superior. And the same skillset, of course, goes into the way the reinsurance they buy is designed. I think we have simply a lot of intellectual property there. I am not suggesting that with regards over Heartland, don't do similar; I don't really know that organization. But I think from our analysis, AgriLogic will make a return for us in ROE terms way, way above the average of the rest of the organization. And for today, that is a nice little thing to have. No problem. Thanks for your questions. I think the only closing comment is to thank all of the listeners this morning for having joined us and wish you a very pleasant summer's day. Goodbye.

2016_AHL

2017

PWR

PWR #Good morning, everyone, and welcome to the Quanta Services First Quarter 2017 Earnings Conference Call On the call, I will provide an operational and strategic commentary before turning it over to <UNK> <UNK>, Quanta's Chief Financial Officer, who will provide a detailed review of our first quarter results Following <UNK>'s comments, we welcome your questions Quanta's first quarter results were consistent with our expectations and put us on track to achieve our full year outlook Our end markets are strengthening and we continue to believe we are entering a renewed multiyear up-cycle for our business The successful execution of our strategic imperatives, coupled with favorable end-market trends, positions us well to further separate Quanta in the marketplace and for profitable growth Fundamental to Quanta's growth is our view that our backlog will remain strong and has a potential for solid growth Our electric power segment backlog increased without the inclusion of multiple larger project opportunities that are in various stages of regulatory review or that remain subject to competitive submission processes to meet state and provincial energy policies Oil and gas segment backlog declined in the quarter, primarily due to burn associated with significant pipeline construction activity, seasonality and the cancellation of a pipeline project contract for which we received a cancellation fee As a reminder, oil and gas segment backlog can be variable due to its faster book-and-burn nature and the timing of larger pipeline project awards As we mentioned in our Investor Day a month ago, we feel incrementally better about opportunities to book pipeline work for the second half of this year, which should positively impact backlog as contracts are executed We're in the late-stage negotiations on multiple larger pipeline projects that are expected to start construction in 2017 and are in discussions for billions of dollars of larger pipeline projects that could break ground over the next several years Overall, we are supporting our customers' project scoping and infrastructure development initiatives across our segments and believe there is opportunity for our backlog to increase to record levels over the next several quarters Turning to the electric power segment, Labrador Island Link transmission project for Nalcor Energy in Canada is progressing well In addition, full scale construction on the Fort McMurray West 500 kilovolt transmission project is on track to begin in the third quarter of this year We have completed many important engineering and procurement milestones over the past two years for this EPC project and now look forward to the construction phase The Fort McMurray West project is the largest individual project ever awarded to Quanta Based on this expected timing, the Fort McMurray project should ramp up as the Nalcor project moves to completion This dynamic should provide an efficient transition of our people and equipment, improve the stability for our Canadian operations and provide multiyear visibility since the project is scheduled to complete in 2019. Though our Canadian operations remain challenged by economic conditions, we are proud of how our team has executed on the Nalcor project Overall, our customers' multiyear capital budgets continue to increase and should remain robust for some time We continue to believe larger transmission project awards will likely increase over the next 18 months We are in various levels of active discussion with numerous utilities and merchant transmission companies in North America about their transmission projects Several of these projects are making progress with permitting and regulatory approvals, which increases our confidence that they could break ground over the near to medium term In addition, small and medium transmission projects, as well as distribution work, remain active, and large multiyear MSA proposal activity is at record levels Further, we believe the deployment of several new large multiyear capital programs by our customers is imminent These programs include both larger and smaller electric power infrastructure projects to upgrade and enhance the grid We are able to provide comprehensive turnkey solutions for these multiyear capital programs that we believe are unmatched in the industry As we have said in the past, we believe we are uniquely well positioned to provide solutions for these potential opportunities, which are of the size and scope our industry has rarely experienced We continue to have a positive long-term outlook for our electric power segment and believe we are entering an upward multiyear cycle The end-market drivers we have spoken about for some time continues to spur demand for Electric Power Infrastructure Services These drivers, including the need to maintain and replace aging infrastructure, generation mix shifting to more renewables and natural gas, grid modernization and regulation aimed at improving grid reliability are what we believe will continue to provide opportunities to grow are our electric business Turning to our oil and gas segment, we generated record revenues in the quarter, which is also noteworthy because it occurred when it's typically the lowest quarter of the year due to seasonality The quarter's record revenues were primarily driven by strong activity on several larger pipeline projects in the Southern United States and in Canada, which contribute to significant margin improvements versus the same quarter last year We did, however, experienced some margin pressure in our base business For example, we have been increasing and training our workforce to meet our customers' needs for the multiyear gas distribution and integrity programs However, a couple of these customers delayed commencement of work under our MSAs during the quarter, which impacted margins As discussed earlier in my remarks, we believe the larger pipeline project market will remain active for several years and are pleased with our execution to date In addition to larger projects, we see opportunity for base load work to continue to grow over the coming years This base load work includes supporting midstream infrastructure, downstream support services, natural gas distribution, pipeline integrity, MSAs, pipeline logistics management, horizontal directional drilling and engineering During the first quarter, we resolved the litigation initiated by Dycom Industries related to the non-compete agreement entered into in connection with Quanta's disposition of certain communication construction operations to Dycom in December of 2012. While the terms of the resolution are confidential, we are very pleased with the outcome We began the expansion of our U.S communications infrastructure services operations following the expiration of our prior non-compete agreement in early December 2016, and with this litigation now behind us, our ability to continue our U.S expansion efforts is unencumbered market expansion efforts have been very well received by our current and potential customers, and we are actively pursuing opportunities with various U.S telecom and cable MSOs We have developed a workforce and delivery model over the past several months and anticipate receiving awards in the second quarter Outside of the U.S , we signed several MSAs in Canada During the first quarter, deployed fiber to eight communities throughout the country, and our Latin American operation continues to expand its fiber, wireless and cable operations, which are all performing well Quanta has provided infrastructure services to the communications industry since the company's inception and the expansion of our U.S operations complements our existing and growing operations in Canada and Latin America All three of these geographies provide multifaceted opportunities for growth in a broad diversified customer base, which we believe is advantageous versus focusing on just one area We're excited about the market opportunity and look forward to sharing our progress and success as we grow our communications infrastructure services operations We also continue to advance our infrastructure solutions capabilities with strategic partnerships between Quanta, our customers and capital partners These typically take the form of concessions, public-private partnerships or private infrastructure projects in the markets served by Quanta These structures are fairly common arrangements in the infrastructure world and Quanta has good success with partnerships like these over the recent years Quanta believes aligning is a true partner in these projects, and for select projects investing alongside our customers, creates a strong collaborative relationship that is open and transparent We believe this approach yields greater opportunity for Quanta and our customers to drive a more efficient and effective design and overall structure that reduces cost and increases the chances the project moves forward and is executed successfully Infrastructure solutions is a capability that we've been building and executing on for a number of years These successful efforts have resulted in approximately $2 billion of project revenue across our core competencies in electric power, oil and gas and telecom and across our geographies in Canada, the U.S and Latin America Further, we are pursuing a number of additional projects that fit well with our infrastructure solutions capabilities During the quarter, we enhanced our capabilities with the establishment of First Infrastructure Capital, or FIC, which is a partnership between Quanta and select infrastructure investors FIC provided $750 million of available capital to invest in infrastructure projects with the potential for this additional capital from our existing FIC partners This partnership is an important part of our broader strategy of partnering with our customers and providing fully integrated, differentiated infrastructure solutions while leveraging Quanta's operational excellence, strong execution capabilities and project finance expertise In summary, the year started off well and we are on target to achieve our full expectations While project permitting and regulatory challenges remain, we continue to have a positive multiyear view of the end markets we serve and believe we are entering a new - renewed multiyear up-cycle for our electric power, oil and gas and communications infrastructure service capabilities We are confident that Quanta is well positioned to provide unique solutions to our customers and capitalize on favorable end-market trends We are focused on operating the business for the long term and continuing to distinguish ourselves through safe execution and best-in-class field leadership We will pursue opportunities to enhance Quanta's core business and leadership position in the industry and provide innovative solutions to our customers We believe Quanta's unique operating model and entrepreneurial mindset will continue to provide us the foundation to generate long-term value for our stakeholders With that, I will now turn the call over to <UNK> <UNK>, our CFO, for his review of our first quarter results As far as the backlog goes, and where we're at in the pipeline cycle there, it's lumpy, we've talked about it We've announced ACP before It's not in our backlog today So you can see some of the stuff that's not in there and others that are imminent here So it's - we're just in late stages of negotiations It doesn't meet the criteria to put in our backlog We feel confident that we'll fill that up with our large pipeline business The 2018 cycle is robust The latter half of 2017 is looking favorable So we're happy with where we're at on that As far as the cancellation fee, there are some contracts that contemplate this and delays and this is one of them Roughly, the amount was around $100 million so for 2017. We're in a robust environment in our large pipeline business Rover's moving along I think we're in good shape in 2018 as well as we stated in the past that we do have capacity We can still book work But I feel confident that with the ongoing opportunities and what we see, we should be in pretty good shape here for the next few years Good morning Yes, I think you have to look at it on the electric side and the gas side and split it If you want to talk about Canada, the overall economics, being energy based, are down but our project-based business and the need to move natural gas to the coastline is there We like where we're at We like where we're positioned there We're starting to see some projects move forward in your shales, in your Montney shales and such moving that gas out And when you get some takeaway in there, things will look good We've seen Trans Mountain get mentioned a few times Those kind of things, those larger projects stroll up resources in the country and so that allows others - other projects that we'll be on to - we can execute well So I like where we're at there I think we're cautious about the overall economy on the gas side, but there's signs of life On the electric side, with us having a backbone project of WFMAC and coming off Nalcor, we are seeing some stuff in the East, Toronto and in the West <UNK>a is still, besides WFMAC, it's still very depressed there So we're optimistic on the coast and we're cautious about the <UNK>a market But all in all, we're executing through it pretty well through a tough economy there And if you go back a few years in Canada, it was our highest margins in our company So I'm optimistic we'll come back to those margins over time Good morning Yes, as I've said with <UNK>, I think what we see and our opportunity that we see and where we're at in the stages of the contract negotiations, we feel confident in the statement So I'm fairly optimistic that we'll be in record backlogs I would say, <UNK>, we'll over-communicate a bit for a few quarters here on telecom because we'll give you some idea of where we're at I do think we're a little bit behind where I'd like to be When you have a lawsuit in front of you, it does It is a distraction on the operation and that past us now And hopefully, that's the last time we'll talk about that, I think it is And we're optimistic of the markets and you see it growing You see what AT&T, Verizon and others are doing in that business And our Canadian operations, our Latin America operations are growing nicely, similar to what you see others are doing in the U.S So we had really good feedback from the customer base and I'm confident we'll move forward here in the next few quarters And we'll definitely communicate it to the investment community Yes, I'll talk a little bit about the job itself and let <UNK> talk a little bit about the numbers From our standpoint, we're working collaboratively with the client and I think both of us have the same goal in mind and that's for a completion and it be a successful project There's nothing to read into that other than we're working together to - on both commercially and on schedule that they would like to see completed this year So we're working through all the issues that it takes to do that It is a 1,200 kilometer or so job across very remote country and you get 50 foot of snow in the winter and so things, you get a thaw And so it's difficult from a construction standpoint and we've done a great job executing through it I'm happy with our performance there And so the client's happy with us and we'll get through the commercial issues here over the next few quarters And I'll let <UNK> comment on where we're at from a cash standpoint Yes Last year, we added some nonunion capabilities in addition to what we've had All those projects were around the edges on all of them And so we see them depending on where we're at from capacity and what they're trying to accomplish We're in there We're in all the basins for the most part There's also some EPC opportunities with both pipe and stations in that arena that will be around So we like it We like it It gets capacity out of the market as well So again, as you start to see that takeaway come in, you'll start to see midstream business come back and all those markets are good markets for us Yes <UNK>, I'd like to add a little bit of commentary on that We got $6 billion or so to execute through the next three quarters, and obviously, the first quarter has got the most seasonality in it We're through it, so we can see the visibility in the next three As we execute through, we will update Also, as <UNK> said, we added roughly around 1,000 employees in the quarter And as you do that it in your baseload business for the future, it's difficult to put the thing into three month windows So as we have to talk about today, that's a good thing going forward We're, by our highest headcount, 29,400. So we're optimistic about what's going on with the base business and also where we're going in the future So it did put a little pressure on this three months here Yes, I don't - I'll let <UNK> give you a quantification I just - it's a general quantification to us It's just we know it's pressure when we see 1,000 employees get at it But we contemplate a lot of that in our guidance and so for us to say we didn't contemplate any of that would be a fallacy because we knew seasonality was there We've stated it when we talked in our Investor Day that we thought that there would be some seasonality, we contemplated it Yes, there were some impacts, both sides of this But again, we contemplate the seasonality in the first quarter But adding 1,000 employees and the seasonality is kind of what we're talking about Yes From a revenue perspective, yes, at the high end, I would tell you at this stage, I mean, it's possible that - for both segments to slightly exceed 10% to get to the high end of the range And then from a timing perspective and how that plays out, I think that we've still yet to see the risk profile as the back half of the year may still yet not materialize for oil and gas, which is what's giving the variability in the overall revenue profile with the back half still having the risk of having declines Although we feel incrementally confident in the nature of the rewards, as it stands here, I mean, until we actually receive and place them in backlog We're not in position to guide to anything stronger and to continue to caution that the back half of the year could have weakness such as the fourth quarter Much like we said at year-end, it could be down And then the last part of your question, telecom, yes, as it stands here right now, we've not baked in any incremental aspects of telecom We're still looking at something in the $150 million to $200 million range from both Canada, the U.S and Latin America contributions We have not increased anything relative to telecom No, I mean, I don't want to put a time frame on it We're going to collaborate with our customers to get the right contracts in place for both risks and M&As It takes time They're big projects, obviously So as you walk through those, it just takes time So I don't want to put a time frame on it but I would say the next few quarters here We're not complete with all of them Many of them are in the late stages and we're happy with what we've done as far as executing on the broad spectrum of all of our pipe and our spreads We're extremely satisfied with where we're at We can always do better but we're happy I think what puts pressure on our segment is that you have a lot of ancillary businesses with your MSA work, your integrity work, which is good and its good long-term work, but you do get seasonality And when you are ramping for these long-term integrity programs, along with that seasonality puts pressure in any given quarter when you add those folks So lots of your adds are developed in this quarter or to support that piece of business and those guys once you get them trained And also, we had some customers that delayed or were working through some state regulatory issues that cause some delays in MSAs that were anticipated to go in the first quarter So that also caused a little pressure in the segment We'll work through that as we go and start executing on their budgets for the year Again, it's the right answer for the long term of the business, it just puts a little pressure here in the quarter But we're happy with the way we executed on our mainline work Well, we're not done with them yet, but we're happy with where we're at From our standpoint, the way we looked at 2017 is playing out largely like we thought it would As far as the way our customers look at it, they may look at it a little bit different than we did But from our standpoint, the way that we see things happening is basically like we thought it would What's going in '17 is going and with a few exceptions Some of them did push a bit, but for the most part, it's playing out like we thought it would We do need to get some commissioners in place I don't think it's an issue The administration has committed to putting people to work I think you'll see that The biggest issue that we see is probably in the Northeast with some of the water permits and some of the things that are going on there that you've seen make the press All in all, it's lining up like we thought it would I mean, I'll make a general comment on it We've talked about the integrity business in our LDC, our local distribution markets, and the sustainability of that over the - there's 20 to 30 year bills as you get low natural gas prices, low interest and they're able to lock in long-term bills I think it's good for the ratepayer It's good for our customers So as you see that, you'll start to see them announce it in their capital budgets and we're executing on those CapEx projects across multi-years, 20 or so years We like the market We think we can grow it double digits And then that piece of business, it's a long-term stable type work It does have lower margins than your larger diameter pipeline work And it does have more cyclicality as you go into the winter months, just the way it is So it's just, in general, lower margins, more seasonality, but its good business and a good long-term business and we understand the risk on it Yes, Alex, some your spreads will come down as well in the quarter So the net effect of that, as the spreads start to come off a bit in the quarter, it's just a dynamic Yes I just - I really don't want to get into it I just - from my standpoint, we're in late stages negotiations on multiple large projects and I think it's - we'll talk about it more as we get them signed up We talked about ACP so others have announced that, announced what's in their backlog, so you can see the type of contracts we're talking about with Atlantic Coast there Again, we watch that Everything concerns me and so we stay on it, we stay and watch it and think about it and think about how it impacts our business and our customers And so yes, we're watching it closely Most of our projects are natural gas based at this point And we're moving gas and that's baseload fuel at this - what we see going forward, it will continue to be baseload If you look at it, it surpassed coal and your electric grid You need redundancy We like that business, LNG export I think that piece of business is really good Oil, we're watching it closely It affects Canada more so than the Lower 48 as far as what we're doing on a daily basis And it also affects the overall economy in certain areas So we keep our eye on it So far, we've kind of weathered through some of the lower pricing and the volatility in it Our customers continue to spend CapEx on different things and with the low interest environment and low natural gas, so it allows us to get a multiyear view on many things in our business Yes I think it's just - if you go to the major IOUs and specialty or integrated IOUs, nat gas and electric, if you just look at their CapEx and their OpEx budgets, they're giving five year guidance for the most part As you look at that and you look at the incremental impact and how much more that is due to all the things that we talked about with grid modernization, it allows us to get more visible and work with them on multiyear builds as they get regulatory - they're getting their regulatory relief there and I'm able to talk to them about a long-term agreement in the rate base So I think it's good for the customer Fuel's going down They can invest in infrastructure and talk about a multiyear view And this is unique over the last year, so you're starting to see this And it's additive to what was already going on in the industry So we like what we'd see It gives us an ability to provide the solution that we think we're unique on and talk about multiyear programs and how we help with those So we like that piece of business and think it's something that's additive to what's been going on in the past The overall environment in the communications business is robust They need people to build infrastructure So as you see that, you can see I'm talking about it as well in our CapEx You can see others talking about how they're putting on people It's a big market I'm optimistic we'll be able to sign stuff fairly quickly here I'd like to thank you all for participating in our first quarter 2017 conference call We appreciate your questions and your ongoing interest on Quanta Services Thank you, and this concludes our call

2017_PWR

2017

CNK

CNK #Thanks a lot. Thanks for the questions. Thank you very much for joining us all this morning. We look forward to speaking with you again following our first quarter. Bye now.

2017_CNK

2015

CHD

CHD #Yes, you're right in that there is some pipeline fill, obviously, any time we're going to be entering new markets. But it still ---+ we still do have same-store significant growth overseas. So I wouldn't throw a bucket of water on that. That thing is a [rocket] here. It's going to continue to grow. As far as price goes, we actually did get some price in the second quarter. So we have done some selective pricing around the international business. If you go back to the release, you'll see that. And I wouldn't expect, like you say, for Batiste suddenly to plateau. On the other hand, we expect that to continue to grow in 2016 and 2017. No, I would say we're watching this current ---+ yet again brand-new news of several weeks ago as impacting the category, but I fully believe pods will be here to stay. The industry is taking actions to deal with these issues and we fully expect to be a full-time player in the category. And again we're safe from any legal issues right now with the liquid pods situation because we are not in liquid pods. But we have plans in place to build our business going forward and I just don't want for competitive reasons get into what those details are. Yes, I would tell you, yes. We have flattened out in the last year or two but that was a pretty ---+ a lot of our competitors went backwards. So actually we have absorbed a lot of hits out there from a time period of higher commodities and foreign exchange, everything else going on. So while our performance and flat, that's actually been better than competitors. And I do believe we can get up to a 50 gross margin in this business, it'll be a combination of launching new products with higher margin, continued productivity gains and acquisitions. And it is our goal to get up to that point time and I'm not going to give you the timeframe we believe in that. But I do believe that is very doable. Are you kidding. It's a very active marketplace out there. We are incredibly actively engaged in that marketplace. But as you know, we are very picky and that begin pickiness has paid off huge dividends in the past in terms of the accretive value that we drive through acquisitions. So I assure you that I'm probably spending major part of my time going out and looking for the right acquisitions right now. And again, nothing big has happened so far. We picked up some wonderful small acquisitions that have been nicely accretive to our women's health business to our SPD business and that. So I can just guarantee you we continue to be hot and heavy looking for the right deals out there. And when they happen, you'll be the first to know. With respect to the full year, <UNK>, you know that it's always pluses and minuses that go into any of our forecasts. So when we scorecard the rest of the year, all the things that you cited are on the page. So the answer is yes, we obviously always forecast in leaving ourselves some flexibility to react to market conditions. As far as your observation about XTRA, your assertion is what. That XTRA is declining. So our 13-week data would say that XTRA is flat. It is true that it had been on the downswing over many quarter basis but we've corrected that. We put a lot of promotion behind XTRA this year in order to deal with some of the competitor actions. So we expected that's going to be stabilized and it's going to return to growth. Yes, <UNK>. This is <UNK>. I would say are we pleased where we are. No. We want to be higher. We are very pleased with the progress. We had a big 20% gain and consumption in the second quarter so we got good momentum behind the business right now and we feel good. But we want to continue to grow the business. It's a great product, there's great performance out there. We're very, very happy with the progress we've made in the beginning of this year. So we're in the right direction. And I would say within the cusp where Purcell is, OXICLEAN is performing very well versus the majority of the Purcell SKUs. In fact the majority of the Purcell SKUs don't deserve to be expanded. And so, we're not that fearful of Purcell at this point in time. Something else that might be helpful to you is that OXICLEAN's share is 1.2% in laundry but where we have distribution, we are over a [2%] share. So remember, we're still trying to get trial and distribution 2015. Thanks, <UNK>. Yes, well, you've got to appreciate ---+ this is a ---+ we have not been in the upper end of laundry. That was our entry in 2014. So we priced this product 20% below Tide. So now we're up against Tide and Gain and more recently Purcell comes in. So it's a crowded area and this crowd is not going to roll over and play dead. So it does require a significant amount of promotion and advertising in order to get trial. So as <UNK> said, yes, we are okay where we are but as far as how are you going to hold shelf long-term, the significant ---+ you've got to be below 2% ---+ above 2% share and we're at 1.2% today, we are 2%, we are in distribution. We've got to get over 2% to hold share long term and then grow from there. You know, <UNK>, keep in mind this is a laundry detergent is a $6 billion category. So 2% share is very meaningful revenue results and we are, again as <UNK> said, where we have good distribution we are over that already and were building distribution in other places. So it's a challenge. We believe it is very doable. We have the plans in place, we have new product launches coming to support that and we will achieve that in my mind. And again, if we had created and launched the <UNK> <UNK> brand and we were spending all this money, I would say it was big mistake. But we spent all the money behind the OXICLEAN brand very smartly from a marketing standpoint and that's why we continue to do well on the original OXICLEAN additive brand is doing very well on the marketplace, benefiting from all the advertising we are spending on the laundry detergent version of it, so ---+. And also the bleach version, we didn't even mention today, the launch in the bleach last year of the OXICLEAN brand has done extremely well. So very incremental to the business. Again, this is why we believe in megabrands. Because when you spend behind a megabrand and expand it to a new category, you get a lot of benefit on the prior parts of the brand that are out there from the Halo to the advertising bag. So we're very much going to continue the strong support behind Oxy laundry detergent and we believe that will benefit the whole OXICLEAN megabrand. Hey, <UNK>, it's <UNK>. Let's talk about it from the total Company perspective first. So in Q2 on a stack bar basis, a year ago we were at 3% and we're 5.1% so that's an 8%. If you do the same thing for Q3, it's around a 7%. And if you peel that back and you take the specialty product business out and the international timing out and you just look at the domestic business, the stack bar for Q2 is around 5.5%, and for Q3 it's a 6%. So we think it's actually a pretty decent quarter when you look at it like that. That is quite an open-ended broad question because you're assuming that these are what the issues are. Our issues are simply that in our Vancouver plant we had some equipment that went down and that was just one of those things. Now so, we had to repair the equipment in our existing plant. In our new plant the startup was expected to be completed in March. This is very sophisticated equipment, it has to ---+ it won't work in a synchronized fashion and once you get it rolling, it rolls. And it's producing now the way we want it to produce. But it's taken us three or four months to get there. I would say, <UNK>, too, we've had some customers command to see our new facility in York and they've been blown away by the sophistication of it and its potential. So again we did the right thing building a real state-of-the-art spaceship type plant that will produce ---+ increase our capacity by 75% and it was just a little bit more difficult than we estimated. We are very aggressive and we had a very aggressive timeline and it was a little more difficult than we estimated to get this state-of-the-art facility going. But we are very impressed by its potential. Our customers who have been able to look at it are blown away by its potential and it's just we've had the short-term hiccup and we'll get it behind us but it's been fixed. That's right, that's good. Yes. It's a decent question, <UNK>. You've got to remember most of the categories we play in, in these countries, we're relatively small players. So we don't have the pricing power to really take FX impacts. So the 2% is largely Brazil where there is currency impacts, and I would say the whole country price is up. But in general, no, we don't think we can price up all the way to cover currency. Right but I would say plus 2% is a reasonable number. Yes, the (inaudible) personal care category ---+ they've actually performed better over time than some of the household categories and household again was dragged down by the laundry category which was a big part of it. And we've had good results. Our shares have been strong in those categories. There have been some pricing competition in things like pregnancy kits which has caused a bit of a war out there. But no, we've got a lot of new products in those categories and we are very happy with those products in that. And if I had one wish in life, I'd wish I get the Trojan category growing. The condom category has been relatively flat now for quite some time but we're working on some major new product launches in that category and some great new marketing programs to help to get that going forward. Because that's the case with a 76.4% share, it's really incumbent upon us to drive the category more than share grows. But we have some plans in place over the next two years, which I find very promising, to rejuvenate that category and get it growing again. One more question, guys, and then we're going ---+ we have to get off to back to building this business. Yes, John, on the vitamins side we would not have built a plant with 75% volume upside if we didn't think we would use it. We're just not in a position right now for reasons to expand upon that how we plan to get there and when. So good question but sort of like laundry [compacts], we're not going to answer it. And then on the gross margin side, I'll turn it over to <UNK> and <UNK>. Yes, with respect to SG&A, you're right. We've had a lot of SG&A leverage over the past few years. But part of our long-term model is, we tried to grow [to] our operating margins 50 basis points annually. And the way you're going to get that is the lion's share of it from gross margin will be 25 to 35 basis points and the rest is going to come from SG&A. And as we saw this quarter, if you hold SG&A dollars flat you're going to get leverage. You have 15 basis points of leverage in the quarter. So, yes, you have to be vigilant about how you manage SG&A. We're not going to get the 50 or 60 basis points a year from that line item. Acquisitions obviously can help because you know our acquisition model is essentially we buy marketing contribution which is gross profit minus marketing. So that gives you instant leverage on your SG&A. And that has been part of our story historically. So there's lots of leverage to go in there. I hope that's helpful to you. Thank you all ---+ good, thank you. I'd like to thank you all for tuning in today. Another great quarter from Church & Dwight. A great first half of the year despite the problems we had on vitamins and a lot of great things coming in the future. So thank you all for your great questions and give any more questions, give <UNK> or <UNK> or me a call and we'll do our best to answer them. So thanks, everyone.

2015_CHD

2017

GRMN

GRMN #<UNK>, many of our products that we offer in outdoor and fitness are beyond some of the notable news that has been circulating, in terms of the overall activity tracker market. So our product lines were strong, particularly those with GPS. Fenix was a good performer. And we see people wanting to step up to a more advanced smart watch product, which Fenix definitely falls in that category. Yes, I think we've talked about the secular trends particularly in fitness, and we do anticipate that basic activity trackers are going to see a maturing cycle starting now, and going forward into the future. But with that said, on the outdoor side, we do see positive response to our Fenix 5 announcement, and we anticipate starting deliveries of those soon. And we also do see increasing interest from retailers in the outdoor wearables. So for example, we are gaining additional shelf space in some of the key retailers, particularly in the US, and expanding our shelf space in the US market. It is attracting a different kind of customer. There is certainly strong running bias in people that buy Fenix products, but we're also seeing people that are just generally aspirational and love any kind of outdoor activity move up to the watch. We believe our channel inventories are reasonable exiting the year, and into Q1. Many retailers, particularly in the US try to manage their inventories very carefully as they close out there year. But we believe our inventory situation is okay. Yes, so starting first on BMW. For this program, there is not any significant upfront investments for this particular program. We had already made investments in our factories, in order to be able to accommodate this win, and those are already costs we've incurred. For the solution, it's the media graphics unit, which actually is a common architecture piece across the entire BMW line, not only in China, but around the world. And so, consequently this is production of that architecture for the China market, but it is scalable elsewhere. In terms of fitness, in terms of the mix there, as I mentioned we are seeing stronger interest in more advanced products on the wearable side, and that includes what we would call our wellness line, like vivo as well as obviously Forerunners, which are all GPS products. We don't split those out by category, but I would say that GPS was the stronger performer, and basic activity trackers were weaker. We don't have numbers to share right now, but we can certainly prepare those and share them in the future. Yes, so definitely product mix is still a factor, even though basic activity trackers were weaker. Basic activity trackers have a very low cost basis, so their margin profile doesn't necessarily improve the overall fitness market, if they are weaker. That said also, the vivo line in general, including those with GPS, they are feature-rich products and they have to sell at a competitive price, so consequently there margin profile is generally lower. In terms of Apple and the specific impact on our market by the Series 2, I would say that certainly their initial results would appear like they're doing very well with Series 2. But we don't see the impact on our customers in our segment from that device. I think that it's a very competent device and it does a lot of things, but as we said before in the past, we believe that it's attracting a slightly different customer base than what we speak to. Okay. <UNK>, starting with marine, definitely there is a component of our outlook that reflects the improving macroeconomic conditions surrounding marine. Marine has been on a slow growth trajectory since the downturn, and we continue to see that, so certainly some of that is due to organic market growth. But certainly the other part is the momentum we see in our business, and particularly we believe we are taking share from the major competitors, and we believe the reason for that is our strong product line up and superior features and technologies that we have in our products. Regarding free cash flow currently for 2017, based on the current guidance out there, we anticipate free cash flow of about $500 million, and as you mentioned, that includes the increased CapEx, as well as you saw in 2016, we had quite a bit of improvements on working capital. Probably won't see as much of those working capital improvements in inventory, as well as the assumed year-over-year change in the operating income, also. And so as I mentioned on BMW, what we will be supplying is a hardware component that drives the overall media system in the vehicle. So it is a higher dollar value product, which we'll definitely benefit on the revenue side. I think in terms of margin profile at OEM, we don't break it down by category, but we generally said that the margin profile from the OEM business is generally lower than that of the overall auto business, so there would be some downward pressure as those revenues ramp up.

2017_GRMN

2016

FFBC

FFBC #Good morning, and welcome to the First Financial first-quarter 2016 earnings conference call and webcast. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to <UNK> <UNK>, Controller. Please go ahead. Thank you, Andrew. Good morning everyone, and thank you for joining us on today's conference call to discuss First Financial Bancorp's first-quarter 2016 financial results. Discussing our financial results today will be <UNK> <UNK>, Chief Executive Officer; <UNK> <UNK>, Chief Operating Officer; and <UNK> <UNK>, Chief Financial Officer. Before we get started, I would like to mention that the press release we issued yesterday announcing our financial results for the quarter is available on our website at www.bankatfirst.com under the Investor Relations section. Additionally, please refer to the forward-looking statement disclosure contained in the first-quarter 2016 earnings release, as well as our SEC filings, for a full discussion of the Company's risk factors. The information we will provide today is accurate as of March 31, 2016, and we will not be updating any forward-looking statements to reflect facts or circumstances after this call. I will now turn the call over to <UNK> <UNK>. Thanks <UNK>, and thanks to those joining the call today. Yesterday afternoon we announced our financial results for the first quarter. Before I turn the call over to <UNK> and <UNK>, I would like to comment on another strong quarter of operating results, which is now 102 consecutive quarters of profitability. We are pleased with our results, which reflect continued strong loan growth across our markets and products, stable net interest margin, and disciplined expense management. While we have areas for improvement, with fee income being top of mind, we continue to capitalize on our comprehensive suite of credit products and unique client-focus strategy to grow our commercial and specialty product segments, both in our metropolitan markets and across our two nationwide lending platforms, Franchise and Oak Street. The first quarter was marked by significant market volatility related to concerns around energy, the strength of the US currency, and other global economic headlines. Despite this global economic backdrop, we continue to see solid credit demand, and financial performance across our clients and prospects. While individual credit relationships come under stress from time from time, we believe the overall credit outlook across our markets remain stable and conducive to continued growth opportunities. As we work towards our strategic objective achieving top-quartile performance, our focus remains centered on serving the financial needs of our business, consumer, and wealth management clients, while remaining disciplined in our approach. Overall, the Company remains well positioned to continue to grow organically and meet our strategic objectives. With that, I will now turn the call over to <UNK>. Thank you, <UNK>. Net income for the quarter was $19.8 million, an increase of $2.2 million, or 12%, over the first quarter last year. Earnings per diluted common share for the quarter were $0.32, with return on average assets of 0.98%, and return on average tangible common equity of 13.06%, excluding approximately $500,000 of pre-tax non-operating expenses, which were primarily related to the consolidation of six branches during the period. Net income was $20.1 million, or $0.33 per diluted common share. Return on average assets was 1%, and return on average tangible common equity was 13.27%. Consistent with our comments over the last few quarters, we continue to see opportunities to organically grow our balance sheet across a number of diversified products, including our two national lending platforms, First Franchise and Oak Street Funding. We remain focused on a disciplined underwriting approach to optimize capital employment and increase yields, while still managing credit risk. End-of-period loans increased approximately $116 million, or 9% on an annualized basis, compared to the link quarter, and is in line with our long-term expectations of mid to high single-digit growth. Average loan balances increased $175 million, or 13% on an annualized basis during the period, as we recognized the full-quarter impact from late fourth-quarter 2015 originations, in addition to another strong quarter production, particularly in the CNI and specialty finance portfolios. Loan origination pipelines, primarily in our metro markets and our specialty finance businesses, remains strong, and we head into the middle of the year with positive momentum. Our client relationship, centered strategy, diverse product offerings, and strong cross-sell culture continue to produce sustainable growth. End-of-period deposits were relatively unchanged from the fourth quarter, with total average deposits declining $111 million, or 7% on an annualized basis, primarily as a result of seasonality in our public funds deposits. Our overall cost of deposits increased 3 basis points from the link quarter to 36 basis points, as we recognized the full-quarter impact on our indexed accounts from the late fourth-quarter increase in interest rates. Turning briefly to Oak Street, the significant areas of integration are now complete. The new associates are adapting well to the banking environment in general, and more specifically to the First Financial culture. I'll note that we are learning from Oak Street as well, and we remain very optimistic about their long-term growth potential. With that, I will turn the call over to <UNK> for further discussion of our first-quarter results. Thank you <UNK>, and good morning everyone. Net interest income for the first quarter was $66.6 million, an increase of $500,000, or approximately 1% when compared to the link quarter, as strong organic loan growth was complemented by the impact of the December interest rate hike, as well as the higher yield on our securities portfolio during the period. Net interest margin was 3.68% on a fully tax-equivalent basis, compared to 3.69% in the prior quarter, as a modest decline in loan yields was largely offset by the higher yield earned on investment securities. The effective yield earned on the security portfolio increased 15 basis points to 2.59%, benefiting from the December rate hike, as well as our efforts to reposition the portfolio and improve the yield profile in recent periods. Looking forward, we expect net interest margin for the second quarter to again be relatively stable with the first quarter, with potential fluctuation in either direction, depending on production mix and pre-payment activity. Further, I'll note that our interest rate sensitivity continues to trend toward higher asset sensitivity, and we remain well positioned for rising interest rates should we see additional rate hikes later this year. Non-interest income for the first quarter was $15.5 million, in line with the prior quarter, but impacted by seasonal declines in deposit service charges, bankcard income, and mortgage revenues during the period. Additionally, while wealth management fees benefited from seasonal tax services during the first quarter, fees were negatively impacted by market volatility through much of the period. Client derivative fees were stronger in the first quarter, increasing 16% over the fourth quarter, while covered and formerly covered loan-related income declined on a link-quarter basis. As <UNK> noted earlier, we are focused on improving fee income performance, and have multiple initiatives in process across the Company to grow fee income by optimizing product pricing and positioning, particularly with respect to commercial deposit relationships. Non-interest expense decreased by $600,000, or 1% from the prior quarter, to $50.7 million on a GAAP basis. Excluding the $500,000 of pre-tax non-operating expenses related to branch consolidation activity during the period, non-interest expense was relatively unchanged from the link quarter at $50.3 million, as improvement in OREO related costs was offset by a seasonal increase in compensation costs, as well as higher than expected healthcare expense during the period. Turning to asset quality, we are again pleased with our credit team's efforts and the resolution activity that occurred during the quarter, as non-performing loans declined 8%, and OREO balances declined 10% from fourth-quarter levels. That charge-offs declined 27% from the fourth quarter, with provision expense declining 11%, while the allowance for loan and lease losses increased modestly to $53.7 million at March 31. Consistent with our overall credit performance, the allowance for loan losses plus the remaining purchase accounting marks on acquired loans, net of the indemnification asset, as a percentage of total loans declined to 1.08% as of March 31, from 1.11% at year end. Overall, our credit outlook remains stable, and we are well reserved against potential credit losses. This concludes my remarks, and I will now turn the call back over to <UNK>. We will now begin the question-and-answer session. (Operator Instructions) At this time of will pause momentarily to assemble our roster. The first question comes from <UNK> <UNK> of Sandler O'Neill and Partners. Please go ahead. Hi, <UNK>. I wanted to ask you first, a couple different comments from you and <UNK> on fee income initiatives. I wonder if you could drill down a bit more into a couple things. One, if there are areas where you guys are disappointed with where you've been doing, or just haven't had the focus you like. Are you saying that there are things that you guys haven't done well, or is it just there's a lot of understandable market choppiness that makes it tougher to sustain momentum and fees. Beyond that, if you can maybe just give some examples of some of the initiatives and what you're focused on most intently. Go ahead, <UNK>. Sure, <UNK>. As we mentioned, we've got multiple initiatives across the Company there. I wouldn't say it's something that we are necessarily disappointed in, it's just areas that we feel we have room for improvements. In past years, we been focused on some of the acquisitions, and this is really focusing on executing on our existing products and services here. Multiple initiatives across the Company, I would say broadly targeted across really three categories ---+ first being product pricing relative to market; second being price and governance and being disciplined in the level and frequency in which we're granting exceptions; and then the third one being product penetration. These aren't necessarily second-quarter events, per se. These are longer-term strategies, but I do think some of the earlier strategies that we're working on would start to see income hopefully in the second half of the year. Okay, perfect. This is more or less just natural strategic extension, an appropriate extension, as opposed to anything else, it sounds like then. Exactly. Yes, this is <UNK>, <UNK>. We feel like we've got ---+ that we've been under market a bit in a few areas that we've got some opportunities to improve. Yes, it's more about improved operating leverage. Okay, that's perfect. Thank you for the clarification there. Then <UNK>, I was wondering if you could talk a little bit about the construction book. It's still ---+ in the aggregate, it's not a huge part necessarily of who you guys are, but it has grown very rapidly over the last couple of years. Just curious about your comfort level and outlook for overall growth in the construction book. Yes, <UNK>, it has grown. We ---+ I'd say started from a relatively low base that didn't really grow much coming out of the crisis until really the last ---+ to your observation, the last couple of years it's grown. What I would say is we have seen lots of good opportunities, especially in the last two years in our metropolitan markets around a few different categories ---+ some being multi-family, some being health care, some being build to suits, whether for a variety of tenant types. I'd say we are now at a point where while you may see that balance grow some just as those projects finish out or build out, we're not looking for significant growth in the construction portfolio. We'll look at good opportunities, we will continue to serve our clients well. We'll see some movement up, but you won't see the same kind of growth over the next two years that you've seen over the past two, maybe is a better way of saying it. You bet. <UNK> <UNK>, Jefferies. Please go ahead. Hi, good morning, guys. Yes. Sure <UNK>, this is <UNK>. I think the interest rate hike in December really manifested itself exactly as we expected. You saw that with margin holding pretty much in line with fourth quarter, which was in line with our expectations. The December rate hike significantly closed the gap between loan origination and payoff spreads. Saw some lift on the securities portfolio, as well. Saw some lift on the deposit side as well, as we have had success in recent years with an index money market product for clients who are rate-sensitive. It also gives us a good opportunity to sell, and bring new money into the bank there. With respect to the last part of your question around the public funds, you're exactly right, we did see the typical cyclical outflow of public fund deposits, which starts late in the fourth quarter. They tend to come back in mid to late first quarter. We saw that this year as we have in years past, but it was a little bit larger this year. Don't know that there's anything specific driving it, but we certainly noticed it as well that the magnitude of the outflow was a little larger than we've seen in the last few years. <UNK>, this is <UNK>. It does. I think we continue to see good growth opportunities organically, and given that, we don't for see any repurchase activity here in the near term. We look at it every quarter as a Board, but at this point I would say your assumption is accurate. Hi, <UNK>. Yes, <UNK>, the branch consolidation activity that we referenced in the release, that was ---+ certainly there's some expense saved there, but that was included in the guidance we gave back in January for the full-year operating expense run rate of approximately $50 million a quarter. We opened a couple branches late last year. We've got one or two more coming this year. Those are some of the efficiencies that we've spoken about in the past that we're looking to realize to help offset some of the continued investments we're making elsewhere in the business. Yes, <UNK>. We're still expecting in the low 33% range there, probably a little lower than what you saw here in the first quarter, but in that ---+ probably between 33% and where you saw it here in the first quarter. Sure. Thanks, <UNK>. Good morning, <UNK>. Yes, I'll start. <UNK>, this is <UNK>. I'll let <UNK> give his thoughts, as well. We're doing a couple things. One is obviously we're always trying to grow core DDAA, which is always the best way to reduce those costs ---+ and really doing it through continued proactive sales efforts, which we've always done; but we've also added a couple people to call into the franchise book of business, as well as to call into the Oak Street book of business. You could maybe some treasury management opportunities within that group. Those, from a core sales perspective, are the main initiatives. Yes, <UNK>, I would just add to <UNK>'s comments there. This also touches on the pricing governance comment that I made earlier around being a little more disciplined around the exceptions and the level of exceptions we're allowing to our standard pricing. Yes, <UNK>. I would say we're now in the high 80%s, depending on where deposit flows are. I think we could easily be in the mid-90%s as an optimal level, so we've got some runway there. Just given the size of our securities portfolio, I think certainly we can convert that into loans, that would be more efficient for the balance sheet. That's what we think about is more in the mid-90%s range. Sure. Certainly our goals, as we've talked about in the past, is to move that number closer to the 110%, given the current rate environment. We think obviously continued organic growth in that mid-to-high single-digit range that we've discussed, we think with the combination of growth platforms that we have now from our core community markets to the metropolitan markets, to some of our end market specialty product, to Oak Street and Franchise, some of which have higher yields associated with them, we think we can do that in a stable-margin-type environment, and get operating leverage by holding expenses down. That's I would say primary. Secondary be some of the fee income strategies that <UNK> referenced earlier. It really is about that core blocking and tackling, continuing to realize the growth we've talked about, with maintaining the expense discipline ---+ assuming a well-behaved credit environment. That's the way I would describe the walk-forward of it. Yes, we're still maintaining our expectation of a $50-million operating expense run rate through the balance of the year, quarterly. Thanks, <UNK>. Hi, <UNK>. Yes, I would say in their core insurance business, we've seen a couple of bigger deals since we closed the deal. As you get with strong borrowers that are of larger size, they may be at lower margins than what the core business is. But I would say the bulk of their originations have been consistent with what they were originating pre-transaction. Yields have been comparable. That said <UNK>, I think we're seeing yield pressure in all the business lines. I think they will ---+ Oak Street will continue to see it, as well. But I give that Management team credit. They have been able to hold yields pretty strongly, still realize the growth we expected. At this point, nothing material or significant, but I would expect as we do bigger deals that on those specific relationships you will see lower yields than what their overall portfolio is at. Yes, we have seen some movement in and out, <UNK>. We had one larger deal move out, another larger deal move in. We've seen some ---+ again, some singular credit movement that's caused those variances ---+ nothing of particular concern or significance at this point; but yes, any time we see those numbers move around we're sensitive to it, and try to get on top of it quickly. Yes, we are. I think the pipeline continued to be solid going into the second quarter. We still feel good about that mid-to-high single-digit-type organic growth rate. That said, it's still very competitive. We continue to try to stay disciplined, both from a pricing and structure standpoint. I always put the caveat in there about that, that we would rather not do a deal than to do a deal that's too high risk. We'll balance those two, but at this point we think that guidance is appropriate. Well, I will take your second question first, there. On the securities book, it really depends on the growth we see on the loan side. To <UNK>'s earlier comment, our preference is to deploy capital in the loan portfolio. You saw on a period-end basis securities book was down about $50 million here as of March 31 versus year end. If loan growth trends continue and we continue to see you good deals with risk-appropriate returns, then I think it's probably safe to say you would see the securities portfolio come down, similar to what you saw here in the first quarter. Your second question on the yield curve, we disclose in our Qs and K the similar interest-rate sensitivity disclosures to others, which are primarily on a parallel shop. We also run additional scenarios that are more of a slow, bear-flattener-type scenario. We continue to be right around neutral to slightly asset-sensitive under those scenarios, as well. The other thing I would mention we're seeing is ---+ and we've mentioned this the last couple of quarters ---+ is the vast majority of our originations have been variable-rate originations, which are obviously priced off the shorter end of the curve. At least at this point, the longer end move-down has not had a significant impact. Yes, we don't really give guidance out beyond the near term and the next quarter, but as I commented earlier, we're expecting margin to remain relatively stable. Good morning. Sure, Dan. This is <UNK>. The way we're thinking about M&A right now is that we really feel like the work we've done over the last few years, we've positioned the franchise in really the markets and products that we were interested in being in. Right now we're most focused on organic growth and the execution of the strategy. We'll certainly look at deals if they're strategic and it makes sense for us, either from an asset platform or from a market extension, but I would tell you that's not the first priority right now. Really, it's about organic growth and executing on the core strategy. Yes, I'd say it's been interesting. It's been episodic in terms of different moves and competitive conditions. We've seen it most competitive lately in what I would call some of the middle market, CNI-type business, where I would say both rate and structure have been competitive. We're trying to compete against that, but still stay true to our strategy and our risk profile. Commercial real estate continues to stay competitive, but I think that's plateaued as it relates to structure and pricing. Then on the deposit side as well, as the other loan products, it just tends to be market by market, and depending on which competitor may at that point be more aggressive than another. I would say it's still a market we feel like we can compete in, we can grow in and hit our yields and returns in, but it's still very competitive. Thanks. Hi, <UNK>. Well, to answer the last question first, yes. It's one of those where we all get it ---+ that if you're going to go, you need to go, and we're very cognizant of that. We certainly don't want to do a deal just to do a deal, and then put us into a situation where we see lower returns because of the $10-billion issue. We are sensitive to that. That won't cause us not to do a good strategic deal. The way we look at it, <UNK>, is we've got probably three to four years of organic growth runway before we would do it on an organic basis. But that said, it's soon enough that we are preparing for ---+ and <UNK> can speak to some of the things we're doing. All right, <UNK>, thank you. Great. Thanks, Andrew. Again, thanks everyone for joining our call today, and for your interest in First Financial. Thank you.

2016_FFBC

2018

CTB

CTB #Good morning, everyone, and thank you for joining the call today. This is <UNK> <UNK>, Cooper's Vice President and Treasurer. And I'm here with our Chief Executive Officer, Brad <UNK>; and <UNK> <UNK>, our Chief Financial Officer. During our conversation today, you may hear forward-looking statements related to future financial results and business operations of Cooper Tire & Rubber Company. Actual results may differ materially from current management forecasts and projections. Such differences may be a result of factors over which the company has limited or no control. Information on these risk factors and additional information on forward-looking statements are included in the earnings release we issued earlier this morning and in the company's reports on file with the SEC. During this call, we will provide an overview of the company's first quarter 2018 financial and operating results as well as our updated business outlook. Our earnings release includes a link to a set of slides that summarizes information included in the news release and in the 10-Q that will be filed with the SEC later today. Please note that we will reference certain non-GAAP financial measures on this call. The linked slides include information about these measures and a reconciliation to the most directly comparable GAAP financial measures. Following our prepared remarks, we will open the call to participants for a question-and-answer session. Now I'll turn the call over to Brad. Thanks, <UNK>, and good morning, everyone. Before we begin, I want to quickly congratulate <UNK>. As recently announced, she has decided to transition later this year from a full-time executive career to focus on serving on public company boards. <UNK> is fully committed to remaining actively engaged at Cooper and helping us deliver on our plans. She will remain in place until a successor is identified and assimilated into the company, assuring a smooth transition. I'd like to publicly thank <UNK> for her contributions to Cooper, including playing a key role in the development of our long-term strategy and business priorities, and wish her the best in her future endeavors. With that, I will begin our call with a brief overview of our first quarter 2018 financial results, and then provide an update on Cooper's progress towards our strategic priorities. I will also discuss our business outlook for the remainder of the year. After that, I'll turn the call over to <UNK> for a more detailed discussion of our first quarter performance and capital allocation. I'll return for a few remarks before we take your questions. Let's now talk about the first quarter 2018 results. The first quarter was, in large part, a reflection of the U.S. tire market performance. Our U.S. light vehicle volume performance in the first quarter was a decline of about 6% compared with the same period a year ago, which was more aligned than recent quarters with the USTMA trends, which continued to be weaker than expected, with a decline of over 5%. Global net sales for first quarter were $601 million, down about 6.5% compared with the same period last year. Operating profit for the first quarter was $26 million or 4.4% of net sales, which is a decrease of $32 million from the prior year. The decrease in our first quarter operating profit, adjusted for onetime items, was more than explained by weaker volume and higher manufacturing costs, as we made production adjustments to keep our inventories in line with the current market conditions. It is clear that the challenging industry conditions of 2017 carried forward into the first quarter of 2018 and impacted the tire business as a whole, including Cooper. While the tire business navigates through this period of weak demand, we at Cooper are focused on what is within our control, taking actions to effectively manage our inventories and reduce costs. For example, we restructured corporate headcount in the U.S. and reduced the production schedule and workforce in Mexico to align with market demand. In addition, we are under way with several initiatives to drive unit volume growth and profitability, which we will detail during our Investor Day on May 11. I can tell you that these initiatives around ---+ revolve around key strategies, such as speeding up the cadence of new product introductions and operating with a new consumer-led product development process. One important product line developed using this new approach is the all-new A/T3, which will take industry-leading product to even greater performance. We will begin shipping the new A/T3 in a few weeks. We will have more product news at our upcoming Investor Day. In addition, our strategy involves entering new channels that represent opportunity for Cooper, where our considerable brand strength can be leveraged in new ways to expand into channels such as e-commerce, auto dealerships, general merchandisers and continued OE penetration. To accelerate our commercial initiatives, we are excited to have a new President of North America Tire Operations, Chris Ball, who joined us in mid-March. Chris comes to Cooper following 15 years at Whirlpool Corporation, where, among other posts, he led the company's largest business unit and their KitchenAid small appliance business. Chris is a talented global executive with significant commercial experience, and we look forward to the fresh perspectives, energy and positive change he will drive going forward. As we have said previously, our actions will take some time to manifest in our results, but we expect our performance to improve as these efforts take hold and as the industry rebounds in the future, supported by strong macroeconomic factors. We do not believe that current industry conditions represent a new normal for the tire business. Ultimately, we believe that positive trends, such as employment levels, gas prices, miles driven and others, will result in an overall improvement in the industry, and we expect to participate in such a recovery in the future. Going forward, we expect operating profit margin performance in the second quarter to be similar to the first quarter as we continue to navigate through a challenging market environment. However, we expect industry demand to improve in the back half of the year. We expect that this improvement, along with our actions to drive volume and reduce cost, will result in operating profit margin approaching our stated 9% to 11% range for the second half of 2018. It is important to recognize that apart from all of the industry challenges in the light vehicle tire market, we are very pleased with the volume performance of our truck and bus radial, or TBR, tire business, which was up 25% in the first quarter, well above the industry trend. In March, we announced a Cooper-branded TBR product line to leverage the opportunity we have, particularly in the fleet space. This new Cooper brand complements our successful Roadmaster brand, which has provided quality products primarily to owner-operators and trailer manufacturers for more than a decade. In addition to our success in the TBR segment, we are highly encouraged by profitability within our International segment, which more than doubled versus the same period a year ago. This growth continues to demonstrate the value of our strong global footprint. Now I will turn the call over to <UNK> for an update on the financial results and capital allocation. Thank you, Brad. I'll start with our first quarter financial review. Net sales were $601 million compared with $643 million in the first quarter of 2017, a decrease of 6.5%. First quarter net sales were negatively impacted by $39 million of lower unit volume and $20 million of unfavorable price and mix, partially offset by $17 million of positive foreign currency impact. Operating profit was $26 million or 4.4% of sales compared with $58 million or 9% of sales in 2017. Our 2017 operating profit has been restated to reclassify $9 million of other pension and postretirement benefit costs out of operating profits as a result of the adoption of Accounting Standards Update 2017-07, which changed the U.S. GAAP accounting for pension and other postretirement benefit costs. First quarter operating profit as compared with the same period in 2017 was impacted by the following factors, which are summarized on Page 6 of the supplemental slide deck: $12 million of higher manufacturing costs, due primarily to lower production volumes; and $11 million of lower unit volume. This was partially offset by $6 million of favorability resulting from, first, $14 million of favorable raw material costs, partially offset by $8 million of unfavorable price and mix. As expected, our raw material index sequentially increased during the first quarter from 153.1 in the fourth quarter of 2017 to 156.7 in the first quarter of 2018, as shown on Page 5 of the supplemental slide deck. While up sequentially, this was 5.8% lower than our index of 166.4 for the first quarter of 2017. There were also multiple unique items that impacted the quarter: $22 million of unfavorable variance related to the reversal of preliminary TBR tariffs, which were incurred in 2016 and reversed in Q1 of 2017. This was partially offset by $7 million of costs related to tornado damage at a North American distribution center in 2017 and $3 million of net insurance recoveries in the first quarter of 2018 related to the same event. In addition, there were $3 million of higher other costs related to restructuring in the U.S. and reduction in the manufacturing workforce in Mexico, where we went from a 7- to 6-day operating pattern as well as start-up costs related to 2 new U.S. distribution warehouses, both of which will be operational later in 2018. We delivered earnings per share of $0.16 compared with $0.57 in the first quarter of 2017. Moving to our segment performance, I'll start with the Americas Tire Operations. Segment sales for the first quarter were $485 million, down 8.7% from $531 million in 2017. This decrease was a result of $30 million of lower unit volume, $19 million of unfavorable price and mix, which was partially offset by $3 million of favorable foreign currency impact. Operating profit in the Americas was $31 million or 6.4% of net sales compared with $71 million or 13.3% of sales in the same period last year. Operating profit was impacted by $10 million of lower unit volume; $12 million of higher manufacturing costs, which reflects our decisions to match production volume to demand and control inventory levels; and $14 million of favorable raw material costs; offset by $14 million of unfavorable price and mix. As mentioned previously, there were multiple unique items that impacted the quarter in this segment: the $22 million unfavorable variance related to the reversal of preliminary TBR tariffs, which were incurred in 2016 and reversed in Q1 of 2017. This was partially offset by $7 million of costs related to tornado damage at a North American distribution center in 2017 and the $3 million of net insurance recoveries in the first quarter of 2017 (sic) [2018] related to the same event. In addition, there were $6 million of higher other costs, which include expenses related to workforce actions in Mexico as well as start-up costs related to 2 new U.S. distribution warehouses, which will be operational later in 2018. You can see the full profit walk for the Americas on Slide 7 of our supplemental slide deck. Now turning to our International Tire Operations. Net sales for the first quarter were $161 million, up 13.6% from the first quarter of 2017 as a result of $13 million of favorable price and mix and $14 million of positive foreign currency impact, partially offset by $8 million of lower unit volume. Unit volume in the segment was 5.4% lower in the first quarter of 2018 compared to the prior year as a result of decreased volume in Europe, which more than offset a slight increase in unit volumes in Asia. In Europe, we had a difficult comparison as the first quarter of 2017 had significant buying ahead of announced price increases. Our Asia business remains strong, and we still expect double-digit domestic unit volume growth for the balance of the year. The International segment operating results increased compared with last year with an operating profit of $7 million in the first quarter compared to $3 million in the same period a year ago. These results were driven by $6 million of favorable price and mix, which were partially offset by $1 million of lower unit volume and $1 million of unfavorable other costs. You can see the full profit walk for the International operations segment on Slide 8 of our supplemental slide deck. Now turning to some corporate items. The effective tax rate was 27.8% for the first quarter compared to 30.7% in 2017. The first quarter 2018 tax rate includes discrete items related to the accrual of additional uncertain tax positions relating to previous years. The rate is based on forecasted annual earnings and tax rates for the various jurisdictions in which the company operates. We estimate the full year 2018 effective tax rate will be in a range between 23% and 26%. More detail on our taxes is available in the Form 10-Q that will be filed with the SEC later today. Moving to cash flows and the balance sheet. Cash and cash equivalents were $213 million at March 31, 2018, compared with $365 million at March 31, 2017. Capital expenditures in the first quarter were $60 million. We continuously evaluate the appropriate level of capital spending in the current environment, remaining prudent while also evaluating the capital needed to support our ongoing modernization, mix transformation and automation initiatives, in addition to investments in capacity to align with our global strategic growth plans. As a result, we are lowering our full year capital expenditure projection for 2018 to between $200 million and $220 million. We continue to earn solid returns on our investments, delivering a 12.3% return on invested capital for the trailing 4 quarters, excluding the impact of unique fourth quarter 2017 tax activities. Moving to capital allocation. In February 2017, our board extended and increased our share repurchase program by authorizing the repurchase of up to $300 million of the company's outstanding common stock through December 31, 2019. During the first quarter, approximately 470,000 shares were repurchased for a total of $15.6 million at an average price of $33.15 per share. As of March 31, 2018, $208 million remains of the $300 million authorization. Since share repurchases began in August 2014, the company has repurchased a total of 15.2 million shares at an average price of $34.38 per share. Of note during the quarter, we extended the maturity dates of both our revolving credit and accounts receivable securitization facilities to maintain our strong financial flexibility. Cooper believes our existing cash, cash flows and potential leverage are more than sufficient to support our capital allocation priorities. We define those priorities as supporting our ongoing commitments, capital to support organic growth and margin improvement initiatives, acquisitions and partnerships and funding our dividend and share repurchase goals. We believe our long-term operating performance, our sustained high level of ROIC, and our demonstrated commitment to delivering on our strategic plan, including our balanced approach to capital allocation, delivers long-term value to our shareholders. I'll now turn the call back to Brad for perspective on the balance of the year. Thanks, <UNK>. Before we take your questions, I want to say that despite tough times in the tire industry and for Cooper, we are optimistic about Cooper's future. In the near term, we expect operating profit margin performance in the second quarter to be similar to the first quarter as we continue to navigate through a turbulent market environment. However, we do expect industry demand to improve in the back half of the year. We expect that with this improvement, our actions to drive volume and to reduce costs will result in operating profit margin approaching our stated 9% to 11% range for the second half of 2018. We have a strong brand with great consumer loyalty, an attractive value proposition and exciting new products that will be coming out at a faster cadence. We believe that long term, Cooper will continue to be a strong global tire competitor that delivers value to our shareholders. That's all we have for our formal remarks. Let's move on to your questions. Operator, will you take the first question please. Thank you, Chris. Sure. Thanks, Chris. I think that the way that we would describe the environment in North America right now is, frankly, similar to what we saw in the second half of last year. You'll recall in the first part of last year, especially in the first quarter, raw material prices began to increase rather sharply. There were some market pricing events that took place starting in the first quarter. We announced our increase in March and into the second quarter. And then as the industry softened through the year, or continued to be relatively soft, especially in the second half of the year, we did see a pickup in promotional activity. I don't think that we've seen an increase in that level of activity as we get into the first quarter, but we certainly have seen a continuation of it. So I'd say it's relatively consistent with what we were experiencing in the second half of last year on ---+ I know we are very focused on making sure we keep ourselves in an inventory position where we're not forced into doing things that we don't want to do on the promotional or price side. You see that coming through the results in the first quarter in our manufacturing costs on ---+ and in general, as we look at the market, I ---+ again, I'd say that it's relatively similar to what we were experiencing in the second half of last year. Well, I think there are many factors, but there are certainly a few that I'd highlight within that, Chris. We do expect that industry demand in the U.S., which is obviously extremely important for us, is going to pick up in the second half of the year. All signs point to that, and we believe that, that will be the case. We believe that we're extremely well positioned to take advantage of that right now. In particular, I mentioned in the comments earlier that we're coming out with our new A/T3, which is an extremely important ---+ and has been very successful for us over time. And yet, we're positioned to take even more advantage of the market with this new and improved A/T3 coming online. So we do expect volume and Cooper's performance relative to the market to be a contributor in the second half of the year. We also do believe ---+ we did ---+ we took some actions. We talk about the things that we can control, and we can control costs. We took actions beginning in the fourth quarter and continuing into the first quarter of this year to restructure our corporate headcount and SG&A. So we've reduced costs there, and we'll begin to see more on contribution from that as we move forward. And importantly in the manufacturing footprint, we've downsized specifically in Mexico on our capacity in order to make sure that we're aligned to demand. And we had costs associated with that in the first quarter this year, both of those events, and we should see benefits from those as we move into the second half of the year. Yes. The real rationale there is Roadmaster has been, and will continue to be, a fantastic product for us on ---+ it competes in specific segments within the TBR industry. So the owner-operators and the trailer OEs have been a space that has driven that success for Roadmaster. On Cooper, it's going to allow us to enter other segments of the TBR market, specifically the fleet portion of that market, which right now is a terrific place. The timing of this introduction of the Cooper brand couldn't be better with what's going on in the TBR industry in the U.S. And our entry into that part of the market, we really look forward to seeing the results from that moving forward. So clearly, the sell-in is soft for the industry. And we were in line with USTMA, but it was with a weaker industry for sell-in. Anecdotally, we are hearing that there has been some evidence of stronger sell-out. And frankly, with some important customers of ours, we've heard that Cooper sell-out has been good within some of those improvements that they've seen. On looking back on the first quarter in whole and then carrying back even into the second half of last year, the trend that we have seen and believe has existed through the second half of last year and at least into the first part of the first quarter, were weaker sell-out trends. Whether ---+ we are hearing anecdotally that there may be a turn in that right now, we'll see. Yes, I think it's a bit of both, <UNK>. I do believe that there has ---+ there had ---+ the macro environment suggests that people are utilizing their tires. And at some point, that means they're going to need to replace those tires on ---+ as we move forward on ---+ we're ---+ and I don't think we're alone believing that, that time is coming sooner rather than later. And we're talking about it in the context of the second half of this year. I'd also say that there are some newer contributors to that when you look at the implications from the reduced tax environment in the U.S., which should put more money into people's pocket, paycheck to paycheck, and also coming through the first round of tax filings this year. We didn't see it in the first quarter. You see the same numbers we do, where consumer durables were down a bit in the first quarter and savings levels were up. But eventually, as people are utilizing their tires, they're going to need to replace them, and they should be in a better position to do so financially. So without commenting specifically on some of the recent announcements or specific customers on ---+ to put it into context for Cooper, our distribution ---+ the wholly owned part of our distribution is largely to service into our wholesale distribution customer network. So we're partnered with wholesale distributors of all sizes, from the very large national representatives, to large regional representatives, down to smaller independent wholesalers and distributors. And we believe going forward that that's still the right model for Cooper to continue on, to work with our customers as our fulfillment arm to deliver customers if ---+ when they want them, where they want them and at the value they want them going forward; that we're better off taking our capital and investing it in new products and plants and our people and leaving the fulfillment part of our business to our customers who we have strong relationships with. Having said that, we also believe that with the changes and the disruption that it's bringing to the market in the U.S., that it provides unique opportunities for Cooper. We're looking at that more holistically. We think we're really well positioned right now with the strength of the Cooper brand and where we're at with ---+ on the freshness of our product portfolio as we stand today, and as we introduce the new A/T3 that I've been talking about, that there are opportunities that will present themselves to Cooper as a result of some of the changes that are happening in the U.S. market right now. Yes, that's a restatement related to the implementation of the revenue recognition standard. And so there will be ---+ there is some more detail about that in the Form 10-Q that will be filed today. We may see ---+ we've seen a little bit ---+ or we've had a little bit of an increase, and we may continue to increase our R&D resources. Having said that, part of the reason that we went through the restructuring that we did at the end of last year was to ensure that we could keep SG&A levels, in total, and cost of good levels to the extent that ---+ on the fixed part of that, in line with what we've been spending historically but to be in a position to invest in some of the things that we need to invest more in, like R&D capability to support our product cadence and to support the part of our business, of OE, which is beginning to flourish. Well, I'm not ---+ you're going to get me on those words. I'm not sure which ones we used. But frankly, it was about flat, just up slightly in the first quarter. But that is a little bit of a timing thing. We are still expecting double-digit growth in third-party sales in Asia this year. It's a little bit of that. It's a little bit of when the new year fell this year relative to the way that OEs order. So it was really more timing than anything. Again, without commenting specifically on any of the announcements that have come out at the beginning part of this year, we really believe that this is an opportunity for Cooper, Cooper's brand to take even a bigger position in some parts of the market. And we're actively working on those right now. Related to the timing, the second quarter versus the second half, it is a little bit driven by our expectation about the market rebound. And again, we have also received anecdotal comments and evidence that there might be some turn in the sell-out volume, which could impact the sell-in. Part of this though, while our inventories may be in a good position, it doesn't necessarily mean that all the channel inventories are in good position and that there might need to be on ---+ there may be some time required in order to fix that in the channel in general, that could impact the timing of when we all begin to see the benefits of a stronger market in the U.S. in particular. So the volume part of that is really the biggest contributor to the comments related to the second half versus the second quarter. As we do move into the second half of the year, beyond the expectations that we'd have for a stronger market in the U.S., we do believe that that's when we're going to begin to see benefits from some ---+ from the A/T3 product launch. While we'll begin shipments of that in this quarter, that will really begin to impact our sell-in on ---+ more so in the third quarter and for the balance of the year. And we believe that we're going to be in a much better position on ---+ with regard to our manufacturing situation and filling that back up when we get into the second half of the year. Those are the, really, the 2 biggest contributors to what our expectations are for the second half. We haven't provided specific guidance on that, and we will see some benefit. And I would also reinforce that we'll take up ---+ on the SG&A side of that, in particular, we will be reinvesting a portion of that into some skill sets and capabilities that we need to deliver the strategy that we have going forward. So it'll be a little bit partially offset. But we do expect that there will be improvements from that as we get into the second quarter and beyond. Well, first of all, the inventory is on ---+ and I'll let <UNK> provide some more specifics on this ---+ but it's an increase in the dollar level of inventory that we have. Actually, the unit level of inventory we have is down in the quarter, even with some important events like the prebuild of the stock for the A/T3 launch and the transition that we're making with our TBR warehousing approach in the United States to better service our customers on ---+ but <UNK> may ---+ you want to comment on that. Yes, I will. So the dollar value of inventory is up year-over-year, although units are down. Tire inventories are down year-over-year. And as Brad said, really, that's about building some inventory of high-value items for the A/T3 launch and the TBR inventory that we're stocking into some of our new mixing warehouses. But, <UNK>, I think was your question also about margins in the second half and what's driving our assumption around margin. So we certainly do continue to balance the production levels with inventory. And assuming that we see the pickup that we think we'll see in the second half of the year, I think our hope is that we will have less manufacturing costs. I think it also goes back to the point Brad made a couple of minutes ago, with our planned launch of the A/T3 and our hopes that the market picks up in the second half of the year; and finally, the programs that we're driving internally, the cost savings and some of the actions we've already taken. Those are the big drivers of what's going to impact our margin in the second half. Brad, anything else you want to add. Yes, the thing that I should add on ---+ because it relates to the first part of your question, is some of the areas where we're expecting volume growth around the A/T3 and around TBR are ---+ that will be favorable to mix as well as we get to the second half of the year. It richens the mix of the products that we'll be selling. It will begin in the second quarter, but you're going to really see a bigger impact from that in the third and the fourth quarter. Well, we believe that, that time is near. And there's a couple of things to highlight here, and I appreciate the question because it will allow us to do that. One is ---+ and we've mentioned this in our last call and stopped because we're largely through it, but over the last few years, we have dramatically reduced our exposure to private brand wholesale on sales in the United States in particular, over 5 million units. Again, we're largely through that transition now, and we have opportunities to grow in the other parts of our business. In the other parts of our business, the areas that we've highlighted that ---+ where we don't have an appropriate share of the market for Cooper, is ---+ are in e-commerce, it's in auto dealerships, it's in general merchandisers among others. But those are 3 areas that we really are emphasizing right now that we need to increase our exposure. That will be helped by some of the OE relationships that are developing for us right now and that we'll be able to talk about more as we actually begin to supply those starting later this year. Yes, I ---+ well, we're going to ---+ we do continue to have a strong balance sheet on ---+ and are pleased to be in that position. We will continue to balance on what we're investing in the business to deliver our strategic priorities versus other ways that we can return to shareholders. Obviously, we'll be looking at share price, among other variables, to make those decisions. We do plan on having a more thorough conversation around capital allocation at our Investor Day on May 11, so I'd leave it there for the moment. Okay. Thank you, operator, and thank you all for being with us on the call today. As I said earlier in the call, we do not expect that the current industry challenges represent a new norm for the tire industry. Macro trends do remain positive and should ultimately drive improvement. The programs that we have already started, combined with our strong business model and global footprint, position us well to benefit over the longer term. We look forward to speaking to you soon at our Investor Day on May 11. And as always, please reach out to <UNK> with any further questions or comments. Thank you.

2018_CTB

2017

NBHC

NBHC #Thanks, Mike. Good morning, and thank you for joining National Bank Holdings' First Quarter Earnings Call. As usual, I have with me our Chief Financial Officer, <UNK> <UNK>; and Rick <UNK>, our Chief Risk Management Officer. I am pleased to share that our pretax earnings were in line with our expectations, and you'll also see that we realized a meaningful tax benefit during the quarter. Loan production was solid, with our teams delivering a 20% increase in production over first quarter of 2016. Our growth in deposits was primarily driven by a 6.3% increase in annualized growth in our low-cost deposits. Noninterest income was in line with guidance, and then expenses were flat to the fourth quarter. I'll add that we feel very good about our momentum going into the second quarter. Finally, as I turn the call to Rick, I'll encourage you to pay particular attention to his comments on the diversity and granularity of our portfolio. While there's no doubt that our commitment to diversification makes growth more difficult, we continue to believe that this discipline will translate into more reliable returns over time. Rick. Great. Thank you, Rick, and good morning to everyone. As you saw in yesterday's release, we delivered $0.30 earnings per share with return on tangible assets of 81 basis points and a return on tangible equity of 7.7%. We continue to make progress towards our financial goals of 1% return on tangible assets and a double-digit return on tangible equity. There's a lot to like in the first quarter, as we realized solid trends in loans and deposits, fee income, credit quality and expense control. In fact, we are delivering on our 2017 guidance provided last quarter, and as a general rule, we are reaffirming that guidance. Included in the results was a tax benefit of $2.8 million or $0.10 per share from the realization of previously issued performance-based equity awards. Recall that prior accounting recorded these tax benefits directly to capital. Partially offsetting this benefit was almost $0.02 of net problem asset workout and OREO expense in the quarter. I point this out as we have guided these expenses to a net 0 for the year, and we see this as simply a timing difference and fully expect a net 0 to even a net positive impact for the year from OREO gains more than offsetting the problem asset and OREO expense. I should mention the economic assumptions inherent to the 2017 guidance. Our markets continue to outperform the national averages, and we see nothing to disrupt this trend. With regard to interest rates, recall that we included just one 25 basis point move in June in the prior guidance. We got that one move in March. The current consensus is for additional rate increases going forward. Given our asset-sensitive balance sheet, we would continue to benefit from increasing interest rates. However, reflecting a level of conservatism in our forecasting, we've not included any additional rate hikes. Loan growth has gotten off to an excellent start, growing 13.1% annualized. The first quarter has been historically slower, so we were pleased with the start to the year. It's worth noting that our originated loan book grew 17% annualized, led by the commercial portfolio growing at a very strong annualized rate of 22.3%. Our pipelines continue to be robust, and we are reaffirming the full year total loan growth guidance of around 20%. Turning to deposits. We had a good linked-quarter average deposit annualized growth of 5.5%. This growth was led by a 6.3% annualized growth in low-cost transaction deposits. Just as noteworthy is the fact that we grew average transaction deposits on a year-over-year basis 3.4% while consolidating 8 of our banking centers over the last 12 months, representing an 8% reduction of our banking center footprint. In the second quarter, we are on pace to complete the 4 banking center sales that we mentioned last quarter. These banking centers represent approximately $100 million in total deposits, with half in time deposits and about $14 million in total loans. We are reiterating our prior guidance of delivering total deposit growth for the year, led by a mid-single-digit transaction deposit growth while keeping time deposits flat after the reduction for the banking center sales. Fully taxable equivalent net interest income totaled $36 million with a net interest margin of 3.44%. We are right on target with the guidance we provided last quarter. We also guided that we expected to reach a linked-quarter net interest income growth inflection point for the year, as interest income from loan growth is expected to more than offset the decrease in high-yield 310-30 accretion income. We are very pleased to be forecasting linked-quarter growth for the second quarter and for the remainder of the year. We are increasing the net interest margin guidance range to 3.4% to 3.5% and keeping the earning asset guidance at $4.4 billion to $4.6 billion at year-end. Given the prospects for increasing interest rates, let me share a few comments on interest rate sensitivity. We continue to be about 4% asset-sensitive given a 100 basis point parallel shift in the rate curve. We model a weighted mid-30% deposit beta, which continues to show a very conservative, given actual deposit rate moves over the past year. Given that the rate curve has not been moving up in an orderly fashion, we often get asked about the loan portfolio sensitivity. About half of the originated book, or about the mid-40s percent of the total loan book will move with changes in short-term rate indexes such as the 1- and 3-month LIBOR, prime rate and others. We're beginning to realize the benefits of March's rate move and would welcome additional rate increases going forward. Rick provided a credit quality overview and our outlook for the rest of the year. Adding in our loan growth guidance results in an expected full year provision for loan losses in the range of $10 million to $13 million. Noninterest income totaled $8.7 million, coming in at the middle of the first quarter guidance of $8.5 million to $9 million. We reiterated our guidance of mid-single-digit growth collectively for banking fees. In addition, we are on track to realize the second quarter estimated gain of $3 million on the previously mentioned banking center sales. We continued good trends in noninterest expense as they totaled $34.6 million in the first quarter, basically flat with the fourth quarter. As I mentioned, the quarter did include net expense of $760,000 related to problem asset workout and OREO. We reiterate our full year guidance of $136 million, including the net 0 impact, if not better, from the OREO and problem asset workout expenses. Regarding the tax rate, we are repeating prior year guidance, with a forecasted 2017 effective tax rate in the range of 22% to 24% and a fully taxable equivalent tax rate in the range of 29% to 31%. Capital ratios remained strong with $55 million in excess capital at quarter end using a 9% leverage ratio. One final comment would be that we have forecasted average fully diluted shares to be in a tight range of 27.7 million to 28 million. Tim, that concludes my comments. Great, <UNK>. Thank you. Mike, why don't we go ahead and open up the call for Q&A. The good news is we continue to have solid growth in our core markets of Colorado and that Kansas City, Overland Park market of Missouri (sic) [ Kansas ]. Texas has been a little slow in our markets of Dallas and Austin to ramp up this year a little slower than even we expected, given the quality of those markets. But we're very excited about what we're seeing developed in the pipeline there. In terms of competition, so many of the independent banks, community banks that are in our markets continue to be heavily focused on CRE, and that's evidenced if you look at their balance sheets, that I would tell you, in Kansas City, Overland Park, the real competitors there are UMB and Commerce. They both do a great job, obviously well-entrenched banks in that market, and yet tend to be rational, which we like. They're smart when it comes to credit and they're rational on pricing. In Colorado, it's a little bit of a mix, but we have benefited in particularly over the last 6 months. And we see that trend continuing from some fallout of one of the larger national banks. Yes. Our ---+ I'll tell you our expectation in terms of impact on the income statement is really neutral this year. Having said that, I'm a little disappointed with the pace of our partner on that effort. They've run into a few roadblocks on their side, but they remain confident that we're going to be able to deliver and have those additional network points delivered here this year. And we're still pressing for this summer. So I think, from a financial standpoint, neutral this year; from a timing standpoint, not moving at the pace that we were initially promised. It's actually right on top of it, Chris. I'm glad you asked that question. As you've heard us talk before, we've consistently been in that 60% variable in our production range. In this past quarter, it was actually 66% for a weighted average yield of 4% even and as you might recall it wasn't that long ago, we were talking about 3.6% as a new loan yield so, to your point, it's dilutive to that particular category. So we're real pleased that we are seeing in the details of the new production coming on that's becoming equal to, and we expect shortly to see it be accretive to that yield. Yes. It's a little difficult to do that on so many assumptions that get into it. So what I did play ---+ so what I did repeat to you, we're 4% asset-sensitive. Now that's a little over $6 million when you think about it on an annual basis. And inherent in those assumptions are certainly the asset sensitivity that we have plus about a 30 ---+ mid-30s deposit beta. Looking ---+ as you look historically, at least recent historically, it's fun to look at our deposit costs. Our interest-bearing deposit costs only increased 6 basis points while rates have moved 50 basis points ---+ well, actually, 75 basis points most recently, but 50 in the last 12 months for practical purposes. So I think we're a little conservative on the deposit side. I think, as you look at your guesses as to that 25 coming or not, I'll try to give you the loan specific that you can model in. Our total loan portfolio would move about 40%, and so that's short-term rate movements. And so as LIBOR moves ---+ certainly, prime rate hits very quickly and treasuries and other indexes we might have, but as LIBOR moves, you'll see that come through our loan yield first before anywhere else. Hey, Chris, I'm going to lever your question and <UNK>'s response to thank our teammates for their continued focus on expanding our client relationships. We feel very good about the growth in our low-cost transaction account business. And that's just part of good relationship-building with our clients. And if you think about that growth in light of reducing our distribution network by 10%, it's even more meaningful. But more important than that, I would tell you is we're seeing very nice momentum on that front. So to <UNK>'s point, as you think about the influence of those low-cost deposits which come with core operating accounts, that's just the nature of that business. That's an attribute that we're going to get, whether we see those interest rate hikes or not. And Chris, if I could, just one last piece. So I did ---+ to provide some guidance of the 3.4% to 3.5% on the net interest margin, and we ---+ as we currently model out with no rate hikes, we'd be in that tight range through the rest of the year on a quarterly basis as our loan book ---+ as our originated loan book yield's going to go up but we're still running against some of that 310-30 yield burning off. Chris, really nothing from our side. I think you've heard us consistently for 4 or 5 years here that we are very focused on the use of capital and the best return for that. We're certainly projecting great use in our relationship banking and growing those. But there will be additional capital that's accessed there. We've taken full advantage of buying into our shares. And look, the market has given us at least the start of a reasonable share price, from our perspective, that becomes a little bit more attractive in expanding our own footprint. So we will continue to focus on opportunities that best leverage that at full returns. We've ---+ we moved through a number of those floors. So that's pretty much our book. Yes. Look, we're constantly looking at the performance of each of our banking centers, each of our profit centers for that matter. And we look at the contribution of that banking center ---+ or the ---+ each banking center and each profit center relative to the potential or the opportunity in the market it serves. And so you can imagine, our focus is on those lower-performing profit centers where there's lower potential. We think we've identified the group that really, in our operating model, didn't have the opportunity to ---+ or the potential to contribute within our expected time frame. And we'll continue to monitor the rest of the profit centers on the same basis. So I would tell you it's very dynamic, and we're going to continue to have accountability, and that accountability will drive further actions. Rick, I may be opening up a box here that <UNK> will want to close quickly, but why ---+ because we're not in a position in this meeting to share details, but you ought to talk about, while we're not required to conduct a stress test, you ought to explain to the group how we do internally stress our own portfolio. And the bottom line is, when we do that work and factor in those very severe loss levels, we still operate as a well-capitalized bank post that kind of an experience. And Tim, I know that's a lot more than you asked for, but I'd like to get to a point where we could even provide more transparency around that testing and what we do. Again, it's not a regulatory requirement, but we think it speaks to the quality and the importance of the diversity of the portfolio. Tim, it's really a focus on a set of very high-quality clients with deep relationships. The challenge we have is that almost all of them were able to successfully raise large tranches of equity in the downturn. And if anything, we've seen our senior bank debt come down. Many of them are sitting on the sidelines waiting for opportunity to acquire assets at the right values. And until that happens, I would expect our exposure in that space to either maintain current levels or even decline slightly. Yes. No, look, that\ No, probably more normal, where the fourth quarter was a little higher. Yes. Yes. We're going to see a benefit from the March move that happened. Yes. Look, and maybe I'll point out a couple of things on that spot versus the average. You'll also note that our loan deposits ---+ or excuse me, our loan growth, which grew at 13% on a spot basis, grew less than 1% on an average. And so the average earning assets are going to see a nice pickup as we go from the first to the second quarter, which will help, remember that guidance on that net interest income. Now back to the investment portfolio, we saw an opportunity with the deposit activity that Tim's mentioned in our book to go ahead and place some investment securities on the book. Not a lot. We haven't done anything in 4 years. But we added just under $100 million of MBSs because we still like the cash flowing from them. We were able to pick up a yield of 2.6%. We saw that as an opportunity here in the first quarter. And as I guided last time, we didn't see that we were going to recur doing that as the quarter goes on, probably see that book continue to come down in our forecasting for the second, third and fourth as we fund the 20% ---+ around the 20% loan growth that we had guided. Yes. We were looking for the mid-single digits on a year-over-year growth. And look, we were real pleased that we hit the first quarter. You might recall I ---+ we gave specific guidance of $8.5 million to $9 million, so getting that $8.7 million in the first quarter was right on top of that. But on the full year, look at it as a year-over-year on mid-single digits. We picked up a little bit on our commercial clients back to back. Not as much as we're expecting. We certainly have a lot more conversations in that. So it was a couple hundred thousand dollars. And not much in the marks for the ineffectiveness that you have to take on those things. But ---+ so really a pretty quiet quarter there versus last quarter. You saw a big pickup that's going to reverse the number of the rate moves for 2016 in total. Yes. No, the ---+ it's ---+ look, the effective tax rate, without the fully tax affected, we feel pretty good on a quarterly basis to be in that 22% to 24%. And then when you gross it up for the fully taxed equivalent, about 29% to 31%. I will tell you that this new accounting standard for the vesting of share-based compensation will move ---+ continue to move that around a little bit. Look, Tim, it's a great question. We absolutely hold ourselves accountable for leveraging that advantage. Said another way, we clearly see it as an advantage and, I would say, certainly, coupled with the fact that we see a number of competitors that have over-concentrated in certain specialties. Certainly, we all have seen the number of banks that have broken 300% of capital in the CRE space. We think, to the extent that we're willing to work with clients in the CRE space, our capacity gives us the ability to be very selective as it relates to both credit structure and pricing and, again, to take advantage of situations in the market where other banks are having to retreat. So I ---+ it's a topic we spend a lot of time internally focused on. And I don't know if there's anything, <UNK> or Rick, you would add, but that's the best answer I can give you. And I know we like that, and it's a source of how we're going to drive to that 1% ROA is getting that loan-to-deposit ratio up to ---+ closer to that 90%. And you can see there's a lot of runway. And with the success we're having with deposits, that creates even more. So we're excited to have that opportunity, and that'll continue to move the net interest margin and offset the 310-30 and then grow from here, as we've talked about. So it's always been part of that strategy. We're cash flowing out of the investments, securities to allow that to happen. So it's a good point, Tim. Thanks. Thank you, Mike. I just want to thank everyone for joining us today. Please don't hesitate to follow up if you have any additional questions. Good day.

2017_NBHC

2016

EME

EME #Yes. We're pleased with it. The way we think of the business, T, is about 80% of that business is in the field; 20% of that business is in the shops; half of that shop business is with the new build heat exchanger capital work. Half of that shop business. So, 8% to 10%, depending on the year. Yes. It's ---+ well, it's ---+ I like I say, for every $1 we lose in our shops with absorption and everything else, we have to go make $2 somewhere else in EMCOR in revenue. All that being said, we had an pretty good fall turnaround season. We had an exceptional fall turnaround season in 2014. And we didn't think we were going to repeat that, and we have said that. Yes. And T, this is <UNK>. Clearly, we never recouped the lost revenues from the first quarter that didn't get executed pursuant to the refinery operator strike. Yes. We're building it in with a measure of confidence ---+ I mean, conservatism; and confidence, I guess, because it is in the conservatism, right. I look at it the other way. We never had a maintenance downturn, if you look at the last 2 years, in our refinery maintenance business in the field. We've grown ---+ if you take all that together ---+ up 40% in Q4 last year; up this year, high teens; up the year before, low 20s. I mean, we have had very strong underlying growth. But for this refinery operator strike, we would have had growing earnings in ---+ Industrial. Industrial. Despite what happened in ---+ but we lost about $30 million of revenue, give or take. And that's not even taking any pull-through revenue. That's stuff we pretty much knew we were going to do. And we estimated then, I think, $0.06 or $0.08 a share. The reality was probably higher than that, because we got no pull-through work either in the shops out of those turnarounds. So, we had a pretty good 2- to 3-year run in refinery maintenance. We see no reason, with the utilization rates, that that's not going to continue on the maintenance side. The question is, how does drive ---+ driven miles today ---+ there's an article that it's up; that the refinery profitability in the Midwest is down. That'll all wash itself out. It's cyclical. I would always remind people, though, it depends on what your customers are doing during that time period. And ---+ less than what's actually going on in the overall market. Some people want to draw big conclusions because one company's up, one company's down. Big-picture, the market grows about 3% to 7% a year, depending on the year, on the maintenance side. That's what it's been doing. We took a lot of share here over the last couple of years. It shows the strength of the RepconStrickland acquisition and how, after the first 4 or 5 months, we were again able to hit the ground running. We feel really good about that. And quite frankly, it might be an opportunity now to be okay to look for assets in that business long-term. Because we're bullish on the petrochemical and the refinery business in the US for as far as we can see. There'll be hiccups along the way, but it's a good business. Yes. Look, the places where we had, [quote], execution issues here in the third and fourth quarter, are the same places that have executed some of the best projects that we've ever executed. Sometimes you get in a situation on these larger projects where schedule ---+ we're a subcontractor. And when designs start changing and conditions start changing on the job, and schedules get elongated, what really happens on some of these jobs are, you have a set of general conditions you're operating in. You're paying for all that infrastructure in those general conditions on those jobs. You're going to be entitled to a chunk of that money after. It's going to be a fight to get it. But it's pretty clear that if the job expands 9 months, and you're spending $500,000 a month to have people at the job site doing the administration and the project management and everything else, that you're going to recoup that. We tend to be ---+ some people aren't ---+ we tend to be very conservative in our estimate of that recovery, because we like people to see where we stand today versus the execution of those jobs. So, we don't build big unbilled sections. We don't build big claim portfolios. And so, we may be a little different than other people, as you can see with the recovery in the mechanical. I'll take our execution in the transportation sector over time, against anybody's in the industry. There's a couple of things going on there. One is just flat mix of work. When we were doing the fast-turn hospitality work, where every day you can get it open is worth millions of dollars to the operator, it means a lot to get it done in prices. And when you're able to take your whole company and dedicate it to a separate large ---+ those large jobs, and get 100% absorption on your SG&A almost, because everybody is leaning forward and out into the field, focused on those projects, you tend to get better pricing. I think you've got a mix issue right now. And I think, also, it's just ---+ it's just a tougher market. This has been a very slow recovery. And in a very slow recovery, I guess we're all learning. Non-residential construction, I think, through history, tends to snap back a lot quicker. With this slow recovery, it's had a long time to absorb the work. And as a result, labor's been able to come on. Are there spot labor shortages. Sure; but nothing like you would have experienced in 2007 or 2008. So, how you get better pricing is, your resources become more valuable. Your resources, which is ---+ ours is labor ---+ becomes more valuable. You're able to get an upsell on the price. We have spots in the country where we can do that, but not ---+ it's not wholesale. Yes. I just think in general, when you look at labor, it's still very competitive in the Gulf Coast for the right kinds of labor. As one of the other analysts pointed out, we're having a 25% capacity increase in our petrochemical base. That's (inaudible) [but] upstream guys aren't downstream guys ---+ aren't builders; they're different kinds of people. That's not an easy migration to make for most of the skilled trades. You have very busy markets in parts of the country like Boston, and New York, and California, right now, on the trade side. But at EMCOR we don't ---+ we like labor tightness and shortage. We're one of the biggest in the country. And I always go back to what I think really skilled people and supervision care about. The first thing is, are you going to work for a company that's going to make sure you get paid every week. We're check, check on that. Are you going to work for a company where the supervision's competent. Forget about the five people around the table here today, or the six people around the table here today. Is the supervision in the field competent. We get triple checks on that. Maybe the most important thing, then, is, are you going to keep us safe. And we have ---+ every day we wake up and knock on wood, and thank ---+ and are very thankful that we have the focus on safety and the supervision that focuses on safety that we do. And so, we can resoundingly answer yes to that. And are you going to provide me the equipment I need to be safe. And we can resoundingly say yes to that. So, we tend to attract the best tradespeople and supervision in the industry. So, we wish labor would even get tighter. So, thanks. Yes. Thanks for your interest in EMCOR. We're coming off a very good 2015, and have cautious optimism as we look to 2016. Thank you.

2016_EME

2015

NDAQ

NDAQ #So I'll say a couple of things and then turn it over to <UNK>. One is, I would also highlight on the Listings side the strong performance in the Nordics, and That gets overlooked a little bit, I think, too much. And it really has been a remarkable the success we've had there. With respect to the US, we are here at the market site today and it's been a wonderful week. We had the PayPal spinout happening and yesterday, Blue Buffalo had, obviously, a very successful IPO. We're also very happy to win Pure Storage a week or so ago and as we said before, we have a 70% win rate. So we have a high degree of issuance. We have an increased win rate and that certainly is contributing to our performance. So in terms of the pricing change, we announced the pricing change in the fall and it was primarily related to the annual listing fees. And we also announced that the potential impact of that as we went into the fourth-quarter earnings. And we are experiencing the benefits of that pricing change. The most notable change really is at the top end of our fees where we are now allowing issuers to opt-in to an all-inclusive fee, which means that they will no longer be subject to any listing of additional shares, fees, or any other administrative fees. And the maximum charge for a listing based on their shares outstanding is $155,000 a year. We did see significant opt-in to that pricing level and will we will continue to offer the opt-in over the next two years. So we've just have seen a lot of success in the adoption of the fees that we put out for the firm. And frankly, a lot of support for that all-inclusive fee. <UNK>, how are you today. So I would say, one, we have a version of the product coming out in the July/August timeframe, which will address, in a comprehensive way, a very small subset of the users. So that's a good experience for us and a good ramp in terms of we get to test the underlying technology and get some user response. In the meantime, we'll be working on the full production release and your data is correct. So we expect to have a product in place that should address 85% of the market by the end of this year. So we're excited about that. In the beginning, the pricing is not our focus. It's to make sure it's the best product. But we certainly think we have upside to both the revenue side. And probably, as importantly, I think with the new product deployment, once we get beyond the dual cost structure, we'll have a simpler way to deploy this product, which should represent improved margins over time. So I'll start with the broad strategic direction we have. So we certainly believe that passive investing, represented by indexing, will continue to grow as a percent of assets under management. But then we also think, within that category, smart beta will grow even faster. And that we recognize that passive investing has somewhat of a natural ceiling because you're bound by a set of predetermined rules. Smart beta allows you to put some more intelligence into the passive space and witness not just the DWA acquisition but obviously, dividend achievers and some internal products that we're developing. So that certainly represents, looking at <UNK>, put some pressure on her to get a double-digit growth opportunity over time. Right, <UNK>. I would agree in the overall growth of smart beta. Go ahead, <UNK>. So <UNK>, I'm glad you asked the question and just to kind of ---+ there are a lot of moving pieces in the Information Services business. As you noted, there was a $6 million change in the overall audit revenues year over year that the audit revenues were down $6 million in this quarter. And I think it's important to understand if you want to try to get into kind of a clear organic growth for the quarter year over year and you take the operating impact that is, ex-FX, increase of $9 million and you take out the DWA impact of $80 million for the quarter. But then also keep audit flat from the year-over-year period, our Information Services revenue would have been up $7 million, or 6%, which is very consistent with revenue growth guidance that we have given for that segment. And I think that's a reasonable basis as we look out over the longer term for that. I do think that, from an audit revenue standpoint, we are seeing kind of a stabilization in that revenue and so we may have, from quarter to quarter, some upside or downside. But I think the level that we're at right now is a good baseline to use. Sure. Great question. So I would say, one, let's start with the initial focus and that's cap table management. We have clear metrics on how many customers are using gotten how sophisticated their use is of cap table. That's kind of our first foray into the customers. Then the second stage, we run liquidity programs for them and we track, one, the size of the liquidity program and then, two, how often they're running it. And then as we evolve over time, it's going to be how broad the participation is in those liquidity programs. Typically, they are employee programs today, but we certainly see the ability to evolve to a credit investors or early-stage VC firms participating in some of those liquidity programs. So we definitely are, one, excited about the progress in a short period of time. Definitely see this market evolving. And we definitely pay very close attention to what I'd call the non-financial metrics which you are looking at now, which kind of referencing now which will really gauge our progress in the medium term. Another great quarter for NASDAQ. Record earnings on a number of different measurements so we're proud of that. But I also say we're most proud of the fact the we are, again, well-positioned in each of our businesses and I think are taking the lead in innovating in a number of those businesses in our pipeline, on our new products coming, I think, are incredibly strong. So we are fundamentally excited about our prospects going forward. We appreciate your support and look forward to getting back together with you next quarter. Thank you.

2015_NDAQ

2016

VRA

VRA #Yes a couple things - one, in department stores, what we are seeing for us is obviously a little bit different than some of our competitive set in that we're not as mature in the department store space as they are. So we are seeing continued growth and new opportunities in department store, whether it's in our core segments and categories or whether it's in some of these new brand extensions that we've been talking about. But we have seen a little bit of pressure in, you say, true like-for-like performance. So there's a little bit but we are able to more than offset that as we continue to grow and expand. And in terms of adding new distribution, obviously that's something we are continuing to look at in the specialty store. We have been adding a few new apparel and accessories stores to the mix. And I would still say we are early in that growth. Thank you, <UNK>. Generally, the May performance is really reflected in our guidance as we talk about second quarter and we haven't seen a material difference. <UNK>, as it related to Q1, February was probably our best month and then really, March, April and May have been much of the same for the most part. Yes, that's one of our executives - we put out an 8-K, I think just a couple of weeks ago, and it's Roddy Mann who is leading up the sales force. So he left us, actually today - or yesterday was his last day - and we've also hired Mary Beth, who will be leading the wholesale side of our business. And that we have Melissa leading the direct side and both of those individuals will be reporting to <UNK> directly. Basically, just for your knowledge too, that was something that Roddy and I had worked out that he basically spent the last year helping get our sales organization ready for this transition and we feel really good about the team we have in place. Oh gosh. In Q1 of this year, it's in the 70%s, the low 70% range, and it's really very similar to Q4. And then if you look at Q1 of last year it was probably in the 40% range. We started the year at 25%, worked our way up to 70%, it so its probably in the 40% range in Q1 of last year. That is correct. We'll still get a little bit of a benefit in our gross margin in Q2, and then post- Q2 we're really at that percentage we foresee being at for the foreseeable future, <UNK>. So not a lot of benefit going forward after Q2 Thank you, <UNK>. We've just stated at this point that the total comp is what we are expecting to turn positive at some point in the back half of the year. We're obviously expecting improvement across the board as you look at our full price stores as well, but what we've stated is the total comp we expect to be positive as we exit the year. That's correct. That could be one way to get there. It was about $2.5 million. That's the amount ---+ it related to a pattern launch we did in May last year - I think it was Sierra that was the pattern name. We actually pulled that into Q1 of this year, and it was around $2.5 million on the specialty side of our business, which was the significant movement from Q2 to Q1 this year. You know, still feel like on the direct side of the business it's getting comps going and to be able to leverage our SG&A expenses, obviously we've been very proud of the gross margin improvement we've seen this year and last year. But really on the direct side, it's really being able to leverage the SG&A expenses by getting the sales up. On the indirect side ---+ probably there, I feel like we are in a good place. I don't feel like there's a huge improvement looking forward. I think we are right around 39%, 36% I think ---+ oh no, 39% in the quarter, and I feel like that was a pretty good percentage. And what we've stated over the long-term is we really don't see that number going up very significantly. I think there will continue to be pressure on the indirect side as we continue to expand in the department stores, just with regards to chargebacks and returns and things like that we need to manage very closely, which we are. So I feel like the opportunity to leverage from an operating income percentage perspective is on the direct side of the business. And beyond that we can leverage a little bit our corporate expenses as well, looking forward. As we continue with our business turnaround, we believe we have a clear direction and road map to assure our brand is more modern and relevant to the Daymaker. We remain energized and excited about the future of Vera Bradley and thank you for joining us today and for your interest, time and questions. And we look forward to speaking with you on our second quarter call on August 31.

2016_VRA

2016

VG

VG #Sure, <UNK>. We remain very bullish in the opportunity in the programmable US voice market. You cited in your question many of the elements of how we are attacking the market, whether it is, as we push the brand and market more aggressively, the product itself, which has a higher quality, ability to deliver voice at lower cost, the way we are pricing it on a per-second basis versus our competitor on a per-minute basis our customers are finding to be a fairer solution. But the market is vast and we really haven't been in it very substantially, so we think there is a great deal of upside there and we're just attacking it very methodically. I think you should read into something about the growth in developer registrations. It's a very positive sign because for that ---+ for us that is the top of the funnel; that is what begins the long-tail Business customers for us. They have to start initially registering as a developer. Yes, it is behind us. There isn't anything any longer named iCore. It's simply they had a direct salesforce; now we have built a core direct salesforce. That direct salesforce is selling today our UCaaS products across Vonage Essentials and Vonage Premier. We have expanded the number of salespeople, the number of sales territories, and then we are continuing to press, as I put it in my prepared remarks, forward on improving processes, integrating systems, training, etc. , etc. Let me start and then I will turn it over to <UNK>. Nexmo pursues a hybrid distribution model. So we have a direct sales effort, which is comprised of salespeople in-market and inside sales and sales engineers and account managers; sort of a classically-organized direct sales model. We also work or generate business as a pull, so it's not being pushed by salespeople. It's a pull so that developers out there in companies large and small everywhere will come to our website, pull down the API, and then begin to play with it. Embed it in their application, into their website, what have you, because we have this desire to embed communications into their solution. As I mentioned on the earlier question, that's the top of the funnel for us for that long tail with Business customers. They have to initially register as a developer. They have to, therefore, be aware of us as a solution. Nexmo's footprint was much more of a global footprint much more oriented towards SMS and now we're pushing things to balance it out into voice and domestically. So we have to build that awareness and that's some of the value of the Vonage brand. Again, getting greater numbers of developers is an important element to us because that's the top of the funnel. <UNK>, you want to add to that. Yes, sure. I would like to add that we doubled the rate of inbound leads since the acquisition, so that's actually the sign-up plus the contact sales on our website. And that's as a result of the increasing awareness and marketing investment we are making around the developer community. The developer persona is important in our business because what we offer is programmable objects that require to be built by a developer, whether that developer is in a start-up company where there are more influential in making decisions or they are in an enterprise setting where they are being asked to develop distribution. So overall we continue to invest in increasing and developing our awareness within developer community and we already see early result of that since the acquisition. So the inbound leads that sign-up on our website and start using our platform, meaning it has the APIs and you can consider that a download, but essentially, they don't download anything. This is not a piece of software you view; you install on your computer. It's really an API, which means that you are connecting to the platform and interacting with the platform to build the communication application you want to build. They are intact. In fact, we talked last quarter about accelerating investment into Nexmo and we continue to do that, whereby Nexmo ---+ if you think about our EBITDA guidance for the year, within that Nexmo is going to be negative in the $5 million to $7 million range as we talked about on the last call. So our OIBDA is actually up more than what's implied in the guidance that we updated. That delta is coming from Consumer and it's really two areas. It's slightly less spend in consumer than we earmarked, because we were able to put that into Business and then the spend in Consumer being much more efficient than we had planned. And so we are just getting more bang for the buck. So in Consumer there's a little bit less revenue in there and a lot more cash flow. And part of that revenue was also USF, as I talked about. So there's no change to our capital allocation plan. Yes, it was. <UNK> can provide any color, but, yes, it was ---+. We talked about our strategy is to diversify the customer base and diversify the product and geographic mix, and that strategy is going to take time to execute but we are trying every quarter to lengthen the tail. Our competitor, Twilio, has talked about this base versus variable revenue concept and we clearly see that. Once a customer gets to be very large, they are sophisticated and they tend to look at this as a dynamic business. So what we saw consistent with that is continued volatility amongst those very large sophisticated customers, although they did grow in the quarter on a sequential basis, and much higher growth than the average in the everybody else category. If you think about Twilio, which is a pure-play, which I think has done a very good job of kind of defining this, they talk I believe about variable revenue sub 20%. Using the same definition, on a dollar size basis, we have the same dynamic: sub 20%, very large accounts that again approach the business differently with our strategy to make the other part, the tail, longer and more stable. Yes, it is a mix difference, so it's SMS where we are 90% SMS and it's outside the US where we are about 70% outside the US. We have no intention of pulling back at all on SMS or outside the US. It's really about creating that counterweight and that diversity in voice globally and a presence in the US across the products that we think will lead to gross margin increase over time as we execute the strategy. We also feel like our advantages on the peering side and termination side, they play to the US market. They don't really play to the international SMS market. I think I will turn it over to <UNK>. You said what's the gestation period between ---+. We've disclosed in the past that we have roughly 5,000 business customers, so we don't break it down specifically between a developer who registers and ---+ if we had 100 developers registered today, who's paying and who is not. It's more think of it as the top of the funnel that are going to convert an element of those over time into paying customers. So when we bought the company it was 130,000 roughly registered developers and about 5,000 business customers. We are certainly working on improving those ratios, but that's an over time phenomenon. <UNK>, you want to add to that. I'd like to add that we are going to start measuring the time to first payment. Typically it's ---+ you can sign up online and start testing today and we give you free credits and then when you [redeem these free] credits you could go and pay online to replenish your quota essentially. And that time could be as short as a day, but depending on how the customer is testing and how long they need to test, it could take over months from sign up to first production paid transaction. <UNK>, excuse me, you clipped at the beginning. Why don't you start your question again. This is <UNK>; let me take that. I think we are still singing the national anthem. We have even started the game yet. Clearly, on the VAPI release we have integrated it in with our industrial-strength network and that's proving to be very, very effective. But the opportunity of an integrated solution, that is still being planned and won't begin being executed probably in meaningful pieces until the next year. That is sort of in the physical integrations of the platforms. From a lead-gen point of view, however, it is becoming very, very important. One, we are viewed evermore as a thought leader. Our customers we find very, very frequently use CPaaS tools in addition to a UCaaS-based solution. We cited one example on the call of an initial ---+ an existing UCaaS company who now has switched from our competitor to us because they wanted to buy it from a single vendor. So very early days. But we are seeing all the right indications that we have done is the exact right thing from an acquisition perspective and how we are going about executing this are the right things as well. So very, very hopeful about it. Let me have <UNK> answer that. Sure. Thanks, <UNK>; I will. First, when you look at the combined Vonage and the Nexmo platform with the voice API provides a unique offering to the US market specifically. Because in the past customers needed to make a trade-off: either they go with easy-to-program platform or they go with a carrier-grade, heavy, old telco. Now, together with Vonage, we offer the best of both. We offer the easy-to-program voice and backed by the underlying carrier-grade network, which has five-nines uptime, 16 billion minutes of voice terminated a year, so customers don't need to make a trade-off anymore. That's one of the key advantages the combination of the asset provides. But specifically, even without the combination, the new voice API provides higher level of programmability and a much easier way. It's built on more modern web framework ---+ we call it JSON ---+ and it has a number of full-control objects that provide this higher functionality for the developer and enable any developer ---+ you don't need to be a telco developer to be able to build the next-generation of voice application. And, thirdly, would be the international reach. The new voice API has two times more inbound reach, so you can provision a phone number in two times more countries than any other close competitor in the market. Yes, it was close. Second quarter was high teens. <UNK>, why don't you take that. I think it's still too early to say. Clearly, we are seeing anecdotal evidence of the ability to cross-sell quickly by putting the product into the ---+ the suite of Nexmo products into the sales bag of the salesperson. But we are going through our planning process now so it's ---+ we are not a position to comment how much will come from that. I would also just note; we talked about bookings and I think that is a good shorthand for it, but it does ---+ it's not as subscription business. It does tend to be more volatile than a booking, both up and down and usage based. <UNK>, why don't you handle that. Yes, sure. So the text messaging market is as big as the programmable voice market and we see similar growth rate in both markets when you look at it from a CPaaS point of view. There's really three levels of growth, if you think about it. There is the existing business, the expansion in the existing business and that there is twofold, which is the natural growth of these companies and also the competitive win as well, when you specifically own the top accounts that have multiple vendors. And then you have the new business, the new accounts. Today we see growth across the board. There is the volatility that <UNK> mentioned on the top accounts and that volatility is being replenished by the natural growth of the other accounts and also the addition of our new business. Overall, we continue to see growth in the business on SMS and the new business is an important driver to manage the volatility in the existing business on the top accounts. Thanks for your question, <UNK>; this is <UNK>. We have a completely national footprint right now. It is an omnichannel approach, so clearly our inside sales group sells nationally. Our channel sales group sells nationally. Our enterprise group sells nationally. Within our field sales teams, which has grown dramatically both in terms of numbers of salespeople and numbers of sales territories, we often speak about it as we want to be in all the NFL cities, which is roughly 30. I was get in trouble with people from St. Louis when I say that, but the ---+ roughly 30 cities. And we're in about half that today and growing. Our focus, in terms of cities, has been more East Coast and Southwest, but we are pushing West so you will see more of that in the coming quarters. Well, it is a land grab in the sense that we are ---+ it is a land grab and we are competing against the other cloud players. Let me break that down. The land grab is that we are stealing share from the on-prem solutions that are out there. In the midmarket in the enterprise, you are almost always seeing the names you would expect that you would compete against because those mid-market enterprise customers are certainly not going to go with the first vendor who knocks on the door. Down market, though, is very different. Down market, where the lead gen generally starts from a buyer doing a Google search, it's the person who ---+ so, therefore, the buyer is generating demand intent. It's the vendor who gets there first who generally wins, because they don't usually do a competitive process. And we have found, given the strength of the Vonage brand, that has given us the ability to source those leads less expensively than others because we have so much domain authority in our space. And that's why the down-market side of our business, the small company start of our business continues to grow so well. If you look at the total numbers, the percentage of business above 50 seats, 250 seats, and 1,000 seats, the percentage of total revenues is comparable, but the total base is growing. And that's because we're growing at both ends. We have made a lot of improvements and I think we talked back in the first quarter about integration. We talked about rationalizing the salesforce and all that stuff is behind us, so we are seeing the benefits of that. I would say, though, that I don't see the model that we are pursuing today growing at 30%, just given again in the midmarket and up market it is a longer sales cycle, it is a more sophisticated sale, and it's a longer install cycle. And that market continues to tip to the cloud, whereas in the SMB market it already has. So it's going to take time for the average to go up, given the factors that I talked about in the up market. I think the growth that we are seeing is where we are right now. Yes, there's no change to the way we're looking at 2017. As I mentioned, we are in the budgeting process and there is capital to grow that business as fast as possible. We talked about the long-term strategy, but there's no change to the view right now for 2017. Thank you very much. Great. Thanks, David, and thank you, everyone, for joining us this morning. We appreciate your support. We look forward to speaking to you again next quarter. Thank you.

2016_VG

2017

HSII

HSII #Good afternoon. This is Heidrick & Struggles' First Quarter 2017 Conference Call. This call is being recorded. It may not be reproduced or retransmitted without the company's consent. (Operator Instructions) Now I will turn the call over to <UNK> <UNK>, Vice President of Investor Relations and Real Estate. Please go ahead. Good afternoon, everyone, and thank you for participating in Heidrick & Struggles' 2017 First Quarter Conference Call. Joining me on today's call is our Acting President and CEO, <UNK> <UNK>; and our Chief Financial Officer, Rich <UNK>. During the call today, we'll be referring to some supporting slides that are available on the IR homepage of our website at heidrick.com, and we encourage you to follow along or print them. Today, we'll be using the terms adjusted diluted earnings per share, adjusted EBITDA and adjusted EBITDA margin. These are non-GAAP financial measures that we believe better explain some of our results. A reconciliation between GAAP and non-GAAP financial measures can be found in our press release, on the last page of our financials, and in our supporting slides. Throughout the course of our remarks, we'll be making forward-looking statements and ask that you please refer to the safe harbor language contained in our news release and on Slide 1 of our presentation. The slide numbers that we'll be referring to are shown in the bottom right-hand corner of each slide. And now, <UNK>, I'll turn the call over to you. Thank you, <UNK>, and good afternoon, everyone. As you saw in our press release in early April, our President and CEO, Tracy Wolstencroft, is taking a 3-month medical leave of absence. I'm honored to be filling in for Tracy while he is out. For those of you who don't know me, I've been with Heidrick & Struggles for 16 years. Before joining Heidrick, I was a partner in a leading global management consulting firm. I joined Heidrick in 2001 as a search partner in our Global Technology & Services practice, and since 2014, I've been on the firm's executive committee. I've led the Executive Search business since 2016. Heidrick is a talent-rich organization with a team-oriented culture, and we're all aligned in our pursuit of our strategy to deliver premium leadership advisory solutions and insights to leading organizations globally. We wish Tracy well and look forward to his return. Let me begin with a few remarks about the first quarter beginning with Slide 3. The positive momentum of our 2016, third and fourth quarters continued into this quarter. Consolidated net revenue increased almost 8% year-over-year and almost 10% in constant currency. The sequential decline in revenue, compared to the fourth quarter, was typical of what we see in the first quarter as a result of lower fourth quarter confirmations during the holidays. Executive Search net revenue increased almost 8% year-over-year. Every region contributed to this growth. Americas grew 5%. Europe was up 12%, or 21% in constant currency. And Asia-Pacific grew 12%. The Consumer Markets, Healthcare & Life Sciences, Industrial, and ENSE practices each achieved 15-plus percent revenue growth. Leadership Consulting grew almost 60% year-over-year, mostly related to the acquisitions we made in 2016, which we are still in the process of integrating. We are encouraged by the early acceptance we are seeing of our new advisory framework in Accelerating performance. Culture Shaping results in the first quarter were disappointing. Revenue was down 31% year-over-year due to slower sign-on of new engagements. This obviously impacted their bottom line as well. With the increasing awareness of how impactful culture is on a business, competition has increased and the corresponding sales cycles have lengthened. We are actively involved in addressing these market dynamics. Importantly, our growth in consolidated net revenue, without a corresponding increase in expenses, helped drive an improvement in operating income of almost 72% and an increase in adjusted EBITDA of 14%. The 2017 first quarter operating margin was 4.7% and the adjusted EBITDA margin was 8.8%. We are also growing our base of consultants. As you will see on Slide 10, we ended the quarter with 363 Executive Search partner and principal consultants, 20 Leadership Consulting partners and 18 Culture Shaping partner and principal consultants. In the first quarter, as part of our annual review process, we promoted a record 28 people into the Search consultant ranks as principals. This increase in consultant headcount not only reflects our well-established development and training programs, but it also reflects the acceleration of the career path in Executive Search by eliminating one of the four levels. It will be important to support our new hires and promotions in order to ensure improving productivity. Now I'll turn the call over to Rich to go into more detail on the quarter. Thanks, <UNK>, and good afternoon, everyone. I'll begin with some additional details on the first quarter results beginning on Slide 11. I'll echo what <UNK> said, we are generally pleased with the first quarter results, including revenue growth of almost 8% as well as the increases in operating income, net income and EPS when adjusted for the impact of the EBT settlement. Let me take a minute to give you some more background on what this is and our thinking behind the settlement. You may recall from our previous disclosures since 2010, we had been notified by the HMRC, which is the tax authority in the U.K., that it was challenging the tax treatment of company contributions to Employee Benefit Trusts, or EBT, between 2002 and 2008. We have been appealing this notice since maintaining our position that the use of these trusts was proper and that our position would be upheld under any challenge. But recently the challenges by the HMRC have been escalating within the U.K. courts. In the end, we decided it was best to settle and put this behind us. The settlement also reflects a partnership with the employees who benefited from the trusts as well as the obligation by the company. The net settlement for Heidrick was $3.7 million, which is less than the HRMC's (sic) [ HMRC's ] proposed adjustment, which we valued at $4.8 million at December 31, 2016. Slide 11 shows, in rounded U.S. dollars, how the settlement was recorded on the income statement: $1.5 million of expense is included in salaries and employee benefits; $2.4 million of expense is in other net; and there is a credit of $200,000 in the tax provision. Looking at Slide 12, salaries and employee benefits expense in the first quarter increased $6.1 million or 6.7%. Fixed compensation expense increased $6.4 million, while variable compensation expense declined about $300,000, mostly related to the accounting for deferred revenue. The increase in fixed compensation reflects compensation and benefits mostly related to acquisitions made in 2016, as well as other investments in new hires, primarily in Executive Search. It also reflects the aforementioned EBT settlement in the Executive Search segment, which is the major reason why Europe's operating income declined year-over-year. Turning to Slide 13, general and administrative expenses increased $930,000 to $36.1 million. The increase reflects G&A from the acquisitions of DSI, JCA Group and Philosophy IB, which also includes the use of third-party consultants and contractors in that category as well. The improvements in operating income and adjusted EBITDA margin in the first quarter, referenced earlier in Slides 5 through 8, reflect the revenue growth in the Americas, Europe, Asia Pacific and the Leadership Consulting segments, and we benefited from the improved operating leverage in those businesses. Referring to Slides 14 through 17, net income was $700,000 in the 2017 first quarter and diluted EPS was $0.03, with an effective tax rate of 84.1% in the quarter and a full year projected tax rate of 44%. If we were to exclude the $3.7 million settlement, diluted EPS would have been $0.19. Now referring to Slide 18, the March 31, 2017, cash and cash equivalents balance was $68.3 million, or $43.3 million net of our current debt position. In the first quarter, we made approximately $132 million payment to employees for performance bonuses. Approximately $12 million was related to the payment of bonuses that were deferred in 3 prior years. And $120 million was for variable compensation related to the 2016 performance. And we'll make an additional payment of $10 million in the second quarter related to the 2016 bonus payments as well. In the first quarter, we borrowed $40 million for short-term working capital needs under our credit agreement, and subsequently, we paid $15 million. $25 million remains outstanding. And while it is categorized as long-term debt because our credit agreement expires in 2020, we intend to repay this debt as soon as practical. Cash used in operating activities was $110.5 million compared to $119.2 million in the last year's first quarter. Our cash position, plus the cash we have access to through our revolving credit facility, is quite strong, and we are in a great position to continue our investments in the growth of our business. Now let me give you the guidance for the second quarter. Our Executive Search backlog, shown on Slide 19, remains healthy. Monthly Search confirmation trends are shown on Slide 20. Other factors on which we base our forecast include anticipated fees, the expectations for our Leadership Consulting and Culture Shaping assignments, the number of consultants and their productivity, the seasonality of the business, the current economic climate and foreign exchange rates. We are forecasting 2017 second quarter net revenue of between $153 million and $163 million. Reported net revenue was $148.9 million in the second quarter of 2016. When adjusted for constant currency, based on the rates in March 2017, last year's second quarter net revenue would have been $146 million. With that, I'll turn the call back over to <UNK>. Thank you, Rich. Since late last year, I've spent time in Asia, Europe and in many of our offices in The United States. Market conditions, in general, for our business continue to be favorable. I'm truly energized by the work we're doing for our clients. We have the ability to offer our clients more insight and services than I've ever seen in my 16 years at Heidrick. I'd like to highlight one example of client work that we've been involved with recently. This work showcases the complexity of assignments we are executing and the power Heidrick & Struggles can deliver by bringing together our global team of consultants and a full skill set of Search and Leadership advisory services. In conjunction with the completion of a large acquisition, we were selected by a large, S&P 500 multinational company as their global talent adviser to help assess and select the best of the 2 teams globally. This project involved 24 of our consultants throughout all 3 regions over a span of 4 months. The client also benefited from the use of our assessment tools developed under our Accelerating performance framework. In subsequent months, Heidrick was engaged in 8 global searches to fill some of the gaps that were identified during our assessment process. And today, we're actively engaged in discussions with this client on topics including diversity and inclusion and leadership development. We are this company's global talent and leadership adviser. We feel good about our start to the year. No doubt we are seeing some bumps, like Culture Shaping, but we are growing our consultant base via very little turnover. I'd characterize the business momentum as very sound. The economic environment is vibrant. And we're improving profitability and increasing profit margin. The market for premium leadership talent is a great place to be. We're actively working to increase our presence and effectiveness with clients building on our brand and momentum. We're delivering on our strategy to deepen and expand our presence with clients at the top and to offer more services as a trusted and valued adviser. Now Rich and I will be happy to take your questions. (Operator Instructions) And we will take our first question from Tim <UNK> of William Blair & Company. Just Culture Shaping, can you elaborate on the challenges there. And how much of that is related to the transition of the founders out of the business to the best you can tell. Tim, good afternoon. This is Rich. I'll start and I'll turn it back over to <UNK> as well. I think there is a couple of things going on. There is no question. There is probably some level of impact just on the ramp-up of our transition of our new partners getting up to full speed and continuing that process. Keep in mind now that in terms of people that have left the business, the biggest turnover from 2016, 2017 with Jim Hart, who was the President and CEO; Larry Senn, the Founder is still active in the business; and some of the remaining legacy partners are still part-time in the business. So it's not been a total drop although their time is still winding down over the course of this year. So we think there is probably some impact on that. But I think there is also few market conditions, maybe I'll let <UNK> talk a little bit about that as well. Okay. And just ---+ is there any reason to think that they count about more competition there. It sounds like that's probably a ---+ not an issue that goes away right away. Is there any reason to think that changes. No. I don't think that the more competition is going to change. I think sort of how you have the conversation along with the competition and then in the context of the competition is what we're working on getting our arms around and working with the teams on. I think another thing that I'd add, Tim, is that, we still expect an increase in the profitability over the course of the full year as the cost of the act of our compensation related to the onboarding of the new people has come off in 2017. So we do still continue as if ---+ as business ramps up, continue to see the margin improve and start pointing back towards the direction of the historical margin. Okay. And just, I guess, more broadly on the Leadership plus Culture Shaping businesses, quite a big change from Q4 to Q1, even Q4 versus Q3. So I get there is volatility in the business. But can you ---+ what's ---+ is this more of the normal course of production. Or is there, I guess, are we underearning here. And were we overearning, outperforming what you would normally expect in Q4. Is there any way I kind of frame what we should really think is the kind of the more natural run rate of the business at this scale that we have right now. Sure. I think you touched on the key point right at the end of your comment, which is scale. And until we get to these businesses up to a larger level of scale, I think some of the volatility we're seeing in the revenue run rate will be less apparent. Keep in mind that there is no question the culture results were disappointing for us, but they weren't disappointing in magnitudes of tens of millions of dollars. It was just from a couple of million dollars. And in the case of Leadership consulting, which is more of a normal course, the first quarter ---+ after a strong quarter like the fourth quarter, we tend to see in that business a little bit of absorption of the work and while people are doing some work as well as business development. So as we continue to add people to that business and investment to that business, and have a few more people who are more dedicated to pure business development and less than just also client activity as well, I think we can settle into a more normal rate. But I think we'll still see some volatility in that, but right now we still think that on a trailing 12-month basis, we're still seeing a nice growth in that business. And we still think the more normal run rate is probably somewhere in between where we are this quarter and fourth quarter. And we will take our next question from <UNK> <UNK> of Deutsche Bank. Send our regards to Tracy too for a speedy recovery. I want to just talk about, Rich, within the context within that revenue guide, is there any way to think about the implied EBITDA associated with that. I know there's fair amount of movement much below the line, but is there any sensitivity of the EBITDA given the revenue range out there. We don't ---+ <UNK>, we're still not going to forecast EBITDA in our guidance plan yet. Again, I think, in large part because of the nature of our scale of our business and the fact that we can get some volatility within these lines, it doesn't take a lot to move the needle. That said, what we are encouraged about and I kind of touched that at my remarks a little bit is that, I think, again, earlier in the year, we're seeing a little bit better operating trends this early in the year than we have seen in recent years. So that shows that as we've gotten up to a little bit higher level of consultants, we've had very little turnover, a nice steady run rate of ---+ and <UNK> talked about it in his remarks relative to the momentum in the business that, that generally leads the fact that we can kind of continue to slowly build that EBITDA level. Got it. And then any thoughts on ---+ if you could give us maybe a little more granular number the monthly confirmation trends on the Executive Search, just looks like that slipped a little bit. What was that kind of year-on-year. And just ---+ is that ---+ any particular reason for that. Are you talking about the April number that we posted on the slide. Yes, well, again, on a ---+ probably on a 4-month basis with that number, over the course, it was probably up almost 4 ---+ 3% to 4% year-over-year. And I'll let <UNK> give a little more color on it. So it's not uncommon, especially when we have a big spike like we saw in March that we would have a little bit of down because it's a little bit like I talked about in the consulting businesses. We have to digest a little bit, and sometimes, it's a little bit of execution versus business development. I wish I could speak to the trends a little bit more. Yes, look, I think, we are seeing a good market out there, still, for Executive Search. March was a huge month. I think, Rich, it was probably the biggest month we've had in several years and so there was little bit of absorption that was going on. We are still seeing good number of confirms in April, and we are forecasting that to continue. Got it. And then just one last one along those lines. Have you seen any changes in the type of assignments in terms of the scope of work you're doing around financials. Is it more revenue or still compliance driven. Just any thoughts on the scope of the work. No radical changes that we've seen over the last year or so in the scope or type of work. I think that we're seeing more confidential assignments than we have in the past where clients are looking to us to do work quietly. So I think that would probably be the only trend that I'm seeing that's somewhat different. Got it. And then Rich, just real quick. The investable cash like usable cash as opposed to just overall. Yes, we still remain pretty strong with the moves we made with our tax structure at the end of the year and the fact that we will continue to build cash as expected over the course of the year. We had very little cash locked in any jurisdiction. We watch that pretty closely. And we're actually in a pretty good shape there. So most of our cash is usable or to be redeployed within the business pretty quickly. (Operator Instructions) And we will take our next question from Tobey <UNK> of SunTrust. Question is about the monthly volatility, just that April and March relationship and even a little bit just kind of zigzagging in February and January. Over the last year or more, in your opinion, has there been more monthly volatility. If we were able to see some of the geographic representation of monthly confirmation, would there be a different geographically, maybe like the French elections or Brexit actions that would somehow kind of make sense compared to those monthly trends. I think we can go back and look at that. There has been that lens, but I don't really feel that there is a huge difference in the monthly trends over the last several years on the volatility. I think there is a relationship, as Rich said, between where we've got very large months and some absorption that we see in the following months. And we have seen impact, for example, in Asia, we saw it last year in the first quarter when China was very soft, and there was uncertainty in China that we saw impact throughout Asia associated with that. We did see more currency-related issues with Brexit is what I would say in that phenomena. But I'm not sure that there is anything more than that, that I've seen in the volatility of confirmations driven by particular issue. It's an interesting ---+ Tobey, this is Rich. It's an interesting question. The only thing I can think of that maybe ---+ might it be even had a slight structural impact on the timing of that is uptick because of the fact that as we think about the role that upticks that played in the completion of the assignments displayed, it has been a little bit more important over the last, probably 12 to 18 months in our business. And so especially after periods of large business development or new assignments, simultaneously people are also working and making sure we get those done and to bring in the last bit of revenue relative to those piece because it can always be recognized the same way. So I'm not sure if it's a material move, but it's just a slow shift in the business a little bit and maybe that has a little bit of it. But it's really onetime confirmations go on client decisions as much as anything, and we've actually been blessed by the factor. I think we've had good luck in making sure that we've had higher completions over the last year or so. And so it just maybe sometimes it's a little bit more lumpy. And we tend to try to average it out and look at it and talk about it from an average perspective as well in terms of how we look at it. Okay. That's helpful. If I could kind of switch to the record promotions on the changes in categories of consultants, could you expound upon that a little bit. And (inaudible) my last follow-up. Yes, the objective is really twofold. One objective, obviously, was to give the cleaner career path for our consultants. So we've done, I think, a nice job of promoting from within, and we found that there were some bumps along the road with that program. So one was to do that. And then two, with a lot of the emerging technologies and things we see out there, getting some of these people opportunities and develop them to be market facing as well from a client perspective, was an added incentive as well. So those were the 2 objectives. No. I don't think so. I think I adjusted. So if you take the $158 million against the $146 million would be the comparison. Yes. Well, we aren't going to forecast specific margins, Tobey, but directionally, we're trying to grow the margin and that's been an objective of ours for a long time and twofold: number one, by bringing stability back to the Executive Search business and getting to a scale where we cover the overhead at a better rate. And I think we're starting to see that pull-through on the operating leverage because we kind of always pointed to the fact that we had to kind of get to and maintain and keep growing from the 350 number. And I'm pleased with the job that the team has done in terms of getting there and holding relatively steady on the productivity as well as the turnover. That certainly helped our profitability. On the new business, there is a couple of key ---+ and we've got work to do there. Number one is still we've got a good scale in the Leadership Consulting business and scale in the leverage support systems of the Leadership Consulting business. So that as we build that revenue, it's more profitable than Search because ---+ but right now we still use the lot of outside contracts, and it costs us a little bit of margin. On the Culture Shaping side, we have to get back to the historical run rate. First objective of getting back into that high 30s, $40 million range, employing at an operating margin of 20%-plus. And that would go a lot to helping our profitability as well. Well, it's certainly, and I think <UNK> touched on this in his early comment, I'll certainly let him add to it, but there are ---+ there ---+ the culture is still a very hard space in terms of the leadership discussion in most entities. It doesn't always necessarily get as narrowly focus this Culture Shaping, which is the core strength of what Senn Delaney does. So one of the things we'll do on top of just reinvigorating and working with the Senn Delaney operation as we bring up our new people up to speed is also look at ways to we can either build on our capabilities and should we build on our capabilities for client needs. And that's something I think we have to work with. Yes, let me just amplify on that. I think the cultural conversation is a very big topic and Culture Shaping is just one vein inside of there. And so what we are discovering is that there is a magnitude of different discussions that one can have. And while we stabilize the Culture Shaping side of what we are doing now, we continue to dive in and get into these other topics as well and investigate those. (inaudible) mentions one standalone, but also in terms of how it supports and helps Culture Shaping as well. So I think there is opportunities over there for us to continue to look at. Okay. Thank you everybody for participating in our earnings call. Have a wonderful day. Thank you.

2017_HSII

2017

AMZN

AMZN #Sure. Let me see what I can tell you on that. First of all, I want to remind you that Q3 is typically a lower operating income quarter as we're preparing for the Q4 holiday peak. The other dynamic is that similar to last year, a large percentage of our new fulfillment centers are coming online in the second half of the year, a lot of them in Q3. So to give that some perspective, the Amazon-Fulfilled Network or the combination of retail and FBA shipments coming out of our warehouses has been nearly 40%. It was that last year and it's continued through this year. Last year, we added 30% additional square footage to handle that additional shipping volume, and about 80% of that went in to service in the back end of last year. That's what I mentioned about this time last year. The ---+ similar dynamic this year. We're going to have about 80% of our increase in square footage for fulfillment and shipping coming online in the back end of the year. So that's a major increase. The other comment I would make is on the content ---+ video content. Video content, last year I highlighted the fact that it was going to be a significant step up between first half ---+ second half of 2016 and the second half of 2015. We are still ---+ we lapped that most of the first half of this year, and we'll also be increasing video spend on a sequential and year-over-year basis in Q3 and that's included in this guidance. Other than that, I can't give much more specifics except to say that the large investment areas remain increasing fulfillment capacity to service the strong growth of the FBA business. I'll also point out that the strong usage growth at AWS has led us to a step up in infrastructure in the form of capital leases. We've built capital leases in the trailing 12 months. They've increased 71% through the end of Q2 versus last year. That is servicing ---+ accelerating usage in our largest AWS services as well as geographic expansion. So that's additional factor sequentially in the quarter year-over-year. Sure, <UNK>. First, as far as Whole Foods is concerned, as <UNK> mentioned, it's not included in this guidance since it hasn't closed yet, but we are excited about that acquisition and looking forward to working with the team at Whole Foods. We think they're very customer-centric just like us. They've built a great business focused around quality and customers. So we're really glad to join up with them. On your larger question about with the place of AmazonFresh, that include Prime Now and some of our other efforts, I would say we believe there will be no one solution. So we're experimenting with a number of the formats, from physical pickup points in Amazon Go to online ordering and delivery to your door through Prime Now and AmazonFresh. And we'll see how customers respond. We like the response that we've seen so far. We think they're valuable. All those are valuable services. Amazon Go is not out of beta, but the other ones are. On top of that, we're looking forward to adding the Whole Foods team and their great reputation for quality and customer service to this offering. Sure. As far as Q2 is concerned, we were very encouraged by the revenue and unit growth acceleration, particularly in North America. We see that as tied to the Prime growth and the adoption of Prime and success of that program. Also point out that AWS stepped up its run rate from a $14 billion run rate last quarter to $16 billion. So we saw the largest quarter-over-quarter and year-over-year increase in revenue in that businesses as well, and gross margin expanded 130 basis points. So as you point out, the year-over-year difference is primarily driven by investments. The ---+ we're within the guidance range, and we continue to invest in, as I said, fulfillment capacity and logistic services, digital video, our Echo and Alexa ---+ Echo devices and Alexa platform, India, the buildup at AWS infrastructure, all the things I mentioned, not to mention Prime Now and AmazonFresh and Prime benefits. We did see a big jump in headcount in year-over-year. You'll see it's 42%, and in the past I've said most of that is driven by operations hiring. And I've even said that headquarters office hiring many times in the past was below the level of revenue growth. Right now what we're seeing is an accelerated growth rate in software engineers and also sales teams to support primarily AWS and advertising. So yes, those ---+ the growth rate of those 2 job categories actually exceeded the company growth rates. So we are adding ---+ having success hiring a lot of people and pointing them at some very important programs and customer-facing efforts. On the place of physical, again, as I mentioned in the earlier question, we are experimenting with a number of formats. You've seen the physical bookstores, and I would say that the benefit there is ---+ again, we have a curated selection of titles and it's also a great opportunity for people to touch and feel our devices and see them, especially the new Echo devices. I went into the store in Seattle last week and I saw about 1/3 of the people were standing around the device table, learning how they work, how they interact with the devices. So I saw firsthand the customer experience. I think that's where we're seeing the benefit to the physical stores right now. Yes, let me start with the second one. So yes, we've had numerous price increase ---+ or decrease, excuse me, and we continue to have that in the AWS business, both absolute decreases in service costs and also rolling out new services that may be cannibalizing more expensive, other services that we provide. So nothing really to note on Q2 or Q3 from that standpoint. The fulfillment investments, I can't split it out for you between Amazon Logistics support sort centers and fulfillment centers. What I can say, the biggest dynamic going on, again, is that Amazon-Fulfilled unit growth of nearly 40%, which was last year and carrying it to this year. It's a global number, and we are very glad of the success of the FBA program. We're matching that with just over 30% increase in square footage. And yes, you're right, that does include some shipping sort centers and things that are incremental and new functions for us, if you will. But that's about all I can say on that right now. I think we're very happy ---+ we're very happy with the FBA program, its impact on Prime and we think Prime and FBA are self-reinforcing. We know customers really like it, the additional selection that FBA provides. So we like those combined, and we are working very hard to match that with capacity in an efficient manner. Sure. On the price of Prime, I have nothing to add at this time. We think that the ---+ we're increasing the value of the Prime program every day. So it becomes more and more valuable and again, as we've said, it's the best deal in retail. On AWS, yes, the ---+ we are seeing great customer adoption. The ---+ again, as I've said earlier, the run rate's gone up from $14 billion to $16 billion in Q2. And also, we had the largest sequential and year-over-year dollar rise in revenues. Our usage in all of our large services are actually accelerating, so ---+ and they're growing at a rate higher than our revenue growth. So we're seeing great adoption. We are seeing AWS customers migrate more than 30,000 databases over the last 1.5 years. We've signed some very big customer wins like Ancestry, Hightail, California Polytechnic State University and others that we're very proud to have. So yes, the momentum in the businesses is very strong. We continue to open new regions. We'll be opening 5 regions in the near future in France, China, Sweden, Hong Kong and a second government cloud region in the east. So yes, we like the momentum in that business. Stepping back, I would say that where pricing is important, again, we're generally being selected because of our functionality and pace of innovation. The innovation keeps accelerating. It did in the first half of this year, the pace of new services and features. We also know that customers value our partner and customer ecosystem, and really the experience we've had. We've been at this longer than anybody else. Sure. Those margins, as we say frequently, are going to fluctuate quarter-to-quarter and always going to be a net of investments, price reductions and cost efficiencies that we drive. So I would say the biggest impact in the margin that you're seeing in Q2 is really around the 71% increase in assets acquired under capital leases. Most of that is for the AWS business. So we've really stepped up the infrastructure to match the large usage growth and also the geographic expansion, and that is showing up in tech and content. On the marketing, if you look under the marketing expenses, they are also up and that is driven by the increases we're seeing in the sales team, both in AWS and advertising. So I would point to those 2 as probably larger-than-normal impacts on Q2 operating margin. Sure. Let me start with your second question. On the subscription revenue, grew 53% year-over-year versus 52% in Q1. So yes, we continue to see strong Prime membership growth. That is the main thing. There's also, in that line item, are also other monthly fees associated with some of our other subscription services like audiobooks, eBooks, digital video and digital music. But again, I would say that we're very happy with the Prime membership growth, and it remained pretty consistent both in Q4 and then through Q1 and Q2 of this year. On your second question on Prime Now, so Prime Now is now available in 50 cities across 8 countries. We do learn something new in every city and have different ---+ slightly different shapes and sizes of those buildings and different density profiles. And so we are learning as we go. We learn as we grow internationally as well. That is a service that customers love. That's not an inexpensive service though, and we also have ---+ so we're constantly working on our cost of delivery and our route densities. And again, we like what we see, and we'll continue to expand that and we'll be working very hard on making that not only a valuable Prime offering, Prime benefit, but also lower-cost operation as well. Sure. Yes, it's early on the Echo Show. As you know, we just started shipping those in late June, but we're very excited about the potential and the additional ---+ the addition of the video screen and the messaging capability and video capability. So it's ---+ I've used mine and it's awesome. It's a big step up, in my mind, but we'll get more customer feedback as we go along. On advertising, technically, what I said is the sales force has grown higher than the rate of growth in the business itself, which was 42% regular headcount, and that sales force is primarily AWS and advertising. So we build self-service tools and obviously that we want to make those as efficient as possible for customers and advertisers, but we realize it will need actual sales contact with accounts as well. So it's a mix. I can't get into the split really, but I would see both growing. Sure. I'll start with the second one. Yes, as you noted in the press release or the 8-K, we had an absolute step up from Q1 of $792 million to Q2 of $1.2 billion. So it increased 51% year-over-year in Q2 versus a headcount increase of 42%. I'll also say that we generally see a step up from Q1 to Q2 because we do our employee RSU grants in Q2 of each year. So that's a normal trend. But the 51% year-over-year is also ---+ is a combination of the hiring we've done, but also an adjustment we've made to our estimated forfeiture rate. We're seeing less forfeitures, which is a great sign for our employee retention, but you have to make adjustments to your reserves as you see that. So that was another influence in Q2. On operating margins internationally, I'd step back and say, we ---+ a lot of the investments we're making in North America, we're also making in international: Prime benefits, including Prime Video and remember, we launched global video in Q4 of last year to 200 countries; Prime Now; AmazonFresh; the general rise of FBA and added selection, both retail and FBA, to make Prime more attractive and the fulfillment and logistics costs that go with that, any additional constant effort to reduce prices and accelerate shipping. So that all impacts both North America segment and international. The North America segment is a little further along in the Prime ---+ or excuse me, yes, the Prime membership growth curve. And so in some respects, we are giving benefits earlier in the life cycle to international Prime customers than we did in North America just because it launched later. And then there's also India. As I mentioned, we continue to invest in India. We're very hopeful with the progress we've made with sellers and customers alike in India, and we see great momentum and success there. So we'll continue to invest, and we have some of our best people in that business. I'm sorry, what was the first part of your question. No, nothing. In that other line item is advertising and also other things like co-branded credit card agreements. I would say that the main ---+ excuse me, advertising revenue growth has been strong and fairly consistent over the past 3 quarters. So that number will move around, but there's other things that more the variance in the volatility as in the other line items. Your question on stores. We are ---+ again, I personally think that new devices ---+ the ability to see new devices is a great asset, but I don't want to shortchange our ---+ the rest of the bookstore and the ability to have curated selection and the creativity we've had in taking a new look at the bookstore. So we are experimenting with different formats, and we look at different sizes and we look at revenue and cost per square foot just like any other physical retailer. So we haven't essentially nailed the model yet, and we continue to experiment and see what works and how it differs by city or more suburban locations.

2017_AMZN

2015

STZ

STZ #So first of all, as it relates to pricing, it is pretty much what we have said all along throughout the year, which is that we've expected to take in the 1% to 2% pricing range, and that's what we're doing. So the strategy really hasn't changed. Like every other business, we've got costs to cover. And our brands are strong enough to bear that kind of pricing. If there's any change in our strategy, I would say that the marketplace is changing somewhat in terms of the makeup of the types of products that are out there. The market ---+ I mean, the industry ---+ is definitively premiumizing, while volume remains sort of flat. So there's a shift internally towards more premium products. And I would say that that probably has given us the opportunity to be less focused on what's going on with competitive products and to be more focused on what do we think is good for our brand and what do we think will work and won't work. So we continue to be very strategic in our pricing. We're doing it on a market by market, brand by brand basis. Our guidance, nevertheless, hasn't changed. We're still looking at the 1% to 2% range. And you can call it leading or not leading. We're sort of, I'll say, marching to our own beat as opposed to too worried about what some of our competitors are doing overall. And that's up to them. And we'll do what we think the market will bear for our brands and what's good for the health of our brands. So in some cases, that will mean that we will lead pricing. But as I said, the market's changed. It's premiumizing. 10% of the industry now is craft, selling at very high prices. And the other 10% of the market is basically us. And those are the two segments, that 20% is obviously taking share from the other 80%. So things are a little different out there than they have been in the past. I would say in general, we're not overly focused on the pricing gap with the domestic premiums. The domestic premiums have taken on a life of their own. I'm not sure how relevant it is, at this stage. Yes. We're less concerned about that gap today than we were several years ago. Thank you. So we have, in terms of supply chain procurement, not finished good procurement, we have largely separated ourselves from reliance on ABI. And then separately, we will continue to procure finished goods from AVI's breweries until June of next year, of 2016. So I don't think we see any issues with pinot noir sourcing, which we're doing quite a bit of it, between <UNK> West, <UNK> Mondavi, the various tiers, and Meiomi. But I would say that our supply chain is very well nailed down. And then I think to your question on the pricing in the marketplace, I think that pricing ---+ I think the answer to your question is maybe yes, yes. I think that even in the higher end, I certainly don't see pricing going the other way. It hasn't been a very robust market over a number of years in terms of pricing. But if you listen to the talk out there in industry-type circles, I think everybody's ---+ the market in general is probably more favorable to some pricing than it has been in quite a number of years. So it probably bodes well. Yes, so clearly implied in a guidance that brings us back into the 34% range, margins will compress a little bit in the back half of the year as a result of several headwinds, if you will, those being bringing assets into service, so our depreciation number will go up, line commissioning costs, incremental employees for training, as well as throughput lowering as we go into the back half of the year at Nava, just based on the seasonality of our production. So I would say that built into the 34% is our current estimate of FX and commodity rates for the rest of the year. It's a little bit of both. And so from a hedging perspective, we run a three-year layering program, and so we are ---+ we kind of stabilize our returns a little bit, which means you leave some money on the table when commodity prices and FX values are falling and you gain on the other side. So I would say that we will get ---+ assuming commodity rates were to stay where they are today, and primarily for us, we're talking about benefiting from diesel rates, as well as aluminum ---+ but assuming those rates were to stay as they are today, there would be some benefit that we would experience next year. It's just far too early to call what that is, at this point. The first thing I would say that from a consumer experience standpoint, our research and the feedback that we receive is that as more people in the US become exposed to Modelo Especial, they tend to continue to drink it. So it's a very high quality, well respected, authentic brand from Mexico. To address the can versus bottle component, we had depletions year-to-date on cans that are 12-ish % on the can part of the portfolio; and then bottles, we were in the high 20% growth rate, from a depletion standpoint. So we're seeing growth coming across the spectrum of offerings on Modelo Especial. And I would say that as far as the consumer goes, I'm not sure that we agree with you that it's two completely different consumer bases. I think that we've seen a shift, somewhat, at least, in the growth from cans to bottles. The can is only slightly priced less than the bottle. It's really almost irrelevant, the pricing difference. Interestingly enough, cans have, in general, taken on a very premium image, since it's becoming the package of choice in the craft segment of the market. So the whole view towards cans in general, I would say, is shifting quite significantly from a consumer perspective. So we don't see any difficulties in marketing the cans and the bottles together, like everybody else does, markets cans and bottles. So that's not a particularly unique aspect of our Modelo Especial business, which, as we said earlier, is actually growing more than it ever has on an incredibly large base. So the strength of that brand is phenomenal at this stage, without it really having fully transitioned to a general market product. And it is transitioning to a general market product, again, with our own help, as we've turned on general market TV advertising, which has been very successful. And we know that there is huge room for distribution growth in that brand. And you will see it. You will see it as we continue to move forward and execute with that brand. You'll see the ACV continue to go up. That's simply going to be the case, as we believe quite strongly at the current time. So cans are strong. The bottles are strong. It's following the same pattern as many brands that have become major brands. And Corona's probably the best example of that. So there is some overlap of wholesalers that carry the Femsa brands, or the Heineken/Femsa brands, and ourselves. Quite a bit of overlap, in fact. I would say that that is totally irrelevant to us. The Femsa brands are small. And in terms of growth, they have some growth in their Dos Equis brand, which is less than half the size, for instance, of Modelo Especial, and the growth has slowed down. And Tecate, I think, is in negative territory, and they've had some growth in Tecate Light, which basically sells at the domestic premium price point. So we don't really view that as particularly strong competition. And we don't really care whether they're in Miller Coors or ABI or, frankly, where they go, because we don't focus on that portfolio very much. And Heineken's a whole different animal, obviously, that I think is competing with a different consumer base, in general, than our Mexican portfolio. So again, it's not something that we really focus on. And in general, our modus operandi is to worry more about our portfolio and the opportunities there. And execution is going to be the key on our portfolio in the future, which is going to be about taking advantage of distribution opportunities and basically increasing the number of SKUs per account. That's really what we ---+ where the opportunity lies for us. Because we actually generate a huge amount of growth for ourselves and our retailers with a relatively small amount of shelf presence. And we're under-SKUed, given our velocity and our dollar volume at retail. So there's just a big opportunity there for us and our retailers. Our retailers are and should be interested in increasing their sales and margin per unit space of shelf space. That's what they're all about. And probably their biggest opportunity to do that and to get dollar sales, turns and, even more importantly, margin is through increased SKU and shelf space for our portfolio. And when we talk to retailers about that, I think they realized it, because the statistics are just overwhelming for them as a way to increase their profitability. So building our SKU count per retail account is going to be one of our primary focuses going forward. I think in terms of capacity, it's like high single digits is what we have said in the past, or you can infer that from our comments about doubling the business over a long period of time, 10 years, that's just sort of simple math. Our real guidance for the year continues to be high single digits for the beer business in general. And then your second question was. Oh, a lot. We just introduced it, really, and made it a priority over the last relatively short period of time. So I think that there's a big opportunity for more distribution on that, right. It's only about 5% of our volume at the current time. And we should be growing that more like 15% or 20%. So that will be achieved through continuing to build distribution and doing what I said, focusing on SKUs per account. Okay. Well, thanks, everybody, for joining our call today. As we close the discussion of our second quarter results for FY16, I am very, very pleased with what our business has achieved so far. Though the year is far from complete, our new guidance reflects the confidence we have in our ability to execute in the second half and achieve our goals for the full year. We look forward to the next time we speak with you in early January, when we will share the results of our third quarter. Until then, we wish you a safe and happy holiday season. This time of the year is a great opportunity to share our fine beer, wine and spirits products with friends and family, and we encourage you to make Constellation Brands a part of your celebrations this holiday. So thanks again, everybody, and have a great day.

2015_STZ

2017

PNW

PNW #First of all, no question we had a weak fourth quarter. At the end of the fourth quarter, we had positive sales, so don't know that that's necessarily a trend and I'm not going to look to the first and fourth quarters to look at a trend with us being weighted to second and third quarter. But I will say we have a lot of ---+ business sales were up last year. For example, State Farm started filling their buildings in 2015. That wasn't complete until October of this year, so you'll have a full-year impact of that and we just see a lot of construction, especially multifamily homes, going on in downtown Phoenix. So all the signs are pointing toward modest sales growth in 2017. We are projecting between 0% to 1%. So we will ultimately see what happens. I think I will defer that until we talk about 2017 guidance. We continue engaging with the parties in constructive settlement discussions and generally speaking, we believe the parties are motivated to settle. It's really difficult to go into any detail at this point. Everything is up for negotiation.

2017_PNW

2015

ATI

ATI #Well that number that we gave, that at least $1 billion in revenue is all parts and components, it is all forgings and castings. I think most of it, <UNK> ---+ I see what you're saying, I think most of it is parts and components as opposed to metal. There is some metal because of the Rene 65 and the 718Plus but when you're talking numbers that big, the majority of that increase is parts and components. Yes, that would be our goal. There is a lot of questions there. The flow time from sponge into a mill product, we are doing that now. So we're using ---+ we have been using our own sponge for a number of years. We just couldn't use it until recently on premium ---+ on certain premium quality rotating part mill products, either for the aerospace or in some cases for the medical market, which has similar specifications for a wide variety of reasons. So now we can. We are producing basically at a 15 million pound annualized run rate. We will continue at least at that rate, I think the question for us as to whether we increase it in the second half of the year is really more tied to the cost competitiveness of our tickle supply. Because tickle is such a significant cost of the production of sponge that we are in discussions now on that front in terms of our tickle supply beyond 2015, and it really just becomes an economic decision of what is the economical price point of tickle and how does that relate to the ultimate production cost of sponge at varying operational (technical difficulty) either 15 million pounds or ultimately 20 million pounds or 24 million pounds at that facility, versus the cost of procuring the raw material units externally. So those are things we will always balance out. And I think the one thing that we have learned about ramping up greenfield facilities, not [Indiana] <UNK> facilities but greenfield facilities, is that we want to do that in chunks. Because when we brought the facility down because of ---+ we didn't need as much of the sponge being produced because it wasn't PQ, we backed down the workforce to a number that was minimal, and now we are hiring and growing. But what we want to do is do that really in manageable segments so that we get the workforce added, the crew added, they become trained, it becomes very stable. We come down the learning curve, and then we will go the next pace, so we will continue to do that in an orderly fashion. Yes, I think that is a good conclusion. Thank you. Yes, I think it is more than 20% or 25%, it feels more like 35% to 40%, quite frankly, and the impact of that is obviously not just on that revenue stream but also on the load factors in the facilities, including on the forging side. We had a significant piece of oil and gas business, forgings not necessarily what you might think the traditional Cudahy, the former [lattice] facilities, but more in the legacy former Teledyne facilities in Portland, Indiana, and Lebanon, Kentucky. So those businesses have been impacted negatively from a reduction, obviously impacts the cost absorption and everything going all the way back to melt. So it's impacting us in the high-performance materials and components segment, in melt, in our Sheffield, UK operations, which is more heavily involved in oil and gas ---+ the oil and gas market than aerospace, quite frankly, and then in some of our forgings. So I think the depth of the correction continued to worsen in discussions with our customers as we move through the second quarter. I think now ---+ what we are seeing now is what we expect to see at least through the end of 2015, and I think quite frankly, the dialogue we're having and just the assessment of the overall market, I personally don't see those market conditions improving, absent some geopolitical event which none of us want to see. I don't see the market demand and fundamentals improving until probably mid-2016 at the earliest. I think it was pretty evenly split, quite frankly. I think the oil and gas had a pretty dramatic impact on it, probably more so than just the normal margining off of the revenues, because of the load factors and the lower utilization, and what happens with those fixed costs. So we need to replace that business, quite frankly, and we need to focus on reducing the cost structure and that's what we'll be doing here, and then when the market does come back and it will, quite frankly, the cost structure will be better and the margins will be higher. Yes. I think it is an important factor, and really what we are trying to do is ---+ what we're trying to accomplish with our negotiating strategy is really not an overall cost reduction, it's more of a stabilization at the existing level, so that the current all-in rate that we have now doesn't continue to grow. And if we can do that and then capture the benefits of attrition and normal attrition, and improve productivity, which is really where some of the language and work rule changes come in, then I think that's supportive of that, plus what we need to do in other cost areas in that business outside of the represented employees, I think that's where the strategy of $0.50 a pound profitability can work. So the aim is not to do that 100% on the backs of the United Steelworkers. That is just not the case at all. Yes, I think that while our preference is a joint venture, I think as a temporary basis, when we consider tolling for a carbon steel partner on a short-term basis, the answer is sure, we would. The first thing we need to do is get the rotary crop shear replaced, right, which is the end of September, and then we need ---+ our primary focus has always been to continue to focus on the products that we make and to maximize the learning curve opportunity there, and then at the same time turn our sights to what we are going to do on the carbon steel side or what opportunities exist on the carbon steel side. As I have said many times, the return on investment calculation of the HRPF did not assume a carbon steel partner or any type of carbon steel tolling for that matter. We just believe that because of the power and the capabilities, and the available capacity of the HRPF, that it makes sense and it would make sense for ATI and someone else, to use the capabilities of this very unique asset in a very capital efficient way. And we still believe that, and quite frankly, the dialogue that we have had, in one case it was more advanced, in other cases it's very early, is an intriguing proposition to potential carbon steel parties, and I'll just leave it at that. And we are not ---+ I'm not going to put a self-imposed ---+ do I have a goal in mind in terms of when we would like to have that completed. Yes. Tomorrow. But we are not going to do it for the sake of doing it. It's going to be with the right partner, or the right ---+ if it's a tolling arrangement on an interim basis, the right party that makes sense for them and for us under the right terms and conditions. So it's not something that we are going to do just to check the box. Yes. Sure. I think it's mainly targeted towards the more commodity 300 series stainless, the 304 type stainless mainly, primarily in terms of sheet product form and to a lesser extent in terms of strip product form. I think it's not only us. I think a more successful trade case is representative of industry participation and that ---+ we work that process, quite frankly, through a US-based trade association called SSINA. ATI is very important member of SSINA and has been for a very long time. So we tend to, if there is any one company or one member of SSINA that tends to drive these types of issues and considerations on the trade side through SSINA, it's probably ATI. So we take that responsibility seriously. We know what the trade laws are in terms of when you can bring a successful trade case. I think we have worked in partnership ---+ I know we have worked in partnership in the past with other affected parties like the United Steelworkers, and the leadership of the USW and the support of appropriate trade cases, and it's a very fact specific situation. When you look at the trade laws in terms of will a trade case be successful, we think a trade case is required and necessary based upon the behavior of certain importers into the US, mainly from China, and that data is being collected, and I would think the path that we are on, we would expect the trade case to be brought. Okay. Thank you, everybody, for joining us on the call today, and thank those who asked us questions, they were great questions. We appreciate your continuing interest in ATI. Thank you, <UNK>, and thanks to all of our listeners for joining us today, that concludes our conference call.

2015_ATI

2018

SWM

SWM #Thank you, <UNK>, and good morning, everyone. Yesterday, we reported our fourth quarter and full-year results with full year adjusted EPS of $3.18 exceeding our guidance of $3.15. Before we go into further detail about the quarter and year, it is important to note that we had a net onetime noncash tax expense of $39.6 million or $1.29 per share related to the recently enacted U.S. tax legislation. This had a substantial impact on our full year GAAP financials, including a fourth quarter GAAP loss per share. <UNK> will provide more color on taxes later in the call. Regarding our overall results for the year, AMS organic sales growth and the benefits from the Conwed acquisition offset the challenges in our recon business we had assumed when we originally issued our guidance. Specific to the fourth quarter, adjusted EPS was $0.64 a share down from $0.80 in part due to lower organic sales in AMS as customers adjusted year-end inventories following several quarters of strong growth. Concurrently, EP faced a difficult comparison to the prior year's fourth quarter. 2017 free cash flow finished at $90 million, a reduction from the earlier expectation of close to $100 million as we chose to build additional inventory to ensure consistent service levels during our facility consolidation and expansion projects. We expect free cash flow to rebound to more than $100 million in 2018. Shifting to AMS segment results. Excluding the Conwed acquisition, organic sales declined 2% in the fourth quarter but were up 4% for the year. Recall, transportation sales increased rapidly midyear as we expanded our Asian distribution channels for surface protection films. While we saw these customers reduce their year-end inventories during the fourth quarter, we have seen ---+ since seen a more normal order pattern resume in 2018. Although fourth quarter transportation sales declined, for the full year they grew more than 10%. In filtration, we saw a good quarter growth across most product lines but the full year still finished with a modest decline. We expect filtration sales growth in 2018. In medical, we continue to see gains during the fourth quarter and for the year, medical sales finished up in the 2% to 3% range. Industrial sales were up slightly in the course of the year, up 2% to 3% with particular strength in our small but growing graphics products. Commenting specifically on Conwed, the top line in the quarter benefited from continued momentum in sediment control and construction-related products. These areas were also the best performing products on the [go-forward] basis. Sales of erosion control products grew for the year but were constrained by a fire at one of our customers' plants which cut the supply chain. We expect these sales to pick back up in 2018 as infrastructure investments and highway development remain robust and the channel debottlenecks next to meet pent up demands. The AMS legacy site closure plan remains on cause ---+ on course for phase completion in 2018. Execution of this action should solidify the achievement of our $10 million run rate synergy goal later this year. Regarding segment operating profits, fourth quarter margins were down due to lower organic sales, however, for the full year we saw over 200 basis points of adjusted margin expansion from organic sales growth, favorable mix and the addition of Conwed. For context, AMS segment margins have increased about 400 basis points from the mid-13% level in 2015. Switching to Engineered Papers. Fourth quarter results were generally as expected though the comparison to last year was challenging. Recall during the fourth quarter of 2016, we delivered particularly high profitability due to a combination of positive factors resulting in elevated margins. That said, fourth quarter 2017 sales were up 2% for the gains attributable to favorable currency movements, which more than offset 1% volume decline. Segment volume was driven by lower recon products with the traditional RTL decline, partially offset by the Heat-not-Burn ramp up and wrapper and binder volume growth, trends we have seen consistently throughout 2017. Full year 2017 sales were down 2% on a 3% volume decline, which was driven by lower recon volumes as we expected and total cigarette paper volumes contracted in line with smoking attrition. These declines were partially offset by nontobacco volume growth. Lastly, as we've noticed on recent calls, contractually lower LIP royalties have negatively impacted sales and margins throughout 2017. On a separate note, during the fourth quarter, we received a favorable ruling in our LIP patent infringement litigation in Europe. For legal reasons, we cannot provide further detail at this point and we will continue to provide updates as appropriate. Regarding execution of our EP segment priorities, Heat-not-Burn tobacco sales continued to increase during the fourth quarter as the market continues to show positive movement. As we have noted in our earnings call, this product represents a unique opportunity to help offset some of the ongoing headwinds of the tobacco industry. However, it remains in the early stages with much of the global adoption story yet to play out. We will continue positioning SWM as the supplier of choice for reconstituted tobacco products used in these devices. Leveraging our dedicated teams with significant technical expertise, strong relationships across the industry and available capacity. I will now turn the call over to <UNK>. Thank you, Jeff. I'll now review our financial results starting with AMS segment performance. In the fourth quarter, AMS sales increased 52% to $99 million due to the Conwed acquisition. Organic sales declined 2% due to lower transportation film sales. Adjusted operating margin was 13.4% of sales, down 200 basis points. The quarterly margin contraction resulted from soft organic sales. For the full year, sales increased 54% to $433 million driven by the addition of Conwed and 4% organic sales growth. Adjusted operating margin was 17.5% of sales, up 230 basis points, driven by organic sales growth and the addition of Conwed in related synergies. For the Engineered Paper segment, fourth quarter sales were up 2% despite a 1% volume decline. Favorable currency movements drove the sales increase more than offsetting lower LIP royalties, while price and mix were net neutral. Adjusted operating margin was 21.8% in line with the full-year margin but down 480 basis points versus the prior year quarter, due primarily to lower traditional RTL volume, lower LIP pricing and royalties and reduced overhead absorption. Also, pulp costs were unfavorable compared to last year. As Jeff mentioned, the margin decline was magnified by a difficult year-over-year comparison. The fourth quarter of 2016 adjusted margin of nearly 27% was the highest quarterly [segment] margin in recent years. For the full year, sales decreased 2% due to the 3% volume decline. Consistent with fourth quarter results, price and mix were net neutral for the year and favorable currency more than offset the decreased royalties. Adjusted operating margin was 22.1% of sales, down 330 basis points. Adjusted corporate Unallocated expenses decreased by 7% and 2% for the fourth quarter and full year respectively, declining as a percent of total sales. This decrease is due to lower consulting fees and our continued focus on cost control. On a consolidated basis, fourth quarter sales increased 19% but were up 1%, excluding Conwed, and down 2% excluding both Conwed and currency benefits. Fourth quarter adjusted operating profit margin was 12.5%, down 310 basis points. For the full year, sales increased 17% but were flat excluding Conwed and down 1% excluding both Conwed and currency benefits. Full year adjusted operating profit margin was 16%, down 110 basis points. Shifting to consolidated earnings. We recorded a fourth quarter 2017 GAAP loss of $0.89 per share. The loss was due to the $1.29 per share of net onetime tax expense resulting from the implementation by the U.S. Tax Act. Fourth quarter adjusted EPS was $0.64, down from $0.80 in the prior year. For the full year, GAAP EPS was $1.12, with the onetime tax expense driving the significant impact. The full year adjusted EPS of $3.18 exceeded our guidance of $3.15. Now I would like to provide some context for the recently passed U.S. tax legislation and its impact on SWM. As mentioned, we incurred $1.29 per share of net onetime noncash tax expense in the fourth quarter 2017. The total incremental net tax imposed by the implementation of the Tax Act was $48.7 million, or $1.59 per share and was driven by a repatriation tax on undistributed earnings of non-U. S. subsidiaries. The company will elect to pay this transition tax, partially offset by the utilizations in credits over 8 years as permissible under the new act. We also revalued our net deferred tax liability as a result of lower projected tax rates. This resulted in a $9.1 million or $0.30 per share benefit. Excluding the net impact of these onetime tax items, our effective tax rate would've been approximately 26% in the fourth quarter and 30% for the full year 2017. In relation to our 2017 guidance, our results were generally in line with our expectations as we outlined at the beginning of the year. The most significant element was the anticipated accretion from the Conwed acquisition, which was essentially offset by expected declines in traditional RTL. We had also anticipated higher taxes in certain European jurisdictions, lower LIP royalties and the interest expense impact of an interest rate hedge to fix a portion of our floating rate debt. These factors played out as anticipated. The most significant headwind we faced in achieving our guidance was the shortfall in the Chinese recon JV which was expected to deliver additional growth. As we have discussed on previous calls, we are tempering our expectations going forward as we work with our JV partners to drive better performance in a challenging supply demand environment. Now shifting to cash flow and liquidity. 2017 free cash flow was $90 million, about 10% below 2016, while operating cash flow of $131 million was up slightly versus prior year. Total CapEx increased by $10 million to $41 million. About 1/2 of this increase was related to the addition of Conwed and the remainder of the increase stems from growth projects across the business, including the new film line and modification to our legacy paper line to make specialty filtration products. We have previously communicated that 2017 free cash flow was expected to approach the $99 million we generated in 2016, however, to ensure consistent customer service during our planned facility move, we built the inventories in the fourth quarter. Thus, we ended the year at higher levels than originally planned. This higher inventory balance show higher working capital balances impacting free cash flow. Consistent with expected EPS growth in 2018, we anticipate 2018 free cash flow to increase to more than $100 million. From a leverage perspective, for the terms of our credit facility, we were at 3x net debt-to-adjusted EBITDA at the end of 2017, up from 2x at year-end 2016, driven by the increase in debt at the closing of the Conwed acquisition in January. Absent unusual circumstances or potential acquisitions, we expect to continue to pay down debt in 2018. Now back to Jeff. As we look to 2018, our guidance for adjusted EPS is a range from $3.30 to $3.45. The overarching theme is that expected organic sales growth in AMS and further synergy realization are projected to more than offset the tobacco driven headwinds in engineered paper. We expect smoking attrition trends in our key markets will be the primary influence on EP results, while anticipated Heat-not-Burn growth offers an offset to traditional RTL declines. This is an exciting inflection point for SWM as our outlook reflects projected increases and consolidated sales, operating profits, earnings and free cash flow. This growth outlook is the culmination of several years of strategic portfolio rebalancing with AMS reaching the scale necessary to position us for sustainable organic growth. For 2018, we anticipate the reduced effective rate on the U.S. portion of our earnings, net of the impact to certain previously available deductions, will yield a few hundred basis point reduction in our effective tax rate from the normalized 30% rate in 2017. We caution, however, that the interpretation and application of this new tax legislation may evolve throughout the year, hence potentially impacting our financial results and cash flows. Our strategic priorities remain essentially unchanged for 2018. In AMS, our primary focus areas are to drive accelerated organic sales growth and realize the benefits of our scaled platform. The center piece of this optimization plan is the legacy AMS site closure but we continue to pursue other actions to improve and grow our operations, including manufacturing and productivity improvements and segment wide R&D and product development collaboration. As noted, we will continue to make growth-focused capital investments where they advance our strategy, such as our first international surface protection film line located in our U.K. facility and our expanded AMS facility in China. These investments and others to come represent the benefits of AMSs' increasing scale as we are able to leverage existing overseas assets to help internationalize our business. In Engineered Papers, we continue to strategically manage capacity and costs and look to grow share to offset market pressures. As mentioned, Heat-not-Burn remains the product development focus and we plan to build upon our strong customer relationships and innovation capabilities to support the potential growth in this innovative product line. Before wrapping up with closing remarks, I'd like to thank <UNK> for her hard work over the past few years, particularly her role in the Argotec and Conwed integrations and leadership of our tax team through a demanding 2017 year-end process. As announced several weeks ago, <UNK> will be stepping down, following a carefully planned transition to our new CFO, <UNK> <UNK>. They are both currently serving as co-CFOs through March 1 at which point Andy will take over sole responsibility. Andy has an investment banking and corporate finance background, mostly in the industrial space, and we look forward to his leadership contributions. Andy. Thanks, Andy. In closing, 2017 was a year of significant developments for SWM. The addition of Conwed to AMS increased our scale and created opportunities to drive optimization synergies across our growth platform, not only with respect to our manufacturing footprint but also from realigned commercial organizations. Another important milestone is that our total nontobacco sales reached more than 50% for the first time in the company's history. Our tobacco operations continue to generate attractive margins and cash flows but as we look longer term, the continued expansion of AMS is a critical component of our ongoing transformation into a diversified and growing specialty materials company. Since joining SWM, I've been assessing our strong global operations, products and end markets and long-term strategy. We believe we have the right strategic direction overall with a strong global franchise underscored by our commitment to delivering highly engineered specialty materials to our customers, fostering collaborative partnerships with them and focusing on operational excellence. I consider the strategic transformation progress in recent years a significant organizational accomplishment. And our view is that Phase I of transformation is complete. We have rebalanced the portfolio with AMS, now a scaled growth platform, which we will continue to expand through a combination of organic growth investments and potential acquisitions intended to broaden our end markets, customer base and technologies. We appreciate your continued interest and support. That will concludes our remarks. Kim, please open the lines for questions. Yes, a lot of our products ---+ we are big in wound care and formation of finger bandages, et cetera, and we continue to have very close collaborative relationships with our end-use customers, they continue to grow. There's a new product line coming out called Sports strip that we're a large component of that is making major gains in the marketplace. So it's a sum total of a lot of little pieces, it's no one single overarching trend. I think we're just well positioned in that marketplace. Yes, I think the underlying trend continues to be the same as we indicated. One of the goals of the AMS division is to continue to internationalize our division. We've opened up an expanded supply chain in Asia and that product market is very successful there. You saw we had a little bit of weakness in the fourth quarter and that's really because a lot of that channel was growing very rapidly in the second and third quarters and they did a little bit of industry ---+ inventory rebalancing, which is typical for many companies at the end of the fourth quarter. And then we're seeing those trends continue. So we remain positive on that, I don't know if we can see the same double-digit year-on-year growth due to the very strong performance that we had this year. But we're very optimistic about this product line overall. Yes, I think that's in the regional projection. There might be little bit of upside in that, again, it's an early stage adoption. So we're excited about what we're seeing. You have as much line of sight as we do into our political system. So I'm not going to try to comment on what people are saying but we are optimistic on infrastructure. It's clear that the long term trend in the country is that we need to reinvest in highways and things of that nature. So I'm more optimistic that I think the country is going to realize the need to continue to do that. No. It's got this litigation, we're really cautious. It's just the comment that we have been defending our technology, our LIP technology is something that we think is very innovative. It's one of our large cost customers we actually have a loyalty licensing agreements in and so this reflects another customer ---+ another competitor that we have been just defending our technology about and had a favorable court appearance just recently. Well, yes. One of the things that we have is a strong area of focus on operational excellence in our EP side, and that's something that we are now embedding even greater into our AMS side. So we formed it into a fully integrated operations division. We're optimizing around some of our sites that we're closing some and moving other operations, and doing that by combining with the best practices and our Lean 6 sigma activities I think we'll be able to continue to drive efficiencies and that's going to be one of our key focuses for the coming years actually. Yes, we still are very optimistic in our film business. And we've already seen orders rebound in January to what we are considering more expected levels. So that's why we feel the fourth quarter slowdown was really inventory adjustments from what we've seen. Yes, so we've seen the last 2 years a little bit weaker on our RO side, which is the large desalinization plants and our customers continue to tell us that the replacement cycle is starting to come back and that there's been some approvals for new large scale capital, particularly in the Middle East and may be some over in Asia. So we're hoping that picks up. Actually our process filtration, which is non-water liquids, if you think about it has actually been pretty strong and then we have a small air filtration business that showed a little weakness but that was primarily due to one customer and moving to a different technology. So we're expecting that business to grow in 2018. Well, yes, the problem they face, by the way, I think that's why positive on this because the long-term trends I think continues to favor these types of technology. The problem is you can't build them at the last second and that's basically what South Africa is facing. The desalinization plant that they actually are building is not coming online in time and they're probably going to need more. So hopefully, we'll see those trends and we are well-positioned with the key end-use suppliers so hopefully, they'll start see their order books increase and that will flow backwards with us. Yes, what I can share is I think the growth has been faster than what we have planned in terms of our operating plan but with that said, I think we continue to caution. This still remains a small part of our RTL, overall RTL business. So it's in the 5% to 10% range right now. So it's just still early enough in this development process that it's really hard for us to forecast how it's going to grow. The key thing I think to say is that we are the innovation partner of choice for anybody who's building Heat-not-Burn technology-based on RTL. So we still remain positive but again I don't ---+ it's small but fast growing and I think it's going to be something that is going to be attractive for us and help offset some of the pressures we see in our traditional business for years to come but again, I'm just a little bit more cautious than others in how I forecast that. Well it is commercial. So there are sales around the world but if you think about it from the PMIs and BATs of the world, they would say this is very early on in their process. They're test marketing in a number of cities. I think they're trying to tweak their formulas to the different tastes around the world and were still applying for approvals in various parts of the world. So I think it's very early in the lifecycle but everything continues to be positive from what I've seen and what I've spoken with our customers about. Yes, so just a couple of things. So I just want to emphasize two things, one is our main focus right now is demonstrating the organic growth and getting those synergies that we are ---+ had promised the investment community this year. So that's our primary focus. Now with that said, we are always looking at what's out there in the marketplace and looking at ways that we can grow our product lines and grow our positions but it's all around our strategies, so we'll take hard looks at that. We've shown that we can handle leverage rates in the 3% to 3.5%. So it's not necessarily our goal to get back down to 2%, but we're going to keep paying down debt and keep our powder dry and if the right opportunity comes along, we'll look hard at it. I think that's going to be a component of our strategy going forward. Yes, we have a pretty big M&A cookbook in terms of how we look at things. So the first screen that we always do is, strategically, does it fit into what we do today and does it add value to us. So that's always going to be the first screen. And what we do today are not commodity level products, so higher margins tend to come with specialty and niche applications and those are the things we tend to favor. I don't have though, a specific target cut off specifically on the margin returns for the businesses. It really plays into what we think we could do with them once we get them. And our target is always going to be around that 20% margin, is where we want to get things. And so you see right now with AMS, we're moving across that stream, we are at 17.5% now and we've gone up about 300 to 400 points since we've owned these things. That's going to be the typical model, so the things I buy might not have those margins but that would be the expectation that we'll be able to move them for a variety from R&D or efficiencies or other synergies. Okay. Well, thank you, everybody. I appreciate you listening to the SWM story. We're excited about where we're going and I appreciate you taking the time to join us today.

2018_SWM

2016

SEM

SEM #Thanks Bob. Good morning everyone. For the first quarter our operating expenses which include our cost of services, general and administrative expense, and bad debt expense were $966.9 million. This compares to $698.7 million in the same quarter last year. The increase in operating expenses is primarily due to the addition of Concentra and Physiotherapy. As a percentage of our net revenue operating expenses for the first quarter increased to 88.8%. This compares to 87.8% in the same quarter last year. The increase as a percent of net revenue is a 120 basis points increase in the cost of services, which was partially offset by a 10 basis point reduction in G&A and a 10 basis point reduction in bad debt. Cost of services increased to $922.3 million for the first quarter, compared to $664.4 million in the same quarter last year. As a percent of net revenue cost of services increased 120 basis points to 84.7% in the first quarter. This compares to 83.5% in the same quarter last year. Cost of services in our Concentra segment was $213.2 million in the first quarter, or 85% of revenue. The higher relative cost of services in our Concentra segment, as well as an increase in the relative cost of services in our specialty hospital was the primary reason for the increase in our cost of services as a percent of net revenue during the first quarter. As Bob mentioned, we had an increase in labor costs in our LTACs associated with the increased patient acuity, and the higher wage rate for clinicians due to patient criteria. In addition to the aforementioned labor costs, we have elected to maintain certain staffing levels at many of our specialty hospitals in criteria, even though we have experienced a decline in volume. This is due to the current nursing shortage we have been experiencing. Given our belief that we will be successful in replacing reduced volumes, this strategy will allow us to not incur the additional costs of recruiting and training new nurses, as well as avoiding the hiring of agency nurses. G&A expense was $28.3 million in the first quarter, which as a percent of net revenue is 2.6%, this compares to $21.7 million, or 2.7% of net revenue for the same quarter last year. G&A expense in the first quarter included $3.2 million of Physiotherapy acquisition expenses, excluding the Physiotherapy acquisitions costs G&A would have been 2.3% in the first quarter. Bad debt as a percentage of net revenue was 1.5% in the first quarter. This compares to 1.6% in the same quarter last year. Total adjusted EBITDA was $128.6 million, and adjusted EBITDA margin was 11.8% for the first quarter. This compares to an adjusted EBITDA of $98.9 million, and an adjusted EBITDA margin of 12.4% in the same quarter last year. Depreciation and amortization expense was $34.5 million in the first quarter. This compares to $17.3 million in the same quarter last year. The increase resulted primarily from an incremental $15.4 million of depreciation and amortization expense in our Concentra segment. We generated $4.7 million in equity and earnings of unconsolidated subsidiaries during the first quarter. This compares to $2.6 million in the same quarter last year. These increases are mainly the result of the contributions from our specialty hospital joint venture partnerships. During the quarter, as Bob mentioned, we had several one-time gains and losses. We sold our contract therapy business for approximately $65 million, and recognized a gain on the sale of $30.4 million. Additionally, we recognized an impairment loss of $5.3 million on an equity investment in which we are a minority owner. This loss was triggered by the planned sale of the Company by its controlling owners. Both of these items were reflected in our income statement as non-operating items. In connection with our financing activity in the quarter, we repaid our series D term loans that were scheduled to mature in December of 2016, and recognized a loss on early retirement of debt of $800,000 during the quarter. Interest expense was $38.8 million in the first quarter. This compares to $21.4 million in the same quarter last year. The increase in interest expense in the first quarter is a result of additional borrowings related to the financing of the Concentra acquisition in 2015. The Company recorded income tax expense of $17 million in the first quarter, the effective tax rate for the quarter was 22.2%, compared to an effective tax rate of 38.3% in the first quarter of last year. The lower effective tax rate during the first quarter of this year is primarily related to the sale of our contract therapy business. Our tax basis in the business exceeds our selling price, and as a result we had no tax expense resulting from the sale. Net income attributable to Select Medical Holdings was $54.8 million in the first quarter, and fully diluted earnings-per-share were $0.42. This compares to fully diluted earnings-per-share of $0.27 in the same quarter last year. Excluding the gain on sale of the contract therapy business, loss on impairment of the equity investment, Physiotherapy acquisition costs, and a loss on early retirement of debt, and the related tax effects, earnings-per-share on a fully diluted basis would have been $0.23 in the first quarter of this year. At the end of the quarter, we had $2.78 billion of debt outstanding, and $85.4 million of cash on the balance sheet, which includes $61.5 million of cash at Select, and $23.9 million of cash at Concentra. Our debt balances at the end of the quarter included $1.1524 billion in Select term loans, $315 million in Select revolving loans, $710 million in the Select 6.375% senior notes, $646.6 million in Concentra term loans. In addition we had $62.8 million in total unamortized discounted premium and debt issuance cost that reduced the balance sheet debt liability. With the balance of $20.5 million consisting of other miscellaneous debt. Operating activities provided $111.2 million of cash flow in the first quarter. Our days outstanding, or DSO, was 52 days at March 31st, 2016. This compares to 53 days at December 31st, 2015, and 56 days at March 31st of 2015. Investing activities used $397.7 million of cash during the first quarter. The use of cash was related to $412.9 million in acquisition-related payments, primarily related to the acquisition of Physiotherapy, and $46.8 million in purchases of property and equipment. This was offset in part by the $62.6 million in net proceeds from the sale of the business during the quarter. Financing activities provided $357.5 million of cash in the first quarter, the provision of cash was primarily the result of Select's financing the Physiotherapy acquisition and refinancing of certain term loans. Net activity on Select and Concentra credit facilities were $388.2 million of net proceeds, offset in part by the repayment of bank overdrafts of $28.6 million and $4.4 million in repurchases of distributions through non-controlling interests. Additionally, in our earnings press release we provided revised financial guidance for the calendar year 2016. This includes net revenue in the range of $4.15 billion to $4.35 billion, adjusted EBITDA in the range of $500 million to $540 million, and fully diluted earnings-per-share to be in the range of $0.87 to $1.06. The update to our guidance includes changes in the full year expectations resulting from the acquisition of Physiotherapy, the sale of our contract therapy business, and the financing activity completed in the first quarter. This concludes our prepared remarks, and at this time we would like to turn it back over to the operator to open up the call for questions. Yes, <UNK>. That's a great question, and I think the response to that is when you take look at the portfolio, the portfolio really isn't that much different. You're right. There are fewer additional beds, but at the end of the day there really isn't that much of a difference. You're absolutely right, <UNK>. I mean when you take a look at the decision to not really flex, and the other issue is that when you think about the variable expense on salaries, wages and benefits, it really isn't linear. It's a step function. So the way that we staff is, we will staff RNs for four to five patients per nurse, based on the acuity of the patient, and as Bob had mentioned, we're basically down ADC on a per hospital per day basis about 1.1 patients, so in essence what we expect to see is when that volume comes back you will see no incremental cost on the labor side. So all of that incremental revenue from the increased volume should basically with the exception of pharma and supply costs drop right to the EBITDA line. <UNK>, I think as a follow-up to Bob's comments, I think the other thing to remember and we have talked about this, is that the approach, the multi-prong approach that we're taking we think is having some success here, and as you recall that multi-prong approach is having the clinical liaisons that are on the ground at each of our LTACs, the amount of time that they spend with the case managers, the discharge planners. We have our Chief Medical Officer and his staff out talking to the discharging physicians from the short-term acute care hospitals, and we have our finance people spending a bunch of time with the finance people at the short term acuity hospitals. So I think over time, it really is an educational process an over time we think we will become more and more successful. Yes, <UNK>. It's a great question. It's interesting if you take a look at those facilities that have been in criteria from October through February, and you take a look at the reduction in ADC pre versus post criteria, that's about 2.6%, and yet Bob had said that we're at 3.9% in total. That's really a function of what's going on with the last group of March hospitals. We anticipate that will improve just like it's done historically. So yes to your question is that as the hospitals come onboard, and as they mature, we see improvement. Sure, <UNK>. No. I think it's the right way to think about it. The real question for us is as Bob had mentioned, there is a nursing shortage right now, and we're going to monitor that, and not be quick to flex down, because again, we anticipate we will get that volume back. And as you recall in the third quarter, we talked about the educational process, the educational costs that we incurred, and from our perspective as you well know as all of the investors know, is that when you flex down the nurses can't get their hours, they're going to go someplace else, which means when the volume comes back that would really require us to go out and recruit, retrain, and the incremental cost of doing that just doesn't make a lot of sense. Yes. We would say Concentra is on plan right now. First quarter was a little bit better than we anticipated. There is seasonality in the occupational medicine business, but it's really the down quarters are typically the fourth and the first quarter. The second and third quarters are typically the best, and with regards to synergies, I mean we still have some more synergies to achieve there, but all-in-all we think we're very happy and pleased with what's going on with Concentra right now. Sure. That's correct, <UNK>. If you take a look at both on revenue EBITDA and EPS line that's what it reflects. On the EBITDA, it's a net differential of about $30 million. What we have done is we have assumed that for full year Physio would be at $37 million, and we needed to back out the EBITDA so it was a contract therapy of $7 million. And then. On the EPS line, it's a net $0.15 and the way that we arrived at that was taking a look at the $0.19 gain on the contract therapy sale, plus approximately $0.03 for the Physio transaction, less about $0.06 associated with the refi, less about a penny for the contract therapy sale. So netting out all of that is about $0.15 and that's what you see in the guidance. Yes. With regards to your question on Concentra, no, we don't really see the same type of issues in Concentra that we see on our specialty hospital side. Yes. There was a $10 million reduction in Specialty Hospitals on a same quarter year-over-year basis. $3.8 million of that had to do with, on the inpatient rehab facilities. That was $3.8 million of start-up costs. There was about $1.3 million associated with the closed hospitals, and then the balance had to do with the labor that we talked about. No. $3.8 million in total this year versus I think it was $5 million, a little bit more than $5 million last year. What I am doing is giving you an idea that the $10 million component, yes. So it would have been a little bit of a tailwind. Labor, when you walk it through it's the labor costs. I want to make sure that people are aware that on the inpatient rehab side there's $3.8 million worth of start-up costs.

2016_SEM

2016

CXO

CXO #Hey, <UNK>, it's <UNK>. Just to reiterate what <UNK> said earlier, you have a lot of things going on. You have new assets coming in, old assets going out. You have changes in interest assumptions in different asset areas. But the net effect is the same capital, and roughly the same net wells. Yes, we're comfortable with what we've come out with before on that, <UNK>. So the short answer is, yes. We're still very optimistic about the Avalon in that area. Thanks, <UNK>. That's correct. It's well productivity, is the main driver. It's about half and half in Upton and Midland County. Yes. Yes, the impact of that property trade for our Company was a pretty large impact. And that's the kind of thing, the kind of asset high-grading that I think we ought to continue to do. Landing them both at the same time and closing two deals on the same day, or announcing two deals on the same day, is a little bit of a trick. But in general, as we progress through the year, continuing to consolidate Tier 1 core acreage and sell off stuff that is further out in the drilling queue, is an activity that I hope we will continue to see. Yes to the first two. And the lateral length, I think those are all two-mile laterals down there. A mile-and-a-half to two miles. All right, thank you, <UNK>. Yes, right now the north is a lot bigger than the south. We've had good results from second Bone Spring, Avalon and Wolfcamp in the north. And primarily, what we're doing in the south is Wolfcamp. So I think that will be expanding, but we're very pleased with the performance of the North Harpoon area in the southern Delaware Basin. It competes with anything we're doing in the northern Delaware. And as we've stated, we think that the efficiencies will continue to drive costs lower and production higher. We like both those areas. The Avalon oil is just as ---+ I mean the rates of return, the productivity, the prospectivity, is just as good as anything we have. We're really high on it. One of the big drivers was that trade, where we're doing more drilling now, more of our capital in the southern Delaware Basin around North Harpoon. That's a big driver. Yes, in our prepared remarks we said we added two rigs immediately on those acquired acres. I'd like to dispel that notion that we've been primarily a Delaware Basin player. I mean, we bought Henry Petroleum back in 2008, and they were one of the first movers in recognizing the oil potential in the Wolfcamp on the western side of the Midland Basin. So we inherited a lot of that knowledge, expertise. I think we were an early mover over there. It's just been, with all our Delaware activity and everything we're doing in New Mexico, all that really good Midland Basin stuff got lost in the bigger picture. But I think we've got some of the best Midland Basin acreage that there is. Our well results compare with anything that anybody else is turning out in the Midland Basin. And we now have completed the infrastructure kind of investment that we needed in place, so that you could run a multi-rig pad drilling development kind of program. So we're ready to devote more capital there. When we come out of this cycle and things start rolling rapidly again, I think it would be good for Concho to have multiple growth drivers. The last time we came through this growth cycle, the growth of the Company was really driven by the northern Delaware Basin. I think next time, we'll have multiple growth drivers. I think that will be a better, more diversified Company. We've got 110,000 net acres, and we like the great majority of it. Yes, is the answer to all those questions. The longer lateral length is primarily coming from the Midland Basin and the southern Delaware Basin. And that's where we just really put the rigs on. No, I hope they get better. One thing you're dealing with, with longer laterals though, is just the mechanical ability to move that much fluid out of a two-mile lateral. So I think as the industry goes to longer and longer wells, the initial 24-hour, 30-day rates aren't going to move as much as the 60- and 90-day rates. Because these wells, in the first initial days, you just can't make that much more fluid out of that sized hole. But I think they will hold up better, and you'll get better economics. Our DUC inventory is down to about ---+ what is it. 30. 30. And in general, because the conditions have changed a little bit, there's not as much tightness in the supply for frac spreads. So the balance of inventory of wells waiting on being completed and wells drilling, I don't think you need quite as many wells waiting on completion as you had in the past. There's more flexibility in the system because of excess capacity of frac spreads. It's just a basis of partners joining or not joining in the wells, and our net interest in those wells, at this point in time. Yes, so as we've said in the past, we've come down significantly from 2015 to 2016. And going from 2016 to 2017, there may be some modest shallowing in that decline curve, but not anything comparable to the change between 2015 and 2016. That's right. A more steady base, is a way to think about it. I'm sorry, could you ---+ try that again. I think that our long-term strategy that we've had works well in cycles like this, the way we think about our balance sheet and our leverage and our activity. And I think what's going to differentiate Concho going forward is our ability to grow within cash flow. And so when you compare us to other companies, I think our growth will be differentiated, or better, and we'll be drilling within cash flow, while others will probably be outspending their cash flow. Thank you. Yes, in general, we're experiments with everything. But specifically to your question, one thing we've done to reduce expenses ---+ early in the process of drilling these wells, several years ago, we would put electric sub-pumps on the wells, so we could move the fluid faster. That was very expensive. And so as we've tried to optimize things, especially at lower oil prices, we'll put mechanical pumping units on them earlier. They move less fluid, but it kind of flattens the decline curve. So it's not really choking them back, but it's controlling cost, and not using as many sub-pumps. Sure. The pace will slow down markedly, and we're going to stay consistent with the budget that we laid out in the beginning of the year. Yes, it's, again, consistent with the 10%. It's embedded in that 10% of non-drilling and completion capital in the budget. And I don't believe we broke it out beyond that. You bet. Good morning. Yes, I think the Permian is in better shape than the other basins, because the Permian seems to be the place right now that all the equipment wants to come to. We spoke about the rig count. The rig count is at a historic low right now, at about 130 rigs. So there's a long way to go to add back equipment and people, even to get back halfway to where we were two years ago. So I do think that, in general, it will take the industry some time to respond to increased activity. But we need some increased activity just to get back to normal. So I think we have a lot of spare capacity right now, and we're likely to have spare capacity for some time to come. All right, thank you. All right, thank you once again. I know that it was a busy morning, and I appreciate you dialing into the Concho call. It was a really good quarter. We look forward to talking to you again at the end of second quarter. And thanks again for your interest in Concho.

2016_CXO

2015

MHO

MHO #Thank you very much and thank you for joining us. Joining me on the call today is <UNK> <UNK>, our CEO and President; Tom Mason, EVP; <UNK> <UNK>, COO of our Mortgage company; Ann Marie Hunker, VP and Corporate Controller; and <UNK> <UNK>, Senior VP. First to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also be advised that the Company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to <UNK>. Thanks, <UNK>. Good afternoon everyone and thank you for joining our call to review our third quarter results. We were very pleased with our third quarter results as we had solid results on many fronts. We achieved continued growth and profitability in the third quarter with record-high third quarter revenue of $363.5 million, which is a 10% increase over the third quarter of 2014. Pre-tax income in the third quarter was $26.5 million, a 19% improvement from last year's third quarter. Net income for the quarter was $15.6 million or $0.51 per diluted share, representing a 14% increase over 2014 third quarter. Our growth in revenue was driven by a 9% increase on our average closing price to $349,000 a home and we delivered 994 homes during the quarter, which is an increase of 1% from last year's third quarter. The increase in average sales price from last year was driven by a combination of the mix in our communities, as well as pricing increases in certain locations. During the quarter, we achieved gross margins of 21.5%, which is an improvement of 80 basis points from a year ago. As a result, our third quarter operating margin improved to 8.3% from 7.5% a year ago. In a few minutes, <UNK> will discuss our margins and returns on a little more detail, but at this point let me just say this. Our third quarter gross margins of 21.5% were down slightly from the second quarter margins of 21.8% as well as the first quarter margins of 21.7%. This slight decline was mostly due to mix. During the quarter, our SG&A came in at 13.2% which is the same as a year ago. Year-to-date, we have improved our SG&A ratio by 50 basis points and expect continued improvement going forward as we grow our revenues. We have continued to experience some delays and challenges in both land development and home construction in many of our markets, primarily related to the availability as well as cost of labors and subcontractors. Today, delays on the home construction side approximate roughly five days. It doesn't sound like much, but it does equate to a week of business. On the land development side, though very inconsistent from market-to-market the delays were probably slightly more than a month. The good news, however, is that we do not believe these conditions change markedly for better or for worse during the quarter. And, at least from a pricing standpoint, we've generally been able to raise prices to offset increases in construction costs. Overall, new home sales in most of our markets remained healthy during the quarter, which is generally a slower season for home sales than the spring months. We were able to increase our new contracts by 11% over last year, largely due to the opening of 42 new communities this year, through the end of the quarter. We have increased our community count by 11% from 2014's year-end and remain on track, as stated in our release, to increase community count by 15% during 2015. Our backlog sales value also increased, up 27% from a year-ago to $657 million with a record high average selling price of $367,000. Our financial services business segment also continued to perform very well with pre-tax income of $4.4 million during the quarter, which represents a 31% improvement from last year. Year-to-date, we have earned $14.3 million from our financial services business and in a few moments, <UNK> <UNK> will review this in more detail. Our balance sheet and liquidity remained strong with $583 million of shareholders equity and ratio of net debt to capital of 50% at the end of the quarter. Looking ahead, we expect to continue expanding our community count and growing our market share. And we will remain focused on continued improvement in both income as well as returns. Before turning it over to <UNK>, let me give a little bit more specific information on our three regions. First; the Southern region, which is comprised of our two Florida and four Texas markets. In the Southern region, we had 377 closings for the quarter, which represented 38% of our total volume. New contracts in the Southern region increased 22% year-over-year. We are achieving solid results in both of our Florida markets which are Orlando and Tampa and we have been growing our position in each of these markets. In Tampa and Orlando sales were strong during the quarter and we expect both of these markets to perform well for us for the remainder of the year. In our growing Texas operation, both Dallas and Austin contributed significantly to our sales and deliveries, particularly compared with being in start-up mode in those markets a year ago. Our sales business in San Antonio was relatively flat year-over-year and I will note that we have seen a slight pickup in sales than used to in this quarter although we continue to monitor market conditions there as job growth in Houston has slowed as has been well-documented. The dollar value of our sales backlog in the Southern region at quarters-end was 51% higher than a year ago and we have 62 communities across our Southern region at the end of the quarter, which represents a 22% increase from last year's third quarter. As to our four Texas divisions, we have 35 communities versus 31 a year ago and continue to be very excited about our growth opportunities throughout the Southern region. Next is the Midwest region which is comprised of our Columbus, Ohio; Cincinnati, Ohio; Indianapolis Indiana; and Chicago, Illinois markets. We had 363 deliveries in the third quarter, a 5% percent decrease from a year ago as those 363 closings represented 37% of the total company closings. New contracts in the Midwest were up 5% for the quarter. Sales backlog was up 12% from the end of the third quarter last year in dollar value and our controlled lot position in the Midwest increased 18% from a year ago. We ended the quarter with 67 active communities across the Midwest, which is 8% more than a year ago and at the end of the quarter, demand in all four of these markets remained good. Finally, the Mid-Atlantic region, which is, Charlotte, Raleigh North Carolina as well as DC; new contracts were up 3% for the quarter compared with a year ago and backlog value was up 22% at quarter's end from a year earlier. We ended the quarter with 37 active communities in the Mid-Atlantic region, which is about 9% more than a year ago. We delivered 254 homes in this region, which was 25% of total Company and this volume was down 2% from last year. Our Charlotte operation had a particularly strong quarter, with improvement in sales and delivery and while our deliveries in Raleigh were slightly off for the quarter, Raleigh continues to be one of our best performing markets. Demand in the DC market continues to remain a bit sluggish. Our total controlled lots in the Mid-Atlantic region decreased 15% from last year. And with that, I'll turn it over to <UNK>. Thanks <UNK>. We continue to focus on improving our profitability on our returns. In the third quarter, our pre-tax income increased 19% on revenue growth of 10% and our pre- tax income percentage increased to 7.3% from 6.7% a year ago. New contracts for the third quarter increased 11% to 988. Our traffic for the quarter was up 11% and our community count was up 13%. Our new contracts were up 10% in July, flat in August and up 25% in September. As to our buyer profile, 38% of our third quarter sales were to first time buyers compared to 37% in 2015 second quarter and 49% of our third quarter sales were inventory homes compared to 50% in 2015 second quarter. Our active communities were 166 at the end of the third quarter. The breakdown by region is; 67 in the Mid-west, 62 in the South and 37 in the Mid-Atlantic. During the quarter, we opened 14 new communities, while closing three and our current estimate is to end the year with about a 15% higher community count than we started 2015. We delivered 994 homes in 2015's third quarter, delivering 55% of our backlog compared to 60% a year ago. Revenue increased 10% in the third quarter compared to the same period last year, primarily as a result of an increase in the average closing price. Our average closing price for the third quarter was $349,000, a 9% increase over last year's $320,000 and our backlog sales price is $367,000, up 10% from a year ago. Our building cycle times for homes have been slightly higher this year than last year. Year-to-date, our cycle times have increase about 4% and our construction and land development cost have also increased, looks like about 2% year-to-date. Our gross margins were 21.5% for the quarter, up 80 basis points compared to last year's third quarter and we've had 21.6% in year-to-date gross margins versus 21.1% last year. Our third quarter SG&A expenses were 13.2% of revenue, flat compared to a year-ago. Our variable selling expenses increased as a percent of revenue by two-tenth of 1% in the third quarter compared to a year ago and our expenses associated with our increase in land inventory and higher community count increased as well. Year-to-date, our SG&A percentage is 50 basis points below last year and we continue to focus on improving our efficiencies. Interest expense increased $1 million for the quarter compared to last year and increased $2.3 million for the first nine months of 2015. These increases reflect higher borrowing amounts and cost. We have $17 million in capitalized interest on our balance sheet compared to $16 million a year ago. That's about 1% of total assets. With respect to income taxes during the quarter, we had a tax rate of 41%. Our rate during the quarter was unfavorably impacted by changes in a future state tax rate, which reduced the value of our NOL carry forward in the State by $600,000. Excluding this one-time impact, our effective tax rate for the quarter was 39% and we estimate that our tax rate for the remainder of this year at 39%. Our earnings per diluted share for the quarter were $0.51 per share. This per share amount reflects $1.2 million of dividends paid to our preferred shareholders. Now <UNK> <UNK> will address our Mortgage Company results. Thanks, <UNK>. We continue to manage our balance sheet carefully focusing on investing carefully in new communities, while also managing our capital structure. Total homebuilding inventory at September 30, 2015 was $1.1 billion, an increase of $239 million about September 30, 2014. The increase is primarily due to higher investment in our backlog, higher community count and more finished lots. Our land investment at September 30, 2015 is $551 million, a 29% increase compared to $426 million a year ago. At September 30, we had $282 million of raw land and lands under development and $269 million of finished unsold lots. We own 3,844 unsold finished lots with an average cost of $70,000 per lot and this average lot cost is 19% of our $367,000 backlog average sale price. The market breakdown of our $551 million of unsold land is; $163 million in the Midwest, $214 million in the South, and a $174 million in the Mid-Atlantic. Lots owned and controlled as of September 30, 2015 totaled 21,562 lots, 51% of which are owned and 49% under contract. We own 11,073 lots, of which 33% are in the Midwest, 42% are in the South and 25% in the Mid-Atlantic. During 2015's third quarter, we spent $83 million on land purchases and $63 million on land development for a total of $146 million. About 60% of the purchase amount was for raw land. Our estimate today for 2015 land purchase and development spending is $425 million to $450 million which includes the $322 million we've spent year-to-date. At the end of the quarter, we had 360 completed inventory homes, two per community and 962 total inventory homes. Of the total inventory; 289 are in the Midwest, 428 are in the Southern region and 245 are in the Mid-Atlantic. And at September 30, 2014 we had 305 completed inventory homes and 999 total inventory homes. Our financial condition continues to be strong with $583 million in equity and net debt to cap ratio of 50% and at September 30, 2015 there was a $156 million outstanding under our $400 million unsecured revolving credit facility. That completes our presentation. We'll now open the call for any questions or comments. I think it's both. I think you've nailed it pretty accurately. I think that obviously based on the terms of the call, our investment in our new markets and so forth in the land spend that <UNK> talked about, we're bullish about housing. We continue to believe that that conditions in our markets will get better and ---+ not to sound like a broken record, it's often uneven and a bit choppy. Certain markets tend to get soft when others don't and then the pattern switches itself. And we have tried to be disciplined with our margins. We feel good about our margins. As I said, even though they were down slightly from first and second quarter, they're relatively in line when you begin to factor out mix and so forth. And of course, our margins are net of nearly ---+ slightly more than 4% of selling expenses. So when you look at our margins for the quarter, at 21.5% we feel that those compare very favorably with other builders. And one other comment I would make is that we feel pretty good about, if you look at sales this year, we were up 13% the first quarter. We were up 8% the second quarter, we were up 11% the third quarter and we're also pretty pleased with focused on growing communities by 15% by the end of the year. So all in all, we feel like things are pretty solid. Probably the least active in DC and as you look at the other 12, equally active and it's very competitive. And the strategy of our land really hasn't changed where we're intensely focused as a first, second and third priority on getting what we call from premier locations. Hopefully, you can get them on a finished lot basis but if it takes developing them ourselves and we're able to manage the risk appropriately, we do that. As <UNK> said, about 60% of our deals were at Raleigh during the quarter and that's close to about where we are company-wide right now. We haven't changed our underwritings in terms of the minimum hurdles from a return standpoint, which is all influenced by expected margin and pace based upon conditions the way they are now, not based upon what we think might happen to conditions going forward. But it's very competitive and Orlando and ---+ Orlando, Charlotte, Tampa, Austin all of them are quite competitive. But we're looking to grow in all of our markets. The one that we're most concerned about because of just in general, sluggishness of it is DC and we're probably being a bit more cautious there right now. I don't know that, I'll let <UNK> take, maybe, how it might differ from region to region. That's an average. In some markets, it's two or three days; in other markets, it might be for four or five or six days. It averages out to about five. If you look at 994 closings during the quarter, sometimes one week doesn't sound like a lot, but it can equate to 50, 60, 80 closings. I'm not saying that's exactly how many had impacted, but certainly, it did have an impact and I'm not sure if that answers your question. It is, like <UNK> said, it's kind of just market dependent. If you look, for instance, at Dallas and Charlotte, trained labor has been a little bit of an issue. When you start looking at Austin and Dallas it's again, kind of been concrete labor and mason. So markets are a little bit different, but again, we think that [cyclical] time has been about 4% or so, which is about a week to us. It doesn't ---+ I want to emphasize something I said. Look, it could change tomorrow, but as of right now, it doesn't seem like it's getting any worse. We feel like it's gotten settled into about where it is. The situation has been more acute in terms of delays on the land development side. Obviously, land development is a seasonal business and weather can certainly have a very significant impact on land development much more so that it would have on home construction generally and everybody likes talk about the weather but there have been contractor delays there as well. There is contractor shortages. We really haven't changed our strategy. Oftentimes it's deals driven. About 20% or so of our business is probably ---+ maybe a little more than that right now, but close to 20% is attached town homes, which typically will bring the price down somewhat, but we have not launched any major new product initiatives with smaller houses designed ---+ at any significant way designed to appeal, perhaps to some first-time homebuyer. We're watching that market carefully. There are signs that that may be unhooking itself in some markets. Historically, pre-2000, back in the early 2000s and 1990s, we were very, very strong with sub-2000 square foot houses in markets and if and when that market does come back, I've got every confidence that we'll be able to react at that time, but at least in terms of today, when you look at our mix, it really hasn't changed a whole lot. Every market is a little bit different <UNK>. Our spec policy really hasn't changed much. We're about the same number as we were a year ago, about the same as far as completed specs. It's just the local deal you are always trying to bring in subs that maybe from one market to another that makes sense. You try to make sure that they understand and appreciate the volume that we can give them the certainty of the payment et cetera, but each market is a little bit different. You can comment in a lot of different ways. And it's very hard to manage it. I mean, I think we're doing a really good job of managing it, but there is no easy answer. Five years ago or three years ago, I should say when we were coming out of the housing recession, every builder was talking about how one of their big initiatives was to become better and smarter and reduce cycle time and that was certainly a big priority here as well, but when you look at ---+ as housing has begun to come back and you look at the strength of the apartment market, a lot of people used to build houses or build an apartment, they're easier to build. Every one of them is the same and houses require a little bit more time any maybe complexity. So you manage it. As we said twice during this call, we've lost about five days and I'd rather have us pick-up five days than lose five days, but I think we're doing a pretty good job managing it. It has had an impact. Well, when you look, in general, way our business is, as you close the motels in the fourth quarter, [all we see is] revenues up. So you hope to get more leverage in the fourth quarter and you tend to get the lower closings and the least amount of leverage in the first quarter. But as <UNK> said, we continue to focus on the SG&A line. There wasn't really anything that jumped up that much in the third quarter with the exception that variable selling was up two-tenths. Having more investments leads to more real estate taxes and HOA fees and those type of things. Opening more communities drive some of those selling expenses also, but as our volume, hopefully, continues to increase, [directly] we'll get that leverage as far as at the SG&A and the operating line. Don't make any estimates as far as the gross profit line. Our GPs have been pretty much flat the first three quarters, which we feel pretty good about and it's 50 basis points year-to-date better than last year. We continue to focus on that, but no projections as far as the GP line. That's a really---+ there's no specific answer on that. Every deal is different, but I don't know whether it's changed, it would have been the same answer a year ago and year ago and year ago and that is that every deal is different. Smaller deals, you turn it through quicker than you do larger deals. We don't generally take on larger deals like we used to, but typically the day ---+ I mean, this is very, very general, but the day that you buy a piece of raw ground, it takes about six months to develop an initial phase and then another 90 days beyond that to get open for business. So this is so rough and dirty it's probably not worth the words I'm using to describe it, but it's about a nine month process from the time you buy the land until you begin to open for sale and sometime it can be ---+ that time is stretched because of all the things we talked about earlier on the call, but a lot of deals are stretching out a year. But if you look at our land position <UNK>, as you know, we like to own a two to three year supply with about a year of those being finished lots and today we own a little under 4000 finished lots and then we own like another 7000 either raw or under development. So we're in really good shape for 2016 and also a fair amount of 2017. So we feel really good about our land position, we try to be all about premier locations. We think that means more to customers, being in the better school districts, near the better shopping, near the better transportation. We'd love to be on little more land like as everybody would, but if we have to develop those premier sites, we will do that knowing it takes more time and you take development risk in most of those situations. But again, on those raw land deals and deals we develop the hurdle rates also are higher to make sure we get rewarded for that. But overall, we feel pretty good about our land position. Just one more thing I'd add, just to answer than and to underscore what <UNK> said, I think, comparatively speaking, we have a very healthy land position. We own just a little bit over 11,000 lots, control another 10,000 on top of that and when you look at what our growth goals have been and what they are going forward, I think we're in really good shape and I think it's managed very well with over half of the owned and controlled off the books. No, it has not. I think <UNK> is going to answer this one. Yeah, hi <UNK>, this is <UNK>. We've given some indication in our 10-Qs as to where we think the peak will be this year and it's been close to ---+ we had said it could be as high as $209 million. At this point, we've generally said it's probably not quite that high, it's probably more in the $175 million range. We were around $150 million outstanding at the end of September. There is a lot of swing week-by-week $10 or $20 million. So that's really the only comment we made and we certainly don't have any suggestion out there for next year, but we did announce that we increase the commitment level on it to $400 million from $300 million and that was really just largely to give us extra comfort to get us through the foreseeable future. And with the current debt structure that we have I mean we feel very comfortable with it. I missed the last part of your question, you said to comment on the Houston market and what was the (multiple speaker). Yes, most of which you said is true. The Houston market has been negatively impacted by the decline in oil prices. It remains, for the most part, a very healthy economy in terms of the macro economy. I believe that it's still the largest new home sale market in the United States though not quite as robust as people expected it to be a year ago at this time. It has affected our business slightly to be sure, particularly as you get into the first and second move up. I think that's more impacted than the lower price points there and it's ---+ I'd say the market is in a very average condition right now based upon what it was. It was quite hot for a while, but we remain bullish about it long-term. We think it's a very healthy market in terms of the economy and homebuilding in particular. Thanks very much for joining us. Look forward to talking to you next quarter.

2015_MHO

2015

CORT

CORT #Thank you. Good afternoon. My name is Charles <UNK>, Corcept's Chief Financial Officer. Joining me today is Dr. <UNK> <UNK>, our Chief Executive Officer. Thank you all for participating in the call. Earlier today we issued a news release giving our third-quarter 2015 summary financial results and the corporate update. To get a copy of this release, go to Corcept.com and click on the investors tab. Complete financial results will be available in our third-quarter 10-Q. Today's call is being recorded. A replay will be available through November 19 at 1-888-843-7419 from the United States and 1-630-652-3642 internationally. The passcode is 41022099. Before we begin I want to remind you that any statements during this goal other than statements of historical fact are forward-looking statements subject to known and unknown risks and uncertainties that might cause actual results to differ materially from those expressed or implied by such statements. Forward-looking statements include statements regarding our anticipated revenues and expenses for 2015 and beyond, the pace of Korlym's acceptance by physicians and patients, the anticipated contribution of our sales organization to our revenue growth and earnings, the cost and timing of preclinical and clinical trials and the results of such trials, the clinical attributes and advancement of our next-generation selective cortisol modulators, the protections afforded by Korlym's orphan drug designation for Cushing's syndrome or other intellectual property rights including our patent concerning the use of glucocorticoid receptor antagonists to treat triple negative breast cancer or the cost, pace and success of our product and development efforts. These and other risks are set forth in our SEC filings which are available at our website Corcept.com or from the SEC's website. We disclaim any intention or duty to update any forward-looking statements made during this call. Now I will review our third-quarter financial results. Corcept's net revenue in the third quarter was $13.3 million compared to $7.3 million in the third quarter of 2014, an 82% increase. We are reiterating our 2015 full-year revenue guidance of $49 million to $53 million. Our GAAP net loss in the third quarter was $600,000, or $0.01 per share compared to $6 million or $0.06 per share in the third quarter of 2014. The third quarters of 2015 and 2014 included non-cash expenses of $2.2 million and $2.1 million respectively. Excluding these non-cash items we generated net income on a non-GAAP basis of $1.6 million in the third quarter of 2015 compared to a non-GAAP net loss of $3.9 million in the same period last year. A reconciliation of GAAP to non-GAAP income and losses is provided in our press release. Our cash balance on September 30, 2015 was $36.5 million compared to $37 million one quarter ago. The reduction in our cash balance includes the repayment of $1.8 million in principal under our capped royalty financing arrangement. We expect to make our final payment under that arrangement sometime in 2017. Based on our current plans and expectations, which include fully funding our Cushing's syndrome franchise, completing our Phase 1/2 study of Korlym for the treatment of triple negative breast cancer and if that study produces positive results conducting a Phase 3 study, advancing CORT125134 to Phase 2 studies in both Cushing's syndrome and in on oncology indication, advancing to the clinic at least one more of our next-generation compounds and repaying the balance of our capped royalty financing obligation we believe we will reach cash flow breakeven without needing to raise additional funds. I will now turn the call over to Dr. <UNK>. Joe. Thank you, <UNK>, and thank you all for joining us. Corcept is the leader in developing and commercializing medications that modulate the effects of cortisol, widely known as the stress hormone. Our research and research carried out by the dozens of academic investigators with whom we collaborate has shown that cortisol modulation has therapeutic potential in many serious illnesses including oncologic indications such as triple negative breast cancer, ovarian cancer, and castrate resistant prostate cancer, psychiatric indications such as alcohol and cocaine dependence, metabolic indications such as antipsychotic induced weight gain and non-alcohol fatty liver disease and of course Cushing's syndrome which our first commercial medication Korlym has been approved to treat. We are taking significant steps to develop our cortisol modulation platform. We will present initial efficacy data from our Phase 1/2 study trial of Korlym for the treatment of triple negative breast cancer at the San Antonio Breast Cancer Symposium on December 10. We plan to enter our lead next-generation cortisol modulator, CORT125134, in two Phase 2 trials: one treating patients with Cushing's syndrome and another treating patients with oncologic indications. We are advancing more next-generation compounds towards the clinic, including CORT118335, a molecule I've mentioned before that has shown promise in both in vitro and mouse models of non-alcohol fatty liver disease and CORT125281 which looks headed towards an oncology indication. Most important our Cushing's syndrome franchise continues to grow and to generate the cash required to sustain itself and fund our growing preclinical and clinical programs. To enable us to achieve our preclinical and clinical goals we recently made an important addition to Corcept's leadership team. Dr. <UNK> <UNK> recently joined us as our Chief Medical Officer. I want to take a moment to introduce Bob. Bob brings to Corcept 19 years of product development experience. Before it was acquired by Roche Holdings he was Senior Vice President of clinical development at InterMune where he led the pivotal clinical trial of pirfenidone for the treatment of idiopathic pulmonary fibrosis and managed the effort that led to the FDA's approval of that medication in October 2014, actually before its PDUFA date. Prior to InterMune Bob was vice president of clinical development at Alexza Pharmaceuticals where he led the development of inhaled loxapine leading to its approval by the FDA in 2012 and the EMA in 2013. Before that he held positions of increasing responsibility at Heartport, Aerogen, and Anthera Pharmaceuticals. At Corcept Bob is responsible for all of our clinical programs including the extension of the Korlym label to treat triple negative breast cancer and the Phase 2 studies of CORT125134 which we will begin next year. We couldn't be more excited that Bob has joined the Corcept team. Before I discuss Corcept's key programs I want to take a minute as I did last quarter to highlight Corcept's financial performance. Excluding non-cash expenses our non-GAAP net income grew to $1.6 million in the third quarter. Our second consecutive non-GAAP quarterly profit is further proof that our Cushing's syndrome business can support itself even as it funds our expanding development activities and covers payments on our royalty debt, the principle of which we pay every quarter and which we expect to retire in full in 2017. I'll briefly review our key programs then stop to answer your questions. Our business marketing Korlym for the treatment of patients with Cushing's syndrome continues to grow. We expect that growth to continue in the future. As <UNK> mentioned our revenue guidance for 2015 remains $49 million to $53 million which is roughly double our total for 2014. We added both new prescribers and new Cushing's syndrome patients in the third quarter but the vast majority of the 10,000 or more patients who could benefit from Korlym still have yet to use the drug. The clinical specialists we hired early this year have begun their work of educating physicians about Korlym and the benefits cortisol modulation can provide their patients. As I have pointed out before this education takes time. Endocrinologists are a cautious and busy group of doctors. Treating Cushing's syndrome by modulating cortisol's activity at the receptor (technical difficulty) the powerful but novel approach. We found that prompting a doctor's first Korlym prescription often requires a clinical specialist to make five or more visits to the doctor's office. We're just beginning to see the contributions of our new sales representatives as they take physicians from an initial introduction to a first Korlym prescription. For all of its power as a treatment for Cushing's syndrome Korlym has certain drawbacks, the chief being that it blocks the progesterone receptor and terminates pregnancy. In some nonpregnant women progesterone receptor blockade (technical difficulty) endometrial thickening and irregular vaginal bleeding. Non-life-threatening, manageable side effects but one that patients and their physicians would clearly prefer to avoid. But more than 300 compounds in our portfolio of next-generation molecules do not cause these problems. They all bind to the glucocorticoid receptor and therefore share Korlym's ability to modulate cortisol but they are not active at the progesterone receptor, so do not terminate pregnancy or cause endometrial thickening. Korlym is an excellent medication. Our new compounds have the potential to be even better. As I've mentioned before we plan to advance our lead next-generation molecule, CORT125134, to Phase 2 as a treatment for Cushing's syndrome and an oncology indication in the first quarter of next year. Its Phase 1 data show that CORT125134 appears to share Korlym's ability to potently reverse the effects of excess cortisol activity, the essential quality in treating Cushing's syndrome. It also appears to be even more potent than mifepristone, Korlym, in rodent models with triple negative breast cancer and castrate resistant prostate cancer. Our overall oncology program continues to advance. At the San Antonio breast Cancer symposium on December 10 we will present initial efficacy results in our Phase 1/2 trial of Korlym to treat metastatic triple negative breast cancer. As you may recall the efficacy portion of our trial is designed to enroll 20 women, administering to each of them 600 milligrams of Korlym every day and 1.1 milligram per meter squared of Halavan on a 21-day cycle. To remind you Halavan is Eisai's brand-name for eribulin. For those of you who are not familiar with triple negative breast cancer, let me provide some background. 40,000 women in the United States are diagnosed with the disease every year. There is no FDA approved treatment for triple negative breast cancer and patients with metastatic disease have a dire course. In our trial some patients who enrolled sadly died before they could even receive their first dose of medicine. Triple negative breast cancer patients have tumors that do not express the three receptors, estrogen, progesterone, and HER2, to which medications like tamoxifen or Herceptin bind which means those medications cannot treat the disease. The great majority of triple negative breast cancer tumors do, however, express the glucocorticoid receptor, GR for short, to which cortisol binds. This is important because cortisol's activity at GR appears to suppress the body's immune response and stimulate the tumor's growth. Our triple negative breast cancer program is built upon the observation that cortisol modulators like Korlym and CORT125134 seem to reverse cortisol's tumor protective effects, allowing chemotherapy to work better. Our work builds on extensive in vitro animal and human data generated by researchers at the University of Chicago. And with the exceptionally positive data the University of Chicago team presented at the 2013 San Antonio Breast Cancer Symposium from their clinical trial of Korlym in combination with nab-paclitaxel to treat metastatic triple negative breast cancer that prompted us to begin our own clinical trials. The therapeutic potential of cortisol modulation is not confined to triple negative breast cancer. For instance, the University of Chicago investigators are conducting a follow-up study of Korlym in combination with a different chemotherapeutic regimen, gemcitabine and carboplatin, to treat patients with ovarian cancer as well as patients with triple negative breast cancer. A separate team at the University of Chicago is conducting a 108 patient Phase 1/2 trial that combines Korlym with enzalutamide to treat castrate resistant prostate cancer. Extensive in vitro and in vivo work from their group and others shows that in that disease cortisol activation of GR stimulates tumor growth. Accordingly GR modulation by Korlym, CORT125134 or another of our selective or GR antagonists when used in combination with a androgen deprivation agent such as enzalutamide could be a potent treatment. Extending Korlym's label to include triple negative breast cancer is only part of our oncology efforts. As I've said before we plan in the first quarter of next year to begin a Phase 2 trial of CORT125134 in combination with chemotherapy to treat solid tumor cancers. Another of our next-generation compounds, CORT125281, is completing preclinical testing and is a candidate for the treatment of triple negative breast cancer, ovarian cancer, castrate resistant prostate cancer and perhaps other oncologic diseases. Our research has shown that many, although not all, solid tumor types express GR and may respond to cortisol modulation therapy. We are reviewing candidate indications and will make our development decisions regarding CORT125134 and CORT125281 soon using our own data and data generated by our academic collaborators. I want to return to the topic of cortisol modulation's broad therapeutic potential. Because there are receptors for cortisol in nearly every tissue of the body excessive or disordered cortisol activity causes or aggravates many serious diseases. I've talked about our work in Cushing's syndrome and oncology because it is the most advanced. But it is just the start. In addition to cancer we and our academic collaborators have explored the use of Korlym and our next-generation compounds as potential treatments for a wide range of illnesses including non-alcoholic fatty liver disease, antipsychotic induced weight gain, post-traumatic stress disorder, alcohol dependence, ALS, Alzheimer's disease and central serous retinopathy. We're advancing additional compounds towards the clinic. In past calls I have discussed one such compound, CORT118335, that in animal models prevents and reverses non-alcoholic fatty liver disease. Today I've mentioned another, CORT125281, that we are beginning to advance as a potential treatment for solid tumor cancers. As these and our other compounds progress we will match them to specific therapeutic targets suggested by our own research and the work of our collaborators and advance the most promising candidates to clinical study. To sum up our Cushing's syndrome business grew again last quarter as it has every quarter since Korlym's launch. On a non-GAAP basis we once again generated a profit. We expect this growth to continue and to be able to reach cash flow breakeven, including repayment of our royalty obligations, without having to raise additional funds. In vitro and early clinical data suggest that CORT125134 may treat Cushing's syndrome, Korlym's efficacy but without the side effects associated with progesterone antagonism. The compound's Phase 2 study for the treatment of Cushing's syndrome should start early next year. Our oncology program continues to advance. At the San Antonio Breast Cancer Symposium this December we will present initial efficacy results in our Phase 1/2 trial of Korlym in combination with chemotherapy to treat triple negative breast cancer. CORT125134 should enter Phase 2 for an oncology indication by early 2016. CORT125281 is completing its preclinical testing and other next-generation compounds are advancing towards the clinic. I will stop here and answer any questions. Thank you very much for the question. And I'm glad to give you the guidance we can give you right now. As you said our initial results will be able to be presented at the San Antonio Breast Cancer Meeting in December and as you can tell when you look us up on clinicaltrials. gov we're still actually enrolling patients in that study and that study has a bit of time still to run. We'll make a decision about going to Phase 3 when we have all of our results in hand, which we expect actually to be in the very early part of next year. So we'll see where that goes. I can give you a definitive date but we expect results to be full enough in the not so distant future to be able to make that decision. We think that actually a lot of data will emerge in the next 12 to 18 months and I appreciate that you're following that. So for instance one of the things I mentioned already was the trials which are being run at the University of Chicago in ovarian cancer and in prostate cancer. Now one of the issues with investigator studies is that we at the Company don't control their exact timing and when their readouts are. But based on our expectations those are two important studies which are going to produce results in the next 12 to 18 months. So that's really an important set of data. Just to mention a couple of the others, we expect that we will see results from our alcohol dependence study that's being run by the group at Scripts and we expect that the posttraumatic stress disorder study, which is being run as a VA Consortium study, will also produce at least preliminary results on that timeframe. Yes, although again I just want to point out that unlike a Corcept study we have less control about the ultimate release date for that information. But based on our observation of how they are doing we think that that medium-term timeframe is about correct. The answer to that is we're first waiting to see our results from our Korlym study but our expectation, you know that's a drug that we know a lot about, and our expectation is that we will actually advance those programs in parallel. We obviously know lots and lots about Korlym. We have good preliminary results from the first University of Chicago study and we're very optimistic about CORT125134 but we haven't yet treated it in a patient who actually has cancer. So we'll have to see where those go as we go along. But I think it's very important for you and the whole audience to know is that the Korlym study in triple negative breast cancer is not a proof-of-concept study. It really is a study with the intent to extend our label of Korlym into that disease. As we mentioned before we expect to have 20 patients in total in the study and we haven't yet said how many patients you'll see data on in December. So I guess the best I can tell you is you will have to wait and see the poster. Well this is of course all preliminary information based on results we expect to see and obviously the powering of the study is going to be the results we see in the Phase 2 study will have strong bearing on that. But our general expectation is that this is a study that's probably going to be on the order of 300 to 350 patients. Now how long will it take to run. Those are always a little tougher guesses to make but I'm guessing, and it really is just considered speculation at this point, that start to finish first patient into last patient out is on the order of a couple of years. You know I'm just going to take an opportunity only because you'll be hearing a lot from him in the future to introduce you to <UNK> <UNK> who is our Chief Medical Officer and let him answer that question for you. So first time you've heard from Bob, but pleased to introduce him. Yes, let me answer that question. So I do want to confirm what you said. This is a very sick group of patients and unfortunately their clinical path is often like a falling knife. The literature really indicates that the average length of time between metastases and death is close to six months for these patients. They are very, very ill. And so as a consequence I do think other than separate from other diseases the bar for showing an improvement is lower than many other diseases because in fact these patients are so sick. So in some sense the course that people are expecting is a rapidly progressing disease and obviously anything we do which prevents that from happening or any medicine that prevents that from happening is a beneficial thing and in some sense the more the better. If you can actually make the tumors decline in size or go away entirely that probably is at least somewhat indicative of being able to extend people's life. But at this point in time we expect that for a Phase 3 trial the endpoint would be progression-free survival. I think that's what the FDA would be looking for. I was just going to say it looks like we've exhausted our questions. So I wanted to thank everyone for dialing in and look forward to speaking to you next quarter. And hoping that you will read all of our releases between now and the next quarter.

2015_CORT

2015

JWN

JWN #The answer is yes. The answer ---+ That's good, <UNK>. We can have a little back and forth here. No, the answer is yes, that we would look to reduce our ---+ the acceleration of our investment/cost as it related to those initiatives. Sure, this is <UNK>. Yes, well, it starts with a consistent flow of fresh, new goods. That drives all of our business, but particularly in the Savvy department, our ability to always have something new to show the customer really drives our success there, and we feel good about our plans over the next couple months. You mentioned Topshop. We have Topshop in 70-odd stores. We're increasing that to over 90 by the end of the year. That's been a real positive business for us and our partnership with them is really strong. We have Madewell in approximately 30 stores, and that's been performing really well. Another brand that we're happy with right now is, I'm spacing on it, Brandy Melville, thank you. In our junior's department, Brandy Melville's a brand we've added to a number of stores, and our customers have really responded. Our ability to find ways of continuing to be relevant to particularly younger customers who are shopping with us maybe for the first time, and we've acquired a lot of customers. Our metrics around customer acquisition continue to be very strong, which gives us a lot of confidence as we continue to execute these plans and look towards the future.

2015_JWN

2017

NUS

NUS #Thank you, <U<UNK>K>, and good afternoon, everyone, and thank you for joining us today. As this is my first earnings call as the CEO, I wish to thank you all for your interest in <UNK>u Skin Enterprises. I'm excited about our future. And since recently changing to this assignment from my previous CFO assignment, my optimism for our future has only grown. I believe our business ---+ I believe that ---+ I believe in our business. I believe we have great confidence in our ability to compete and succeed. I feel fortunate to be surrounded by a very talented and experienced management team. To that point, I'd like to begin by introducing to you our new CFO, <U<UNK>K> <U<UNK>K>. <U<UNK>K> brings a tremendous skill set to our management team, and we look forward to his impact on helping us grow our business and create shareholder value. And we'll hear from him a little bit later on during this call. I'll provide a few quick highlights to the quarter and then turn the time over to our President, <U<UNK>K> <U<UNK>K>. He will provide information on segment results and key initiatives in the business, and then <U<UNK>K> will address a few financial highlights. And as customary, we'll open up the call for questions. Overall, I am quite pleased with what we accomplished in the first quarter. We posted revenue nearly $500 million compared to $472 million in the prior year. This represents growth of 6% in reported revenue and 7% in constant currency. Our quarterly earnings per share were $0.51, which compares to $0.06 on a reported basis of $0.42 when excluding the impact of a Japan customs charge in the prior year. Our growth in revenue was driven by strength in Mainland China, in South Asia/Pacific and in the EMEA region. While the Americas revenue was flat for the quarter, we're actually seeing encouraging signs of growth, particularly in our customer count and believe this will lead to revenue growth in the future. And we continue to have challenges in South Korea and Japan, and we'll address these a little bit further when <U<UNK>K> speaks. As a reminder, we executed strong LTO sale in 2016 in both Q2 and Q3. To remind you, we reported $106 million in LTO sales in the second quarter, mostly in China and in South Asia/Pacific; and $56 million in LTO sales in the third quarter that was mostly in South Korea and China. In the current year, our planned introduction of the ageLOC LUMISPA is for the fourth quarter. And <U<UNK>K> will speak to our guidance, but note that the comparable year-over-year sales over the next few quarters are impacted by the timing of these product introductions. During the quarter, we made steady progress against our key initiatives for 2017. We continued the rollout of ageLOC Me during the quarter, which positively impacted results in Mainland China and South Asia/Pacific. This is an important product for us, and it further strengthens our competitive advantage in the skin care device category. We continue to see good progress in our China business and solid growth particularly in this market, in our customers and sales leaders. And social selling is becoming a multiplier in our global business, allowing our sales leaders to share our products with many more of their friends in a powerful and efficient manner. We're focused on driving growth through social selling as we move forward. With that introduction, let me turn the time over to <U<UNK>K> to provide additional detail regarding our markets and our growth plan. Thanks, <UNK>. Good afternoon, everybody. I'm also very excited about our business potential around the world. As <UNK> mentioned, we are acutely focused on customer and sales leader acquisition. We believe that this is key to driving growth in 2017 and sustaining that growth moving forward. Let me address some first quarter highlights as well as our plans to generate growth and improvements throughout the world. In Mainland China, we generated 33% local currency revenue growth in the first quarter. We were encouraged by a significant year-over-year increase in customer growth as well as a sequential increase from Q4 to Q1. Typically, we see a sequential seasonal decline in customers in the first quarter. We initiated the product launch of ageLOC Me in China at the end of the quarter, which is proving to be a strong product for both attracting and retaining customers. We continue to leverage business incentives and quarterly expos in the market. These initiatives introduce our products and business opportunity to many potential customers and drive sales leader productivity. And we're working towards a strong LUMISPA introduction in the fourth quarter. Japan and Korea continue to be challenging markets for us. While the economic and political environments are difficult in both markets, we believe our key to improving these markets is to increase our focus on customer acquisition through social selling and other mediums. I just returned from visiting both of these markets last week, where I spent time with our management teams as well as key leaders in the area who remain optimistic despite the challenging environment. In Japan, we executed a successful convention, which is helpful in aligning our sales leaders with the company's direction. Over the next several quarters, we will focus our initiatives around social selling and customer-focused promotions while training and preparing these markets as well for a successful LUMISPA introduction in the fourth quarter. While we don't expect to see immediate improvements, we anticipate that our initiatives will begin positively impacting these markets later this year. Let me briefly speak about social selling, as it is becoming a powerful platform for us around the world. Generally, our sales leaders are introducing new customers to many of our differentiated products through their social media outlets. We're seeing strong trial and customer acquisition through this social business model. Social selling has become a powerful business driver in many of our markets in EMEA, South Asia/Pacific and most recently in the Americas. Our efforts to enable social selling include providing differentiated products position for a broader demographic, including millennials; enhancing the platforms that empower our sales leaders to build their businesses; and providing programs that increase the velocity of our business. Lastly, we look forward to meeting with our top sales leaders from around the globe in 2 weeks as we continue to partner with them to grow our business. We feel contagious excitement that will help us accelerate the pace of growth moving forward. I'll now turn the time over to <U<UNK>K>. Thanks, <U<UNK>K>. I'm happy to be with you today, and I'm looking forward to the opportunity ahead of me. I can tell you that after just a few short weeks in my new position, I am confident in the leadership of <UNK>u Skin, and I look forward to building on the already great things taking place. It truly is an honor to be part of the <UNK>u Skin family, and I look forward to getting to know many of you soon. My immediate focus as the new CFO will be on 3 areas: supporting an accelerated pace of growth in top line revenue, identifying the efficiencies in the business to improve margins and working with our management team to create shareholder value. Before diving into the financials, let me explain some of the changes you will notice in our financial reports for this quarter. First, we have modified the format of our earnings release to highlight what we believe are the key financial metrics. Secondly, you will notice that we began reporting revenue in 7 segments to provide increased visibility into Japan, South Korea and Mainland China. I will now take you through the financial details from the first quarter. As <UNK> mentioned, our revenue grew approximately 6% over the prior year quarter to $49.1 million. There were no limited time offers in either quarter. The operating margin for the first quarter improved to 9.3% compared to 1.7% or 8.4% when excluding the impact of the Japan customs charge in the previous year. Gross margin improved slightly in the quarter to 77.7% compared to 70.8% or 77.4% when excluding the customs charge. Selling expenses for the first quarter were 41.9% compared to 41.5% in the prior year. General and administrative expenses were 26.6% compared to 27.6% in the prior year period, reflecting leverage from the revenue increase. We incurred an expense in the other income expense category of $4.6 million due largely to interest expense in conjunction with the Ping An transaction, which took place in 2016. This compares to an expense of $2.9 million in the prior year. Our income tax rate for the first quarter was 34.1% compared to 37.3% in the prior year period. During the quarter, we paid $19 million of dividends and repurchased roughly $7 million of our stock, leaving approximately $193 million remaining in our share repurchase authorization. Our guidance for the second quarter is revenue of $530 million to $550 million with earnings per share of $0.65 to $0.70. Second quarter revenue is expected to be negatively impacted 1% to 2% by foreign currency fluctuations. As a reminder from our Investor Day, the quarterly comparables to 2016 are challenging due to significant LTOs in the prior year of $106 million and $56 million in the second and third quarters, respectively. We have no significant product introductions in Q2 or Q3 of 2017. We do anticipate a significant bump in the fourth quarter revenue from the planned introduction of ageLOC LUMISPA beginning in October. We estimate approximately $100 million in revenue from this new product in the fourth quarter. With this in mind, as we look to the year, we are reiterating our previous guidance with revenue of $2.26 billion to $2.30 billion with a negative currency impact of approximately 3% and earnings per share of $3.10 to $3.25. We will now open up the call for questions. Yes. Tim, we'll keep it consistent with what we talked about at Investor Day, really about $60 million for the year. I think the first quarter was $16 million. So consistent on that line, around $45 million for the balance of the year. Yes. I'll take that, Tim. Yes, we were encouraged, as we indicated, with the results in China. And this is partially related to ageLOC Me, where the response to that was good, although ageLOC Me really only began to sell the last few days of the quarter. And so the growth that we were seeing earlier on is really attributed to better customer performance in the quarter. Again, sequential improvement that we typically don't see, which is a positive. We have some good business promotions ---+ or programs, excuse me, going on there that are helping this as well. So overall, we feel very good about it. Yes. We did do a lot in the fourth quarter. We'll continue to be in the market. I wouldn't expect our behavior around stock repurchase to change at all under my leadership as the CFO here. Yes. I think ---+ great, great question. And going back to customer activity, was really solid in the quarter. One of the unique elements of the social selling model is that we find that the customer growth is very favorable. Our traditional model is, to your point, where we have LTO activities in some of our business programs really strengthen the sales leader numbers. We didn't have a lot of that activity or those initiatives going on in Q1, but we did have quite a bit of the social selling activity that's really helping us around the world. Also, going back to ageLOC Me and the benefits we're seeing there on both customer acquisition and retention, are very positive there. So overall, combining these ---+ the customer elements of the opportunity with the leadership elements of our opportunity, we think, will ---+ go hand in hand. It does. In fact ---+ I mean, one of the greatest benefits of ---+ for social selling products are demonstrability, and LUMISPA is a very, very demonstrable product. So we believe, both from a pricing standpoint, positioning standpoint, from a benefit standpoint as well as just the overall attractiveness or the appeal of this product to a millennial market is going to fare very well in social. <U<UNK>K>, this is <U<UNK>K>. Yes, I think you've got the points accurate. We would expect to see a shifting of revenue out of Q2 and Q3 into Q4 just based on the historical. Last year, we had the large LTOs in both of those quarters. And I think your growth rates in the 20% range are spot on, where we think we will end up in Q4 with the launch of the LUMISPA. So <U<UNK>K>, maybe just to add one thing to that question as well. There's a lot of excitement building for the fourth quarter. We have a live event, which is our global convention, which will happen in October. So that's really the kickoff of ---+ the start, let's stay, of the launch of LUMISPA, which will then kind of be introduced in several events throughout the quarter. So we are looking to a real strong fourth quarter and, as <U<UNK>K> mentioned, probably around the $100 million mark as it relates to the new LUMISPA launch. So yes, we would anticipate to have a real, good, strong fourth quarter and think that we have real, good ammunition in place to deliver that result. Yes. <UNK>o, great question, and it's something we're focused on significantly here. For us, social selling is really a modification of direct selling. The underlying principles of social selling are not dissimilar to direct selling. They're just in a new medium. And so for us, that's ---+ what we're focused on is how to apply those fundamental principles into a new environment and then to support that, again, from a products, programs and a platform perspective. And so for us, we view it very much as individuals sharing products via their social networks and really taking advantage of the natural sharing practices that occur there. And we're just ---+ we're seeing ---+ as I mentioned, we're seeing this pick up around the world. It's a very natural process. And it's something, by the way, that is just very, very natural for millennials. Direct Selling put out a new study on this just recently, talking about the appeal of the 2 models: direct selling with social selling. So that's really our view of it. Sure. I'll take this one. If you look at our gross margins reported at 77.7%, it's pretty close to in line with what we reported the same quarter last year at 77.4%. As you look at last year, you also see that, that gross margin improved as revenue improved throughout the year. I would expect to see the same trends this year. And as revenue goes up, our gross margin will improve. I don't think there's anything specific about product mix or mix shift that we're seeing that would cause our margins to behave differently than it did last year. Sure. As you all know, the environments in Korea ---+ well, Korea, in particular, is facing some political and, I guess, war-oriented distractions, I think, in that market that make it difficult. And direct selling, in general, hasn't been as growing an industry as we've seen in years past. Japan has just kind of an ongoing lag in both industry dynamics as well as economic dynamics in that market. But again, as I stated earlier, our intent and our focus, our approach to these markets is to really focus on the fundamentals of customer acquisition via social selling, which is an emerging opportunity in these markets, both of which have unique regulations, by the way, around social selling. And so we study these intensely. <UNK>evertheless, we believe as we focus on the fundamentals, we focus on customer acquisition through these mediums, we'll ultimately see improvements in the business. Also, we're very, very ---+ looking at LUMISPA very favorably for these markets because, again, they're both very strong consumer markets, personal care markets. And for us to be able to offer a new cleansing device into that market that has kind of revolutionary science to it, we believe, will fare quite well in those markets in over the midterm. Yes. Let me speak to that, <U<UNK>K>. Thank you for that question. We are really excited about China, frankly, because we think there's great potential for the products we offer and especially the opportunity we provide as well. So while the customer ---+ sort of there's been up and down in the customer over the last little while, we believe our primary focus is just delivering a real, compelling opportunity. And ageLOC Me seems to hit that, but we also have several other products that are doing very well, the Galvanic Spa, for example. And again, that's why we believe LUMISPA has great potential, because these devices seem to be playing very well. So I think it's partially the customer, it's partially the opportunity we provide for people to be successful and earn additional income. And all those things are playing into our favor right now, and we're real optimistic about what we see going on there. I would love if we could ---+ I just have a couple more questions on Me and then on LUMISPA. For Me, are you able to share with us since it did launch in China in late March, now kind of a full month in April, what ---+ sort of what your trends are or the customer sales leader response to that. Yes. We ---+ as I mentioned, it ---+ really, we launched it out the last few days of March, and we're going into April now. So we're kind of in our second month into it. Seeing some really favorable things. I mean, obviously, the customer activity has been really favorable. And that's really been driven both by customer acquisition as well as retention, which, for us, is ---+ well, any business but particularly ours in China, we're very interested in seeing that improve. So ageLOC Me has been critical for that. And we'll continue to focus upon initiatives and programs that will enable us to drive greater acquisition. But the retention just continues to do really well there. Yes. Maybe I can add one thing to that, <UNK>, too. I totally agree with <U<UNK>K> here. This is really an interesting product for us. And I think it will be similar to what we've seen with Galvanic, which has become our largest selling product. It took time to have our sales leaders really get to understand how to present that product, how to attract customers with it. And we think ageLOC Me will sort of have that take a little bit longer time to get. What I was really encouraged with in China was the fact that we had a lot of people who purchased the device last year in the LTO who are back buying the cartridges now. So that, to me, is really encouraging. We had to take them off the market for a short period of time because we stocked out, as you know, in December. And those were all ---+ the cartridges, the devices available for sale to a limited group at the end of the March and then to a larger group beginning in April. And so we're encouraged by both, as <U<UNK>K> said, the ability to attract new customers, but the fact that we have a lot of customers who purchased last year who are back purchasing is very encouraging to us. Great. Perfect. And with regard to the $300 price point of the promo, where the product was sort of pitched to us at the Investor Day in December, are you feeling good about that $300 price point in many of your markets. Or might that need to shift. Or is that settling in pretty nicely. We're encouraged by that price point. I mean, for us, it's a persistent pursuit to finding the optimal offer that enables us to maximize our ---+ really, our customer acquisition with our margins. And so we're pleased with what we're seeing so far in multiple markets. I think we'll continue to focus on the optimal offer as we move forward, but so far, so good. Great. And then for LUMISPA, I know in the last call is when you spoke about LIVE. But could you just help us a little bit understanding how is that different from the biennial conventions of the past. Will folks be buying it in person, virtually over the couple days of the convention. We're just trying to understand the risk associated. Is this a big October event. Is it a 4Q. And also, is the supply chain in good order for that product. Yes, absolutely. And I'm glad you asked the question, <UNK>, because it gives us an opportunity to invite you all to the LIVE event in October 11 through the 13. But the LIVE event ---+ so really, we do this biennially, as you mentioned. We're really changing this up in a few ways, though. First, it is a live event being broadcast globally. So while we can only fit 15,000 people in our arena here, we're seeking for many times that around the world. And we've been experimenting this in EMEA, for example, and this LIVE event form is really favorable. It gives us an opportunity to truly globally preview our new programs and initiatives and products. So LUMISPA will be globally previewed on site for people in attendance, followed by some additional sales opportunities in markets. And then, of course, we'll go throughout the market preview process throughout the quarter. Q4, that is. So that's really kind of how it differs. We're excited about it because it gives us an opportunity in a global stage to release this really unique product as well as our programs and initiatives for the last 2 years. As far as supply chain goes and being geared up for that, we are gearing up for that. And of course, we're ramping up. We're really conscious of ensuring that we don't overproduce, but we'll be able to supply. Certainly, our forecast and the way we have our model set up, things are looking really good. Great. And <U<UNK>K>, if I could address one towards you, and welcome. I look forward to working with you. The guidance for reported sales, I think, is the same from prior. And there's the update of, I think, 100 basis point less pressure from FX to the top line. I believe it was 3 to 4, now 2 to 3. Kind of how does that shake out with that less pressure. Where does local currency sales, I think it was 4% to 6% previously, now come out today in the guidance. I think we're pretty conservative on our ---+ with our 3% approximate number. There's a lot of movement in the dollar right now. There's a lot of uncertainty, what's going to happen with the Trump tax implications and the changes there. And we didn't see a tremendous amount of movement, 1% in Q1. So we felt pretty comfortable leaving our overall guidance where it was and giving a range of roughly 3% FX impact for the quarter ---+ or for the year. Fair enough. I have one last question, if I may. Is there any chance that Youth launches in China this year. <UNK>o. That's a long time line. Yes. It's just regulations in the market are so complicated that Dr. Chang's life is difficult. We're (inaudible). Yes. That's exactly right, <U<UNK>K>, and appreciate that question. We're still, frankly, working on the allocation of exactly how many go to each market as they finalize their plans with their sales leaders on how to introduce this product. So it'll be spread. There's probably somewhere around 60 million to 70 million of device sales, again based on where our price is, with the balance coming from the cleansers and the heads that go with it. And there's a lot ---+ it feels like there's a lot of excitement around the product. We anticipate that, that's a quantity that we will pretty much sell through for the most part. And we kind of make those final allocations as we get closer right to the end and understand the direction of each market and how it's going to play out. Yes. I think we still stay at 36%. Yes. It's really a 2-question. <U<UNK>K>, do you want to address the gross margin issue. Yes, for sure. I don't have a lot to add to what I said before. We came in at 77.7%. Same period prior year, we were 77.4%. So we had a slight improvement there. As revenue increases, we get more leverage against the fixed cost that hit gross margin, and you see gross margin go up. I don't think we've seen anything from a mix perspective nor do we suspect anything from a mix perspective to challenge that number. Yes. I think overall, <U<UNK>K>, the numbers came in really where we had anticipated them to be from our guidance. The margin was similar to what we expected. Sometimes, we'll see a little movement one line item to the next, but it was really pretty much in line. What drove that and what I'm really encouraged about is it felt like we've needed to really focus on customer acquisition. We've got to drive our active customer base up to support our growth as we go forward in sales leaders. And so I was really encouraged during the quarter to see several of our regions make some progress in this area. And I think we can continue to stay focused on that, trying to get our offerings just right for the customer, trying to accelerate customer acquisitions through social selling. And I think it'll do 2 things. <UNK>umber one, it will help the productivity of our salespeople, but it will also make them ---+ be able to retain them longer. They'll have a bigger base of customers that are purchasing. So from my perspective, one of the encouraging things out of the quarter was a quick response to our initiatives around customer acquisition, and we're going to stay really focused on that as we go forward. Yes. We ---+ no, great question, <U<UNK>K>. For us, on LUMISPA and the $100 million, it really is a forecasting exercise based on the growth of the sales leader and then the number of customers per sales leader that we can acquire. And so for us, we build our programs, all of our initiatives in Q3 and Q4 to drive to those outcomes. This year ---+ and we've talked about this in years past, how we've gone away from maximizing the size of the product introduction in order to really optimize the development of the channel, of our sales leaders and our customer base. And you'll be seeing this year a more balanced approach to driving through our programs and our initiatives, even our launch plans themselves, how we drive customer growth with sales leader growth attached. And so yes, we're forecasting it in that way, and that's how we're planning our ---+ all the programs. Yes. And to <UNK>'s point earlier, Tim, as we work with the markets and the program design, based on the dynamics of the sales force, these plans change as we go. And so we want to be somewhat noncommittal that way. But generally speaking, we ---+ the consumer research across the board, market to market, has been consistent, very, very favorable response on the product concept, on testing that we've done around this product. And we haven't seen one market outperform the other in terms of appeal. They're all very strong. And so for us, it's really around maximizing the ---+ we have a limited quantity of 500,000. And it's really optimizing the allocation according to the markets' plans. And of course, we have to look into 2018 as well in how we allocate. And so we see very favorable reaction in Greater China, in both Korea and Japan, very positive Southeast Asia, Americas, EMEA. They're all very favorable. So for us, we'll be allocating according to the needs of the business and, to some degree, reflect the revenue size of those businesses. Yes. I just had one other comment, Tim. This is, as <U<UNK>K> mentioned, a scaled-back version of what we've done with LTOs in prior years, which have been substantially larger at times. We really began training our sales force on the product, on the benefits of the product, how we're going to position it 3 or 4 months before the product actually launches. So the anticipation is that they will have several customers in place and ready to purchase at the time the product becomes available. And it's an exciting time. It's an exciting time for the business. It's an exciting time to bring out a new product. So that energy should build throughout the third quarter and to a strong fourth quarter. And we feel fairly comfortable with that number that we put out, both based historically on what we've seen but as well, as <U<UNK>K> commented, on the feedback we're getting right now. So it looks like that is all the questions that we have right now. And let me just take a second again to thank you all for joining us today and reaffirm our confidence in the future. I'm excited about what we're seeing. We're going to partner very, very closely with our sales leaders as we go forward. They're talented and excited. I think about the future, and we'll focus on 3 things. We'll focus on making sure we have the right products, building upon and leveraging our product portfolio, making sure we can deliver that, deliver innovation as well in our product pipeline. We'll focus on the programs that we have, which will enhance the appeal to a larger demographic in both of entrepreneurs but as well as customers. And then we'll focus on our platforms. And I'd really point there to social selling, our ability to support that and help that take shape all around the world. We think that's a game changer for us. We look forward to the year. We got good things ahead, and appreciate again your attention today. Thank you very much.

2017_NUS

2017

TXRH

TXRH #The wage inflation looks like it was a little bit higher, bumping up against 4.5% for the quarter. Definitely a little bit of a step-up in Q4. It continues to be a little bit higher, but I think it came in around 115% or so for the quarter. So I think we continue to see it stabilize versus last year Hey, Chris. The turnover, the growth in turnover percentage has definitely slowed. That said, it's still in our minds way too high. No that's doesn't include any of the overtime pay changes. That's just wage rate inflation. It includes minimum wage changes in certain states, but it has been getting more intense all year in 2016. It varies like it always varies for us. So there are some at 0% or close to 0% and there are some that are a good ways above 1%, but it does vary tremendously, and by item I might say as well. Predominantly, yes. I wouldn't say if there is a correlation there or a relationship with that. We really haven't seen a regional our menu tier specific relationship on traffic growth or lack thereof. You are welcome. Hey, how are you. This is <UNK>. On the franchise acquisition, we did buy all the real estate. So all that land and buildings we own all of that, it was all part of the purchase price. And the franchise acquisitions, we are looking to get a certain return. We will accept a slightly lower return pro forma on a franchise acquisition than we would a new store since we already know what the sales are and there is a lot of sales history in these franchise locations, and some of these restaurants that we acquired were some of our oldest in the concept. There's a little bit less risk there for us in that regard. I think share buyback has been one of those things where we have always had the opportunity to be opportunistic in our share buyback strategy, and we're going to continue to act in that manner. That's what we've done historically and what we will continue to do that. Obviously we have a lot of flexibility in our balance sheet to, if and when we decide to repurchase stock, we can certainly do it in a pretty big way pretty quickly. Thank you. For those restaurants it really depends. It could weigh up the comps a little bit. They start ramping up the growth, and in some cases that's exactly what happens. Now, you're talking 27 restaurants on a comparable sales base of 370. So chances are the impact on the 370 is going to be practically de minimus unless the comps are just humongous numbers. If they are a few percentage points better or worse than the comparable restaurants, it's not going to have much of an impact just because our existing base is so large now. This is <UNK> again. I would say on G&A, one reason why on some of the years it's grown faster than revenue has been a couple lawsuits that we've settled because we include those in G&A versus somewhere else on the P&L. Another reason is we have made some investments in our future which we believe will pay off, with both in the Bubba's concept infrastructure in Bubba's and also international, in our international group. We made some investments and we have been able to keep generally our run rate in G&A in the low [$5 millions]. We've also had a challenge with some of the stock-based compensation, which has been a little higher because our stock price has been quite a bit higher as well which impacted some of our growth. But our target internally is to grow G&A in a normal year, if there is such a thing, less than the rate of revenue growth. Now, it will get tougher as our growth in percentage terms, unit growth, slows a little bit over time. 30 restaurants a year in a larger base is just a little bit lower unit growth. It will continue to be a challenge for us, but we definitely ---+ again, we talk about it all the time and we think we have a very good balance and discipline in how we are investing our G&A dollars and holding our folks accountable to their budgets. Probably the biggest one is our Texas Roadhouse app that some other concepts have rolled, and the app being an app where you can put your name on our call-ahead list, you can pay your bill and you can order to go from an app on your phone. That is being rolled out as we speak across the country, probably won't be in the entire country until at least the end of this year, maybe early next year would be the case. That's probably the most significant thing happening right now. As far as any third-party delivery, anything like that, not even really in that game today. We are very protective of the in-restaurant experience and so we've never really pushed, number one, to-go sales. We want folks to come and dine in our restaurant and enjoy the hospitality, and likewise on delivery, same thing. Could there be an exception. Sure. A New York City type situation, if we had a restaurant in New York City, I could see us maybe doing that, but I would say limited appetite at this point for us to get into the delivery game. No. We're still doing bump-outs and those bump-outs are still helpful to us. We're up to, I think, about 175, 180 bump-outs now and we probably have 40 in the pipeline. I don't know how many of those will get done this year, probably 25 to 30, somewhere in that range will get done this year. Those are full steam ahead. Star Bars, most of the system is done. Star Bars is more of a helping us stay relevant longer term in the future than it is a sales-bumping investment in the short term. In our restaurants, I would say I think nothing's changed in that regard. I think it's just a question of, we don't get too crazy over a couple of months of sales data that haven't been as strong as where we've been the last few years. We're also cognizant of the whole industry has tailed off quite a bit as well. So that kind of tells us, we are still packed, we are still growing traffic. We still have more people coming in our restaurants this year than last year. We still feel like we've got some good momentum going, and sometimes you have to just weather the storms and not think you've got something wrong with your model and start changing things that maybe you regret in the long run just for the sake of a little bit of short-term heartburn. This is <UNK>. We have already had calorie counts on the menus in New York and we've seen no change in the product mix versus what they had before. Just want to say thanks for joining us tonight and have a great night. Thanks. Thank you all.

2017_TXRH

2015

KMB

KMB #Sure. On diapers, and I think the near-term commodity weakness isn't resulting in any significant price movement. If you kind of look at it over the last couple of years, we've had a pretty good amount of commodity increases that there was no price recovery for, so if you looked at the net-net it, we're still ---+ even with the deflation we're going to have this year is less than the inflation we had last year that we didn't get any pricing for. I would say in the range that we're in, I don't think it's going to move price significantly. I also think the consumer is in the stronger position than they were a year ago and we want to make sure that we're ---+ that we've got the right offer and that we've got a very good performing product at a competitive price in the marketplace, which is sort of in the heritage of Huggies for many years and we're really making sure that we stay true to that. In terms of the competitive environment, if you look all over the world, there 's plenty of people that get up every morning wanting to take your business, and so we think about the Japanese competitors, Unicharm and Kao are quite aggressive. Local Chinese competitors like Hengan are aggressive. We've got local competitors in Latin America with CMPC and then SCA is popping up in lots of places. And obviously P&G is a formidable global competitor as well. We know we've got to be moving pretty fast every day to bring right innovation, to execute well in the market, to continue to deliver on our business plans and our teams are up for that challenge. I didn't know you were with Park Place. That's great. (Laughter) Private label shares are up a little bit. I'm looking at the shared data, but it's ---+ I don't know if you got it, <UNK>. They're up 1 point. Up about a point. I'd say it's been more the competitive price points from some of the smaller players in the market that has been making some noise. As you know, we, last year, consolidated everything under the U by Kotex name and that execution went pretty well. We still think that we can do even better in terms of how we merchandise that in store and make sure that we have got the right product and the offer. Our super premium, our U by Kotex line, was a little slower growth this quarter, so that's one that we are really focusing on to make sure that we got the right innovation messaging there. Again, some of it's the category and some of is we'd probably say we could do better on the innovation and execution front. That's a great question. That's something that we're spending a lot of time on. We've got lots of digital marketing work going on all over the world and are trying to make sure we're investing in that capability in each individual market. And then where find something that works to share best practices at a faster pace. So I think that's something that every CPG out there is doing and particularly in the target market of fem care for late teen girls. They are very connected on their social experience and we want to make sure that we're relevant there. So for example, in China, with our relaunch of our Kotex brand there, it's been nearly 100% digital marketing and almost no network TV in that space, just because of the importance of that channel to that consumer. So it's ---+ we've had some real successes and we've also learned some things along the way of what not to do. But we've got a lot of good work going on in that space. We launched that, it was what. Early last year or late 2013. Late 2013, I think, was the first shipments, but it really kind started to hit its stride in 2014. Our brand there is Intimus by Kotex, which is a brand that we acquired. We're upgrading that with some of the global innovation that we've done in other markets along the lines of the U by Kotex things that we've done in the US and seeing a very good response. We picked up brand leadership in Brazil in fem care for the first time in a long time and we have good momentum going in that market. It's more the product itself and actually, it is more of a global innovation. A lot of the stuff the US guys are launching and was invented in Korea or China or elsewhere. That global team is probably doing the best job of any that we have of driving an idea consistently around the world. That, five years ago, probably would've been our most disparate product form everywhere and today we're all on roughly on the same product chassis. We're trying to take that learning and do it in other areas. Some of the things that were doing in diaper pants and baby wipes are tapping into that, where our local teams still have local optimization but we're able to drive a more consistent message around the world. Thanks, <UNK>. All right, since we have no more questions on the line, we thank you for your interest today and we will close with a comment from <UNK>. Once again, a good quarter of top- and bottom-line results and good execution by the team. We really appreciate your interest and support in Kimberly-Clark. Thanks very much. Thank you.

2015_KMB

2016

CMCSA

CMCSA #You know, I think on the video side we've got what I believe is the best product out there in X1. We continue to add content. We are getting integrating new content into the platform. We are getting on more devices so and I think we're just executing better. So I see room in continued churn reduction, it's been 29 straight months in the video and HSD side and I think there is still opportunity there as we improve the customer experience and continue to develop the product. And your second question was. The competitive environment, I mean I think that we're competing well across all markets. Verizon had the strike this quarter but that's only in 15% of our footprint and the rest of our footprint performed just as well. So I think we're always in a competitive environment. Nothing has changed dramatically and we think we're competing very well. So when you look at all the changes going on in the video spaces I think it's easy to overreact to a change or to predict that a change is going to be more dramatic than it really is. The fact of the matter is something like 40% of the people in America have Netflix now and the people it's obviously an extremely successful service and people are watching a lot on Netflix. And whatever Netflix is doing to viewing habits I think a lot of that is already done and it's going to change and the tide will come in and go out, but the fact that <UNK> is putting it on the set-top box is a great idea. It's very customer focused. It's going to make Comcast an easier place to view, particularly with X1, easier place to view all the options in video. And I think it's a very smart strategy for Comcast and I think to the degree the MVPD ecosystem stays strong, that's good for NBCUniversal. Our relationship with Netflix has never been better. They are huge purchasers of our content, we talk to them all the time. So my prediction is it will be quite a good thing for Comcast Cable and it will be a good thing for NBCUniversal. As <UNK> said, the X1 platform gives us the ability to be an aggregator of aggregators and to incorporate services like Netflix and to give the customer easy access to it, a seamless access. We had tossed around the decision for a while but really it came down to what's best for the customer as we get very customer experience focused and making sure we had critical mass in X1 so it made a difference. But concerning the premium packages overall I don't see their role changing dramatically. I think there needs to be some sort of a relationship or an indexing between retail and wholesale pricing. But we still think they add great value to the service and we'll continue to work them into the service. Hey, <UNK>, it's <UNK>. Just to clarify because you did break up for a part of the question, the first question was about inventory sold in the upfront. Is that the entirety of it. I would say the scatter market continues to be extremely strong, as strong as we can remember it being and that's continuing. We're going into an Olympics period, so who knows what's going to happen there. But I think the advertising market is very, very strong and some of that is reflected in the upfront. In terms of volume in the upfront I think we could have sold a lot more than we sold in the upfront. We sold about 10% more volume on the broadcast side, about 5% overall. We turned away a lot of volume, we're working on mix on the cable side to try to get higher, more profitable advertising into our mix in some of our cable channels. But there was plenty of volume. And we could have sold more if we wanted to. The percentage sold as a percent of the total is roughly comparable to previous years, so we still have depending on the network 20%, 25% of the volume available for a strong scatter market. And concerning political, we see a good opportunity in the fourth quarter as we have seen in the past, so we think there is room there. And concerning YES, we had very detailed viewership data where we assumed that if we took it off the air there would be a certain amount of lost subscribers and our assumptions were much higher than the actual case turned out to be, if we had lost many fewer subscribers than we anticipated. So I think at the end of the day great programming there will always be a price for. And we will go in well informed to our conversations and look for value add to the consumer and value add between the programmers and distributors. Thank you, <UNK>. Regina, make this the last question, please. Concerning the Q4 OTT products, as <UNK> said earlier we haven't seen an OTT model that really is very profitable for us. And we think that bundling our products and having business services and operating the bundle is still the best value. And concerning single play and broadband we do market that. We think there is going to continue to be streaming services and OTT services that come through and broadband will continue to grow as we continue to invest in the network and the WiFi capabilities. In terms of programming costs, so for the full year we still expect to be up about 10% for the full year. Year over year we were about 9.4% for the year to date when you adjust out the deflation caused by the fight. And that's on the back of the contract renewals that we had at the beginning of the year and we will have in the second half and some of that will carry over to next year as well. Well, first half of the year on overall margin we were down 40 basis points to 40.3% versus 40.6% last year. And as we said at the beginning of the year it will be flat to down 50 basis points. And not going to tune up the second half of the year but all the trends are as described so we will be in that range. Okay, thank you, <UNK>. And thank you everyone for joining us today. Regina, back to you.

2016_CMCSA

2015

DIN

DIN #<UNK>, I am so glad you asked that question, because I get to tell you, it is everywhere. It's breakfast, it's lunch, it's dinner, it's late-night. It's every daypart, it's throughout the day. It is everything at IHOP. It is sales, it is traffic, it is all doing extremely well. Across the country, across the board, I would call it an A-plus-plus. Yes, I may not have been clear in prior calls. That is a three-year commitment. It is all of 2015, it's all of 2016, and it's all of 2017. It is the same increase for three years. Yes, I have answered this question before, and I know this probably frustrates everyone. We don't see a real difference in our sales or traffic driven by the competitive set. The large majority of the category is independents. And the truth of the matter is, when we steal share, we are going to steal share from largely the independents. We don't see a lot of shift one way or the other because a competitor went on television and said something or drove a price point. That is not really what our nemesis is, or our focus. It is really us differentiating ourselves in the category. What our consumers tell us is they see in general in the casual dining category a lot of sameness, and our whole focus is really on differentiating ourselves from everyone else in the category. And that is what I was speaking to earlier. This notion of being bigger and bolder is really focused on, once and for all, just separating us from the entire category. That is what we are really seeing. It is not anything that is particularly a price point or a promotion. That is just not what we are seeing at all. And that hasn't been for some time. That has really not been our issue. Yes. Great question. It is a couple of very specific things. One is a very focused management team and a very focused group of franchisees who don't try to do 20 things, but do a couple things outstanding. That is the focus we've had at IHOP. That is the focus we are going to get at Applebee's. That is number one. Number two is, it is not any one thing. It is all of those things in combination. So it's the effort on operations, this incredible maniacal focus on advertising. It's focus on innovation. It's doing all those things simultaneously. It's not sequential. It's doing them at at once and getting maniacally focused on doing a couple of things well. I never want to underestimate the power of the execution on the IHOP side and doing that same execution on the Applebee's side. And quite candidly, there is a huge advantage on the Applebee's side. It is not 365 franchisees like it is on the IHOP side. It's 33 franchisees who own all the restaurants in the domestic US and getting them maniacally focused. And the great news is I couldn't be more complementary of the work, the effort and the commitment these franchisees have to do whatever it takes to break out of the mold. And that is the best news of the day. I just literally came from being with all of them in Miami, Florida, and they are maniacally focused on doing just that. So that is the best news of the day. Thanks, operator, and thank you all for joining us today. We are scheduled to report the fourth quarter on February 24. If you have any questions in the meantime, please feel free to call myself or <UNK> or <UNK>. Thanks again.

2015_DIN

2016

ULTA

ULTA #Great, thank you. Thanks for asking about that. I just want to give a little plug. I'm really proud about our team, having really worked this for over a year, and it's a very cross functional effort, as you can imagine, to prepare an organization to launch something like this, and we're off to a strong start. And the good news is, we based it first and foremost on guest insight which is our guests are very interested in this program because it gives them an opportunity to just get more points at Ulta Beauty, but also for us obviously, it's creating more loyalty, more increasing her share of wallet going to us. So that's all great. And we are not going to get into parsing apart all the details of the deal. ADS is a great partner. I will say they manage the program for us and take the credit risk, so that's great, and more to come. So our CRM team is really the folks who really own this project, and you can imagine, they've got a lot of ideas about how to leverage this going forward to drive growth. So more to come on that, and we feel good about where we are. Thank you, <UNK>. Well the good news is that everything we sell, almost everything we sell is highly replenishable. But the great news is that our guest, the beauty enthusiast, is really not interested in just the same product every time. There's categories she will need to replenish when she's out, there might be a couple items that she's quite attached to. But I'll tell you for the most part our guests are really coming in and loving to try new products. She loves trends, she loves newness, she loves great new products that are launched by our brand partners. So what we're finding is that very little of the business is one-for-one replenishment. And if that becomes bigger, perhaps, in the future, we're always looking at that, to see if there's a way we can make it even easier for her. But what she seems to be responding to is the breadth of innovation newness. And if you look, for example, at our e-commerce guest, the guest who shops online and in store, again, some of our best guests, they spend significantly more than somebody who is not buying online, and what she's tending to buy is in response to things that we're bringing to her attention via e-mail. So it's usually new products or exclusives, or new trends. So again, I don't have anything against replenishment, I love the fact that we're replenishing our products a lot, but the one-for-one piece is something that's not a big part of the business. The basket for the loyalty guests. It basically represents what we quoted in our prepared remarks, <UNK>. So again, the loyalty program is more of an 80% of our total sales, and so when we're looking at those metrics, that's basically what it represents. Yes, that's something that we've kicked around from time to time with our Board of Directors, again thinking about all options, on being as shareholder friendly as we can be, whether it's capital allocations or things like stock split. So surprisingly, I've only gotten this question maybe two times in the three-plus years I've been here, and it's been at the annual shareholder meeting, right. So it's usually a local retail holder that would ask that kind of question, so generally speaking, most of our shares are held by big, large investment funds and houses, and most of those folks aren't that interested, based on our Q&A with them about entertaining a stock split. So it's nothing that's on the front burner, but of course, it's something we'll always be ready to consider. Yes, well let me start by saying, as a category beauty has been growing for multiple years. It's a strong, it's up last quarter, was up 5%, prestige was up higher than that, but all growing, as you said makeup growing, the lead in terms of growth. Skincare, every category we saw growth last quarter. So the good news is, we're in a category that's growing. As we look at consumer trends going forward and <UNK> touched on this, but younger women, Millennials, Hispanic women, fastest-growing segment of our population, there is a propensity we think for the beauty category for all those to continue to play a very important role for overall spend of her money, and how she spends her time, so that's all good. And the great thing is that innovation comes from companies large and small. It's probably the most exciting consumer category, I think, that exists, because innovation comes from many different sources. And we positioned ourselves to hopefully be a great partner for brands to do business with, and we offer this variety of product categories and price points. So I think that also helps to sort of insulate us as the subcategories go up and down, and <UNK> talked a little bit about those categories, we're trying to look out multiple years, thinking where do we place our bets, but knowing that really innovation is coming from many sources and we think the foundation of growth is there for us. I know, it gets a little ---+ you look at quarters and you try to stack them together. We look at the single, the double, the triple stack, every which way you can look at the comp. There's nothing extraordinary that sticks out in any one. Each quarter is a unique set of opportunities and challenges. I would say generally speaking, the back half of the year, we feel really great about the boutiques, right. The tail wind we're going to get from that finally all being installed. There's a great pipeline of newness coming, and we believe we've got a great set ready to go for holiday, both on the assortment and the way we have our stores set up, and our gift card program. So we're very bullish on the back half of the year. Okay, well I'll start with the store piece first and certainly this will be something we'll talk more about in October. I think the dynamics have been happening have been happening for some periods of time, in terms of how people shop for beauty. So that's not new to us. It's encouraging to us. As we look at the how our stores are performing today, the store classes getting stronger, even after this many years of being in business, that's really encouraging. And we think that everything that surrounds how we're doing business, driving awareness, giving the great products and services are all enhancing that. So I feel good about that. We had, we think that our 10,000 square foot store has plenty of growth ahead. We're also looking at smaller markets, urban or suburban downtown type formats. So all those things we feel, given frankly the fact that we only have a 5% share of this really enthusiastic beauty shopper, provides us plenty of runway for growth. So we'll talk more about this, but we certainly have done a lot of work and analysis, and feel confident we can drive market share growth frankly, both through comp store growth as well as new stores. As far as the CapEx related to boutiques, again, I just want to remind folks that the boutiques were always in the plan back in 2014, when we rolled out the five-year financial targets. There was an assumption in there for boutiques, over those five years. We just accelerated that, so we pulled it forward. 2016, a big step up, roughly $80 million as you mentioned. That will repeat next year into 2017, so we're viewing it as a two year cycle. And at that point we'll have again those two great brands in the majority of our comp stores, and it will be just about new store build up from that point. Yes, you know, talk about parsing. I like that. We're not going to get into details on that today, except to say we feel confident about reaching the target that we set out, back a couple years ago, and frankly at a much bigger scale of business today, right. With a lot more complexity, so I'd stand by that description. Okay. #ThatsHowILip. I like it, thank you. So with the e-commerce just to be clear, so we service e-commerce out of four buildings today. So Chambersburg out East, Romeoville here locally in Chicago, and the two new, Greenwood and Dallas. And so again, nothing's coming direct from the vendor, so we're doing all of that. The new buildings are just much more efficient. They are designed to actually do e-commerce, pick and fill and ship processes, unlike the older buildings, which were retrofitted and not quite as efficient. So we're happy to see that and we're showing the benefits show up in the P&L as currently, and as we think about the future, so we're very excited about that. As far as in-stock rates overall, that's something that we ---+ that's priority number one, when we think about the guest experience in our stores. And that's part and parcel of all of the investments that we've been talking about for the last couple years, whether it's distribution centers to help the throughput there, capacity and capability overall, but also we are doing a lot of work behind the scenes with merchandise planning tools, SWIFT we talked about. Master data, managing that better. Floor planning and space planning tools are going online, as well, to help with in-stocks overall. And then our team internally here is a lot of individual projects, and look sees going around how we can do a better job. Just making sure we go extra heavy on A and B SKUs so we don't disappoint folks, and how can we be more effective with some of the C, D, E and F SKUs, in stores, and how we better align ourselves on that. So all oars are in the water when it comes to in-stocks and inventory productivity across the enterprise. Well, we aren't complacent about our results, so I'll say that. But I will tell you that as we look at it, our results have been pretty consistent, I would say across regions, period to period, pretty consistent. So then you just saw the kind of comps we've delivered. So we're seeing that a strong consumer sentiment, right. And I think that it's because we continue to benefit from the fact that we're in a category that's important to our guest, and I mentioned this earlier, it's replenishable, it's affordable indulgence, and beauty is popular right now, in many ways, in terms of culture and social media. So you combine that with being in a range of categories and price points, even if somebody is a little bit more pinched, you can get great product at a lower price from us, and in partnership with our brand partners, we are continuing to excite her with newness. So I feel like our results would say there's certain pockets of consumer spending that are quite strong, and we see that macro for the category of beauty as well. But we'll just continue to watch it closely. The location. Thank you. I just want to thank everybody for your interest in Ulta Beauty, and we look forward to seeing you in a few weeks at our <UNK> day. Importantly, I'd also like to thank all of the Ulta Beauty associates for delivering yet another terrific quarter. Take care.

2016_ULTA

2015

TPX

TPX #You probably hit on a couple of them pretty quickly. As I mentioned before, the Sealy margins are not meeting our internal targets. The team's on it. It's a significant opportunity, but it's also a journey that will take more than a month ---+ probably take more than a quarter or two - but there is significant opportunity in the Sealy manufacturing. We're just not where we need to be from that standpoint. We've done some great work on the supplier side, but we need to do some more work on the labor side, primarily. Turning to international ---+ look, international had a solid quarter, when you look at it on a constant currency basis, but were we expecting more. Yes, we were expecting more. The Sealy brands had growth in the quarter, but the Sealy launch hasn't gone as well as we would have liked in Europe. Tempur, primarily in Europe, underperformed our expectation. And I'd tell you that when you looked at the overhead of both, it would be internationally or domestically. But if calling out internationally, the overhead in international is a little heavy and the team is taking care of that issue. But as far as opportunity long-term, international looks like a very good opportunity long-term. It won't be an easy road. That's a tough execution when you're working internationally and there'll be bumps in the road going forward, but long term, internationally is something I'm certainly very excited about. That was odd. Yes. I think I've called that out. And first of all, you're spot on. The Sealy margins did not perform the way we expected them to. Some of that's merchandising mix, and that we certainly were affected from a merchandising mix standpoint ---+ and that's fully explainable. And that will turn when we launch the new Stearns & Foster product. But that doesn't explain it all. We've still got work to do in the area. We've got a team on it. They're very engaged. In fact, I think they were here at seven o'clock this morning meeting. So, the action plans in place and we expect that we're going to be able to report progress in that area. Thank you, <UNK>. Thanks, <UNK>. Good question, <UNK>. From a standpoint of in the third quarter, our Sealy International Europe, Japan ---+ that piece ---+ is about consistent from a sales and EBIT drag basis as we were seeing in the first and the second quarter. So high single-digit million and a very small drag on EBIT. From standpoint of as we look at what's going on ---+ as you know, we had some supplier issues earlier in the year; those are fully behind us. But going back in and essentially refocusing sales advocacy at the store level ---+ that's an effort, and as <UNK> mentioned, we see the international opportunity as being a very large one over time, but it's going to take some time. And so I know the team is very focused going forward into 2016 to increase both the distribution of our new Sealy and Stearns & Foster products there, and we've got a positive outlook. But it's going to take some time. Sure. A great question. First of all, you asked about the cultural ---+ a cultural question about Tempur and Sealy. From my perspective, there is only Tempur Sealy. And I don't feel any cultural issues related to what I'll call a Sealy people or a Tempur people. This is not dissimilar from when I joined Dollar Thrifty. And in case if you're not familiar with the rental car industry, there was a Dollar and there was a Thrifty. And they put them together and called them Dollar Thrifty. But, when I got there, the way I operate and the way I think about it, there really is only Tempur Sealy and I've got to tell you that I think the leadership team here thinks the same way. We've got some great people that came over in the Sealy acquisition that are key members of this organization and we have clearly some key executives from Tempur and I think everybody is working together. All the goals are aligned. And so I don't think we have any cultural barriers to our future success. So I think that would be the first part of your question. Second part of your question was ---+ do I have the right horses or the right team in place to fix the Sealy margin issue and drive Sealy's performance. And the answer to that is, yes. I think we've got the right team. They probably underestimated the challenge from a guy dropping in for 50 days. They probably underestimated the challenge when they started the journey. But, are they doing the right things. Without question they're doing the right things. Are they the right people. They're the people. Are they working hard. They're working hard. And I've got a lot of confidence in the team that we've got on the job. Okay. Great question. First of all, I'm going to call it the aspirational plan, because I don't really think if it as the 650 plan. I think our job is to make as much money as we possibly can. And so whether it's 650 or 750 or 350 ---+ I don't know what the numbers are. So I don't think really think of it necessarily the 650 plan. It's an aspirational plan designed to reward Management for aspirational performance. But look, it's out there. It's a heavy lift. But it's certainly a great plan that's got all the management team focused, and it's been very good for pulling together the team in a common goal. I did not spend a lot of time looking at what previous Management had put together and presented to the Street all their internal documents. I started with a clean sheet of paper and I've asked everybody to start with a clean sheet of paper and do zero budget going forward. And the meetings we're having isn't what we tell people before the kind of meetings we're having; it's what's possible. Think out of the box. What could we do. What could we do different. How could we do things better. And so I can't really reconcile you to whatever has been presented previous, but quite frankly, I didn't spend any time looking at it. But I think there are a lot of opportunities in this business. We can do some things in areas better than we've done it before, and I think we've got some pretty strong competitive advantages in the marketplace that we can take advantage of. So I hope that helps address your question. I think you're asking which bucket it would come out of, and I think the answer is we want more effective advertising from the co-op dollars we spend, and then we need to spend some more money from a direct advertising standpoint. So, I'd call it ---+ it's going to come from both bucket. No, no, without question. You spend advertising dollars investing in brand and product that you think you're going to have a real high return on. And so we don't have a cap on advertising and then do trade-offs between the two brands. We'll spend the amount of money that we think we need to, to support the product, support our retailers, and drive our operations. Good morning. Well. I mean, I would say ---+ good question. I would say that we continue to see very strong gross margin out of the Tempur US business, and that has been driven off of operational improvements, sourcing, supply chain, plan improvements, and pricing. We see those continuing and further opportunity. From a Sealy gross margin perspective, <UNK>'s addressed that we're really getting after that, and driving performance. Internationally, we've addressed that, but I would say that there is continued opportunity as we leverage that portion of the business. And then to the earlier point of streamlining the overhead of the business is going to drive near-term performance. Yes. I'd only add one thing to the list that <UNK> just outlined. The other thing that we're doing ---+ and I think this happens in our all businesses. Look, we're closely looking at all of our sales and making sure that we're doing profitable sales. And we're doing deep dives into customer profitability. And to the extent if we have business that's not profitable for us, we'll have to work with people in that area and make sure that we've got a good healthy long-term relationship for them and for us. And so there may be some opportunity in that area. The distribution is going well. Wouldn't you say, <UNK>, is that fair. Absolutely. I'd say distribution is going well, but I'd also say, like always, you want more improvement every quarter. But I'd say distribution is going well. In the consolidation of the sales force in our recent actions, there was quite a bit of activity in that area. And I would say, now we've pretty much got the sales force exactly where it needs to be, and we are through in the US on activities when it comes to personnel. Great, great question. I called it out when I originally looked at the business. One of the things I really liked about this business was free cash flow attributes are very strong. And in some of my previous lives, I've been in organizations where you had lots of GAAP earnings. But quite frankly, you didn't produce any cash because the CapEx requirements were so big to keep the engine running that there never really was some free cash. So when I looked at this business, I was thrilled with the cash flow attributes. I then looked at the leverage to see where the Company was from a leverage standpoint before getting involved in it, and it didn't take a rocket scientist to figure out that the Company was deleveraging very quickly. And unless you do something else with the cash that it is going to deleverage probably below any reasonable rate. So, as <UNK> called out in his prepared remarks, I've asked him to go work with the senior bank group and to see what we can do in that area relating to covenants, and they're working on that. But let me just talk in general about the way I think about capital structure. I think what we need to do, and what we are doing, is the first thing you want to look at is what the enterprise risk you have in the organization, and stress test that, and we're doing that. Look, long term, our responsibility is to protect the Company in different business cycles. So, before we do anything in capital, we need to stress test the business model and make sure we fully understand how this Company will perform all throughout the cycles and that's being done currently. The next thing I think we have to do, and we're doing, is you look at the nature of the debt that you have. Clearly, if you have debt and it's a one-year duration from senior lenders, that's one kind of leverage; and if you have long-term debt from the market and multiple lenders, that's more stable debt and you like that better and it's a little less risky. You can clearly see in the last 50 days we've put some long-term debt on the books, and that feels good. From looking at the enterprise risk and the nature of your debt and duration, I think from that process, you develop what I'll call a risk tolerance. And then after you have your risk tolerance, I think you look to your cost of capital, and we've asked some people from the outside to do some work for us on cost of capital. And you combine that with your risk tolerance and you have a discussion at the Board level as to, what do you think. And we're going to do that and we're scheduled to do that. After you get that, it's really pretty easy. From that discussion, a capital structure should pop out, a leverage target should pop out, and going forward, then it's just a resource allocation question. Do you want to invest the money in the business to get to that proper capital structure. Or do you want to give it back to the shareholders. And the way I look at that, that's just a return on invested capital analysis, and how can the business deploy the capital, and can it deploy it in a reasonable return. And if you can't deploy it in a reasonable return with the risk associated, really need to give it back to the shareholders. Having said all of that; having not also done all the detailed work that's in process, I suspect that I will be comfortable with leverage greater than three terms is my expectation. But I've not done the work and I've got to talk to my fellow Board members who are all financially astute and having a strong opinion. But I think we owe the market a further discussion of that by the next earnings conference call, because you guys are smart, and if you run your pro formas, you're going to figure out real fast we're going to deleverage pretty quickly. And so we'd better have that discussion with you probably on the next earnings call. That was about $103 million. Yes. It'd be give or take, <UNK>, yes, on a percent of sales. Well, for the full year, our guidance has been that we'd have about a $0.30, rounded off $0.30 EPS hit; and we're taking, I think about $0.22 through the first three quarters and so it'd be $0.05 to $0.08 ---+ something in that vicinity. Yes. Let me take some of that, and then I'll give the hard stuff to <UNK>. Just in general, we'll report the fourth quarter when we report the fourth quarter. I can tell you whatever trends we're experiencing have been fully dialed into the guidance, but I just generally don't comment too much about trends within the quarter. So, just assume that it's been dialed into the guidance. On Texas, though, I think I do owe you some comments, because clearly there has been some weather down there. And there has been a little bit of chatter in the marketplace about Texas and how oil prices might impact that area. I can tell you that when we look at the ---+ what I'll call oil concentrated states ---+ Texas, Oklahoma, and Louisiana ---+ and we compare our performance in those states with the rest of the nation, those markets in the third quarter actually outperformed the rest of the nation. So, through the third quarter, I would say, not only we're not seeing no impact from falling oil prices; I'd like to say they actually outperformed. Now I'm from Texas, so I've been through at least three major downturns in the oil business. And look, you don't feel it immediately; it takes a while. So, although the third quarter, that area came in strong, I would expect going forward that we would begin to feel some weakness in those marketplaces over the next few quarters. But I've also checked with several of my friends in the car business, because the car business is pretty good to tell you what's really going on in the market, and their expectation is similar to mine, is that it will probably trail off slightly. But nobody is expecting it to be too bad in the oil markets, from what I'm hearing. And <UNK>, I think what that leaves us is the commodity cost and input cost. Just as a reminder, in the first quarter, we saw a level of unfavorable commodity impact in the results. In the second quarter, it was a slight benefit. I said on the last call that we expected to see several million of benefit from commodities in the back half based on what we could see. We did realize that; that was built into the guidance and we did realize it. And at this point, looking forward in light of where things are, we'd expect a couple of million of incremental benefit in the fourth quarter. That's modeled into the guidance, and that's on a variety of commodities, whether it'd be steel input, foam, chemicals, et cetera. So, all in, it's been several million of benefit here in the back half, as expected. Thank you, Operator. To the 7,000 employees worldwide, thank you for what you do every day to make this Company successful. To our retail partners, thank you for your outstanding representation of our brands. To our shareholders and lenders, thank you for your confidence in Tempur Sealy, its leadership team, and the Board of Directors.

2015_TPX

2015

MSTR

MSTR #Thank you. This is <UNK> <UNK>, I'm the Chairman and CEO of MicroStrategy. I wanted to welcome all of you to today's conference call regarding our 2015 first quarter financial results. I'm here with Jonathan Klein and <UNK> <UNK>, and our CFO <UNK> <UNK>. First I would like to pass the floor to Doug who's going to read the Safe Harbor statement and make some comments on our results for the first quarter. Thank you, <UNK>, and good evening. Various remarks we may make about our future expectations, plans, and prospects may constitute forward-looking statements for purposes of the Safe Harbor Provision under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in our most recent annual report on Form 10-K filed with the SEC. These statements reflect our views only as of today and should not be reflected upon as representing our views at any subsequent date. We anticipate that subsequent events and developments will cause the Company's views to change. While the Company may elect to update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so. Also during the course of today's call, we may refer to certain non-GAAP financial measures. There's a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of market today, which is located on our website at www.MicroStrategy.com. Now I'd like to turn to our financial results for the first quarter. As I assume that you've seen the press release from earlier today, I thought it was best to simply make some brief observations on our first quarter results. As stated in the press release, our total revenue of close to $124 million reflects a decline of 10% from the first quarter of 2014. Consistent with many multinational corporations, we too experienced strong foreign currency headwinds this quarter, which impacted our revenue by almost 6%. Our product license and subscription services revenue were $27.4 million, declining $4.9 million from the first quarter of 2014. While our North American region saw an increase of almost 10% on a year-over-year basis, driven by a 58% increase in subscription services revenue and an increase in the number of deals over $500,000 for a total of seven, our international region saw a 47% decline, reflecting the impact of foreign currency headwinds and overall weakness in our international markets. Product support revenues for the first quarter of 2015 were $69.3 million versus $71.5 million for the first quarter of 2014. Our North American region enjoyed modest growth of approximately 3%, however our international region saw a decline of over 11% due to the strong foreign currency headwinds. Overall, our support renewal rates remain consistent with prior periods. Moving to the cost side of the business, we continue to see the results from our restructuring efforts and other related cost-saving initiatives. We experienced a reduction of over $39 million in operating expenses for the first quarter of 2015, as compared to prior-year period. Breaking this down even further, as compared to the prior-year period sales and marketing expenses decreased $22 million, research and development expenses, aided by over $5 million in capitalized software development costs, decreased almost $13 million and general and administrative costs declined $4 million. As a result, we had net income of $20.5 million or $1.79 of diluted earnings per share in the first quarter of 2015, as compared to a loss of $6.5 million of a $0.57 loss per share on a diluted basis in the first quarter of 2014. Moving briefly to the balance sheet, I'd like to highlight that it continues to reflect a solid financial foundation for us. At the end of the first quarter of 2015 we had cash, cash equivalents, and short-term investments totaling $391.8 million, and no debt. First quarter 2015 operating cash flow was $55.8 million, with our accounts receivable days outstanding of approximately 42 days for the first quarter of 2015, compared to 44 days in the first quarter of 2014. Additionally, our total gross deferred revenue balance at the end of the first quarter of 2015 totalled $215.7 million, compared to $219.6 million at the end of the first quarter of 2014. Also, we had additional future minimum commitments by our customers to purchase our goods and services of $130.7 million at the end of the first quarter of 2015, as compared to $126.3 million as of the end of the first quarter of 2014. As was the case with the income statement, the foreign currency headwinds also had an impact on our balance sheet, including the deferred revenue and commitments I just mentioned, a portion of which is denominated in non-US dollar currencies. Overall, as the results reflect, we have made significant strides in getting our cost structure under control, and we are pleased with the fact that our efforts have been successful in regaining profitability. Going forward we will continue to maintain our focus on our prudent cost controls. Now I'd like to turn it back to <UNK> for some additional remarks. Thanks, Doug. In the first quarter as we reviewed the results year over year, I would summarize it by observing that we have cut costs approximately $3 for every $1 in revenue we lost, so we made some restructuring changes over the last 12 months that were highly accretive to the business. We did tighten up our operational focus to top markets, and we've tightened our product focus to analytics, mobility, and security for the enterprise. I would attribute the lack of revenue growth to our decision to exit low-margin business lines, to the decision to consolidate our operations to certain strategic markets where we expect that we will be more profitable and be able to grow more efficiently and scalably over time, and to some distraction from the restructuring effort of the past nine months, and of course to foreign currency headwinds and the dramatic strengthening of the US dollar. These are all business challenges that we need to deal with, but we also think that over the long term, these are challenges that we are going to grow out of. We think that the core business is much more scalable and is going to be much more profitable going forward because of the restructuring investments that we've made and some of the strategic decisions we've made during the past year. In the first quarter we launched our enterprise security platform Usher, and we obtained our first customers. We made sales in the retail sector, in the government sector, in the airport sector, and we have ongoing exciting sale cycles across many other industries: the defense industry, the higher education industry, the commercial and banking industry, the insurance industry, and we are optimistic about these things and have gotten auspicious response from most of our major customers in these areas. So we are enthusiastic about enterprise security. We also reorganized our sales, our consulting, our technology, and our support departments, starting the beginning of the year on January 1 to be much more agile and entrepreneurial. All in all, if we look back over the past nine months, the first quarter and back through the last two quarters of last year, our focus generally was on cost control and on the restructuring of our operations to make it more scalable and make them more transparent and more profitable. If we look at our focus for the next nine months, it will be on sales and marketing execution and on revenue growth. Our best opportunities for revenue growth looking forward are the release of MicroStrategy 10 and our new product capabilities for the enterprise analytics space. Our second great opportunity is the mobilization of the enterprise with MicroStrategy Mobile. The third opportunity we are focused on is securing the enterprise via Usher. And the fourth opportunity is migrating customers from the enterprise data center into the Secure Cloud. We have certain key partnerships and platform commitments that we are focusing upon this year. Apple Computer for mobile and security markets, including a special interest in the Apple Watch, Touch ID, and the tablet value proposition. We are focused upon Amazon AWS for the cloud value proposition and our Secure Cloud offering, which is optimized for Amazon, and we are focused upon our partnerships with a number of major system integrators, defense contractors, and physical access control firms in order to develop and bring to market Usher solutions which are customized to those various markets. With regard to the Apple Watch, we are proud to be the first enterprise security company to bring an Apple Watch application to the marketplace. We are very enthusiastic about that. With regard to the Apple Watch, we believe it is the perfect tool to replace the password, the plastic card, or the metal key. Usher is the killer mobile app for the enterprise. We believe that Apple agrees with us because we did get a very favorable mention from the CFO of Apple yesterday on their conference call. And we look forward to working to commercialize both smartphones as well as wearables like the Watch in the enterprise going forward. And we believe that there's a wave of enthusiasm right now for mobile devices that is going to continue to build as the year goes on. And while we don't see the Apple Watch, or the watch in general, as being a major revenue driver for the business, we do believe that it is going to be a major attention driver and a great marketing benefit to us, and it is serving to highlight our technical strengths and our enterprise security capabilities, and bring us a lot of attention and develop awareness both within our customer base and within our partner base and outside of our customer base. We also think that there's another great trend developing in the year 2015 and that's Touch ID. Touch ID is the first commercially successful biometric platform to achieve worldwide awareness and acceptance. Touch ID is a biometric platform that's accepted and trusted by consumers, by governments, by retailers, by software developers, by banks, and it is unclear that there's really any other platform that is or that's going to be in the near term. Our close relationship to the Apple ecosystem and all of the strength we have in mobile and enterprise security I think is going to benefit from increasing commercial acceptance of Touch ID, and I think Touch ID in turn is legitimizing the idea that a phone or a watch and a mobile piece of software should replace your passwords and should replace your enterprise credentials. And I think it is only a matter of time before people realize that it makes sense to use a technique like Touch ID to open up a Wi-Fi network, to open up a firewall, to gain access to an enterprise application, to open an enterprise portal, or to authenticate an enterprise transaction over the phone, such as a reservation or a confirmation of a trade. We expect that as this enthusiasm grows, people are going to reach out for an enterprise platform to do it, and we are standing at the crossroads between the needs of the enterprise and the tremendous capabilities of the mobile ecosystem. The last point I will make on tablet computers and the iPads is MicroStrategy Mobile creates a beautiful, powerful enterprise mobile app for the iPad and for tablets in general. And our ability to mobilize analytic apps and to deliver mobile dashboards and enterprise custom mobile apps to the fingertips of enterprise executives, I think it is a great advantage and a competitive edge we have in the market. And as the favorable winds of mobile blow and as we continue to trumpet this message and become more associated with Apple and the Apple Watch and iOS and all that is new and exciting, I think that that's going to help our business open new doors and expand existing relationships with our customers, as well as to cement and energize new types of partnerships with our integrators, our contractors, our solution providers. And so with that, I would like to go ahead and open the floor for any questions anyone might have on the phone today. Thank you for your support and I guess we will take the first question. Thanks, <UNK>. I think the majority of the heavy lifting with regard to restructuring is behind us now. We are looking forward to stabilizing in 2015 and building from what we see as a much more efficient, more profitable, more stable base. I do think, with that said, there are always opportunities or us to find new efficiencies and I wouldn't characterize it as we are moving substantially from cost control to substantially back to growth, but I think that we are moving from primarily cost control restructuring to primarily revenue generation and growth at this point. But I think we are always going to have our eye on our cost structure and our efficiency, and I believe that as we move forward it is very important for us to always be thinking about high quality and profitability and efficiency. And I think that the quality is better than quantity, and we can certainly grow the business or we can not grow the business in terms of headcount, but that's not really what we are looking at. What we are looking at is growing the revenues in a high-quality, profitable, scalable, transparent fashion. We certainly think that MicroStrategy 10 will be a shot in the arm for the analytics business and we expect that it will open up revenue opportunities or us in the second half of the year. We are not ready to break out our enterprise security business from the overall business yet. And as soon as we feel that it is useful and provides a good degree of insight to the investors, we'll begin to provide that sort of transparency. But otherwise, I cannot give you a clearer answer. I think that our customers are enthusiastic about the arrival of 10, so they have been waiting or it. It does meet a number of needs, I think. In the area of scalability we've got much better support and direct support for things like Hadoop and for in-memory analytics. In the area of data discovery and ad hoc, we've got much more powerful tools for ad hoc and agile application development. We also believe there are a lot of advantages for deployment and it is certainly part of our plan and expectation that we're going to be able to use this to cross-sell and upsell and find new opportunities, and I think there are some customers that probably will be enthusiastic about what we've got to provide. <UNK>, do you have any other commentary on that. Well, I think functionally you've made the high points. What we think it does, MicroStrategy 10 does, is really bring together and bring to the market really a substantial increase in our ability to satisfy both the enterprise requirements and also the requirements of agile visualizations and data discoveries that, as you see in the current buying environment, sometimes begin at the departmental level and then move up to the enterprise. So we feel very good about how 10 really allows MicroStrategy to present a really consolidated vision of having both our historical strength in enterprise analytics but marrying it, really, agility that a lot of business users are looking to to build faster, cleaner, more powerful applications and then to scale those up over time to true enterprise in nature. Yes, well with regard to our expectations, we think in the second half of the year we will start to see revenue opportunities coming to us via the channel, and with regard ---+ for Usher, that is. With regard to how it sits with them, it is a much more channel-friendly product because there are some straightforward use cases. For example, open the door of a million buildings in the country using software and we already know where the buildings are, we know already what the gateway is, we need to open it up. So there's an immediate opportunity for companies that are hardware-based to become software-friendly and mobile-friendly, and then there are companies ---+ there's immediate opportunity for companies that are very mobile-based to become very building-friendly, and there's an opportunity for companies that are very consumer-based to start to look enterprise-friendly. And, of course, we take all the general system integrators. This is one of the benefits of Usher to them versus more sophisticated enterprise application tools is that you can actually get an application solution up and running and deployed within an enterprise within a week to two weeks using Usher, and then you've got a long tail of system integration as you integrate additional systems. So the ability to get a quick win and then integrate more and more systems over time is a very channel-friendly thing. It is much better than having to take six months to a year before you build the app and then deploy it. The other major thing that we've accomplished with Usher this quarter, which we don't really talk a lot about but as we are pointing out on this call, is that after request of some of our larger channel partners and banks and physical access controller companies and the like, we traded software development kits on the client side and on the server side. So our SDK on the server side allows you to build custom gateways. So for example, if you wanted to use the Apple Watch to start a fleet of cars or open safes or safe deposit boxes or use the Watch to authenticate a transaction out of SAP or something like that, you can build that with our SDK on the server side. And on the client side, if you wanted to put an Usher badge behind an application like a Starbucks app or an Uber app or a McDonald's app, you could plug us in and keep their branded application on the front end while we sit in the middle. And so that SDK capability allows you to get out of the gate real fast, but also to integrate deeply on the mobile side or on the enterprise server side, and there's nothing better for the channel than a platform that allows them to walk in on the first day of the year, have something deployed to 50,000 people by the end of January, but then work to enhance the solution for the next 5 years or 10 years every single month or two months delivering another piece of the puzzle. Well, I would say it's keeping us really, really busy right now, but we are not ready to break out the exact number on our counts quite yet. We do look forward to sharing more of that as the year progresses. I think that we have moved pretty diligently through a nine month restructuring exercise in order to find a solid base to grow from. And that required that we, in some cases, exit businesses where we were spending $2 to make $1, or spending $1 to make $1. We have done that as we look through a major macro change with the dollar and the strengthening of the US currency. So it has created a bit of volatility in our top-line number, but I think that the result of the restructuring is that we've found a pretty solid base that we're going to grow from and we look forward to growing from there. I would say that ---+ thanks for asking, I appreciate that. Both those things are somewhat related, if you recall how our deferred revenue is booked. But as it relates to the cash flow, I mean really, the key thing there really has to do with the cutting of costs, to be honest with you. So when you look at a year-over-year basis, we've cut $45 million out of our costs on a GAAP basis. So generally speaking, Q1, you do have a lot of cash inflow coming in from the Q4 deals, especially from maintenance renewals. So it really is a cost reduction effort that generated a lot of that cash flow and coming off of a Q4 maintenance renewal period. Those are the two key factors. And then, so as a result, when you look at our deferred revenue, you're talking about the sequential increase on the face of the balance sheet. So on the face of the balance sheet, if you recall, if you look at the footnotes to our filings, we grossed down our deferred revenue to get to the face of the balance sheet, so collections from our customers will actually have the result of increasing our deferred revenue that we show on the face of the balance sheet. So what I'd say is I could refer you to one of the attachments that we had in the earnings release earlier today, where it breaks out the current and non-current deferred revenue to show the movement of the, really, the cash payments that have been made that therefore reduces the gross down. All I was going to say is that, and then the one thing I mentioned earlier in my remarks was that that March 31 first balance sheet is also impacted by the foreign currency. So there is actually a decline element on a year-over-year and even a period from December 31 because of the decline in the foreign currencies versus the US dollar. Let me give you a few suggestions on that, and then Doug may have a follow-up. The first macro effect, obviously, is the dollar strengthens by 30% and just about everywhere else in the world is euro-driven or close to that. And every other currency weakens against the dollar so that's the number one effect. The second effect is the middle of last year we took a long hard look at the business, and we concluded that ultimately the United ---+ there's a reason that the dollar strengthened, right. The reason the dollar strengthened is because United States is in fact a supertanker economy and it is working very well, it's firing in all cylinders. And when you go to the rest of the world, you've got the second tier and the their tier economies. The third tier economies, in some cases, have imploded and we pulled out of places like Russia and threw in the towel and decided it didn't make sense to be in certain places; there's going to be 5 or 10 years before they stabilize and it was just too difficult to do business. But then we looked at the second tier economies, and there are a lot of places where you can generate revenue but instead of investing $0.50 to make $1, you invest $0.80 or $0.90 or $1 to make $1, and of course the worst is to invest $1.50 to make $1. So I would say that the international revenue line has been affected disproportionately by the strengthening of the dollar, A, and it has been affected disproportionately by our restructuring decisions, B. We are just not investing in second and third tier markets to the extent we might have in the past, and I think we have decided strategically that we are better off to be overweight America and the domestic Americas market, and to be a bit underweight international, relative to what I would have done five years ago or what we might have thought. The world felt different when the euro was $1.45 than it feels today, if you can understand where I'm coming from. There's always going to be volatility going forward, and so I wouldn't pawn this all off to currency, I would say that if you just look at the rate of adoption of mobile technology, the rate of adoption of cloud technology, the rate of adoption of forward-leaning enterprise security technology, and the rate of entrepreneurial growth and investment and analytics and the like, all of those numbers and all of those phenomena just seem healthier in the Americas market right now than they do internationally. And so I would say, given our interest in growing the business from a stable base with some transparency and staying efficient as we possibly can, we make decisions that are beneficial to the domestic number, probably a little bit detrimental to the revenue number internationally. Over time I think that stabilizes, and I think that we are confident we will grow pretty much everywhere in the world over time, but we've tried to be thoughtful and strategic about how we manage our operations this year. Great, thank you. Take a couple. One, for example, would be what we think of as low-margin consulting business or outsourced IT labor, things that system integrators might be known for. The companies that are large integration partners with us have managed to hire hundreds of thousands of people and put them to work at reasonable rates that are viewed to be a bargain by large Western companies. We have been working to shift our mix toward premium consulting or trusted advisory services, and that will continue to be a theme of ours as we go forward, and at the very least we didn't really see a benefit to growing a low-margin integration business. I think another area of revenue that we have deemphasized a bit is custom education offerings. It is possible to actually build custom education courses customer by customer and the like, but it is like custom manufacturing. You really want to create a one-size-fits-all offering and you want to develop one course and teach it 10,000 times, you don't want to create 100 courses and teach them 100 times. And so we have cut back on our investments in those kinds of custom lower-margin services. And I think although we don't classify it as service, the act of being engaged in sales engineering and piloting and aggressive technical sales in markets where the average dollar size of the deal, or in markets where the economic buying potential of the customers are lower, those tend to be low-margin activities. So we've tended to focus upon the richer, more lucrative markets where our offering has higher value in use, and we have drawn back from consulting services, education services, support services, other types of services that we didn't think would be as lucrative. I think one other area, as long as I'm talking support is, we got out of gate fast with an enterprise cloud offering, and we built it and we learned a lot from it, but as we got to a certain size we found that we were actually supporting a whole variety of different backend systems, different database systems, different hardware systems, and different enterprise configurations. And we made the decision corporately that we are going to shift over to a standard configuration, which we call the secure cloud, instead of having eight different configurations, for example. You can have different configs of a database, a different configuration on operating system, a different configuration of servers, routers, data center, etc. So we've been consolidating to one, and the other decision we've made is take that Secure Cloud and make it Amazon first. So we focus upon a particular hosting environment, a particular ecosystem of databases and routers and operating systems and the like, and that in the near term slows down our revenue growth, but over the long term gives us a much more transparent and I think a much more scalable offering, and it makes it much less likely that we would ever find ourselves upside down in a relationship where we are actually spending $1.50 in order to generate $1 in revenue. And so we kind of had to take a step back and restructure those things in order to build a more scalable engine. And it did have implications on our support business, our cloud business, our technology function, and our sales and our marketing and our service functions. But I think we're very comfortable that tightening our focus upon a much more scalable configuration of our software, which we call the Secure Cloud, helps us in our education business, helps us in our support business, helps us in our technology business, and it helps us in sales and marketing. And not to state the obvious, but if there are two platforms that you would like to be standing on top of in the year 2015, one of them is Amazon AWS which is growing north of 50% and I think they said, at one point in a speech they gave at our trade show, that they add more servers every day than they added in the first eight years of the Amazon business. So it is just tremendous capital investment and we want to be riding that wave and not competing with that wave. Even though we have customers and we have people that would say to us, we don't want to host an Amazon, we'd rather you do it yourself or do it a different way, that would be a classic example of, it's better for us to walk away from the business than it is for us to decide that we are going to compete with a juggernaut there. So I think one platform to be on top of is AWS, and the other platform, quite clearly, is the Apple platform. I wouldn't want to bet against the iOS or the iPhone or the iPad or the Apple Watch right now. I think that entire platform has been consistently underestimated just about every quarter for the past seven years. There's never been a point when people did not underestimate it, and I would say even today people underestimate it even still as we are standing here. So I've got people that would love or us to focus MicroStrategy Mobile on the BlackBerry. And we could be focused upon on the Microsoft mobile system the BlackBerry or a second and third cloud offering, our own cloud offering, and there's always someone that's willing to pay you $1 to do $1.25 worth or work, or $1 worth of work. I think the real challenge in this business is find someone that wants to pay you $1 to do $0.50 worth or work. And not to state the obvious because you are all financially very savvy. You know that the business school Harvard case study answer the question of, how do you spend $0.50 to get paid $1 is you've got to stay close to your asset base and stay focused upon your core business, and as you start to stray away from your standard business model, your revenue increments becomes dilutive. I think we are pleased with the cash flow that the Company's began to generate, and our plan has been to return the Company to a healthy profitability and also a healthy cash generation status so that we have options. And clearly the options for the cash flow are to invest it in sales and marketing activities. I think as people always ask me and generally ask me, will we ever do a buyback or will we use it any other way. I think our options to actually use the cash open up if we have a strong balance sheet and we also have strong operating cash flow. So our general view toward this is keep the balance sheet strong, get the business to operating profitability that's strong, work toward revenue visibility and growth visibility that we can see, and then we are in a good position to take advantage of whatever macro opportunities or micro opportunities present themselves. And you just never know what that's going to be in this environment. But I think that we feel that we have more options today and we would be more facile and more agile in taking advantage of those options today than I would have said a year ago. That's a good question. The short answer to the question is yes, I do you get makes us more friendly as a Company. We really think about the business now in three pieces. One part of the business is the product business, which is all about selling product licenses, and our direct sales organization is focused upon maximizing licenses and they get paid based upon the product licenses. If they're necessary or their support is necessary to drive any channel sale, then we actually cross commission then when we find that they're integral to the channel. And when they are not we sell direct. With regard to the second part of the business, we have a consulting professional services business, and that's run by a set of service directors, and their incentive is to sell high-margin trusted advisory business, and not to just grow the revenue of the business to whatever level they can. So their compensation is shifted to be margin-based, not revenue-based, and the field sales organization is no longer commission on the consulting business. So that makes us a bit more channel-friendly in two ways. Our professional services organization isn't trying to get big, they are trying to get high-quality, and in fact we encourage them not to do long engagements at lower prices and lower margins, but rather to do shorter engagements as experts and specialists at a higher rate, and then move from customer to customer and not loiter. I would rather have $200 an hour across 100 customers than have $100 an hour across 10 customers. So you have to work a bit harder and you have to touch and pollinate a lot more accounts. But as they do that, they open up the opportunity for our channel partners to go ahead and take the system integration business. That's what they do well, that's their core business, and so arguably it's before us to uphold closer to trusted advisory on our core platform. It's better for our channel partners to actually take that system integration business. And of course it's also easier for our channel partners to work with our direct sales organization because the direct sales organization can bring in the channel partners or bring it on people depending upon who's got the better offering And we do seem to have some anecdotal incidental evidence to suggest that's happening right now. It is more frequently the case that people in our field sales organization are bringing in our channel partners into deals. I think that will continue. We've also strengthened our business development function and we've aligned it with our product revenue goals. We have tightened up the management of our partner and our channels organization so that it now reports directly to <UNK> <UNK>, our President, so that he's in a position to direct opportunities and lead directly to our partners who may be resellers or [vars] as opposed to directly to our field sales organization. We think partners are in a better position to drive the business forward. You're welcome. I think we have time for one more question. I think our high-level observation is that we're about 20% to 25% penetrated in our existing base, and that the growth opportunity for mobile is to drive toward 100% attachment ratio and also to upsell, because someone that wants to use mobile is potentially going to use ---+ have a lot more users and a lot more use cases for it. So we think that we can increase the number of users within existing customers and then we can go and sell our mobile product to new customers within our install base. Thank you for your time. We appreciate the support of everybody on the call. Thanks for being a shareholder and we look forward to speaking with you again in 12 weeks.

2015_MSTR

2016

SWM

SWM #Sure, <UNK>. So as we mentioned in the prepared remarks, we continue to see solid growth coming from our water filtration business and we have also seen a stabilization of our business with customers that are aligned with oil, gas, mining activities and we have been pleased with some good growth coming from our Asia operations across a variety of filtration applications. The point that I want to emphasize is that we continue to prune our mix of industrial sales. As I mentioned, our focus this year is really to reposition DelStar on higher value applications and expand the profit margins as we are posting year to date. So on the industrial products question, I think the reason we are pointing to some decline is again our focus on profitability and the fact we benefit from growth on the higher margin filtration businesses around the world is kind of helping us to improve the mix and expand margins that way. As it relates to the exposure to the power segment, industry, our focus is really today on wind ---+ tailwind, blade manufacturers, there is some I would say timing of order issues that this industry presents and it is fairly concentrated. However for us, we are seeing steady activity there. Obviously we believe strongly that there is solid growth on selling those customers midterm. We had a very tough comparison as it relates to CTS. The Chinese joint venture, last year second quarter was the strongest quarter of the year and so when we report the profits and decline in volume versus prior period in the second quarter, CTS was the largest driver of that volume decline even though the [French] operation were also down year on year. And as it relates to CTS, there is typically is some timing of orders and continued lumpiness in one quarter to another and as a reflection of the weakness in 2016 in cigarettes being sold by our customers to the market and probably the result of some reduction in inventory of finished products within the wholesale and retail, [some in] the Chinese market, we expect growth from the quarter but certainly not at the level that we had built in the guidance which was double digit income benefit if you want from the joint ventures versus last year. So it is a combination of several factors. I would emphasize the strong performance of our Engineered Paper segments and the drivers being a combination of strong volumes, strong efficiencies within an execution of our plants, within our operations, we caution that we are excited to see the (inaudible) effect of our LIP offering and we believe that will continue in the second half of the year but I am very pleased with the execution of the segment, Engineered Papers overall. As it relates to AMS, strong execution of Argotec to topline and bottom line and improved margins from DelStar are contributing to the gain in profit margins and that is expected to continue. Yes, I think you summarized it well. Obviously currency is out of our control. I think right now we are seeing a very strong first half as it relates to the volumes. On the Engineered Papers side as we have said with the unbuild on the LIP question, it is really ---+ we believe we continue to gain incremental share. The question is how much of that incremental share gain equates at the end of the year which is what you said, the tailwind our business. And in terms of the challenge right now compared to our plan is essentially the weakness on the Chinese joint venture side which obviously we will continue to report on every quarter. So just to address the last point, this is not due to I would say increased competition on the recon side in China. China was the only country of size where there was continued growth in smoking in China and that stopped last year with a small decline. We believe this decline continues and that is driven by anti-smoking regulations and excise tax increases that the government has put on cigarettes. However, this is smaller compared to the challenge that we are referencing with the volume decline and part of that is our cigarettes sales and part of that relates to excess inventory in the supply chain through retail of finished goods, finished cigarettes and for CTS particularly, we also are dealing with another line of excess lead supply which actually is probably more pronounced than what we see worldwide. A lot of that has to do with the fact that the industry was growing strongly and then it started to have an inflection point downward and under maybe the current state regulated system, the adjustments in terms of production outputs for cigarettes and also [crops and now for leaf], have been slow to be made and I think that is the challenge we are seeing this year is a reflection of that. I hope this addressed 0your question. Thank you all for attending the call. We certainly appreciate your interest in SWM. <UNK>, <UNK> and I will be in our offices today and if you have any further questions, please give us a call. We certainly look forward to updating you on our progress and results again in November. Have a nice day.

2016_SWM

2016

PPBI

PPBI #There was immaterial expenses associated with the branch closures. We don't expect anything in Q4 related to the branch closures. Yes. I would not characterize it as same old strategy. We think the strategy is appropriate and correct. We have, as you pointed out <UNK>, have historically looked beyond just hold bank acquisitions within our market. We continue to look at opportunities as they come up. I would say predominately at this point it has been hold bank within California. And that's what we are going to continue to focus on, at the same time where opportunities come up beyond those markets, we will certainly look at those, or opportunities to add products that complement the commercial banking strategy. I think M&A and discussions are always evolving and buyers and sellers are reacting to what is going on in the markets and what they see the future opportunities both at their own organization as well as the combined organization. So you're always assessing those. We certainly, if there is something that we've looked at or had discussions on in the past, we are hopeful that we haven't burned any bridges if we have passed and that we are always open to re-engaging and having discussions. So those can occur as well. I would characterize it as, we remain acquisitive and interested in having conversations with any bank in California that has a business bank focus that we think combined, ultimately results in greater shareholder value for both organizations. The board assesses capital management every quarter. We just recently had a meeting and discussed it. At this point we think that there are opportunities to generate attractive returns by using that capital for either organic growth or acquisitions. But it's a dynamic process that the board is always considering and we take capital management very seriously. I would characterize Q3 as being very strong <UNK>. I would think of something in between Q2's run rate and Q3 from a gain on sale standpoint. You know we are looking at generally speaking the amount of inflows in deposits. The amount of pay downs that we're getting in the existing portfolio. What the new production looks like and in particular from both a commitment basis, because our most of the C&I our utilization rates have not changed, they are roughly about 45% on outstanding lines of credit. And then the actual funded balances that we get from various other lines. And so we analyze it and assess it and then at the same time, we may have a need and desire to buy more but in looking at what's available, we're just not comfortable with either the credit metrics, the underwriting, the analysis, the quality of the portfolio, or the yields on the portfolio, at what were willing to pay for them. So there is a number of factors that we assess and that we forecast each quarter, and then make a determination whether we have a desire. And some quarters, where payouts are slower, deposit inflows are less, production is strong, we don't buy products. So it's a dynamic process. We appreciate everyone joining us this morning on the call. If there are any additional questions, please feel free to reach out to either <UNK> or myself and we would be happy to chat with you. Thank you all. Have a great day.

2016_PPBI

2017

ADI

ADI #Thank you.

2017_ADI

2015

CBU

CBU #Yes, <UNK>, so if it's down 11 basis points I would assign 7 basis points of that to the pre-investment decision and I would use 4 as the core reduction. Without getting too mathematical, too, <UNK>, which is always my risk, the quarter has an additional day. And so that actually moves the number versus the second quarter or the first quarter. But I think a 7/4 split I'd be comfortable with. <UNK>, in terms of that, again, that $71 million of exposure, of which only $35 million is actually outstanding, a lot of this is operating lines for the contractor side of the business. But that is the loan asset that is criticized today within the pool. And I think our expectations will be completely based upon production expectations relative to the drillers. We like the portfolio that we have relative to other sources of cash. We like where we are from a collateral position with this portfolio. So we think we have, quote, the right set of partners. We'll acknowledge it's difficult for somebody to very quickly react their business to a 40%, or 50%, or 60% drop in utilization, field equipment or transportation equipment, which is the answer of what we've got with this one asset. Because if you look, <UNK>, at that list of customers, several of the largest, I think including ---+ I mean, two of the top three largest of those customers are pipeline and related infrastructure credits. Those companies are still doing somewhat better because the pipeline activity continues. It's really more of the drilling-related activity that's deteriorated. So just a little more color, the larger credits that we have are in the pipeline-related space. But I think it's clear there are many fewer drilling rigs in at least the market we're in down there in the Marcellus Shale right now than there was six months ago. And I think if that continues and oil prices continue to be low and drilling continues to be slow, I would expect that there may be other credits in that portfolio that could deteriorate from where they're at right now. I think, on the other hand, if oil prices move back up and that's additive for natural gas as well, I think drilling will resume. And that would be helpful. So I think some of it is just a function of the direction the market moves in and the duration of the downturn in drilling activity, which is impossible to predict. Yes. I think there's 14 relationships that have total exposure of more than $1 million. And a couple of those, the largest are, as I said, pipeline contractors that have about $23 million of the total related exposure. But I believe the outstandings of those are ---+ they may even be zero. I'm not sure about that. They're low, very low. But the outstandings are actually low although the total potential exposure is high. So, as I said, the bigger credits are the pipeline contractors. We have some construction, stone, quarry related credits that is another $16 million in total potential exposure. Again, the actual outstandings are about half what the exposure is. And the rest of it is smaller things that are, again, water haulers, fuel companies. And there's a couple that are ---+ I think two credits that are hospitality related. They're hotels. So that's kind of a brief summary of the majority of the portfolio. The only thing that I would throw in that category, <UNK>, would be the two hospitality credits that we have. The total exposure is about $7 million. Those were built in anticipation of the drilling activities. The credits have extremely high alternative sources of repayment for us in terms of guarantees and the liquidity-slash-network capacity of the guarantors. So it would be just those two and we're unconcerned at this point and I would expect we'll remain unconcerned about those two credits. Yes. We expect that the approval of the closing will happen in reasonably sufficient order here. And we're, as I said, very well prepared operationally to execute. There's been very good integration and teamwork with our folks and their team as well. So we are fully positioned to execute on the transaction at this point which, again, we expect will happen in reasonably short order. However, with that said, we also thought it would happen in July. But, we also understand in the environment we're in, a protested transaction goes through a separate level of review in DC by our principal prudential regulator. And they have a process they go through and they're conducting that process and we are cooperating fully and, again, expect approval before the end of the year. So, we're fully prepared to execute on Oneida. At this juncture it would not forestall us from considering any other high value opportunity. Sure. What needs to happen is we need to finalize regulatory approval, which we expect, as I said, will happen before the end of the year. And then we close on the transaction. So what pushed it back was during the public comment period, which is part of the regulatory approval process, there was a protest filed relative to, I guess you'd call it, fair-lending-related issues. Because the transaction was protested, it puts it into a different level of review, which needs now to go to the Washington office of the OCC for review. And they have a process that they go through, a program, to review any transaction that's been protested. So, we initially thought we would close the transaction in July, which was a historically reasonable timeframe for us based on the February announcement. And subsequent to the protest it went to the review process, which is a more elongated process in Washington. And so that's what necessitated the delay in the closing. Well, the protestor's comments were public and our response is public. The basis of his claims were fair-lending related and they were entirely inaccurate. But, needless to say, that is ---+ [it got] consequential to the process, which is if you have a protested transaction, it goes to Washington for this programmatic review. And so we're in the midst of that programmatic review currently. Alex, I would go with this, just to say that we're at a 3.65% level with essentially the leverage of the transaction already being in our P&L and in our margin results. So if you think about what we're going to inherit from Oneida, it's a little over $500 million of lending assets at yields a little bit above 4%. We will replace the funding that we've got on an overnight basis with core deposit funding that's actually lower than the borrowed funds that we're using today for not only for the strategy, but to fund the rest of the core balance sheet. So I think the number doesn't move a whole lot, just based on that. Now, that being said, Oneida operates in the same markets that we operate in, so the modest headwinds associated with asset repricing will continue to exist for them and their balance sheet, much like they exist for ours. <UNK>'s got that in front of him but, Alex, I'm going to tell you that I think the blended rates are about 3.75 and they are a little bit lower than the third quarter of last year, but actually pretty consistent with the first two quarters of this year. Yes. The most recent third-quarter 3.81; the quarter before was 3.67; quarter before that was 3.68; quarter before that was 3.70; and then the third quarter of 2014 was 3.61. So, they've actually been over the last four or five quarters in the 3.60 to 3.70 range, but it moved up to 3.81 for this quarter. And just another data point on the margin, something that we like to look at is, by portfolio, what is the yield of the originations in that quarter relative to the yield of the overall portfolio. And so if you look at all of our portfolios right now ---+ I won't go through all the details. But, in summary, the consumer portfolios we have, so consumer mortgages, home equity, auto lending, direct branch lending, all the consumer channels, the third-quarter yields of the originated credits were about equal, give or take a few basis points, to the overall portfolio yield. Where we're still experiencing a meaningful differential between originated yields and portfolio yields is on the business lending side. So, for the third quarter, our originated yields were about 50 basis points below the blended yield for the portfolio for the quarter. So we've kind of stabilized on the consumer lending side, on the commercial lending side. Still, I think as everyone knows, highly competitive in terms of rate environment right now. And so we would expect there would continue to be a differential between the portfolio yields and the originated yields on the commercial portfolio. We'll probably continue to see some decline in the yield on the commercial portfolio into 2016. Worth adding to that, though, is the fact that there's certainly a much larger proportion of commercial relationships that are originated at variable rates or index-based outcomes, as opposed to the lion's share of our consumer portfolio that gets originated at a fixed rate. The effect is about net neutral, Wally, under the premise of at a 25-basis-point hike with a pause we will have certain instruments that are index based so, again, assuming the underlying indexes, whether it's LIBOR or prime, actually move with the change. So we would actually have more assets that would reprice in that first 25. And without giving away a secret, we wouldn't expect to raise deposit rates much in the first 25. So I think we've actually said in the 25 with a pause we'd actually get a modest benefit. It probably would not move the needle relative to EPS generation, but it would probably be a net positive. Yes. I would go with that, Wally. That's been history and that's probably what we're using for one- to five-quarter-type projections for us right now ---+ understanding that as we just went through the detail on the lending side, that we have a larger than average invested portfolio. And if we're going to fully redeploy our cash flows off that, there's still a challenge out there to put the same type of quality assets on the books at existing yields. Boy, Matt, in front of me I do not have the combined quarterly number for that. But let me start with this, that from a practical standpoint the third quarter for us, at a $56 million run rate, as I said before, is a pretty reasonable place to start with in terms of our longer-term expectations. Now, as you know, we are the slave of seasonal outcomes in our footprint, which means that we get a little bit more expensive when we turn the heat on and we get a little bit more expensive when we plow the snow. Which means our utility and maintenance costs kind of ride up $0.005 per share into the fourth quarter, go another $0.015 in the first quarter and then start to taper back off for the second quarter. So as it relates to our general operating environment, we are the cheapest based in the third quarter of every year. Now, blending in the Oneida outcome, what we've said is that working off Oneida's base today we expected about an $8 million cost save off their run rate. And, again, in front of me I don't have what that is. We're still pretty comfortable with being able to deliver that kind of synergy-related or redundancy-related expense save as we move into the transaction, despite the delay. And actually we've probably honed our estimates a little bit better as to where those are. So, no difference from that. But the comment I made earlier relative to since we pre-invested the $300 million, their portfolio, what has to happen after the transaction closes is now you have the rest of the revenue generation activities of their enterprise, both banking and nonbanking, and you have the expense structure associated with both banking and nonbanking, and remind everybody we have to issue the shares. So we will have ---+ our expectation is 2.4 million shares to be issued. So, certainly we are still thinking that we will have accretion above just the, quote, redeployment of the securities. But it's probably not likely to be material for the first couple of quarters after we close. I think that's a fair question, Matt. At this juncture, we don't expect a material acceleration of operating expenses related to our work towards the $10 billion level. We've already begun the resource investment and the investment in DFAST. We've already begun our investment in the systems and processes around improving BSA, AML and compliance. So I don't ---+ I think it will be marginal. The incremental cost will be at the margins. I don't think it's going to be millions of dollars of additional expenses that are going to jump out. I think it will be marginal and it will be incremental and it will accumulate over the course of the next probably couple of years as we trend further towards the $10 billion mark. But I don't think ---+ you're not going to see anything that's going to jump out that's going to be a surprise. The significant matter, in my mind, either beyond addressing DFAST and what we think are increased expectations around compliance ---+ BSA, AML, and those kind of things ---+ is really the impact of Durbin. And so that's kind of the greater strategic challenge for us, which we have spent a fair bit of time at the board level and the senior management level addressing what those specific challenges are and what the alternatives and pathways are for us to hurdle that issue without impairing value to our shareholders. So I think we're in pretty good shape. But, to circle back to your question, we do not expect any ---+ the current significant expenses that are going to jump out at you, they will be marginal and incremental. I think if you called it ---+ if you took a run rate now and you said, okay, we're going be bigger so we're going to get a pickup as we get to be more than $10 billion and then you took the haircut off that, I think if you used $8 million you'd be in the neighborhood, give or take. We do have an authorization outstanding which we've had as a matter of just good discipline over the course of a number of years. I think we have not used it since the first quarter, I believe. Right, <UNK>. That's right. When we bought back I think it was a couple hundred thousand shares. At this point we don't have any specific plans to use it or not use it. As you observed, we have very strong capital levels. In fact we have what we consider to be excess capital levels, if you look at our balance sheet and what we think an appropriate, prudent level of capital should be against our balance sheet. At 10%-plus Tier 1 leverage, we have more than we need. And so the question of how much more ---+ we're going to be deploying some of that with the Oneida transaction, which is a 60/40 cash/stock mix. So we will be deploying some of that capital as part of the cash component of the Oneida transaction. And we'll look for other opportunities to deploy that capital as well. We have a history of increasing our dividend, which we certainly expect will continue, or least hope to continue. Expect is the right word. So, I'd prefer not to buy back the stock. I would prefer to use it for construction reasons that can help create sustainable and growing earnings capacity for shareholders. I think our shareholders expect us to use that capital to create a growing return capacity, whereas a stock buyback, the capital's gone and you're not going to get any growth out of that. It's a one-time benefit to shareholders, for sure, but that benefit never improves. Where if you deploy the capital in an M&A fashion, organic growth, any kind of growth fashion, maybe our nonbanking businesses which we've invested in and have grown nicely, you have the capacity to grow that benefit. So I think our preference would not be to do a stock buyback. I always kind of like doing small buybacks like we did the first quarter just to clean up over time some of the dilution from equity programs and equity incentive programs and the like. But at this juncture I think our shareholders would prefer we invest in the business and provide an opportunity for us to grow that capital benefit as opposed to take a one-time benefit for shareholders, which doesn't have the capacity to grow over time. So, I don't know if that was the answer to your question you're looking for, but ---+ Wonderful. Thank you, Shannon. Thanks, everyone, for participating today. We look forward to speaking again in January. Thank you.

2015_CBU

2017

SRE

SRE #Thanks a lot, Debbie First, regarding the cost of capital, we remain constructive on the settlement and believe it's in the best interest of all parties We continue to expect that the settlement or something in a substantially similar form will be approved Second, we're focused on executing the capital plan that we laid out at our conference by advancing major projects, in particular Cameron's Trains 1 through 3 in the marine pipeline We've also made near-term progress on several other projects At SDG&E, we signed five new contracts for battery storage facilities totaling 83.5 megawatt, 70 megawatt of which will be directly owned by SDG&E SDG&E also placed one of the largest lithium-ion battery systems in the world into service in the first quarter Many of you had the opportunity to visit SDG&E during the conference to hear about this and how it supports California's electrification efforts, as well as furthering the state's policy goal by reducing carbon emission IEnova expects to complete three natural gas pipelines by the end of the second quarter This also represents a combined investment of close to $900 million Each project you recall is backed by 25-year U.S dollar denominated contract with CFE Third, we're also looking at new investment opportunities Let me list a few examples IEnova recently agreed to construct a solar facility with a 20-year PPA for 110 megawatts with an industrial steel company This is the first bilateral agreement in Mexico under the new market for renewables where the off-taker is a private company We anticipate there'll more opportunities like this The Pima Solar facility is expected to cost roughly $115 million and be operational by the end of 2018. This project is also a great example of how we at Sempra leverage our experience across different growth platforms The success we've demonstrated in the U.S renewable business allows us to compete more effectively for projects just like this in Mexico We also made CPUC filings for additional projects representing the potential for almost $500 million of new capital To be clear, these projects were not included in the capital plan we outlined at the analyst conference These projects include an expansion of SoCalGas' Master Meter program for Mobile Home Parks and SDG&E's proposal to replace its Customer Information System Now, please turn to the next slide Our first quarter financial results was the strongest first quarter performance Sempra has experienced since it was formed Earlier this morning, we reported first quarter earnings of $441 million or $1.75 per share This compares favorably to first quarter 2016 earnings of $353 million or $1.40 per share On an adjusted basis, we reported earnings of $438 million or $1.74 per share Again, this compares to first quarter 2016 adjusted earnings of $404 million or $1.60 per share You'll also recall that we adopted the new accounting standard on stock-based compensation in the third quarter of last year This was applied retroactively to the first quarter of 2016, and accordingly increased earnings by $34 million in that period Now, let's turn to slide 7 to discuss the key factors impacting our result Our higher quarter-over-quarter adjusted earnings were driven by strong operating results, including $18 million of higher operating earnings from SDG&E in South America; $21 million of higher earnings at our California Utilities, this is largely as a result of the delay of the 2016 GRC file decision, these earnings were recorded in the second quarter of 2016; plus $29 million of higher earnings at Sempra Mexico related to the GdC and Ventika acquisitions, and higher AFUDC earnings Also improving earnings this year were $14 million of higher tax benefit and lower interest cost at Parent These items were partially offset by $34 million of tax benefits in 2016 compared to $3 million of tax expense in 2017 associated with share-based compensation And at Sempra Mexico, $25 million of lower earnings from foreign currency and inflation effects, primarily from current quarter losses If you will, I'd like to spend a moment on foreign currency You'll recall that our current hedging strategy limits our FX-related exposure on U.S dollar debt in Mexico While we expect some inter-quarter volatility from time to time, our hedging strategy over the full year is designed to reduce or eliminate expenses related to this exposure You'll also recall that there are other FX exposures that impact earnings, but not cash flow These occur in Mexico and South America and we do not hedge these additional costs These exposures have historically largely offset over a full year when the currency's movement (08:50) You'll find additional details on FX in the appendix And with that, we'll conclude with our prepared comment and start to take any additional questions that you might have Question-and-Answer Session Good afternoon, <UNK> On the $26 million improvement, roughly $15 million of that is from mark-to-market losses in the quarter last year And as Debbie indicated, obviously, the natural gas prices have improved just over $1. I would also mention that at the end of this year you'll think about the ENI contract will be rolling off And I think if I was to guide you in terms of how we think about the year, this segment we showed you at the analyst conference would report roughly $40 million to $50 million of negative results for the year, and we still think that's the best way to think about it I think that you'll recall that the – ENI was one of the original contracting parties at Cameron, and that contract is rolling off within the year And what we're really basically saying is, next year, you will not have the benefit of that contract Not really It's – I mean, it's probably about a $5 million benefit this year and zero next year

2017_SRE

2016

AMD

AMD #<UNK>re, <UNK>. So look, there is a lot of interest in the deep learning space overall, and certainly our GPUs are very applicable to that space. So when we look at competitiveness and all that stuff, we think we can be very competitive there. We will be talking more about our strategy in the coming quarters, so maybe let me refer to that, <UNK>. But I think suffice it to say, I think we looked at GPUs as overall secular growth, whether you're talking about consumer, professional workstations, server GPUs, or any of this machine learning area. So we're going to continue to invest and lean in, in those areas. I think if you look at a 14-week quarter, I think, <UNK>, you're right, it depends upon many factors. Our 14-week quarter is in the Q4 time frame, which is this quarter we are in. On the revenue side, I would say looking at it overall, there's not much of an impact, as the extra week falls during the holiday season, when a large portion of our operations and our customers are in shutdown mode. There is an impact on the expense side, but that's already contemplated within the guidance of OpEx that I gave, the $350 million due to the extra week. Absolutely, <UNK>. I think it's fair to say that we've been very prudent in how we've invested overall. If you look at our operating expenses, 2016 to 2015, although we've been relatively flat overall, we've actually increased R&D, relative to other elements of the P&L. But as we see revenue growth and as we've seen progress over the last couple of quarters, I think you've also seen us increase our R&D spend. I think there are several areas that we see as very large opportunities, and we talked about some of the graphics areas in the previous question with <UNK>. I also think in the data center, there's a large opportunity for us on the CPU side, as Zen fully comes to market. So I think we have an opportunity to invest a bit more in R&D as our revenue grows, but we're still going to be very prudent with how we do that. I think the key metric there in terms of being net income profitable this quarter, ensuring that we get free cash flow positive from operations for the full year, those are all important metrics for us, and we're going to continue to manage very diligently. Yes, so <UNK>, I think we would expect overall that the CG business or the Computing and Graphics business will grow in Q4. The EESC business will be down. And then within the Computing and Graphics business, I would expect growth on both the graphics, as well as the computing side. Yes, I think on the semi custom side, <UNK>, I will say that we previously announced three, and that's the number that we'll talk about today. Two of them are now known, and they're both in the game console area, one is outside of game console. I will say that we have some very good active discussions on future products and applications, and we'll update more as we get further along. Thanks, <UNK>. I would expect that there will be a relatively good initial demand for <UNK>mmit Ridge, that may be not quite at the seasonal patterns. From where we see, <UNK>mmit Ridge is playing in a space in the high end desktop, that we currently aren't offering a product. So we believe we'll be competitive certainly with Core I5 as well as Core I7, and we will be launching in those areas. We're very happy with how Polaris ramped in Q3. The customer demand across all geographies was very strong. Q3 was primarily a channel-based quarter. With our board partners, and as some of you noted, in the early part of Q3, we actually had some supply constraints, given the customer demand. We did catch up towards the end of the quarter. So very pleased with how that's ramped. I think it's a very competitive market. We've leaned into VR, and we've leaned into our work with CX12 and I think you can see in some of the benchmarks that we're doing very well there. As we go into Q4, in addition to the channel partners continuing to ramp, you should expect some OEMs launching in Q4 more broadly. And so Polaris is off to a very strong start. <UNK>re, <UNK>. Let me start with that. I think, relative to our second sourcing or our supply sourcing flexibility, I think we make it on a product-by-product basis, based on where we are in the business. So we will have multiple products in 14-nanometer and 16-nanometer that will be sourced across foundries, and similarly when we talked about the Wafer <UNK>pply Agreement, we mentioned 7-nanometer as being a key target node for that. Relative to how we make the decisions, I think it's a combination of factors. It includes the complexity of the product. It includes the timing, customers, all kinds of things. So I think that's part of our product planning process. I think that's one element, but frankly, I think what's more important to me is, I need to commit a strong, five-year product road map to the customers, and so we want to make sure that we have all the flexibility to ensure nothing happens. I'll give you just a little bit of context, <UNK>, because I think you know our business well. In this past six months, we've ramped five new FinFET products. It's the fastest transition we have ever made in a process node, and it's gone really, really well. And I think what's helped us with that is the fact that we've had two sources ramping at the same time. So I think our expectation is, we may ship some production samples in Q4, but the volume launch for desktop will be in Q1, and that's consistent with everything that we've planned into the business. And as it relates to server, I think it's a little early to tell. I think we'll go through our process, and our customers' processes, and we'll have more color on that, as we get into next year. If you look at it from an overall standpoint, let's talk about Q2 to Q3, first of all. Q2 to Q3, we had a significant ramp in the semi custom space, which led to significant revenue in the EESC side, and we were able to manage the margin flat quarter on quarter, which we are pleased with. Going to Q4, essentially with the Computing and Graphics business, that's what <UNK> said ramping, and then EESC business, in particular semi custom coming down. The gross margin is up a percentage point, primarily due to the mix in revenue between the two segments. I think right now, as you observe, it's through the end of Q3 we did have some remaining net proceeds from the capital market transactions. After completing what we did in the early part of Q4, we have about $162 million of remaining net proceeds. What we plan to do with it, I think from a long-term strategy, that hasn't changed. Our plan is to continue to delever the balance sheet, reduce debt towards our longer-term targets getting to the net debt cash neutral that I talked about previously, and getting the leverage ratio down to about 2 times from a longer term standpoint. Operator, we'll take two more questions, please. Yes. So I think if you look at our PC market share, as it's published by Mercury, we're talking about somewhere around 10%, plus or minus. I think we view that historically we've been higher than that in the PC market, and certainly the desktop market, especially the desktop channel market. We're fairly well-known by that customer set. So we're enthusiastic about <UNK>mmit. We think the performance is right on the mark with what we wanted to achieve. And we're hopeful that as we launch into the first quarter, that there will be a good, solid ramp in that business. I would expect certainly there are a lot of confidential benchmarks at the moment, but in terms of third party benchmarks, you would expect that in the first quarter. So, <UNK>, I think the game console shouldn't be really looked at on a quarterly level, when you're looking at sell-in and sell-out. It's so different from the other markets. I would say on an annual basis, everything trues up. The thought process is, in Q2 and Q3, there is a bit of build ahead as the customers are really building for the holiday season. And the customers do so much of their business in the last six weeks of the year. That's when all of the inventory is drained. My view is that if you look on an annual basis, the game console business is doing quite well. We expect units to be up. We expect revenue for the business to be up for us, and the quarterly transitions are less important. It's more, we want to ensure that we're meeting our customers' build cycles, so that they get to build everything that they want, and get it into their channels. But from my standpoint, I think it's a very well-managed system. Operator, that concludes today's call. If you could wrap it up, please, that would be great.

2016_AMD

2015

CA

CA #This is <UNK>. As you can see, our renewal yield was very strong. And even when you backed out the large system integrator you can see it was in the low 90s. We think being in the low 90s is pretty standard if you look back over the last few years. We'll have an occasional where we drop into the 80s and we usually talk to you guys about that. That tends to be more on the side of a company going through a merger or a divestiture than it is them abandoning our products, for the most part. I think when you look at it from the overall success of the business, the way we fragmented that, as <UNK> said in his prepared remarks, about platinum, named and growth accounts having sustained now two quarters in a row. Now, two quarters in a row aren't necessary that we've moved beyond but is really a very strong indication that that strategy is starting to take hold around the world. With respect to sustainability, we're seeing a lot more traction and predictability out of the sales force. I think our sales team has become much stronger. I'm much more happy with the sales leadership, I think, in both named and platinum. They consistently follow the techniques and processes you would expect from a modern software organization. We still have some work to do with our partner community. That's something we're really paying attention to. And we've got some great products that are really driving high growth. APIM, for example, is a best-in-class product. We had PPM which is another SaaS product, which grew 70% quarter over quarter, like we put in the press release. So, we have a lot of focus that we've put on products, and the sales force really understands how to articulate that value. So I'm feeling more optimistic that we are into an upward trajectory. Now, on the Mainframe side, as <UNK> talked about, we're going to see some lumpiness based on some of the renewals that we go through, which is just natural to our model. Correct. What I would say is, there's two things. Inside of that you have a little over 0.5 point of our services backlog, which is always going to be current. And as we've been saying, services over time will continue to go down, by design, as we build our products that need less and less services. So, that drags almost half of that current point down. And the second part is really just as you look at the timing of renewals. So, you look at the back half has more than the front, and then you start to reach into next year. That's just more timing as we see them come out. To your point, over time we believe, and if we continue to have sustained improvement, we will be able to offset both of those. So, as we close the gap from prior quarters, we have a few more quarters before that will turn positive. First of all, if you take a look over the last year, the majority of the large-scale public hacks has been the lack of identity management with respect to machines, where a user has either control of root and gets to other machines and imposes their user identity on those other machines, or even inadvertently opens up ports on a machine that allows hackers to get into it. This is a very important piece of technology. We have a very comprehensive PIM solution. Xceedium just adds to that PIM solution. So, this was additive to an already existing portfolio. And what we have, which I think is differentiating the market, is we have a much broader solution that covers more use cases with respect to privileged identity management. There are a number of different competitors in this space. I think it's a big market. I think there's room for multiple players to be successful. I think the differentiating factor for us is that we are not a small company. We have global breadth and depth. We are continuing to invest large sums of capital into this solution. And, secondly, we have adjacencies in and around the PIM solution so that when a customer comes to us we're taking a more holistic look at protecting their infrastructure. Sure. If you look at our portfolio, and I think you heard <UNK> talk about, we had UIM was up, APIM was up. We had a strong APM management, PPM, SaaS. And then you get into, of course, what we just purchased, so Xceedium and Rally. But the entire security portfolio did very well this quarter. Around the horn, we actually did pretty well, which is what <UNK> was trying to talk about earlier. This was more than just the system integrator having a strong influence on the quarter. We saw a large part of our portfolio perform well and it was fairly balanced. We had another strong quarter out of Europe and we had a strong quarter out of North America. We had a strong quarter out of Latin America despite Brazil, so it was the rest of Latin America. So, really the only geo that was a little soft was APJ. It was a very good ES quarter. And when you put on top of that the Mainframe, it was one of the best quarters we've seen in a while. Sure. This is <UNK> again. Remember, that's a ratable transaction and that will be spread over five years. So, as you see that go out over time, there will be some benefit in the out quarters, it's just muted because of that. When you look at the rest of the portfolio and how well we performed, what we were trying to say is what we saw in Q1 was a slight trend of about 1% of our ES business went ratable more than our historical. We saw that again in Q2. Not that two quarters make a consistent line for Q3 and Q4, but we were giving headlights that if that trend continues it will drive the revenue in near-term year to the lower end of our guidance. To the degree they flip back to their historical rate of attach versus not attach, you would be closer to the other end of guidance. All that revenue, though, we'll capture. Now we're just talking about the timing of when that revenue will actually be on the P&L. So, all in all, we've had a very strong first half. Now we're talking about when that revenue will show up on the P&L. What we're seeing is it's starting to move more towards the out years. We're excited by open source. We're a huge open source user and we view that as a catalyst for our business. At the end of the day, you have to remember the heritage of this company has always been in managing heterogeneous platforms. We're probably one of the largest manager of open-source heterogeneous platforms out there. If you just take a look at our APM solution, APM 10.1 was launched just last week, and what we added into that release would both support a Cloud Foundry and Docker, two very powerful open-source systems that are getting extraordinarily quick traction in the market. I know we've been managing multiple versions of Apache for years with our APM solution, which is all open source. When you take a look at the UIM product, the UIM product supports almost all the popular open-source Linux platforms including Red Hat, SUSE, CentOS and Open SUSE. And I think that as we see more innovation coming out of open source, folding that into our platform on both APM and UIM, I think that makes, once again, a differentiator. We're the only ones that have the wherewithal to invest in multiple platforms as they come out instead of waiting for them to be thrown into either legacy systems or for an open-source project to start to manage multiple heterogeneous systems. We just haven't seen a lot of traction in the open-source community to do that. I think that that's a unique place where we can fill a void. No, it's not a macro issue. What we've seen, we now have a very methodical approach to how we build pipeline and then move pipeline through the system. And our headlights into Q3 and Q4, especially on those single product type transactions where named and growth tends to be, we can see what our pipeline is for Q3 and what we believe would be the right yield from that, and we see it for Q4. So, it's nothing more than sharing with you guys headlights into what we see as our pipeline mix between Q3 and Q4. If you back out, we would be down to a little over 4. So, 4.1. It is up. Last year it was in the mid 3s. No. What you see is you had a lot of transactions in the quarter. As I said earlier, you had a very strong Mainframe quarter. Some of the Mainframe customers want to be locked in because they see the value of this platform so they want to get locked into a three-, four- or five-year transaction. So, they're buying a ahead capacity in anticipation of growing into that. It's actually a very healthy statement when you see that type of a mix with the Mainframe customer set. Sure. I'll hit the geographic. We had a very strong quarter in North America, as you would expect. It's the biggest market for us to sell in. And I was very happy with how the sales team progressed deals and were able to hold the line on pricing, as well as get strategic accounts to buy more software. I got to tell you, I've been very happy for the last several quarters with the EMEA team. They've been able to really drive the value proposition. They're getting into the right accounts, they're talking to the right people, and they've had strong, steady improvement across the board. We have had rough air in the last few quarters in Latin America. I was happy to see Latin America really push and do a nice job this quarter. But most impressive I was happy with the way that that management team attacked the market. Knowing that Brazil is a tough market, they repositioned some of their sales capacity outside of Brazil and did a nice job outside across LA. Japan is a market that we really count on to be able to drive growth. Their quarter was a little soft and the rest of APJ was pretty much in line with what we usually see. From the Mainframe side, as you had asked, we didn't see any particular price pressure, if you're asking from a dollar per MIPS standpoint. So, that was in line with what we had anticipated. We did see a nice take up, though, with the capacity people were looking for, which is always, as I said earlier, a positive sign. And we think we're still in line with our low single digit revenue over time, which is in line with the market. Thank you again for joining us this afternoon and for your continued interest in CA. I'd like to leave you with the following thoughts. First of all, we had a very strong quarter in terms of new sales. Secondly, our renewal yield was in the high 90s, the best we've seen in years. Excluding the large system integrator, the renewal was still in the low 90s. Third, following our strong second-quarter performance, we expect a softer third quarter. And then, lastly, our product and sales execution are beginning to show measurable improvement. We look forward to showing both of these drivers and the fruits of our work at CA World in the next month. Thank you very much and have a great night.

2015_CA

2015

LMAT

LMAT #Thank you, Whitley. Good afternoon and thank you for joining us on our Q4 2014 conference call. Joining me on today's call is our Chairman and CEO <UNK> <UNK> and our President <UNK> <UNK>. Before we begin, I will read our Safe Harbor statement. Today we will make some forward-looking statements, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, forecast, and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 25, 2015, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we will discuss non-GAAP financial measures, which include organic sales and growth numbers, as well as EBITDA. A reconciliation of GAAP to non-GAAP measures is contained in our press release announcing the quarter's results and is available in the Investor Relations section of our website www.lemaitre.com. I will now turn the call over to <UNK> <UNK>. Thanks, J. J. Q4 2014 was a very productive quarter. I will focus on three headlines. First off, Q4 was a record quarter up and down the income statement. Secondly, our recently launched HYDRO Valvulotome is performing quite well and, finally, our newly acquired Omniflow II biologic graft is performing ahead of expectations. As to our first headline, in Q4 we posted several financial records: record sales of $18.7 million, up 4% versus Q4 2013; record EBITDA of $3.6 million, up 85%; record op income of $2.7 million, up 134%; record operating margin of 15%. Also, net income in the quarter was $1.9 million, up 157%, and earnings were $0.11 per diluted share, up 120%. As to our second headline, the 1.5 millimeter HYDRO Valvulotome features hydrophilic coating and a smaller diameter. Our sales force has rallied around the HYDRO launch, and vascular surgeons have roundly praised the new device. As part of our country by country hard switch launch, in November the HYDRO became the only <UNK> valvulotome in the US ---+ available in the US, excuse me. Australia and Canada converted to the HYDRO in Q3 2014, and Europe is slated for conversion throughout 2015. The HYDRO represented 54% of all valvulotome dollars sales in Q4. Indeed, the launch perked up the entire valvulotome category, which grew 7.4% on a constant currency basis in Q4. In February 2015, the valvulotome ASP in the Americas was 16% higher than in February 2014. The HYDRO heart switch is similar to a Gillette razor upgrade. The customer pays a premium for a noticeably improved shave. We currently have 50% to 60% market share in valvulotomes, and we believe the HYDRO launch should increase our share. As to our third headline, we acquired the Omniflow II biologic graft in August 2014 and spent the last four months of 2014 buying out dealers and converting to a director hospital channel. On October 28 earnings call, we projected $3 million of Omniflow II sales in 2015. So we were pleased to see a Q4 2014 annualized sales run rate of $3.6 million of the Omniflow II product. We acquired Omniflow II biologic graft for three reasons. Number one, biologic grafts are associated with less infection than standard synthetic grafts. Number two, biologic grafts are a $30 million niche market with limited competition. And, finally, number three, <UNK>'s 31 sales reps in Europe are a superior channel than the previous patchwork of independent distributors. At the acquisition's six-month anniversary, our European sales force has been more enthusiastic about Omniflow II than we had expected. Stepping back for a moment, our often stated financial objectives are fairly straightforward ---+ 10% annual reported sales growth and 20% annual op income growth. For the full-year 2014, we posted 10% sales growth and 40% op income growth, and at <UNK> op income growth feeds acquisitions and dividends. You have seen us execute four acquisitions in the last 18 months, and recently the Board approved our fourth straight annual $0.005 per share dividend increase. Q1 2015 dividends will be $0.04 per share, a 2.1% yield. Thanks, <UNK>. From a bottom-line perspective, Q4 was an excellent finish to the year. As you may recall, we posted a small operating loss in Q1 2014, executed significant cost cutting in Q1 and Q2, and over the subsequent quarters reported operating income of $2 million, $1.9 million and $2.7 million. These results represented operating margins of 11%, 11% and 15% respectively and were driven by increased sales, as well as lower operating expenses. Indeed, Q4 operating expenses totaled $10.1 million, a full $700,000 less than the year earlier period. Our gross margin story in 2014 was less dramatic, and we exited the year at 68.7% in Q4. With no new large scale integrations or disruptor product additions, over the last three quarters of the year, our gross margin hovered consistently around 68.5%. As of late, gross margin has been characterized by several offsetting or transient items, and going forward I expect the gross margin to remain in the 68.5% range and increase marginally to 69% by Q4 of 2015. Any analysis of sales, gross margin or operating income, however, must be viewed through the prism of recent foreign exchange swings. As you may know, about 60% of our sales are transacted in US dollars. In Q4 2014, we estimated that the strong dollar decreased our revenues by $670,000 and our operating income by $330,000. Looking towards full-year 2015, we estimate that the strong dollar will decrease sales by approximately $3.7 million, reduce gross margin by 100 basis points and reduce operating income by approximately $1.8 million. Turning to guidance, we expect Q1 2015 sales of $17.8 million, a reported increase of 6% versus Q1 2014. Excluding the effects of changes in foreign currency exchange rates, this represents 12% sales growth. Excluding currency effects and acquisitions, in other words organically, this represents a 7% sales growth. We also expect Q1 2015 operating income of $1.4 million, an 8% operating margin. For the full-year 2015, we expect sales of $74.5 million, a reported increase of 5% versus 2014. Excluding the effects of changes in foreign currency exchange rates, this represents 10% sales growth. Excluding currency effects and acquisitions ---+ in other words, organically ---+ this represents 6% sales growth. We also expect full-year 2015 operating income to increase by 19% to $7.5 million, representing a 10% operating margin. With that, I will turn it back over to the operator for Q&A. Jason, are you out there. Sounds like Jason is not getting to us. Maybe he is on mute. To the operator, this is <UNK>. Maybe we move to the next question or see if that person also has the same problem. Sorry about that, Jason, if you can hear us. Yes, I think there is. It is all baked into guidance for 2015. You have to know that could we thought a lot about what the full guidance for revenues was going to be for 2015. So that's already in there. But if you want to split out mentally, yes, you are looking at at least in Q4 the annualized run rate was $3.6 million for Omniflow, and you can think of the Angioscope as unchanged from what we talked about before. I think just because Q4 annualized at $3.6 million, I don't know necessarily if we are saying it's different in 2015, but one could follow through on that line of logic. I see what you're saying. Okay. So, on the press release, in the back you can see a schedule of sales by geography, and we don't break things out anymore granular than that. But, you know, that we are selling in those geographies from discussions with us historically in the UK, in Australia, maybe a little Norway and, so, there are some other currencies that run in and out of there and then about what you see on that grid. But really the euro is the main piece for you. Yes, I think we were talking about it at the Board meeting last week, and the euro was about 90% of the topic year because the euro has moved so violently. Canadian dollar is a little bit in there as well, and then the Swiss franc obviously is going the opposite direction of those two. But our Swiss business is only around $1 million a year, so it's not that germane. We certainly do, and so right now, as it is constituted, we are telling you we have 81 reps on the payroll, 41 in the Americas, of which four are Canadian and the balance are American, 37, 31 in Europe, nine and Asia-Pac Rim, for a total again of 81. I think we were talking in those terms last time, so I will continue on with that. Usually we try not to break it out. But I will ---+ I think that the total sales dollars for the year, <UNK> ---+ I know that's not exactly what you asked ---+ was about $16.5 million, including allocated shipping, and you can assume that that last quarter was a fourth of that. I don't have better data right at my fingertips, unless anyone else on this call does. <UNK>, you got that. So, I would say a fourth of that, call it $4 million, $4.1 million. 23% of sales in Q4. Yes, that's a better fact. 23% of sales exactly in Q4, <UNK>, and the sales are what, [$18.7 million]. It's a big one in 2015. I think we've been pretty good about not advertising this. This is not really unit growth category for us. We're assuming flat, maybe up a little bit unit wise, but pricing wise, yes, we are thrilled to get that 16% pricing number in February in the Americas. Largely speaking, the heart switch is all done in Australia, Canada. The US and now Europe is all about this year. You can think one or two countries a month for 12 months and then Japan at the end of the year. So, yes, and in answer to your question, yes, big growth driver. Of course, XenoSure we expect to continue to be a large growth driver and then also Omniflow. We talked about that. We know that we booked exactly $1 million of revenue in Omniflow in 2014, and we just were talking through what is the guidance for 2015. Maybe it's $3.5 million as the previous gentlemen was discussing, so maybe that growth is [$2.5] from 2014 to 2015 for Omniflow, and then you got XenoSure and the valvulotome, and those are the big guys for growth. Sure. We didn't ---+ during the quarter, at the last call, we also had 81, <UNK>, but your broader point is correct, which is when we came to talk to you guys in April, we had 87 reps on the payroll, and now we have 81 at this juncture. So seven are down, and it's actually four of them come out of Europe, one out of the Pac Rim and one out of the Americas. And then in final answer to your question, yes, we do plan to replace them. We are talking about 89, 90 reps by the end of the year, and we feel like the organic growth can get scooched up. We had a 6% organic growth for 2014, and we feel like we can do a little better with a little bit of rep growth. I would say, <UNK>, first of all, you are correct. We have been in the 6.3% range the last couple of quarters. Now you are in the 5.8% range, and I would take that going forward we want to see that go higher. I think we would want to invest a little bit more in R&D, and we will probably work to do that over the coming year. You can see us a year ago in the high 7s% range, 8% range and, so, we would probably try and work to get at least partially back there as the year goes on. Yes, so there's a lot of offsets in gross margin going back and forth. Some of the higher level ones are with the [B&I] acquisition, there was a inventory writeup for purchase price accounting that is going to go away. So we're going to have some accounting help there. I think also on the XenoSure manufacturing line, we're going to see some improvement there as we drive XenoSure costs down, and that will flow through the gross margin as the year goes on. And, certainly, since Q4 from 2014 to 2015 through the year, we will have ASP increases that will help as well. So, I think those are the good guys going through gross margin, <UNK>, and then some of the offsets might be mix and certainly FX. Okay, sure, yes. <UNK>, I would say as you look at the last couple of years, do remember that at the very end of Q3 in both 2013 and 2014 we bought sizable companies, which then artificially, if you will, pumped up Q4 revenue, so just keep that in mind. But in general, the pattern for us as we look at revenues is quite clear, which is Q1 is always a light quarter, and Q3 is always a light quarter. Q2 is really good, and then Q4 winds up being a record, if you will, inside of those four quarters. So, Q2 and Q4 are the biggies, and then because we are such a European business in Q3, it is light in the summer, and Q1 I think you are recovering from the end of the year where the sales reps are all rallying to get to their numbers. Interesting, we didn't break that out as we were giving you this number, so we don't have a breakdown. We have budgets. I would say you can feel pretty confident that our international business is running really well right now, and, so, I would say at a very high level, the lion's share of that growth is coming out of international. In particular, Europe just continues to excel even our expectations. So, I would say it is a European number with the US bringing it down a bit. Yes, I would say we obviously have completed the transition quote-unquote and gained some good stability a number of quarters back in XenoSure manufacturing, and now it's about squeezing costs out of that room. And I think that's already started, and it started as part of the cost-cutting efforts last year, and it will continue through this year. So I'm going to say, if you think about it, in a little bit of a linear fashion throughout this year and then maybe it starts tailing off in subsequent years, but I think you're going to get some decent traction this year. Sure thing, <UNK>. It's <UNK>. I would say we have been ---+ I've been busy restocking the pipeline since the couple a deals in Q3, and obviously we have been focused a lot around (inaudible) integration. We have a good number of targets. The criteria has not changed. In general, I would say they are a little bit larger than what we have looked at in the past. So, just doing what we do, waiting for our pitch and trying to find the right target to swing at. Right. <UNK>, your question ---+ this is <UNK> ---+ your question, your voice cut out right at the meat of your question. I think you are asking about us redoing the sales force back up to 90. I'm going to answer like that. So, the great thing, the exciting thing about <UNK> right now is that we have access to so many countries, so we get to really look at what are the best cities to go into, and, so, for us, you're going to see places, we think, this year like Shanghai, like Beijing, like Auckland, a couple in Europe. I can name Rotterdam and Stuttgart and then us fill in in the US with four or five. So, it will sprinkle around the world. I think the bigger opportunities are Asia-Pac Rim and then filling in Europe because we have so many great products over there that have all the approvals over there, and in the US we don't quite have as many devices because it is a little bit more difficult to get some of these products approved in the US. So, a sprinkling all around the world getting up to 90. I hope that answers your question. That's a great question, <UNK>. I hadn't really thought about it that way, but I do think we do want to stay to this goal of, hey, we're going to try to grow revenue for you 10%, and I do feel like the organic numbers for the last few ---+ put the last six years together, they come out at 7%. So I do think the management team does feel some kick in the behind that we need to buy stuff. We need to set up distribution relationships with this. I think we have been pretty selective and judicious. I think you are saying that in your question. I don't think we will do anything dumb, but I do feel some pressure to go out and deploy the capital. We have $18 million of cash on the balance sheet. We expect, we're not really guiding on cash, but we expect to be fairly cash flow positive here. And so it's got to go somewhere. It is going into dividends and acquisitions, so we do feel like we're an acquisitive company, and we take pride in that, and we want to keep pushing on that. I hope that answers my question. <UNK>, you got a different ---+ slightly different angle on that or ---+. I would just add that acquisitions certainly give us size and critical mass and give us leverage, and the way this business model works is we get bigger. We add more reps, more infrastructure, and we get stronger. And, so, yes, acquisitions, it has been a fundamental part of the business plan for 17 years. It will continue to be. But, as everybody knows who watches <UNK>, we're deliberate. We are never desperate. We are somewhat price sensitive. We will wait for our pitch, but if we see the right target, we will execute on it. <UNK>, I hope that gets to your question from two angles. That's interesting. I'm going to say I don't have to deal with that topic right now, because it's not in front of me, but that's an interesting topic, <UNK>. I can't answer that. It seems so hypothetical out there. Right now I do think as we try to transmit to Wall Street what our capital allocation strategy is, I think we are aggressively pursuing acquisitions and dividends. So, <UNK>, this is <UNK>. Thanks for the great question. Terrific question. I do notice that you are cherry picking off my best op margin of the history of time of 15%, and then you're going from there and I appreciate that. I would say just to temper this all, we saw this coming three quarters ago. We do still feel like the year was a 9% op margin year, and our guidance is telling you that we are 10% next year. Definitely, you can hear through <UNK>'s comments about acquisitions, we feel strongly that if we can get bigger, we can really start pulling operating leverage out of this business, and I think for the first time since we have been doing this, remember we had three straight years of $4 million in op income, and we have finally broken out of that to the $6.3 million number. So, we are starting to show op leverage, and I think you are right on, when we get bigger, we feel like we can do better than a 10%, but I hesitate to guide up to what we can get to. We do know from this year in Q2 11%, Q3 11%, and Q4 15%. We do know that these numbers are possible at <UNK>, although I think you can hear on some of these questions about sales reps and R&D, we probably need to tweak in a little bit more investment into the sales force and R&D, which might take you down a little bit from 15%. I hope that gets to part of your question. Maybe J. can take it more from a CFO perspective. Yes, so, <UNK>, if you think of us as a 8%, 9%, 10% op margin company, because that's annually where we have been as opposed to 15% of the last quarter, and then you think as we grow where we are going to get leverage, you can probably go to selling and marketing as we fill out existing geographies and cover fixed costs in those existing geographies, and maybe you can get a few points there or a couple points, and then G&A you don't need another CFO or CEO, and you're going to get some points there. And R&D, as <UNK> said, probably not want to continue to investment spend there, and then maybe even get a little bit in gross margin as time goes on. So, you can probably tally those us and think that maybe there is some blue sky out there potentially, and we're certainly not guiding that as you get larger in scale, you can get some better percent, lower percentage of sales numbers in those areas. Yes, absolutely, and as <UNK> was getting at, it is driving our desire to have a larger company, which pushes us to do acquisitions, because of what you're after, which is op margin and leverage. Yes, so, the XenoSure piece we haven't really quantified for you. I would say improvements are baked into guidance. So, as you get from the 68.5% to 69% over the course of the year, that's a piece of it. You may get some decent improvement in the product line itself, but remember it is some fraction of the total sales pie. So it's not going to be the driver of gross margin improvement, but it will have a marginal impact. Sorry, I didn't answer your question directly. As it relates to Asia, we have filed in Australia, feels like it's about 12 months, 18 months away. We filed in China. It feels like it's about 24 months away, and this isn't quite Asia but Russia we just filed, and then specifically on Japan, which is probably what you're getting at as well, we still have not committed to what is almost certainly a three-year-ish clinical trial with $1 million or so in expenses. So we are still sorting out what we should do in Japan, but certainly China and Australia we are chasing down. So, just to ---+ I hate to micromanage that question, but we are talking about 10% reported revenue growth, not organic growth. But I know you still have the question about are there other places where we want to get growth through pricing and, yes, we do. So we didn't talk much about our pipeline of new products today, but we do ---+ we got a first-in-man for what we call the long AnastoClip, and that's happening in Q2, and we think we're going to do first-in-man for our shunt flow monitor project, and I would say on that second project that's a $10 million category for <UNK>, and is largely an American product line where price flexibility is the highest at the hospital level. And, so, I think to your question, I think what you are seeing us try to do with the valvulotome, make a big change and then get a price hike back for that, I think you're going to see us try to do on another one of our, call it, mega categories, which is the shunt business, when that thing gets rolling, my guess is you don't see any impact, material impact from that project until 2016 and maybe even into 2017. But, yes, we are going after that, and it's our third or fourth largest product line.

2015_LMAT

2016

MPAA

MPAA #Well, again, it is an unknown. <UNK>, I would love to come out and say we're going to grow 20% nonstop. But I think over long periods of time, when you look at the annualized and I am comfortable that that can happen, quarter-to-quarter is a little more tricky. We are lapping now some significant new business we got last year. So that factors into it. And then the timing of the orders of the customers. So, yes, I think it is conservative. We prefer to be conservative than more aggressive. Again, I think that the outlook as we go down through the next fiscal year, we will continue to grow this business pretty significantly. And we would not be targeting under 20% growth on an annualized basis. The quarters are going to fluctuate up and down. Again, I am not implying that we have a weak quarter on our hands. I am trying to be conservative. I don't want people to get ahead of their skis. I think we're going to have a strong quarter, but let's see. Yes. I think if you looked ---+ if you look at our internal discussions of where we need to be as a company, we think we are in the near-term, over the next couple of years, a 20% growth company. But it is not going to all come in one quarter. It is not going to all come organically. There is going to be all sorts of different things happening. We have a lot of opportunities, and we are just managing through capital allocation and infrastructure to deal with growth. And we feel like the industry, again, there is $106 billion, at least, of opportunity out there. And we are trailing 12 months ---+ I am not sure what our revenue is, but [$360 million] or something. [$370 million]. [$370 million] trailing 12 months. We are a baby in terms of the opportunities this Company is going to have. And as long as we keep our service levels up and our integrity up in dealing with the customers with the right product quality, we are going to see this growth for a number of years. Yes. I think it's a similar profile to a master cylinder, is probably somewhere between master cylinders and wheel hubs, it is a great product line. We already have customers signed up for it. And I think it is a nice margin product line as well. So, we are excited. We think the return on capital is going to be good there. We have a number of other product lines that are being evaluated for launch. So, we think there is a nice pipeline there. And we think we have got a nice acquisition pipeline and we think our organic growth from new customer share is going to be strong. And we think our organic growth from new customer share in all categories will be strong. So, we have invested a little bit, <UNK>, in some incremental G&A, I think, to support our acquisitions group. We have some new technology that we are working on that will help with our backbone and our customer support. And so our marketing backbone has been increased. So we have got a little bit higher G&A expenses, but it is all because we anticipate the growth coming in the future. I think it is going to be a little bit higher. Again, we have added and expanded the marketing department significantly. We have got new R&D efforts that will go along with new product launches, and we have got a full-time dedicated Acquisitions Group that are working as well. And then we have got a full-time dedicated new Products Group. So I think we are sort of at levels now where I think you will see it stable. We have ramped it up a little over the last 120 days. But it's ---+ I think it is now at a rate that is a stable rate to be able to handle the next wave of growth that we expect. Yes. I think we get into the end of all that, thank God. And yes, I would expect that to go down significantly. In terms of legal expense, you mean. Go ahead, <UNK>. This is <UNK>. So in our reconciliation tables, we actually back out those litigation expenses. So, in the past, we have been averaging a few-million dollars per quarter. This past December quarter, it was [a little under $109,000]. So we are already seeing it coming down. But we do adjust for that in the reconciliation tables already. Yes. So that is ---+ I mean, if you are looking at it, <UNK>, there is always going to be some legal, but obviously you are picking up $2 million, $2.5 million a quarter, at least, in opportunity. You know, the ---+ I think, Jim, you may be getting a little ahead of ourselves. I mean, I think we are going to see growth in all of our product lines this year. We certainly feel like our momentum on picking up new market share is strong, and we think that the organic growth in [pesos] we have will continue on. So, I think that you are going to see a nice organic growth, whether that is going to be a third of it, a half of it, or 1% or 2%, I don't really know. The acquisition front is much more hard to forecast what that percentage will be. I mean, there are acquisitions of companies in the hundreds of millions of dollars and we are looking at acquisitions of companies in the $5 million. You know, so ---+ which have strategic opportunity for us going forward. So until a deal happens, we don't know. And the new product launches will continue to be strong. I mean, they gain momentum as they get launched. Generally, we launch with one or two customers exclusively in the beginning and then several leading them out. But I can tell you that, on the acquisition front, on the organic front, and on the new product front, there is lots of opportunities right now for the Company. We are busy sorting through what the right things are to do and the right capital allocation, and being cautious that we manage the growth in a profitable manner. So, I wish I could give you more granular data. Maybe next quarter we can focus on that. But overall, lots of momentum in all of the areas. Yes. Well, on the first part of that question, I think there is a new owner. It is still early to tell what they are going to do or not going to do. So nothing I could really talk about there. On the second part, I mean Pep Boys was acquired. There is a new owner there. We do supply 100% of Pep Boys. We think we have a good program, have been a great supplier to Pep Boys for a lot of years. What they do there is, I think, somewhat of a mystery to the industry right now. You have got a company that is focused on the professional installer business now entering into the retail arena. I think they have announced that they intend to keep the retailers as well as the commercial business ---+ the bays. So, we wait to see. I think that the owner is now financially strong. They have, it looks like, a good management team in place and, hopefully, they will continue to appreciate the great services we do and we'll have some more growth opportunity with them. Sure. So it is going to be working capital. It is going to be mostly inventory growth ---+ to fund the growth. Yes. We have a ---+ look, we have a lot of new business coming in, and we are building inventory and we are busy. And so, the cash flow is deployed really in growth, other than the legal settlement that we had, which took some cash and we recovered some of that. Any weakness in what business. Not at all. No. Our business is fundamentally strong. I mean, it could be stronger if the weather were more extreme, but it is strong either way. All of the elements that are out there right now, whether it be potential recessionary ---+ pullback in the growth of the economy or recessionary economy, fundamentally lead to good opportunity for us. Every indication are out there in our marketplace that people are continuing to keep their cars longer. As you keep those cars longer, the replacement rates go up. The average complexity of our parts continues to go up, so that average price point over time will go up. The interest rate outlook, we think, we are comfortable with. The new car sales, it doesn't really matter. They can sell a lot of cars and they don't have to sell a lot of cars. All we care about is that, fundamentally, the car population continues to grow and that is what is happening regardless. Currency translation is all favorable for us. Our footprint is favorable. I mean, we are doing business in low-margin countries. You know, our fundamentals are exceptional. And whether ---+ again, I don't want to be too euphoric, and that is why I am trying to keep a lid on it, but our fundamentals are all good. We think, as an entity ---+ we have just come off our planning meetings; as an entity, we have lots and lots of opportunity to really grow this business over the next couple of years to be a significant growth company. No. we don't ---+ no. Not that I am aware. I mean, generally, it is the opposite. We have excellent relationships with our customers. (multiple speakers) And our suppliers for that matter, which is equally as important. So I mean, again, I said the other day and I ---+ and certainly the markets do whatever they do and that is nothing we control. But our fundamental business is, on all fronts, positive. I mean, there is always challenges with the business, but our business is fundamentally good. <UNK>, do you want to comment on that. So, historically, Q4 has been a little bit higher, but I think we are seeing ---+ it really depends on customer order patterns and timing of shipments. Yes. Q4 ---+ again, there is no reason why Q4 won't be strong. I do think weather is affecting it a little bit, but ---+ No. So it just ---+ it depends on the patents and replenishment orders. And there's just so many variables. The problem that we have in terms of giving guidance is that one order, as a percentage of the potential revenue for a quarter, could significantly affect a quarter. If that ships on the first day of the next quarter or two days earlier, in this quarter, you have a variance in what your cut-off is. So, it is very difficult until you get much more deep into the quarter. Now, back orders and all the update orders, and all of the activity that are happening is positive right now. We thought a $380 million year would be a fantastic year, and certainly we feel that that is going to happen and hopefully we will do better. Thank you. I'll take it ---+ it's <UNK>. And, first of all, I want to thank everybody for the continued support. I know the market conditions and the public markets are tough at this point, but, as an entity, we continue to focus on our knitting, which is doing a good job for our customers and supplying high-quality product on time. And we look forward to updating where we are as we go down the road. We look forward to speaking with you when we host our next conference call, which will be our year-end fiscal 2016 conference call sometime in June, and at various conferences in the interim. And we thank you again for your support and we appreciate your interest.

2016_MPAA

2016

HBAN

HBAN #Hi, <UNK>. <UNK>, there are two components in that line, right. There's the commercial, the treasury management revenue and then there's the retail side. Keep in mind that in the third quarter of 2014, we made our last fair play adjustment of $6 million. So you're seeing the first full quarter of kind of year-over-year growth off of the consumer side of the business reflecting the great job we do in bringing new households to the bank. And I'll also tell you that treasury management had a great year in terms of product capability, penetrating the customer base and fee growth. So certainly encouraged by what we see this quarter and definitely expect the trends to remain intact, especially relative to what you saw previous to this quarter. Well we continue to invest in the business. That's part of the plan. We've been investing every year. We pace that investment and taper it off. And then there are other categories of expenses that we would look to. And some of that would be some of the business expansion in terms of people and related. Certainly if we didn't see the revenue, the incentives and commissions would be adjusted. We may adjust some of our discretionary investments in a number of areas that we routinely want to look at. An example might be marketing. So hopefully that gives you ---+ there is a smorgasbord that we're working with. We do this routinely. It's part of what we deliver to our Board. If for some reason the economy starts changing, then we have a series of levels of contingent adjustments. Thank you. Thanks, <UNK>. Hi, <UNK>. So we ---+ we're obviously always looking for acquisitions. I think we've been very consistent in how we talk about it. I would say for us, there's really no change in terms of activity. We look at core banking franchises. We look at opportunities like <UNK>quarie that we had this year and continue to look into six to eight footprint contiguous states. So I'd say, <UNK>, there's really no change in how we see the environment or how we approach the environment. It's probably too early to make that call. I would say it's been consistent in terms of what we see happening. Thanks, <UNK>. We're very pleased with our fourth quarter and certainly the full-year 2015 results. We delivered 13% annual growth in earnings per share and 4% annual growth in tangible book value per share. 2015 results reflected a 12.4% return on tangible common equity and a one-on-one return on tangible ---+ return on assets. And as we enter 2016, I'm optimistic ---+ equally optimistic, I should say, with regard to the year ahead. Our strategies are working. Our investments continue to drive results. And our execution remains focused and strong. We are gaining market share and we are taking share of wallet. So we expect to generate annual revenue growth consistent with our long-term financial goals and we'll manage our continued investments in our businesses to the revenue environment. We continue to work toward becoming more efficient and improving 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 and driving solid, consistent long-term performance. So I want to thank you for your interest in Huntington. We appreciate you joining us today. Have a great day.

2016_HBAN

2017

CHK

CHK #Thank you, <UNK>, and good morning. 2016 was a year of significant progress and substantial achievements for Chesapeake Energy. We are stronger today than any other time in our history. Looking back across this challenging period of low commodity prices, we've successfully delivered on our strategy to delever, derisk, and simplify our balance sheet while driving improved capital and operating efficiencies and also driving industry-leading low production costs. The Company is positioned to differentially perform through further debt reduction and development of our high-quality asset portfolio in the coming years. The most significant accomplishment for 2016 included successful liability management initiatives that resulted in reduced debt, refinanced near-term maturities, and restoring a reasonable cost of capital. Other major accomplishments included: one, divesting the Barnett asset, eliminating an annual negative impact of $200 million to $300 million in EBITDA, principally due to NBC payments and burdensome gathering and firm transportation agreements associated with the asset; two, renegotiating midstream contracts including new gathering agreements in the Powder River Basin and Mid-Continent assets; three, divesting of more than $2 billion in non-core, non-operated, and/or low EBITDA-generating assets; four, significantly improving capital efficiency with new technology, better engineering, and greater recoveries resulting in higher quality, more efficient well economics; and five, reassessing our entire portfolio and confirming the long-term economic strength of our asset. We have previously shared the strength of our portfolio consisting of 11.3 billion barrels of net recoverable resources, 5,600 locations with an internal rate of return of greater than 40%, and a projected growth rate of 5% to 15% annually through 2020 at normalized flat pricing of $3 per MCF and $60 per barrel Of oil. We crushed our cash costs in 2016. We reduced our total production expenses by approximately $336 million, or 28% per barrel of oil equivalent of production, compared to 2015. We also reduced our total GP&T expenses by approximately $264 million, or 7% per BOE of production, compared to 2015. These improvements total $600 million of annual savings and we are not done. Our total production in 2016 averaged over 635,000 barrels of oil equivalent per day, down just 0.3% after adjusting for asset sales, while we reduced our total capital expenditures by approximately 53%. This excludes approved property acquisitions and the repurchase of volumetric production payment transactions. These accomplishments reflect the power, strength, and resiliency of our portfolio and the focus of our talented employees. Last week we released capital and production guidance for 2017. We are committed to improving upon our 2016 performance, continuing the transformation of our balance sheet, and increasing our productivity and capital efficiency. We include this service cost escalation in our capital guidance, but we will utilize our operating strength and purchasing power to minimize any potential cost increases. We will be working to accelerate at our stated debt reduction target of $2 billion to $3 billion over the next few years through additional asset sales. Our capital program is designed to achieve cash flow neutrality in 2018 as we progress toward our targeted net debt to EBITDA multiple of 2 times. After planning for a lower turn and line count in 2017 in the first quarter, our production volumes are projected to return to growth in the second quarter of this year. We believe this strong growth trajectory will be driven by our oil assets, most notably the Eagle Ford, the Mid-Continent, and some exciting progress coming from the Powder River Basin. Meanwhile, we expect our gas volumes will be primarily driven by the Haynesville and Marcellus. We are moving to more pad drilling in all of our operating areas which we anticipate will generate a strong production ramp in the second half of the year. Our production guidance for 2017 is projected to deliver an exit-to-exit increase in total production from the fourth quarter of 2016 to the fourth quarter of 2017 of approximately 7%, of which oil is projected to have an exit-to-exit increase of 10%. We expect this oil growth to accelerate even more in 2018, with oil production projected to increase from the fourth quarter of 2017 to the fourth quarter of 2018 by more than 20%. Our portfolio across six major basins is getting stronger due to growing use of longer laterals, more aggressive fracture stimulations, and the shortening of our reinvestment cycle, all leading to greater productivity and higher cash flows for Chesapeake. To reiterate, total production growth through 2020 is expected to range between 5% and 15% per year. Our corporate strategies and financial discipline, profitable and efficient growth from captured resources, business development, and exploration remain unchanged. 2017 is an important year for Chesapeake, a year where we pivot from defense to offense. As noted, we are committed to removing an additional $2 billion to $3 billion of debt from our balance sheet and our plan to execute upon this reduction sooner rather than later. We are focused on expanding our margins and, thereby, our EBITDA through greater oil production and our unrelenting drive to lower all of our cash costs. I will now pass the call to Nick to share some additional financial information. Thank you, <UNK>, and good morning, everyone. We are very pleased with our 2016 results and the significant improvements in our capital efficiency, asset performance, cost structure, and liquidity that <UNK> highlighted in his comments. Starting with our liquidity position; as a reminder, we have effectively taken over $4 billion of leverage in preferred stock out of our capital structure over the last 16 months. That's $2.6 billion of debt, inclusive of our December 2015 debt exchange, and $1.4 billion liquidation value of our preferred shares for common shares. Importantly, through these transactions and several incremental refinancings completed in 2016, we removed or refinanced approximately $2.7 billion of near-term debt that was maturing or could be put to us in 2017 and 2018 primarily through refinancing, with only $77 million remaining do or putable in that period. Today we have liquidity of approximately $3.4 billion including a projected $300 million of cash on hand at the end of February, with no borrowings outstanding on our revolving credit facility. We are pleased with this liquidity position, but our goal is to reduce our debt even further and as <UNK> mentioned, we remain prudently impatient in working toward removing another $2 billion to $3 billion of debt off our books. We continue to achieve significant progress in lowering our production expenses and expect these to decline even further in 2017 on a BOE of production basis. However, our G&A ticked up slightly year over year and will continue to increase in 2017, primarily as a result of costs moving from LOE to G&A following our significant asset sales. We continue to see opportunities to improve efficiency around our reduced operating footprint, having sold nearly 10,000 operated wells in the last year and with that having removed the maintenance of over 30 field offices, significant IT and communications equipment, invoices to process, and decreasing the burden on several other administrative functions. Given the movement between G&A and LOE, we believe the best way to measure the improvement is to note that our combined LOE and G&A per BOE of production decreased by 8% year over year. We also continue to see our GP&T expenses improve, decreasing by approximately 7% on a BOE-of-production basis in 2016 and forecasted to decrease by approximately 10% in 2017. With our exit from the Barnett Shale, the restructuring of our Mid-Continent and Powder River Basin gathering agreements, and amendments to certain firm transportation agreements in the Haynesville and Eagle Ford operating areas, we have seen a reduction, a $5.5 billion reduction in our future GP&T commitments since the end of 2014 and a $2.9 billion reduction since the end of 2015. We have additional commitments that will step down going into 2018 as well as expected synergies associated with volume growth in our key basins, and so we anticipate continuing the trend of decreasing GP&T costs on a per-unit basis beyond this year. This work continues in 2017 with our buy-down of certain crude oil and natural gas transportation commitments this quarter for roughly $390 million in cash. The buy-down of these contracts will remove approximately $560 million from our future transportation commitments, further optimizes our long-haul transportation plans, and significantly improves the margin in our marketing group over time. We have provided a slide on this earlier today, projecting how these buy-downs have improved our GP&T commitments in the coming periods. We also continued to improve our netbacks for our liquids production in various basins by accessing new markets for our hydrocarbons and optimizing our point-of-sale further downstream in several cases versus at the wellhead. Our marketing team continues to have success in improving our realized pricing for our productions and we look forward to further success. On the A&D front, with the closing of our two Haynesville asset packages this quarter, we have received approximately $2.2 billion in net proceeds from asset sales that were signed during 2016. Like we have said before, we expect to continue to optimize our portfolio in 2017 and use asset sales proceeds for further debt reduction. Finally for 2017, we currently have approximately 71% of our projected gas production hedged at $3.07 per MCF and approximately 68% of our projected oil production hedged at approximately $50.19 per barrel, using midpoints of our production guidance. With these hedges in place, our cash flow is not materially impacted by the recent decline we have seen in natural gas prices. We have also hedged a meaningful portion of our 2018 gas production at a little over $3 per MCF. We have stated before that our 2016 achievements have allowed us to focus on our operations instead of our obligations. Our return to production growth during 2017 sets Chesapeake up for an even stronger year in 2018. This production growth and the associated growth in cash flow accrues much more directly to our equity holders than in the past, given our significantly decreased total leverage and improved capital structure. We look forward to executing on these plans to deliver these enhanced returns to our shareholders. That concludes my comments. I will now turn the call over to the operator for questions. Happy to answer that, <UNK>. This was an oil basis pricing differential calculation in one region for a discrete period of time. It has nothing to do with our reserve engineering and is isolated to that one regional oil price calculation. The impact to our financial statements was not material and is laid out in the table in the 8-K. Sure, <UNK>. I'll comment and then <UNK> may want to chime in as well. Basically, as we look at the year and the capital expenditure program that we have laid out, there is a significant amount of flexibility that we've built in based on taking advantage of either pricing, opportunistically looking at where we are testing new things, where we can drive the greatest value. There's not anything significant to take from that. It's just a normal shifting around of the program to optimize the best economics at the current time. <UNK>, do you want to share anything else with that. Sure. <UNK>, if you'll recall, we talked about in the Marcellus and the Utica we've combined that into one business unit and the driver there was not to make a massive business unit, but to allow a lot better rig sharing. So when you look at the Marcellus and the Utica you need to look at it as a combined venture, as far as drilling and completion. We are moving rigs back and forth between those, depending on what wells we need to drill and what wells we need to complete, and it really creates a lot of efficiency for us in a regional area. In the Mid-Con, what we are looking at is we have two rigs running in the Oswego right now. The cycle times are really impressive there; the wells are performing great. The Wedge play, it is evolving, and as we get more and more data we will start to look at do we ramp up, how do we manage that program forward. So where we are today on the slide, you will see in the deck is kind of a static position and as we get more data, we will make that call. <UNK>, this is <UNK> <UNK>. Since the time of the analyst meeting, we talked about putting a rig in play in November; we've done that. As we started to review our opportunity set and the potential in the Powder, we made the election before the end of the year to move in a second rig that is just going to be basically Sussex-focused. So where we are in the basin today is we are completing and actually drilling out our first Turner test now, so that will be online in the near future. We've drilled a Parkman test on the same pad; it will be online in the near future. We have gone in with the completion crew and begun completing ducts, so our production volumes are turning around now. And then the Sussex rig, the second rig, was in the field and spud on the first Sussex pad the first week of February. <UNK>, as Nick noted, the hedging position we have for the year is quite good at approximately 71% at $3.07 per MCF, so it doesn't material impact the program for 2017, the volatility that we are presently seeing. Keep in mind though that the flexibility of the Company today is much improved and where we sit as we look forward to that capital deployment and the long-term pricing forecast, we can make adjustments in the program based on that volatility, if we deem it appropriate and in the best interest of our shareholders to do so. So I think that if you see continuing weakening and pricing we will adjust our capital program and redirect it at other opportunities in the portfolio. The great thing about the Company is the strength and resiliency of the portfolio. We could shift rigs around and drive greater value from other areas if the pricing conditions dictate. We haven't set an exact price. As we've shared in the past, we have excellent breakeven economics in the Haynesville and they continue to get better with the improved capital efficiencies that we have recognized. I think basically in the $2.50 to $3.50 range is where we anticipate gas to move with the seasonality. If you saw it dip below $2.50 for an extended period of time, we would probably start making adjustments, but we are ---+ we haven't really said at a specific price we would move or adjust at. The key is, as you know, we are focused on driving the greatest value where we can capture the greatest returns and we will make those changes immediately as we deem appropriate that we can drive value for another area. Yes, so during the fourth quarter we exited our Devonian shale position and associated with that exit, we repurchased a VPP. That ends up getting booked as an acquisition to repurchase the VPP; those assets then move off with the acquisition. We had noted at the time that we said we were going to divest of the acquisition that it would be a nominal net amount of proceeds to the Company, and that's where it came out. We had a nominal amount of proceeds that came in after repurchasing the VPP. No specific plans for acquisitions in 2017. As I'm sure everyone is aware, there are a ton of opportunities out there to look at. And we have a very active and well-functioning business development team that works with our business units to look at opportunities in areas where we think we have good operating synergies, we have good geologic knowledge, and we have an ability to add value to things that we would purchase. That's always put through a lens of the purchase price and the opportunity relative to the set we have in front of us today, which is a significant drilling inventory at a high rate of return, as we have highlighted for everyone before. So we are very active in looking at things that come across and we are pretty tough judges of what meets the bar that we would consider moving on and we will continue to do that. If we move on something, know that it would be something that we really felt was impactful to our portfolio and we thought we could generate great returns on. We have got so much in front of us today that that is a very high bar. We've stayed away from giving any specific color for the calendar year 2017, other than to note that it's important to the Company to make progress towards our goal of debt reduction. It's important to the Company to make progress towards rightsizing our oil and gas portfolio, and we will make progress on that this year. Exactly how much, when, what assets, we're going to stay away from as it's market-dependent on so many fronts. We're working a number of things today and you can expect that we will continue to progress that. But in terms of a specific point of guidance, we are going to continue to just point to the multiyear goal of $2 billion to $3 billion of debt reduction. <UNK>, this is <UNK> <UNK>. Two things. One, the Barton well was a longer lateral ---+ it was the longest Niobrara lateral we had drilled and it was the largest completion. We had several Niobrara ducts available to us and so when we went back into the field, the completions team took a look at the completion design on that Nio well that was the Barton, which is basically the best Nio well in the country from a cumulative basis. The new wells have received the larger frac. They are not extended lateral so they didn't perform quite as well as the Barton, but the initial well that we brought on is still making about 1,230 barrels of oil a day ---+ BOE a day. 60% of that is oil after almost 30 days online, so we are seeing a response that is very positive. Now we're going to move; as we go into a new Nio program down the road, we will be putting longer laterals and larger fracs on those Nio wells and expect to have good success. That well actually it's performing on a cut basis, as far as oil, pretty much as expected. What it did do is it also validated the spacing assumptions that we are going with now. With a little bit further spacing between wells gives you a lot higher sustained pressure and lot higher deliverability at the wellbore. So everything we told to analyst day seems to be playing out pretty well. We will have a lot more data as we move down the road. The completions team and the drilling team are really focused on this and I think we're going to do a really good job and deliver what we said at analyst day. Great, thank you. We appreciate everyone joining us today. 2016 was a great year for Chesapeake and we look forward to building upon that. What you can expect is continued improved performance across all aspects of our business. We look forward to sharing that with you in the coming months and we appreciate again you joining us for the call. Thank you.

2017_CHK

2016

ELY

ELY #We're trying to be transparent. Thanks, <UNK>. Sure, <UNK>. Thank you so much for the question and, you know, it gives me an opportunity to just compliment Harry Arnett and the Marketing team and what a wonderful job they've done in really creating energy around this brand. Both in traditional and in the new age mediums. The Callaway Media Productions our digital strategy has been kind of break-through for this industry. And it's creating a lot of energy and excitement. It reaches a young part of the golf community which is very brand enhancing for us. It reaches them in a manner which they enjoy interacting. It makes the brand more accessible. And, you know, as we look at that going forward, we really do see it as a comparative advantage for ourselves. So I'm really proud of what they've done and you're nice to ask about it. You see our brand metrics in terms of the brand strength appeal to more younger golfers, veteran players, etc. , no doubt all of that is related to all elements of our strategy but certainly the Callaway Media Productions is part of that. Thank you. Thank you very much, everybody for calling in. And we look forward to updating you after Q2. Have a great season.

2016_ELY

2015

MTD

MTD #Maybe to add to <UNK>'s comments probably to Brazil and Russia we would both say the impact of energy prices has probably been as big on purchasing behavior as the impact of the currencies themselves. Actually, we are working already on additional plans, but of course we will see a little bit how things will play out in the coming weeks and months. But I'm actually optimistic that we are going to implement as we were actually planning. We have really great ideas. The teams have further expanded their analysis to identify new opportunities and I have multiple projects that were already submitted and I'm excited in that context. Maybe also want to say that the ones that we initiated late last year are progressing very well. The big majority have been recruited and are on boarded and now in training mode. I'm actually optimistic that we are going to see a good impact from it and in that sense if things don't change, we would go in another way. China is disproportionate and Russia are both disproportionately low on service. So our service growth is basically the same assumption that we started the year with which is kind of a mid single-digit kind of number and we would expect no reason to change that number. Maybe I think you were just asking about geographic differentiation. We did see some improved growth in the ---+ there was better growth maybe in the Western part of the country, but still proportionately that's a smaller piece compared to the traditional, the manufacturing markets of China, Shanghai for example. We opened up our Chengdu plant this quarter. That certainly is a nice addition but still proportionally the west is relatively small compared to those traditional areas, but there was better growth to your question. Okay. So our Japan business was up let's call it low single digits. But I wanted to highlight that against plus mid teens number a year ago because of a project, so I would expect that number to be modestly improving as the year progressed. That's okay. We can hear you. And just to be clear, <UNK>, you're referring to China. I want to highlight maybe that we need to have continuous product innovation and come up with new products in all the different product categories. They are important to expand our lead versus competition and it's critical also to drive the replacement business. But typically when we introduce a new product it benefits the product category, but for the whole group it is not so important. It doesn't really move the needle that much. I am excited about the two products that I just mentioned on the call, no question. But they are not going to make a huge difference, but they are important for the next couple of years. So I think every time on every quarter's call I highlight two or three product innovations that we have to show to you guys how broad our innovation is and we are going to continue. Actually for the full year we have a very nice product pipeline pretty much across all the different businesses and. Yes, I feel good. For example, just remember last year we talked about product inspection products that we launched and we're talking about earlier this week how that had really an impact, these product launches. I would have a hard time to single out one product for you here. No, we are really being steady. We are in the market every day. We don't try to time the market at all. It is really ---+ <UNK> has the program where she basically buys every day and we have in that sense a very consistent policy. I think we have accepted currency volatility is probably something we're going to face also for the future. We have significant ones in the recent past, particularly around the Swiss franc, but of course the dollar appreciation is also very real and we expect that to go on. The key measures that we take against it is first on the pricing side. We always look what kind of opportunities this offers and how this relates to competition, but also can we adjust and also we sometimes do very targeted mid year price increases to mitigate a currency impact. And then currency changes can also have an impact on where we locate resources and we take measures around that one. This typically not quick hit, but things that we do all the time we have had, for example, in recent years programs in Switzerland to address things. We have, for example, built up low cost country service organizations and these are certainly things that we will continue to do in the coming years I think <UNK> and I will take this when maybe together. I think the first one we will probably on the industrial side say it's the smallest one. We do see that lead times on bigger projects that the government is behind directly or through state-owned companies maybe take a little bit longer. But it is not ---+ I don't think of that as the biggest one and probably the other two ---+ Actually, we see some delays but this can also be related to the leadership. The new leadership team really putting in place all their people around the different decision-making bodies and that probably slows down things. We certainly have concrete examples if that's the case, but otherwise I wouldn't connect it to your first point. The second two probably ---+ it's tough to judge. Maybe I would lean to the second one being a little bit more because of what I commented on with regard to the replacement cycle, but it would be tough to quantify it. If I take early indicators like leads, (inaudible) I don't see supporting points. On the contrary, I would say overall it continues to be healthy and, yes. And our second quarter looks good which is the place where we had the most visibility. Sure. Yes, probably mostly the former. Initially, we were seeing this January/February thing and we were kind of explaining it with that, but when we had actual results of March and visibility also about Q2 we wouldn't connect it to that. I think no, that's not the explanation. I think it's very broad-based. I really feel that way. Of course the European numbers are so strong, particularly if I look on a two-year base that I feel in particular confident about that one. But actually also the US numbers and for emerging markets like southeast Asia, India and so on have also very high confidence. For some of the other markets it may be a little more difficult because I have less data points from competitors to really compare. But honestly it's really broad-based across the different business lines and across the geography. So, out of the program that we initiated last year, we're talking about roughly 200 resources that we added throughout the world. Most of these resources as we've mentioned before are hired, onboarded, and now kind of in training. So you can imagine that the start now to have some impact, but it takes time until they really have an impact that is significant to us. Typically, it takes six to nine months to cover the cost and from then on actually we start to have a good payback. It increases actually more on a linear base than exponentially and I would typically expect four to five years until additional sales person plateaus in terms of a sales cost. I think that's an indication so it is a pre-investment which is to break even rapidly and actually a better contribution particularly in the second year. I might add, <UNK>, that as a reminder we had a smaller field turbo program including in Europe in 2013 and clearly we think part of our success in Europe and in the Americas, but particularly Europe, is partly related to that. Yes, there's nothing special there. (Inaudible) interest rate analysis for you, but we're cash flow kind of ---+ you know our full-year number and you know that the first quarter is typically a period of time where we're more of a net borrower ---+ we're anyway for a full year a net borrower because of the extra repurchases, but in the first quarter is the weakest quarter cash flow wise. So, with regard to its relationship to interest expense, I can't think of anything that's changing or that has changed. You've seen what we have done debt issuance wise. So we did 190 bps in the first quarter and if we can say somewhere in the 1.75 to 2 range I think that's a realistic expectation. Our view on M&A really remains unchanged in the sense that M&A is part of our strategy. I'd like to do M&A cases, but they need to strategically really fit into the franchise. If they are close adjacencies, if they add from a technology standpoint or gives us an opportunity to consolidate our market position in certain country, we are going to pursue it. It's actually much less financially driven in the sense that I say foremost strategy needs to be right and then the financials need to be right in terms of business case and we remain very disciplined on that one. I do not foresee a change in that one even with what you alluded to about the nicely improved profitability. I think the nicely improved profitability gives us the opportunity to further invest in organic growth and the field turbo is a good example of that. So, I don't expect a change in the strategy, but I want to reinforce even that we have wanted on very few M&A's in the recent quarters that we are very committed to it and we are actually constantly working on cases. We have a good pipeline and (inaudible) screen kind of cases that we try to nurture. Also, we are now in an environment where people are willing to pay premiums for acquisitions and here we stay disciplined and so we will see how it plays. Jon, <UNK> and I both continue to believe that in the medium term we can't off of let's call it mid single-digit organic growth or currency growth deliver mid teens EPS growth in a constant currency environment. And while the absolute margins are getting higher, we have one of our biggest programs that we've invested in to drive margin enhancement with the Blue Ocean program being an enabler. We're only roughly halfway done with that so there is more to come in terms of that. And then of course we're saying that knowing that the amortization is kicking in on that intangible asset and that will mean even better free cash flow yield in terms of our EPS numbers as well. So we think the organic ---+ there will be nice acquisition opportunities, but we believe that the organic financial story has many years to run. Your numbers are high. And the way I want you to look at it is the field turbos are part of us to achieve the mid single-digit growth that we are always talking to you guys. So we are not suggesting here with field turbos that we got to accelerate our growth and you're going to suddenly see higher growth rates.

2015_MTD

2015

NATI

NATI #It's a good question, <UNK>. Specifically on Q2, we're glad to see the spicy FX variability, and as we've built in natural hedges over the years to be able to deliver record operating income in the second quarter and a significant improvement in operating margin Q2 this year over Q2 of last year. Looking to the investor conference next week, we will be directly tackling this issue and will hang out our plan for operating leverage for 2016 and discussing the longer term evolution of our business model. So this will be our front and center topic for next Tuesday. So great question. I wish I could give you more specification on it. But we've served and continue to serve a large number of applications for this customer. I believe we are very well-positioned and have delivered a lot of value. Obviously, it's been somewhat volatile and it heavily depends on their technology cycle. So I think we're really well positioned, but it's way too early at this point to get specific on expectations for 2016. Realistically, it's more likely in January or even potentially April of next year. I think our position with the customer is as strong as I think it's ever been. Number of employees was 7,209. It's up about 1% year-over-year. And the average order size is $5,150, roughly. That was about down 5% year-over-year, mainly due to the large customer. <UNK>, this is <UNK>. We don't give the explicit breakouts. The color we provided on the call was a number of the broad-based product areas, software, data acquisition, our embedded products serve a very broad base. In constant currency, we're up. In dollar terms, we're down slightly. Instrument control is clearly where we saw the most weakness. And then RF was where we saw the strongest. Just to calibrate, add a little bit of color on that, <UNK>, too. Obviously, the year-over-year decline in revenues essentially, even in dollar terms, mainly coming from the largest customer. Any applications we were serving that customer with last year in Q2 were tests in nature rather than embedded, if that helps. Maybe I'll start off and let <UNK> jump in. When you look at it from a geographic point of view, obviously, we show some of the bigger headwinds we're in the emerging market countries. That's certainly something I've seen as a common theme running through quite a few earnings press releases, outside of just currency themselves. And then I'll let <UNK> maybe weigh in on the industry side. If you look at end markets or industries, obviously we're seeing a lot of weakness in the energy segment. And that's to be expected. Change in oil prices that have occurred over this year. Also seeing some weakness in the mobile communications overall. On the flip side, we're seeing good growth in automotive transportation industry, as well as the mill aero. And in both of those segments, it's actually growth on top of growth last year. So that's part of the balance we are able to see in the broad base of applications that we can serve. Looking forward, obviously, from a revenue point of view, <UNK>, we're expecting things to be fairly stable as we go into Q3. And looking with the success in managing through the currency issue to be guiding to a record operating income for a third quarter in Q3. Sure. Last time we engaged to any kind of significant degree was in, I believe, in 2010. But as we look forward ---+ we'll talk a little bit about this next week in the investor conference on capital management ---+ but our priorities remain number one, for dividends, number two, opportunistic stock repurchase, and number three, strategic acquisitions. And as always, we'll be happy to report on repurchases once we report earnings each quarter. The amounts ---+ when you're being opportunistic, you're being opportunistic. So I think it's a fair description of our stance in Q2. Obviously, we look at how much stock is available to purchase at a price that we think make sense, and we don't want to be too influential on the market in any one time period. Thanks, <UNK>. That's okay, Rick. We'll forgive you. Rick, this is <UNK>. I'll start with just one additional comment on color with the industry. Another area, not a significant portion of revenue, but the mining ---+ the energy, and then as we've seen with commodities, the mining industry. And so there's obviously certain geographies, Australia, very well known. We've seen a significant impact in that regard. So that's one factor. But it's like the Middle East, Russia. You're going to see that impact. And then it's been, we've seen this before that when government budgets in those countries tend to get constrained, we also tend to see some spillover effect on our academic business in those regions, as they hold on the purse strings. And in general, while saw a weakness in the PMI as we went through the year, it seems to have stabilized in the Americas. We'll see how it plays out going forward in the second half. But certainly, automotive, mill aero, semi are areas of strength in the Americas. It did. As we set expectations, I think last quarter, the impact in Q2 as we go through this transition is relatively modest. And we hope to build on that as we move forward. Yes. You would be pretty close. I mean, close enough that it would be useful, yes. On the small ones, you definitely can, because it's a large number of orders. But if you look at a geographic distribution, I think this should be your key question. That 6%, I think you could apply it to those buckets and be fairly close, Rick. In local currency, that would be the math, correct. So if you look at the, let's take sales and marketing, a simple one, when you look at overall decline and expenses year-over-year, as we talked last quarter, as we went through Q1, we're seeing this steadily strengthening dollar. And we were responding to that. Obviously, we saw an impact on our gross margins as the dollar strengthened through the first quarter. And we were adjusting for that, obviously in Q2, as we said in April. Similarly, to the effect on revenue, it also has an impact on our expenses. And the vast majority of that year-over-year decline in expenses is directly related to the strengthening of the dollar when we convert our international expenses back into dollars. Overall currency exchange reduced our operating expenses by about $10 million. And in talking last quarter and several quarters before about the natural hedge that we have on currency, and that's part of that natural hedge. That's the way to understand it. Sequentially, as we had in Q2 of last year related to the timing of our software releases, typically coming into NI Week, we had a reasonably big increase in software capitalization in Q2 from Q1. It was flat compared to Q2 last year. But that has an effect on the geography of R&D spending sequentially. Year-over-year, it netted out. It didn't have an impact. But if you're talking sequential it would. And a point I'd like to make here, when you look at the performance of the Company in this time frame, with the headwinds we are facing, as we reported for Q1 and Q2, from currency and from our large customer, and obviously, we've given guidance on this now for Q3, you're looking at a number for the full year that approximates roughly $100 million worth of headwinds that we have to overcome in this time frame. So to be in a position to manage through that and still deliver record operating income for a second quarter and be guiding to record operating income for a third quarter, I think that positions us very well to continue to execute on our leverage plan. And I think shows the real strength of the business model. Absolutely. Absolutely. On the revenue side, we take a bigger hit in Q2 than Q1, and we get a bigger benefit on the spending side. I think it'll be, on a non-GAAP, it'll be a little bit below 30%. 29%, 28.5%, 29%. And I wanted to give guidance for next year so people can understand the context. A couple of changes going on relative to what would've expected perhaps coming into the year. One, when we look over the last year, you've got the R&D tax code, which hasn't been renewed this year. Second one, obviously early in the year, when you have the dollar strengthening and a reduction in gross margins overseas, we saw some reduction in our profitability overseas, which has an impact of bringing up our average tax rate. And obviously, we adjust for that as we go through the rest of the year. And then the third one, as we're closing down our Austin-based manufacturing, which we announced a year ago, there is a significant transfer of inventory and assets, which creates a one-time tax expense as those assets leave the United States. Now when we look to next year, obviously we'll see the reverse happen. And we expect to see a significant decline in our non-GAAP effective tax rate for 2016. I'll talk a bit more about the constituent elements of that and perhaps take a look out to 2017 when we talk next week at the investor conference. It was $9 million. Thank you very much. Actually, it would be <UNK> here. Thanks, everybody, for joining us today. Just a reminder, we will be doing an investor conference next week, so we hope you'll join us. Thank you.

2015_NATI

2017

MTRX

MTRX #Thank you. We appreciate everybody's patience. Sorry for starting the call a little late. Before I begin, please let me remind you that on today's call, the company may make various remarks about future expectations, plans and prospects for Matrix Service Company that constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our annual report on Form 10-K for our fiscal year ended June 30, 2017, and at subsequent filings made by the company with the SEC. To the extent the company utilizes non-GAAP measures, reconciliations will be provided in various press releases and on the company's website. I will now turn the call over to <UNK> <UNK>, President and CEO of Matrix Service Company. Thank you, <UNK>. Good morning, everyone, and thank you for joining us this morning. As we open the call, I want to congratulate 2 of our Matrix NAC teams. First, our infrastructure team in Rahway, New Jersey. They won the 2017 Board of Directors Safety Award. This award is the highest award given by Matrix Service Company. Under the leadership of Pete Cheche, this team's commitment to training and education exemplified the highest of standards. Among their many accomplishments was 0 recordable incidents in fiscal 2017. I would also like to congratulate the construction services unit operating out of Eddystone and Canonsburg, Pennsylvania. This team received our 2017 CEO Safety Award. Under the leadership of Dave Kazokas, they maintained an emphasis on safety excellence across a multitude of projects. And among other critical accomplishments, they also achieved in 0 recordable incidents. It should be noted that while we're highlighting these 2 operations for safety excellence, across our entire business, our employees continue to drive a culture of safety, which is demonstrated by our record-low recordable incident rate of 0.49 in fiscal 2017. Our teams also recently worked around-the-clock for 17 days without injury or incident as they restored power for millions in the wake of Hurricane Irma. We are extremely proud of our employees for this achievement given the environment and hazards they face in such situations. Their work demonstrated their focus on performing the tasks they were given with a commitment to keeping each other and those around them safe. Congratulations to all of our employees for a job well done. Before we turn to our first quarter results, I'd like to take a few minutes to review our diversified business model and how it contributes to the strength of our overall business and also allows us to proactively navigate the cyclical nature of the end markets we serve. For those of you who have followed us for some time, you know that Matrix has historically been viewed as having only 2 key focus areas: above-ground storage tanks and refinery maintenance. These are, in fact, the core operations that formed our foundation and continue to be a significant part of our business. That said, several years ago, our management team implemented a strategic plan to strengthen and diversify the business by extending our geographic reach, adding to our skills and expertise and expanding our end markets. As the business environment changed due to class of oil and other commodity prices in 2014, the value of this diversification was demonstrated. With significant project awards achieved in our Storage Solutions and Electrical segments in 2014 and 2015, these 2 segments supported the business during a period when many of our other end markets were softening and project awards were being pushed into the future. Now as project awards in Storage Solutions have lagged during the past 12 to 18 months, work in our Oil Gas & Chemical and Industrial segments is taking the lead as all of our end markets continue to recover. It's also important to note the awards in our Electrical Infrastructure segment that have been impacted by our strategic shift away from large EPC generation projects. However, our high-voltage electrical work, which represents a significant portion of this segment's revenue, has maintained steady performance and been generally unaffected by commodity issues. In Oil Gas & Chemical, beyond our traditional refinery maintenance work, our expanded service offering helped us achieve record-high backlog levels in Q4 fiscal 2017. Capital projects in the refinery and chemical business as well as incremental revenue associated with the expertise gained in our most recent acquisition has contributed to this growth. In addition, the opportunity pipeline for replacement projects remained strong. At the same time, after a long period of minimized discretionary spending on maintenance and turnarounds by our refinery customers, we're seeing signs of improved spending and expect the next 18 months to trend up, with the spring turnaround season being one of the strongest for Matrix in 2 years. Over the past 24 months, our Industrial segment has been significantly impacted by low commodity prices in ferrous and nonferrous metals. As you may recall, this segment traditionally contains the work we do in the iron and steel industry, copper mines, thermal vacuum chambers and fertilizer markets. We are now experiencing a strength in unit maintenance and capital project spending in the iron and steel business as evidenced by the first quarter award of 2 blast furnace repair projects as well as a substantial capital construction project. Further, with the improvement in copper pricing, our key clients in this market are starting to plan for increased maintenance spending and capital projects to meet their customer demands. Additionally, as a result of our expanding engineering capabilities, we are seeing more opportunities in other industrial thermal markets such as cement, grain and miscellaneous bulk materials that we support with our material handling capabilities and marine structures expertise. And finally, we are very active in the engineering and construction of 2 thermal vacuum chambers. It's because of these improvements in the market and our strategic position in the segment that we have been able to achieve a segment book-to-bill of 5.5 in the quarter. Within our Electrical Infrastructure segment, our business is split between 2 primary types of work: power delivery and select work in power generation. In power delivery, our work is focused on servicing the immense infrastructure needs for substation, transmission and distribution work. It is important to note that even during the downturn in commodity pricing, this part of the business remained strong, demonstrating the value of our diversified portfolio of services. Other opportunities in this segment reached beyond the larger projects to request for system maintenance with major private and public utilities. These customer requests encompass unanticipated storm work as well as day-to-day life extension, system hardening or emergency maintenance and repair demands. This work may not be material on an individual project level or from a volume perspective. It's indicative of the industry's trust in our people and results into work that contributes to a significant part of this segment's bottom line. We also continue to focus on specific targeted construction opportunities from new-build gas-fired generating facilities as we shift away from EPC to go to large-scale, full-scale responsibilities. This shift is yielding a strong opportunity pipeline of smaller projects that provide a better risk profile. In our Electrical Infrastructure segment, we currently hold a market-leading position in these and expect to expand beyond this area through organic growth and selective M&A transactions. Our Storage Solutions segment has broadened and diversified its base to include full terminal and other capabilities that allow us to offer complete life cycle solutions. While awards segment has been slow to recover, especially with large terminal projects, we remain confident that substantial project work, much of which comes through our ongoing engineering feed services, is on the horizon. Many of these projects, which include tank and terminal work for crude, refined products, natural gas, NGLs and LNGs across North America, the Caribbean and parts of Latin America, are essential infrastructure. There remains some uncertainty around the timing of these awards as you move through this cycle, but we remain confident that calendar 2018 will be a strong award period. We have seen a substantial uptick in bidding opportunities and awards on smaller balance of plant work and tank-only projects, which has contributed to the 0.9 book-to-bill in the segment during the quarter. Overall, Storage Solutions between pending project awards, current bidding activity and opportunities, our project pipeline is valued at nearly $5 billion. In addition, due to diversification of our business in terms of operating segments and related services, we have also diversified and expanded the services offered by our engineering subsidiary, Matrix PDM. Through our most recent acquisition, this subsidiary has more than doubled in size and, along with increased capacity, now offers significant, multi-disciplined engineering process integration and consulting services for existing and new markets, among them: above-ground and cryogenic storage tanks and terminals; cement and grain facilities; marine structures; bulk material handling; gas processing, sulfur recovery process and handling; and electrical instrumentation and controls. These services are already benefiting our Storage Solutions, Oil Gas & Chemical and Industrial segments. In summary, based on our project pipeline, improving market conditions and our strategic positioning, we expect measured but continued improvement throughout the business as you move through fiscal 2018. As I turn the call over to <UNK>, there are a few things I want to keep in mind. First, some of the markets in which we work can be cyclical. In order to sustain and grow our business across these cycles, we have taken important steps to continue to diversify our business within the energy, power and industrial markets. The value and benefits of this diversification underpins the long-term strength of the business. Next, because of our diversification and the strength of the foundation we've built, we are well positioned to respond to customer needs across all of our operating segments as markets continue to improve. Lastly, our financial strength, organization structure and value-centered employees allow us to execute our strategic initiatives in order to build sustainable and long-term shareholder value. I'll now turn the call over to <UNK> who will review our first quarter results. <UNK>. Thank you, <UNK>. Before we get into the specifics, I will give a high-level overview of our quarter. As <UNK> indicated, we are generally pleased with the results for our first quarter. Revenue volume was in line with our expectations. Our project execution was strong with consolidated gross margin at 10.7%, which is our highest since the first quarter of fiscal 2016. As planned, SG&A costs were higher than the same period last year as the result of our engineering acquisition from mid-fiscal 2017. Our tax expense was higher than normal, which I'll discuss in more detail later in the call. The bottom line is: We produced good EPS in the quarter and have a solid start to the year. The quarterly results are marked by higher levels of project awards and, as a result, growth in overall backlog. Now let's move on to discussing specific results. Consolidated revenue for the quarter was $270 million as compared to $342 million in the prior year, which, as expected, was a decrease of $72 million. The decrease in revenue on a year-over-year basis was primarily due to a revenue decline in Storage Solutions that was partially offset by higher revenue in the Industrial and Oil Gas & Chemical segments. We produced a consolidated gross profit of $28.9 million for the quarter compared to $32.3 million in the prior year quarter. The decline in gross profit in the quarter was the result of lower revenue volume that was partially offset by improved gross margins. Strong project execution and close-outs, the inclusion of higher-margin engineering work as well as improved construction overhead cost recovery allowed us to achieve consolidated gross margin of 10.7%. In the prior year, consolidated gross margin was 9.4%. Consolidated SG&A costs were $21.6 million in the first quarter compared to $18 million in the prior year. The increase was primarily due to overhead associated with our expanded engineering business, including associated amortization on intangible assets and higher project pursuit costs. In the first company ---+ in the first quarter, the company earned pretax income of $6.9 million as compared to $14.1 million in fiscal 2017. Our effective tax rate for the 3 months ended September 30, 2017, was 44.5% compared to 33.6% in the same period last year. Both periods were impacted by stock compensation tax adjustments that resulted in tax rates different than our normal tax rate of 38%. The bottom line results for the company were net income of $3.8 million or $0.14 per fully diluted share in the first quarter of fiscal 2018 compared to $9.3 million or $0.35 in the prior year. Now let me talk about our first quarter segment performance. In our Electrical Infrastructure segment, revenue of $80 million represented a slight decrease versus the prior year of $88 million due to the expected wind-down of work on a power generation project. Electrical Infrastructure gross margins of 10.3% were up from 6% achieved in the same period last fiscal year. The year-over-year increase of margins was due to improved project execution and recovery of construction overhead costs. In addition, our people provided restoration services in the Southeast related to the electrical infrastructure damage from Hurricane Irma. These services bolstered the solid margins produced in the segment. Our long-term margin goal for the segment remains at 11% to 13%. However given the market conditions and our mix of work, we do not anticipate achieving this range in fiscal 2018. Revenue for the Oil Gas & Chemical segment increased 161% to $86 million in the quarter, up from $33 million in the prior year period. The increase was driven by work on the ultra-low-sulfur gasoline relocation project, additional higher-margin work provided by Matrix PDM Engineering and higher volumes in refinery turnaround and maintenance work. Gross margins were 12.9% in the quarter versus breakeven in the same period last year. The increase in gross margins was largely due to strong project execution, project close-outs and higher-margin engineering work and improved recovery of construction overhead costs. Our long-term margin goal for this segment remains in the 10% to 12% range. Quarterly revenue for Storage Solutions was $71 million as compared to $200 million in the prior fiscal year, which was abnormally high due to work performed in connection with the construction of crude-gathering terminals that support the Dakota Access Pipeline. In addition, fiscal 2018 revenue has been impacted by continued delays in expected project awards. As a result of the lower revenue volume, we under-recovered our construction overhead costs. During the past fiscal year, we have made decisions to reduce certain overhead costs while balancing the infrastructure needs related to the expected increase in work as we move through fiscal 2018. The timing of awards remains an uncertainty. But given significant future opportunities, we will continue to proactively manage our cost structure to be efficient yet prepared for the expected demand for our services. The under-recovery of overheads weighed down strong project execution in the quarter, which resulted in gross margins of 10.6% compared to last year's figure of 13.3%. Moving on to the Industrial segment. Revenue increased on a year-over-year basis to $33 million compared to revenue of $22 million last year. Gross margins were up to 6.1% compared to 2.6% for the same period in the prior year. The current period saw improved margin performance due to higher volumes of work, which, combined with previously executed targeted cost reductions, led to increased recovery of construction overhead costs. As <UNK> discussed, the market environment for this segment was difficult the last couple of years, partially attributable to price compression of many commodities. However, the booking of projects in fiscal 2017 and in the first quarter of fiscal 2018 is a very good indicator of recovery for much of the segment. Increased revenue volume and an improving mix of work should allow us to achieve our expected gross margin range of 7% to 10% as we move through fiscal 2018. Moving on to backlog. The September 30, 2017, backlog balance grew by $46.5 million to $728.8 million compared to $682.3 million at June 30, 2017. Project awards in this quarter, including a large iron and steel award in the Industrial segment, produced a consolidated book-to-bill of 1.2. This growth in backlog demonstrates a reversal in the trend in total backlog levels that we experienced throughout fiscal 2016 and 2017. What we regard as the more relevant indicator of future revenue is the pace of new awards. These awards have trended up throughout fiscal 2017 and continue in the first quarter of fiscal 2018. In addition, we are encouraged by robust bidding activity we are seeing across our business. Project awards in 3 months ended September 30, 2017, totaled $316.4 million compared to $259.7 million during the same period a year ago, an increase of almost 22%. To support the growing business, as evidenced by this backlog, the company continues to maintain a strong balance sheet. At September 30, 2017, the company's cash balance was $46.1 million, up from the June 30, 2017, cash balance of $43.8 million. The cash balance, along with availability under the senior credit facility, gives the company an increased footing position of $131.8 million at September 30, 2017. The financial strength and liquidity continue to support execution of our strategic plans, funding working capital and funding capital expenditures with a fiscal 2018 target below 1% of annual revenue. I will now turn the call back to <UNK>. Thanks, <UNK>. Before we open for questions, I just want to restate that we are pleased with the results for our first quarter. We believe it represents a really good start to the new fiscal year. Further, we are confident the markets we serve are in the early stages of recovery. However, timing concerns related to awards and subsequent starts of large terminal and specialty vessel projects in our Storage Solutions segment dictate that we continue to maintain a cautious outlook. Therefore, we are maintaining our 2018 guidance of full year revenue of between $1.225 billion and $1.325 billion and earnings per share of $0.55 to $0.75. And with those comments, I will now open the call up for questions. So I'll start, and then <UNK> can add on. But just ---+ I think if you look at the first quarter, it demonstrates very strong execution throughout all of our segments. We also had the quarter bolstered by project close-outs, and that impacted a couple of our segments, including Oil Gas & Chemical. We have a little bit of that in storage. We also had a little bit of storm work that helped with the electrical segment. So overall, we produced a really good margin profile. Now going forward, I think when you look at this, I think the industrial margins, we would like to see them continue to trend upward as we see volumes increase. Storage, it will be hard to repeat the first quarter this next quarter or 2 until we get these project awards across the finish line and get executing on those projects. So I still think we're confident in that long-term 11% to 13% range, but volume may not be there to support that in the near term. But I think that will return as we move through the fiscal '18 here. Oil Gas & Chemical, we're maintaining that 10% to 12% normal range. Definitely, project close-outs helped that outperform this quarter. And then electrical, as we're completing the work on the generating station, we're going to be replacing some of that. I think we'll officially get back to 11% to 13% range, but it may be a few quarters before we get there. Overall, I feel like the margins are trending in the right direction, and we want to get to work, consistently achieving this type of margin performance. The only thing I would add is in the storage segment that while we're seeing delays in these big ---+ bigger terminal projects, which are both crude related and specialty vessels for gas-related products, that our tank business ---+ our fundamental flat-bottom storage tank business, the bidding environment is very, very strong. We're winning our fair share of those. They're across the ---+ really across the Gulf Coast into the central part of the country. And so from that perspective, we feel very good about our, call it, sort of our legacy tank (technical difficulty) piece of our business is operating very well. It has very good margins by the time you pull all the ---+ everything goes into Storage Solutions together because some of these larger terminal projects are getting pushed out as we tend to see those slow or depress the overall outlook for that segment. But as <UNK> said, we're able to stand with a variety of projects that are related to Storage Solutions. And so we think through the back half of this fiscal year, we're going to start to see some very good awards. Yes. So the glass furnace work are ---+ they're essentially the steel industry's version of a turnaround. So the blast furnace work is generally of short-duration, high-volume projects. They last anywhere from 30 to 90 days in general, and there are multitude of trades that we go in on a shutdown basis and do a planned repair scope for those clients. Very often, there is some discovery work like there is in a refinery turnaround, and there are opportunities for the scope to increase. And so we're in that market where we are one of the premier contractors who provide those services. <UNK>, the other project we've referenced on this call that our iron and steel project it's not a blast furnace project, just to be clear. And it's a longer-term project, but we're looking to get into being real specific about that project at this point. Probably we had anticipated being out at the end of this calendar year. But the transition and some of the things that we're doing to support our client are taking a little bit longer. So we may be up there until the end of the third quarter, our third quarter. I think as we said in the notes, <UNK>, so we feel very good about our project opportunities across all of our segments. We're just concerned ---+ continue to be concerned about some of the larger projects that are going to help to ---+ for us to drive to the top end of our guidance range, the timing of those awards and when we'll be able to get those started. And so we've got an extremely strong pipeline of projects. Some of them are with what you would consider blue-chip clients that are ---+ would perform those projects off their balance sheets. Some of those are with more developer-related people that require a little bit more the i's and t's to be crossed before those projects get awarded. And so there's a lot of movement in and around those awards, permitting issues, offtake agreements and that rights of way and some other things that we feel that are getting closer to fruition. And in some cases, we're competing, so we got to win the work. So we're taking, as we said, kind of a cautious approach as to how those awards are going to affect us over the full year. Yes. We got a number of projects that are ---+ we're anticipating sometime in the next 3 months where we'd start to roll in if we win today. And I think we have to evaluate that. Even when we win, there may be a delay in the start for some reasons. So as we get to the end of the second quarter, we'll evaluate those awards versus the starts and see how that affects our full year guidance numbers. Yes. So we've got a great opportunity pipeline really across all of our segments and projects ranging from $10 million, $15 million to projects in the $280 million range. But the larger projects that we are currently actively bidding and winning awards on are in the Storage Solutions segment. So I think the key will be how big it is. Remember, it's still reimbursable work, so it doesn't always lend itself to high margin. But if there's good execution and we have the big volume, we could ---+ maybe we could outperform what we think we can do. But based on what we see right now, we think we've got a reasonable forecast. Thanks to all of you who joined our call today, and we look forward to seeing you in future investor conferences and on our next call. Thank you.

2017_MTRX

2016

UTHR

UTHR #Thank you, operator. I would like to welcome everybody to our second-quarter 2016 financial results conference call. I'm joined this morning by James Edgemond, or Chief Financial Officer. I will give a few introductory remarks and then open up the lines for questions directed either to James or myself. For the introductory remarks, I'm going to hit on three main topics: products, profits, and pipeline. Let me start with profits. With regard to profits, the Company once again is reporting greater than 90% gross margin on revenues. Revenues have hit $412 million for the quarter. That puts us at a revenue run rate of greater than $1.6 billion per year and nicely on track for our goal of $2 billion per year by 2020. Profits have doubled this quarter from last year, or matching quarter. Now up over $200 million and are up 60% on a non-GAAP basis. When you take a look at earnings per share, things actually look even better, since as a result of our ongoing stock buyback our share count is now reduced to only 44 million shares, which is actually about the lowest number I can remember for quite a while. Now let me turn to the products that are producing these very nice operating results. Our three treprostinil products: Remodulin, Tyvaso and Orenitram, all increased significantly from either last quarter or the matching quarter of last year. The warehousing effect of Uptravi, which I discussed last quarter, now mostly affects Orenitram because it is in the same oral class and more easily delayed for the duration of an Uptravi challenge. Last quarter the warehousing effect affected Tyvaso because it is a more intensive therapy requiring patients to endure four times a day, two minutes of nebulization process. And it is, of course, quite reasonable that patients and their physicians hope that a new pill, Uptravi, could forestall their need for this intensive inhalation therapy. But that warehousing effect is already dissipating, as we are now actually getting double-digit Uptravi patients moving on to our treprostinil products. This double-digit migration from Uptravi to our products is easily understood from Uptravi's FDA label. Their label shows that morbidity in Uptravi varies directly with time. In fact, by 36 months, nearly half of Uptravi patients have already experienced morbidity or mortality. The only logical choices for them are Tyvaso or Orenitram, and indeed Tyvaso has already rebounded from its warehousing effect low, and we expect Orenitram to rebound very shortly, as well. Meanwhile our non-prostacyclin product, Adcirca, continues to grow smartly based on the ever greater awareness of the AMBITION morbidity/mortality study that showed Gilead's Letairis, when uniquely combined with our Adcirca, produced the same kind of morbidity reduction as Uptravi. Indeed, AMBITION six-minute walk results were even better than Uptravi. So what we are seeing, and we would expect more and more payers to in fact require Adcirca plus Letairis before permitting reimbursement on more expensive therapies, such as Uptravi. With that overview of our major revenue-generating products, now let me turn to a discussion of products in our pipeline. We currently have 13 products in our pipeline, so I'm not going to be able to have time this morning to review all them. I will review a selection and invite you to attend our presentation at Wedbush Securities Healthcare Conference next month in New York for a fuller explanation of the whole pipeline. The framework for understanding our pipeline is the five different kinds of pulmonary hypertension called Group 1, 2, 3, 4, and 5 PAH. Now each of these groups of PAH are different diseases requiring a different product profile. Group 1 PAH is the most well-known because it was the lowest hanging fruit with pressures in the pulmonary artery up over 10 times the normal level. So you could well imagine that if you had systolic or diastolic blood pressure 10 times the normal level, well, you wouldn't be listening to this conference call. But with such very, very high pressures, that was the low hanging fruit because it was most easily responsive to drugs. However, Groups 2, 3, 4 and 5 represent many, many more patients than Group 1 PAH and those patients also have significantly elevated pulmonary pressures, generally two to three times normal levels, so still representing a major risk for death and disability among these patient groups. With UT's drugs in particular, and specifically Tyvaso and Orenitram, the Groups 2 through 5 PAH are readily amenable to clinical trial success just as Group 1 PAH was readily amenable to the first-generation drugs, such as Flolan, Remodulin and Bosentan. So while there are over a dozen drugs approved work Group 1 PAH, including four of our drugs and several generic drugs, there are absolutely no drugs approved today for Group 2, 3, and 5 pulmonary hypertension. This is what we at United Therapeutics call a classic corridor of indifference, and we are running like hell down it. We are running like hell with three new clinical trials in Groups 2, 3 and 5 PAH. The clinical trial in Group 3 already enrolling patients in Phase 3, and Group 2 getting ready to enroll patients in Phase 3, and a Phase 2 trial about to start up in Group 5 PAH. But we are also not leaving Group 1 PAH behind. Our implantable pump, which we call [Remo-think] just had a great FDA review meeting, and we feel we are on track for a launch in 2017, as reported previously. Our second-generation subcutaneous Remodulin product, which is based on a clinically superior drug delivery technology called acoustic wave sensing, has also passed, just this month, an excellent gating meeting at the FDA and is now firmly scheduled for FDA submission in early 2017. That is, in fact, about a year earlier than we originally planned when we scoped out this product. We will also launch in 2017 a gene therapy trial for pulmonary hypertension called Sapphire based on our successful Phase 1 results. The Sapphire study is a Phase 2/3 combined study design that will enroll 60 patients and could result in a new clinical therapy to actually halt the progression of pulmonary hypertension. I've probably have spoken enough about our pipeline without chewing up all you guys time, but I'll just mention that we have a new ---+ we have additional new clinical development efforts starting up in various GD2 antibody responsive cancers based on our dinutuximab platform. And in bronchopulmonary dysplasia, based on an [MCE] discovery from our regenerative med lab that has already shown very positive animal model results in this orphan indication, bronchopulmonary dysplasia, that also has no approved medicines from the FDA. With those introductory remarks on profits, products and pipeline, I would like to ask the operator to please open the phone lines for any questions. I'm just going to have time for one question for you, my friend, because there is a long queue with other people with questions. The trends are actually looking very good for all three of the treprostinil products. The Tyvaso is actually up from the previous quarter, and so the trends are looking very positive there. Orenitram, as mentioned, the main effect there is that there is constantly a flow of patients who fail what is now recommended as standard upfront therapy already Europe, and that is going to over into the US, which is the AMBITION protocol I mentioned in my introductory remarks. Of course, it is not a cure. It just slows the progression of morbidity and mortality results, so when patients begin to fail the upfront Letairis plus Adcirca therapy, they next go on and are ---+ would ordinarily move on to Orenitram and then Tyvaso and then ultimately Remodulin. However, with the launch of Uptravi, it is natural for these patients to try an Uptravi challenge before moving on to the more intensive therapies. As you may know, Uptravi does not have to be dosed as frequently as a Orenitram is dosed in the majority of cases. And it also has the label of reporting a reduction mobility and mortality, whereas Orenitram's label, pending the outcome of the FREEDOM-EV study, still talks about exercise improvement. So the delay that you see is this, sort of what I call, warehousing effect of patients waiting for that Uptravi challenge. For some other patients it will work for them, and that is great. For other of the patients it won't work for them. It will take a few months for that to be sorted out between successive doctor visit, and then they roll onto the Orenitram therapy. Thanks for you question. I think that sales will definitely continue to recover on Tyvaso. The fact of the matter is that the disease that we are talking about here is relentlessly progressive. There's ---+ between our efforts and those of Actelion and Gilead, Glaxo, we have done a really good job of moving the mean survival with Group 1 pulmonary hypertension from one to three years, which it was a few years ago, to five to 10 years. That is a really great thing, and I think we can all kind of pat ourselves on the back for that. However, five to 10 years is ---+ looked at another way is frightening, especially when the average patient is a young woman. It's frightening, and what it means is that every year there are very large numbers of patients who are progressing through one medicine after another as their doctor tries to find one that will allow them to climb a few steps without running out of breath and go back to work and go back to school and all the normal life activities. So once you get to the stage of needing Tyvaso, the disease is definitely showing signs of advancement to you. The only stage after Tyvaso is parenteral therapy, which means that you are walking around with a pump that is pumping medicine into your body 24-hours a day, 365 days a year. That's ---+ you are clearly getting toward a latter stage of the disease with something like that. So there's just this continuous pouring of patients from the upfront oral med through Tyvaso and then on to the parenteral. And because this is relentless and never ceasing, we definitely do expect the Tyvaso patient count to increase through the balance of the year. What has been novel in the first part of that year is that there has been a brand-new therapy and the first one in the prostacyclin class, other than Flolan and its generic competitors, that has a label that provides doctors some hope that you could actually forestall morbidity and mortality. As a result, patients who would otherwise be going on to Tyvaso are trying to give themselves a challenge with selexipag, or its brand-name Uptravi. Now, for some patients the answer will be determined very quickly because they will ---+ won't tolerate the side effects of Uptravi. For other patients, may be able to be stable on Uptravi for years. But on average, in about 36 months and at a pretty steady rate of, roughly speaking, 10% to 15% per year and therefore roughly 1% of those patients a month, they are going to progress right through Uptravi. And if they progress very, very rapidly and they have just gone really downhill on Uptravi, the doctor is going to have to skip over Tyvaso and put them directly onto Remodulin. If they have been progressing, maybe if not improving but not really getting worse, then the doctor will go ahead and say, let me maybe swap out Uptravi for Orenitram and see if we can get improvement. And if it is something in between, that is the optimal place for Tyvaso. All of the demographic data, all of the population data of patients taking this pulmonary hypertension drugs, would tell you that Tyvaso definitely will continue to grow during the second half of this year. Yes, very good question. We definitely, positively do have more confidence in the EV study them the FREEDOM study. That is because every study is designed with a pre-specified statistical analysis plan, and that tells you how you are going to power the study, what assumptions you are going to make with regard to hazard ratios and all those sorts of things that ends up with the end of the study. Every time you do a previous study, you learn things and it makes your statistics that much more sharper and smarter for the subsequent study. So, the very first FREEDOM study was actually a monotherapy study, and then the second one, a combination study. EV is a combination study. We learned a lot of stuff from C2 ---+ FREEDOM C2, and that has allowed us to much more smartly set the bio statistical parameters for the EV study. Yes, we are much more confident. In terms of when it will read out, it is a timed to clinical worsening type of study design, so there is no way to up priority, say like 12 weeks after the last patient. It won't be 12 weeks after last patient. But there are ---+ it's obviously blinded, so we don't know the details. What we have been aiming for was to be able to launch this new product ---+ which internal to UT, we call this Orenti-plus because the current Orenitram product is labeled for ---+ as monotherapy, whereas, the market is overwhelmingly a combination therapy market. So we need to provide prescribers with data that shows that when you give Orenitram plus combination therapy, you get a superior result. Our goal has been to be able to launch this Orenti-plus therapy as early in this decade in the 20 teens as possible. Enrollment has been going very, very well. Once the enrollment is completed, which we will certainly announce to the Street, then it is going to be appeared of time to accrue the data for the time to clinical worsening. I would say, based on other similar studies, that's likely to be 12 months, plus or minus, three to six months. If I can give that kind of a window. Then we are already ---+ by the way, as a further to your questionable confidence ---+ we are already, in parallel, putting together things for the regulatory filing for that. Ordinarily, a company will spend about a half year on the regulatory filing. And we have already been able to scrunch that time down to four months, and we're going to try hard to even scrunch it down a little bit better. So if you add up those numbers, you will see that with a positive result and positive FDA action, we should be able to launch this Orenti-plus product definitely in the 2018, 2019 time frame. Thank you, <UNK>. The DEKA pump program has moved better than anticipated. Just to get everybody on the same background, this is the product that I mentioned in my remarks, takes advantage of a clinically superior drug delivery technology called acoustic wave sensing. That entire knowledge is the most precise and most accurate way yet developed to dissipate a drug into the bloodstream. Of course, that is highly important when you are dealing with a drug like prostacyclin, which is so potent that it is actually dosed in nanograms per kilogram. That gives you an idea of how potent this drug is. That technology allows us to ship to the patient disposable cartridges of the drug already in this acoustic wave sensing device. Then with a third-generation pump delivery system, we are able to make a major advance in convenience for the patients. We actually just had a gating meeting, as I mentioned in my introductory remarks with the FDA this month. It was very successful, and everybody is queued up to make that submission to the agency for approval in the first half of 2017, which is actually about a year earlier than we thought might be the case based on some of our kind of worse case assumptions in terms of our drug development, stability, and so on. We are right now already moving the final products on to stability, so it is all going very well there. On the organ transplantation, we have made some really nice breakthroughs. The genetically modified pigs that we use have established the world survival records in animal models for human transplantation with regard to the kidney, the heart, and the lungs, so we are very confident that we have got the best genetic modification platform. With the support of our partner, Synthetic Genomics, we are now able to insert all of the genes that have worked so well super-cleanly using CRISPR technology. I think, really, during the balance of this decade, we will have completed everything necessary to commence the first human trials where the recipients can expect that they would have a durability of their xenograft that was on par and equivalent to the durability of an allograft. And we would not even try to do those trials unless we could show that comparability of survival. Yes. Generally speaking we really don't get into, on these conference calls and have not in the past, discussions of intellectual property strategy. It's a area that is very strategic, involves a lot of legal ins and outs. It is actually managed by a Chief Strategy Officer, so I'm not going to go into the ins and outs of IP. But suffice to say that when you make a new product, there are a lot of things to think about in terms of protecting its economic value to the stakeholders. IP is very important. Know how is very important. Show how is very important. Manufacturing facilities, GMP is very important, having facilities that pass FDA inspection very important. Your question brings to mind that ---+ oh like a couple months ago, somebody asked me a question. They said, PayPal is coming out of North Carolina and somebody else was coming out of North Carolina. Is United Therapeutics coming our of North Carolina. I thought they were actually crazy because we have a beautiful $100 million pharmaceutical production plant in North Carolina that makes our pills that are taken by all of our patients. This pharmaceutical plant has been inspected by the FDA and other regulatory agencies, passed all of its inspections with flying colors. It took years to build, and if you are in the pharmaceutical business, you can't just have a pop-up factory in some other state. It would be years to get another place approved by the FDA. That just gives you an idea of all the different things that you have to think about to protect economic value in any product. Great. Good question. Operator, just as a queue up, we'll have one more question after this one. What we saw was safety that every ---+ there were no untoward safety event, despite ramping up the gene therapy infusions starting at, I think, it was a quarter-million or a half-million cells and ramping it up to the many millions of cells. This is a autologous gene therapy treatment, so there is no viral vectors involved. It is using the patient's own cells, which are transected ex-vivo. And all that is then infused back into the patients, are their own cells with the corrected gene. In this case it is the eNOS gene. We saw beautiful safety, and in the animal trials, we have seen striking evidence of efficacy. Based on that, we and the entire team and medical advisors, all feel confident going into this Phase 2 kind of adaptive trial design based on those results and the fact that these will be patients who are ---+ have already failed all of the previous approved drugs that are out there. I forgot to mention one thing to the previous question. The study is queued up to start in the first half of 2017. We will need to accrue 60 patients. Since these are later-stage patients, it won't be necessarily the fastest accrual. Generally speaking for something like this you would give yourself at the outset a couple years for a accrual. It will be an exercise [sixatant] block end point, so there will be a very quick ---+ and once the last patient is enrolled and then with a positive results, we would file for approval from then. Thanks for the question. Now that the product is launched and it is being used by literally hundreds of prescribers, we are not going to continue providing the type of detailed granularity of which particular dose each patients are at. You could back calculate to an estimate of that based on the reported Orenitram revenues and the reported AWP pricing for Orenitram, would all probably get you into a rough average of a middle of the range dosing that is pretty much in the 10 milligram range. It is not going to be really be meaningful, and I can't really be precise enough to give you any more granularity than that. Overtime, there is no doubt that the ---+ any individual patient will go ahead and increase the amount that they are taking. However, you can't just jump and make a quick trendline from that because there is constantly new patients coming into the drug at the lower level. I can't provide you any insight at all with regard to what's going on in the blinded FREEDOM-EV trial. I think the bottom line here is that if you were to make an estimate that the average Orenitram patient generates something like, today, on the order of maybe $125,000 a year in revenue. I think the average over the next five years is going to continue to creep up. I would not be at all be surprised if by the end of the decade the average was north of $175,000 per year because over time there will be more and more legacy patients on Orenitram and the number of newbies who is coming on it will represent an ever smaller fraction of the total amount. Thank you, everybody, for really good questions. It was fun for me to have a chance to talk about that. From our strong profitability to the persistent demand of patients and physicians for our five approved products, and as well as the exciting potential of the 13 products in our pipeline, we at United Therapeutics are in a really good place, right now, in the middle of 2016. We're looking forward to a continued future of growth not only in pulmonary hypertension Group 1, where we are already share leadership with Actelion, but in pulmonary hypertension Group 2 and 3, where there are no developments going on and Tyvaso is really the only uniquely situated product for Group 3. Then onward to pulmonary hypertension Group 5, which represents a very large unmet medical need that Orenitram is ideally situated to address. Thank you so much, operator.

2016_UTHR

2016

HMSY

HMSY #So I think the first step to has made this more visible in the marketplace is CMS's efforts with the healthcare private public partnership on fraud. And the trusted third-party procurement they did last year, which where we are a subcontractor, really managing the enrollment of new plan and state members into that partnership, as well as bringing our Medicaid expertise to the table. That's heightened the awareness, that looking across the landscape that healthcare claims can both identify fraud, but may even help better understand the risk of a member. What I think keeps us today from doing, from actually executing on the promise of that, is really the data use agreements we have with our customers today. Though we're out talking to our customers and other stakeholders in the industry about the need to start to look at that, using a trusted third-party, a highly secure entity like HMS, to look across providers or members in a given geography, and identify the patterns that would ---+ where we could identify fraudulent providers. Or in the case of members, be able to identify the risk of a member who is moving in and out of the Medicaid program, through different health plans or fee-for-service. What it is unique about HMS today, is that no one else can replicate the 90% of the Medicaid population, and the activity that population has had over the vast number of years. That's what the unique asset we have that we would surely like to use, on behalf of benefiting the Medicaid program, and ultimately other programs across the nation. So we're in the process of implementing, meaning we are out talking to customers. We have the data warehouse and statistical analytics ready to go, and are looking for those what we call lighthouse accounts to start the process. Yes, so there's always work in the queue, when we doing a Medicare RAC revenue. So the timing of quarterly revenue recognition may not exactly coincide with any specific quarterly information. So we did have some additional work in the fourth quarter, based on prior work that was in the queue, that was actually completed in the fourth quarter. As we move into next year, starting on January 1, with the restriction in the number of medical records requests, that we can actually have ask for, and do work on, that's why we are seeing it trending down quite a bit, as we go into 2016. Well, we're not certain it would roll into a new contract. But I think as we said ---+ I mean, if you just start with the 2% request limit, going to 0.5%, I mean, that's a 75% reduction in the number of requests. There is some other intricacies in how they do the counts, based upon what's on a medical campus that actually increases the reduction to the 90%. So I would not speculate on the RFP, because it's still in process. They have asked for questions from the RAC providers. We have provided those questions, and certainly our input on our desire to do more audit work. But until we have clarity and answers to those questions, it's really difficult to predict what the long-term revenue impact would be. Yes. Thank you, <UNK>. So we still have our first account, which recently extended that contract. We have not expanded it yet to a fuller population, but it's moving along well, and we're having great returns. All the things that we said, minimized irritation with the providers, faster revenue for us. And then we have the two sales that we are in implementation with, one on Medicare Advantage and one in Medicaid Managed Care. I will say that our pipeline for PrePay Clinical is robust. We've not closed another account through the balance of 2015, but again, have a strong pipeline for it. It is a product that needs a lot of pre-sale activity and discussion with the customer, because we're talking about a very, very tight technology integration. We're not getting ---+ in our typical business we are getting a batch load of files, claims and eligibility and provider data typically weekly, sometimes monthly, depends on our clients. Here we are getting it nightly, and they're having to ingest our results nightly. So much tighter IT integration, usually takes our client longer to do that. So the planning and the sales cycle is longer. But we're very optimistic with the sales queue that we have, that we'll have more clients adopt this product. And it's usable, across really any organization that pays claims. So it could be a commercial health plan, on commercial risk, could be Medicare Advantage, Medicaid Managed Care, could be a third-party administrator, any of those organizations could use this to their benefit. And again, doing the work upfront eliminates a lot of the backend administrative processing burdens on actually recouping the money ---+ having to go after the money, recouping the money, and getting the money back from providers. Actually doing the work upfront is a much improved cash flow benefit, both for our customers and for us. Because then we'll be paid ---+ based on the current contract, based on our savings within a 30 or 45 day period, versus having to wait six or eight or nine months for providers to actually pay the money back. So as I said in my prepared remarks, <UNK> ---+ so if you ---+ if we look at it and say, basically we have a $55 million commercial run rate exiting the fourth quarter ---+ realizing we have some seasonality in the first quarter ---+ that gives you a $[220] million run rate. We are projecting 18% to 20% growth, roughly $40 million. So about half is based upon the existing run rate, work that's already being done. And certainly, the other half would come from new sales or implementations that have been sold ---+ clients have been sold, but not implemented yet throughout 2016. And again, we also continue to see opportunities for yield improvement as well, just getting better results for our client base, as we continue to refine and improve our analytics, which will also ---+ is also part of that 20%, 18% to 20% growth rate. Thanks. Yes, Matt, this is <UNK>. On balance, we're looking for deals to be accretive within the first year of operations, and so certainly we are looking at return thresholds. We have discussed those publicly. But our expectation is, given our liquidity profile and our ability to do acquisitions we believe quickly, and more importantly or equally importantly, the ability to ramp up acquisitions into our existing customer base, with 250 commercial health plans in over 45 states, that we can add value to acquisitions quickly, and that will help return thresholds as we do acquisitions. So we went into fourth quarter, highlighting that there was some risk to that, just because we weren't certain if everyone would be ready. We did have a few states that weren't fully prepared, but on balance there wasn't any material impact to revenue in the fourth quarter. We could have some impact in 2016, but we think it would only be on a quarterly basis. You could have some revenue potentially push to one quarter to the next. It's not any numbers that I would call out as material at this point, but you could see some movement of revenue from quarter to quarter. But we didn't see any significant or material disruption in our revenue. And ultimately, we believe it's a ---+ it becomes a tailwind, because the chance for errors are greater. And while the CMS has basically given the physicians a year of ---+ a year to continue to learn how to code correctly, we've already seen through our systems inaccurate coding, from an ICD-10 perspective. So we expect that we will be able to use that to our advantage, in identifying additional errors by the time we close 2016. Well, I want to thank all of our shareholders for your continued interest in HMS, and we look forward to speaking again on our first-quarter call. Thank you.

2016_HMSY

2017

FTK

FTK #Thank you, and good morning, on behalf of the Flotek team. Joining me this morning are <UNK> <UNK>, Flotek's Chairman, President and CEO; Rich <UNK>, our Chief Financial Officer; Josh <UNK>, Florida Chemical President; and <UNK> <UNK>, Executive Vice President of Performance and Transformation Officer. Our earnings press release was distributed yesterday and is available on the Flotek website. In addition, today's call is being webcast, and a replay will be available on our website. Before we begin, I would like to remind everyone participating on this call, listening to the replay or reading a transcript of the following. Some of the comments made during this teleconference may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 and other applicable statutes reflecting Flotek's views, comments or expectations about future events and their potential impact on performance. Words such as expects, anticipates, intends, plans, believes, seeks or estimates and similar expressions or variations of such words are intended to identify forward-looking statements but are not an exclusive means of identifying forward-looking statements. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ from such forward-looking statements. These risks are discussed in Flotek's filings, including our Form 10-K, with the U.S. Securities and Exchange Commission. With that, it is my pleasure to turn the call over to <UNK> for opening remarks, followed by a financial review from Rich and insights into key initiatives by <UNK>. We will open for Q&A after their remarks. With that, <UNK>. Good morning, everyone, and thank you, Matt. We are pleased to have you on board as part of our leadership team to oversee our Corporate Development and Investor Relations. We also welcome Danielle Allen to Flotek, who will play a critical role in corporate communication and technology commercialization as Flotek's transformation becomes complete in the coming quarters. Thank you all for joining today's call through hosting from our Global Research and Innovative Center headquartered here in Houston. I'll begin by giving a summary of our quarterly results and sharing an update on the divestment of our Drilling Technologies and Production Technologies segments and other key strategic initiatives. Rich will then share our first quarter highlights and provide additional financial details; followed by <UNK>, who will talk about our work with cognitive computing and data and analytics. Finally, I'll end with closing remarks before taking your questions. Overall, Flotek's first quarter results were in line with our expectations outlined in February, however, above broader expectations. We can say to our shareholders and stakeholders that we are pleased where we have started the year. For continuing operations, which encompasses our Energy Chemistry Technologies or ECT, and Consumer and Industrial Chemistry Technologies or CICT segments, Flotek's first quarter revenue was $80 million, up 13% sequentially and up 25.3% year-over-year. Domestic revenues in ECT experienced growth of 14%, driven by success in our core CnF technology product offerings. Domestic CnF revenue ---+ excuse me, domestic CnF volumes rose 24.7% sequentially, while revenues were up 19.8% sequentially from the fourth quarter 2016. We continue to experience increasing overall demand for our core technology as operators of all sizes look to optimize the recoverability of their reservoirs, which, in turn, maximizes the value of their operations for their shareholders. We believe increasing information sharing amongst the industry as well a growing focus on chemistry will continue to provide a runway of opportunities in the U.S. land unconventional revolution. Our focus remains to help operators move from mechanical improvements to scientific evolutions, which may be the key to unlocking vast resources of hydrocarbons. Internationally, we saw success in expanding the uptake of our CnF technology, with growth in both CnF volumes and revenue, sequentially increasing by 12% and 4%, respectively. These numbers highlight the global adoption and diverse applicability of our products, along with the desire of the industry to improve the recoverability of the oil and gas reservoir. We believe the industry will continue to seek out opportunities to enhance the economics of recovering oil and gas around the globe, and our commitment to providing these solutions for customers will play a role. Even with this global growth, we still faced significant challenges during the quarter, which we overcame through acquisition and changes in asset [owner] operatorship, at least 400 basis points or 4% of potential CnF revenue growth may have been impacted domestically. We recognize that operators are all at different stages in their application and appreciation of chemistry and respect this fact. Our goal is to provide resources to these operators to help them make the best decisions for their shareholders by maximizing the reservoir performance through our deep understanding of chemistry in the fluid systems. As asset portfolios will likely continue to change hands, we remain steadfast in our commitment to our customers and to the science of our technology. We see expanding opportunity as this process occurs and believe it should ultimately lead to more research, which leads to Flotek. In addition, timing of certain large international orders for CnF impacted at least 200 basis points or 2% of growth. Due to the large order processes of international shipments, the lumpiness overseas will likely continue. We will do our best to help our shareholders anticipate these impacts. Finally, in our non-CnF Energy Chemistry Technologies offerings. Certain equipment mobilizations of key customers of ours, combined with the strong fourth quarter well-above completion trends, led to an underperformance of our more commodity chemistry offerings relative to the rig count, as measured sequentially, as we identified in our earnings release. We also continue to overcome challenges within our CICT segment associated with citrus oil price inflation, which is a raw material in our supply chain. Josh and his team have done an outstanding job in capitalizing on our leadership position in this business and have effectively managed through very challenging times in the citrus markets. Roughly a year ago, just after the oil price trough in Q1, we announced that we will explore strategic initiatives in both our Drilling Technologies and Production Technologies segments. This review has led us to a process to divest these businesses to streamline our capital allocation and corporate efforts. We listened to our shareholders and assessed the marketplace, and while timing may be later than some may have wished for, we believe that we've maximized the value and ability to execute these transactions for the benefit of the shareholders of our growing company. We're pleased to announce the sale of our Drilling Technologies segment for $17 million to National Oilwell Varco, which we expect to close in mid-May. Rich will have more to add on this later. We are committed to our efforts to deliver a high-return, asset-light, technology-focused business model as we redouble our efforts to reduce CapEx and G&A relative to our revenues and future cash flows, which we believe will redefine our path going forward. It is our goal to increase critical metrics like our returns on capital and returns on tangible assets. With our proprietary technologies like our patented CnF technologies and disruptive business model, we believe these metrics will improve over time and deliver cash flows to our shareholders. Before we move on. I'd like to thank the leadership and employees of Drilling Technologies for their contributions to the company. They've been a foundation of Flotek for well over a decade, and its resiliency through the cycles has been a testament to the proprietary technologies and high-impact employees within these businesses and, in particular, Steve Reeves, who has led this effort for that period of time. Additionally, we've made substantial progress to divest our Production Technologies segment which remains held for sale. We expect to have an update as we can offer a definitive resolution, which we believe we will have in the very near future. Last week, we announced a global agreement with IBM to begin the joint development of a cognitive reservoir performance system called Reservoir Cognitive Consultant, leveraging IBM Watson. Once developed, this solution will allow us to predict and apply custom chemistry and other approaches to enhance the performance of wells through their entire lifecycle. This announcement comes as there has been an increasing trend in the industry to leverage data and cognitive computing to move toward a more predictive decision making, which can reduce costs and improve well performance. As we've heard recently, industry leaders ranging from BP to EOG, Pioneer to Statoil, including Corelabs and Schlumberger, all are exploring the utilization of data to improve the industry as a whole. Consider that IDC, a leading provider of market intelligence, predicts that by 2020, just 3 years from now, 80% of large oil and gas companies will run their business with help from a cognitive or artificial intelligent agent that is capable of learning, reasoning and solving complex problems. We are seeing and awakening to the idea that critical operational decisions should not be made based on backward-looking information that's available. The complexity of the industry's operation simply requires using cognitive capabilities. We are pleased to be associated with companies with similar paths forward and look to play a leading role in redefining where we go next as an industry. I'll now turn it over to our CFO, <UNK> <UNK>, to deliver more details on the sale of our non-core Drilling Technologies business and our financial results. Rich. Thank you, <UNK>. As we mentioned on our last earnings call. We began a strategic repositioning to focus on our core businesses in energy chemistry and consumer and industrial chemistry. We are executing a plan to divest our Drilling Technologies and Production Technologies segments. Today, we are pleased to report that we have entered into an agreement to sell substantially all the assets of our Drilling Technologies segment. Closing of this transaction is expected to occur in mid-May. Cash consideration will be $17 million, with a $1.5 million pullback. Proceeds will be used to reduce debt on our balance sheet. An investment banker is continuing to assist us with the sale of our Production Technologies segment. We believe we will have something to report on this in the near future. We now report assets, liabilities and results of the Drilling Technologies and Production Technologies segments as discontinued operations. The financial statements in this Form 10-Q and going forward report the results of our core businesses, Energy Chemistry Technologies and Consumer and Industrial Chemistry Technologies as continuing operations. For the first quarter, we reported total revenue of $80 million compared with $63.8 million in the prior period, an increase of $16.2 million or 25.4%. On a sequential basis, revenue was up 13.2%. Our strong top line growth was driven by strength in both Energy Chemistry and Consumer and Industrial Chemistry. Sequential growth in Energy Chemistry revenue was 10.2% due to well completion activity by our customers. Sequential growth in Consumer and Industrial Chemistry revenue was 24.1%, primarily due to increased flavor and fragrance sales. Our first quarter consolidated operating margin was a negative 0.8%. The operating margin was 14.1% in the Energy Chemistry segment and 19.3% in the Consumer and Industrial Chemistry segment. Selling, general and administrative expense was $22.6 million, an increase of $3 million from the first quarter of 2016 and a reduction of $0.3 million from the fourth quarter of 2016. Our SG&A as a percentage of revenue decreased to 28.2% from 30.7% in the first quarter of 2016 and 32.4% in the fourth quarter of 2016. During the quarter ended March 31, 2017, the company incurred a nonrecurring charge of $1.1 million related to executive retirement. Also, our corporate SG&A spending is not allocated to discontinued operations, and we envision reductions following the sales of our Drilling Technologies and Production Technologies businesses. For the quarter, research and development expense was $3.1 million compared to $1.9 million for the same period of 2016, an increase of 61.3%. In addition to opening the Research and Innovation Center in the third quarter of last year, this increase is attributable to new product development, our commitment to remain responsive to customer needs and the development of new chemistries. For the first quarter, Flotek reported a net loss from continuing operations of $0.7 million, representing a loss of $0.01 per share on a fully diluted basis. Flotek recorded an income tax benefit of $0.3 million, yielding an effective tax rate of 30.1% for the 3 months ended March 31, 2017, compared to an income tax benefit of less than $0.1 million, yielding an effective tax rate of 37% in the prior year. At March 31, 2017, the company had accounts receivable of $62.9 million compared to $47.2 million at December 31, 2016. At March 31, 2017, days revenue and accounts receivable was approximately 71 days, an increase of 10 days since December 31, 2016. This increase in days resulted from the 13% increase in consolidated revenue, an increase in international revenues and extended billing terms temporarily granted to a large customer. For the quarter ended March 31, 2017, the provision for doubtful accounts was $0.8 million. At March 31, 2017, inventories totaled $64.7 million compared to $58.3 million at December 31, 2016, an increase of 11%. Our inventory turnover remains at approximately 3.2x per year. During the first quarter, capital expenditures were $1.9 million compared to $3.8 million in the same period of the prior-year. Expected capital expenditures for 2017 have been reduced to a range of $10 million to $14 million. We are continuing to invest in new strategic growth initiatives while maintaining prudent management of our cash position. As a reminder, our financial statements present the continuing operations of our Energy Chemistry Technology and Consumer and Industrial Chemistry Technology segments. The Form 10-Q provides a description and analysis of our discontinued operations, that's Drilling Technologies and Production Technologies, in the footnotes and in the MD&<UNK> We continue to be focused on monitoring capital expenditures, protecting our liquidity and growing our core businesses in the Energy Chemistry Technology and Consumer and Industrial Chemistry Technology. And now, I'll turn the call over to <UNK> to give more context on our data analytics initiatives, provide an update on our Research and Innovation Center and patent portfolio and share a safety update. <UNK>. Thank you, Rich. As <UNK>, previously mentioned, we're very excited about our new partnership with IBM Watson and the development of our Reservoir Cognitive Consultant software, which is a service of leveraged cognitive capabilities and machine learning to help our clients uncover key insights and trends about their wells, help them make better-informed decisions and witness measurable transformative results. A key driver for this recent development in cognitive computing is to leverage our prescriptive approach to optimizing our clients' results, helping them improve EURs or expected ultimate recoveries, with just the right mix of chemistry and innovation. We were very pleased to present at the Transforming Oil and Gas with IBM Watson conference in Calgary last week, where we have provided a brief insight into our developments. This was a great opportunity to discuss our focus with the industry and we were happy with the very positive feedback for our patent-pending RC2 or Reservoir Cognitive Consultant platform. You can expect to hear much more about this important initiative in the coming months. Now I'll give you a brief update on our Global Research and Innovation Center, which has allowed us to accelerate the pace of our prescriptive analytic chemistry business approach. We continue to experience increasing inbound demand for lab analysis and diagnosis of the correct fluid systems to maximize the returns and performance of our clients' reservoirs. This demand is highlighted by the fact that the number of client innovation projects has increased by 38% since the Research and Innovation Center opened last year. While the scale and scope of these projects differ, this is an encouraging trend as we continue to help our clients solve their complex challenges. And at the same time, our intellectual property portfolio continues to grow, with more than 70 filed or pending patents. Turning now to our health, safety and environmental efforts. We've maintained an excellent best-in-class safety record. We believe this is critical as our business model expands to better serve our customers and ensure on-site deliverability and quality control of the FRAC fluids and our clients' completion initiatives. And with that, I'll turn it back over to <UNK>. <UNK>, thank you very much. Before we take questions, I'd like to add a few concluding thoughts. Second quarter here in 2017, we're anticipating steady completion activity with opportunities for growth, continued demand in Energy Chemistry, with expanding margins as the result of strategic price increases, continued efficiency improvement and consistent growth to our Consumer and Industrial Chemistry Technologies sectors, as we continue to expect as we have long term to outperform the completion activity as defined by EIA DPR. We'd also like to take this opportunity to thank our employees around the globe, who believe in making a difference each and every day, not only for our clients, but also for our shareholders, communities in which we work and live, and our environment. We've worked hard while many of our counterparts have waited for higher commodities. We've executed on a strategic plan that we feel is only beginning to be recognized, and we fine-tuned our portfolio as well as personnel to position Flotek for the future. It is an exciting time for all of us at Flotek and for all of our stakeholders. And with that, operator, we'll now open the call to questions. Sure, great question. As we talked about it in the previous call, end of January, we believe that, give or take a little bit, about 100 basis points margin should improve every quarter as we work through 2017, which will get us right at targeting 40% or slightly above by the end of the year. The strategic price increase has been accepted, almost without exception. Again, we've just had 60 days of that. It was initiated 1st of March, but really started to become in effect towards the end. We haven't had any material commentary in a negative way, so we expect that to take hold and we'll see the full benefits of that in the second quarter. Sure. The largest issue in what you just said there is these operators, the clients, the end user kind of move around their pumping companies during the course of the quarter. And we may be providing chemistry through one pumping company that then gets moved out for 60 days in a quarter and someone else comes back in, and that's very difficult to predict, but that's the biggest situation in that question. The pricing on these commodity chemistries, chemicals, I think will continue to be a challenge through the year. It's one reason why we work so hard to keep the pricing and the margin of CnF where it is. All in all, I think it'll start to work out through the rest of the year, <UNK>. The biggest swing that we really don't have any control over is when these end-user operators make decisions to move back and forth between their pumping companies, and we'll just have to see how that plays out as we provide more of those base chemicals. No, I think that's fair. The ---+ and I appreciate you talking about it as a joint announcement with IBM. That's very rare with them. It's something that has been in the works, as you can imagine, for not weeks but months. And clearly, it allowed a level of credibility of the impact of chemistry with cognitive learning as it continues to improve with the data that's applied into the machines of cognitive capability, but it'll become more than that. It's not just a validation of chemistry, it's an ability to understand the different variables that go into the completion process as to whether it's the way the well is drilled up, toe up or toe down; the type of perforations, all the variables that affect the completion that get people so frustrated of not understanding what has more of effect than another, will start to become clearer through the cognitive capability. And that's what we're most excited about. Yes, I wouldn't read too much into that on a quarter-to-quarter basis. What you said are the 2 reasons why that will fluctuate. So I just ---+ I wouldn't ---+ the pricing is, to me, just not that of a significant movement. And it all depends on when different clients are pumping a different blend of CnF. So we're very comfortable with the way we've been able to handle and hold the pricing of CnF and its associated margin. Most definitely. And we won't go down the list of the clients that have been through here in the last 60 days, but it ranges everywhere from majors to small independents, folks from South America to the far East. So it really is becoming a technology magnet of interest, not only for the clients, but also for the industry with the conferences we host here. Again, I would give an open invitation to folks listening in on the call. If you haven't been here, you should come here to experience it. It's different than going into the type of chemistry lab maybe you experienced in high school or college with a bunch of fume hoods. So yes, it's had a certain effect, as <UNK> mentioned. The amount of increase in client innovation work is measurable. We look at that regularly. But the early part of your question, it has compressed the time that people make a decision to choose chemistry as an important part of their completion. There's absolutely no doubt about that. No, it's a great question. We are doing that as we speak. We've meaningfully added to our storage capacity there, so we can ship from our blending facilities, whether it's Waller or Marlow in bulk. And then, go from that facility to staging areas with our clients in bulk, and we expect to see that as part of our margin improvement in the second quarter as the volume continues to increase and our capacity to manage more of the overall logistics from there, for the Permian, will really, we believe, start to have an effect in the second quarter. Sure, we're fortunate we've got our good man Josh <UNK> here, and he can answer that question for you. We certainly did have a good first quarter. The flavor side of our business continues to see opportunities and doors opening as the shorter citrus crops create more need for what we call the citrus flavor molecules. So we have a great interest there. We're continuing to optimize those opportunities. As you look into Q2, our top line might be down just a tad, but we expect the margin performance that you saw in Q1 to sustain itself, especially on the EBITDA line. And then, as you look into Q3, Q4, Q3 and Q2 will be fairly similar, and then usually, by Q4, you see a seasonal downtick with the beverage business slowing down a bit. But looking forward, we do feel good about CICT. The market opportunities are very, very favorable right now. Right. So give or take, a few percentage points. I think, CnF is right around 70% of the revenue in the first quarter. And what you're finding is that there are several, I'll call them localized chemical providers that provide their chemicals really in a geographic-centric area as opposed to us on a global basis. And those folks compete on price. We provide a technology solution that many, many times will not at all will be the lowest price. And through my history, we are very aware of the fact that when you go down on price, it's very difficult to come back. So we're watching this whole commodity chemical side of it very closely. I believe that the complete, what we call prospective chemistry management solution, where we provide all the chemistry, is where the future is, so that you can have the technology of the different ports of the chemistry compatible. It'd be no different than going to the same doctor to get your medicine for heaven's sakes instead of going to 3 or 4 different doctors and not knowing what the other one's prescribing. So we believe that will evolve over time, and as it evolves, we're just being very careful on this pricing. And if it means that at this point, we may sell a little bit less, that's okay. But we've got a very clear vision as to how to continue to move this to where people will embrace a holistic chemistry solution that comes from a company that, in many cases, we recommend less chemistry for heaven's sakes. It's not about selling more chemicals per well, it's prescribing the right chemistry at the right amount in that well to give the reservoir the best chance. And so, we're very confident that we'll continue to evolve as the year goes on, and I hope that answered your question there for you, <UNK>. Yes, so we ---+ I was over there for a board meeting over Easter and ---+ Easter weekend, and they believe that the China market is going to continue to grow with horizontal drilling. That will really start to happen towards the end of this year and moving into 2018. Interestingly enough, CnF is being used right now in acid work and coalbed methane work over there, which is interesting, certainly, as they get to move in towards more horizontal completions. We'll keep everybody focused as to how that evolves. Well, that's pretty perceptive, <UNK>. And I would certainly say everything you that said there is certainly in play. And for many of the folks that are listening on the call, my guess is they probably also listened to Schlumberger earlier in the month, where Paul talked about his views that the business model needs to change, and we agree with that. And what we're doing is creating as much capability on our side to enable the business model to change in ways that, right now, we may not be able to identify, but you listed many of the attributes that we feel that are unique to Flotek that will enhance the opportunity of what you described. Well, when we built this, with the good patience of our shareholders in the downturn, we built it for growth. So we're at about 70-some-odd percent of what it could be. And I think, based on what we're seeing now, by the end of 2018, we could be closer to just under 100% of utilization of our key people. So we're pretty well set for at least 18 months, but then, we've got the ability with this facility to add another 30% of the footprint with some pretty creative expansion opportunity that wouldn't be near as capital extensive as constructing the original facility. So we built this with the expectation of growth within the next 18 months and then, have the ability to grow pretty economically after that. Thank you, operator, and thank you, everyone, for your continued interest and support in Flotek. And we may see some of you on the road and, if not, we look forward to talking to you again at the end of our second quarter. We hope everybody has a great day. Thank you very much.

2017_FTK

2018

SANM

SANM #All right. Thanks, Mitch. And thanks, again, everyone. We really appreciate your time and looking forward to talking to you next quarter. Thank you.

2018_SANM

2015

WU

WU #Sure. Let me start, and see if this answers your question. The hedges that we had this quarter, we had a gain of $16 million on our hedges. That helped our revenue line. That also helped our profit line. That helped margins by about 100 basis points, margin percentage. However, the currency translation on our revenue and profits, the impact of margins from that translation largely offset the margin benefit that we had from the hedges. Currency impact in total was net neutral on the margins in the first quarter. What you're actually seeing come through in the margin improvement is the net benefit of the cost savings initiatives, offset slightly by the higher compliance costs in the quarter. Well, the cost savings are things that we already have under way. The compliance costs will vary from quarter to quarter. But those are the two impacts that are showing up in the first quarter. Obviously the currency impacts will be potentially different each quarter, and it's based on where currency rates are ultimately, on how that equation will play out. No, it's ---+ we did anticipate it. We had planned on making price changes in our DMT business. Even during the course of last year, you recall, <UNK>, that we've been telling you that the cross-border environment has been quite stable. Having said that, we always look at our 16,000 corridors. We do price increases in some parts. We do price decreases. There's a balance of both of those things that are going on in the world. But generally, we haven't seen a big need for large pricing in the cross-border business. We knew and have in our outlook the planned pricing in our DMT business. Also, putting in perspective <UNK>, the DMT prices ---+ as you know, it's only for certain bents, and it's only for certain parts of the country where we feel competitive pressure. It's like a street corp in our pricing, which we were doing earlier. We always choose pricing actions, if we do that, except the 2012 one, one-time correction. We always do in a very intelligent way looking at the corridors and where the competition is, where to do it. <UNK>, we are very focused on optimizing our compliance programs. In the short term, and it's still the short term, we have had to hire a significant number of people in the compliance organization, now over 2,000 people. That was more than 60% of the cost in the first quarter on the compliance number. But we also are continuing to invest in technology and automation of our processes. Over the long term, I do believe that we'll be able to optimize our compliance spend. I don't see it really stepping down from where we are in the near future, because the regulatory environment continues to evolve, and it is complex, and it's a global effort. I see us ---+I think we are at a more stable place in the current range that we have for this year. But our goal is always to optimize (inaudible, multiple speaker) ---+ I really believe that it will differentiate us to be partnered with different parts of the world. I think it's an investment that makes it Western Union special, that makes it Western Union to apply in different parts of the world with the regulations. I believe it's a competitive advantage long term. We always raise prices or decrease prices different parts of the world. We even change bands within the price within the 16,000 corridors. That's a part of the business. We have been doing it for many years. That's about ---+ it's nothing that big price actions that we're going to change our pricing strategy for a certain time for near term. Just to clarify, <UNK>. In the first quarter the domestic money transfer pricing wasn't in place yet, so we didn't have that impact on pricing. Not by quarter, but we are still expecting about $70-million benefit on the hedges for the full year. That can vary a little bit depending on where rates, currency rates, are. But yes, still expecting about $70 million. We've assumed ---+ just so you know ---+ we've assumed about $1.10 euro rate. Obviously that continues to fluctuate around. Okay. Laura, I understand that's the end of the queue. We want to thank everybody for joining the call today, and wish you a good afternoon. Thanks. Thank you.

2015_WU

2018

CHCT

CHCT #Good morning. Thank you for joining us today for our 2018 first quarter conference call. With me on the call today is <UNK> <UNK>, our Executive Vice President and Chief Financial Officer; and Leigh Ann Stach, our Chief Accounting Officer. As is our normal process, our earnings announcement and supplemental data report were released last night and filed with an 8-K, and our quarterly report on Form 10-Q was also filed last night. Once again, we were busy during the quarter. We acquired 3 properties in 3 states during the quarter, with a total of approximately 38,000 square feet for purchase price of approximately $12.7 million. These properties were 100% leased with leases running through 2033, with anticipated annual returns of 9% to 11%. In addition, in the last few days of 2017, the company purchased certain promissory notes for $8.75 million and early in the first quarter, acquired $2.2 million of promissory notes for a total investment in these notes of approximately $10.95 million. These notes, along with the properties previously discussed, brought our total investments to almost $24 million. As it relates to our pipeline, we have 2 properties with fully negotiated purchase and sale agreements for an aggregate expected investment of $7.3 million. The expected return on these investments should range from approximately 9% to 9.3%, and we anticipate that these will close during the second quarter. In addition, we have 4 additional properties under definitive purchase and sale agreements to be acquired after completion of occupancy for an aggregate expected investment of $76 million. The expected return on these investments should range up to approximately 11%, and we anticipate that these will close through the end of 2019. We had 3 of these type properties coming into the quarter, closed on 1 of those and added 2 new properties during the quarter. This represents 35% to 40% of our targeted acquisitions through the end of 2019 already under definitive purchase and sale agreements. We continue to have many properties under review, and we have several term sheets outstanding with anticipated returns of 9% to 11%. We continue to anticipate having enough availability on our revolver to fund our acquisitions through late 2018. After which time, we anticipate utilizing an ATM to strategically access the equity markets. On the leasing front, during the first quarter, we had expiring or terminating leases relating to approximately 21,000 square feet and leased extended or renewed leases relating to approximately 98,000 square feet. To close out our bankruptcy issue, as previously discussed, we entered into a new note and provided $23 million in funding to a newly established company, secured by the ownership interest, cash, accounts receivable, other assets and cash flows of 8 long-term acute care or rehabilitation hospitals, 1 of which has a satellite facility making the total facility securing the transaction 9. We've received a real estate that was secured by the original mortgage notes through a deed in lieu foreclosure with a valuation of approximately $4.5 million and had the remaining mortgage and promissory note amounts satisfied from the funding of the loan. We anticipate earning approximately 9% interest on the loan. However, based on the terms of the loan, anticipated cash flows and potential for refinancing by the new company, we are anticipating a significant amount of this will be repaid relatively quickly. On another front, we declared our dividend for the first quarter and raised it to $0.40 per common share. This equates to an annualized dividend of $1.60 per share, and I'm continuing to be proud to say we have raised our dividend every quarter since our IPO. I believe that takes care of all the items I wanted to cover, so I'll hand things off to <UNK> to cover the numbers. Thank you, Tim. Good morning. I'm pleased to review the company's financial performance for the first quarter ended March 31, 2018. Total revenues for the first quarter of 2018 were $11.4 million versus $8 million for the same period 2017. Rental and investment interest revenues were $10 million for the quarter versus $6.9 million for the same period 2017. The real estate portfolio was 91.2% leased. On a pro forma basis, if all the 2018 first quarter acquisitions had occurred on the first day of the quarter, rental and interest revenues would have increased by an additional $286,000 to a pro forma total of $10.3 million for the quarter. Total expenses for the first quarter of 2018 were approximately $8.5 million versus $6.5 million for the same period of 2017. General and administrative expenses for the first quarter were $1,193,000. Depreciation and amortization expense was slightly over $4.9 million for the quarter. On a pro forma basis, if all the 2018 first quarter acquisitions had occurred on the first day of the quarter, depreciation and amortization expenses would have increased by $140,000 to a pro forma total of approximately $5.1 million. The company reported net income of $1,872,000 for the first quarter versus $913,000 for the same period 2017. Funds from operations, FFO, for the first quarter of 2018 consisted of net income plus $4.9 million in depreciation and amortization for a total of $6.8 million. AFFO, which adjusts for straight line rents and deferred compensation, increases for the total to just below $7 million or $0.39 per share diluted versus $49 million or $0.38 per share for the same period 2017. Again, on a pro forma basis, adjusting for the debt outstanding for the entire quarter, if all the 2018 first quarter acquisitions occurred on the first day of the first quarter, AFFO would have increased by approximately $179,000 to a pro forma total of just under $7.2 million and increasing AFFO by $0.01 to $0.40 per share. That's all I have from the numbers standpoint. Operator, I believe we are ready to start the Q&A session. No, we closed one of them. That was what ---+ we closed 1 during the quarter and added 2. So it was 3 then minus 1 that we closed, and then we added 2. It's hard to tell on construction, and we're trying to use loosely those terms, so that we don't get caught in the box of saying, well, it was going to be this quarter, but it ended up being pushed a quarter. I mean, it is construction, it is ---+ it's subject to weather, it's subject to a lot of things. So way we look at it is we hope to close them in 2018 and some in early 2019. If they get pushed to later in 2019, so be it. It's still great, great product and great rates and new. So. . Correct, right. And it did pay off the promissory notes and the remaining part of the mortgage. So that's ---+ going forward, it's $23 million and 9% until that gets paid back and the property when we get it leased, it will be accretive. Correct. We have some interest from a close ---+ tenant that has some space close. And then we are in the midst of engaging the leasing broker. I mean, this didn't happen until recently. So I mean, we're just now getting our hands on the property and getting to be able to move it forward. All right. It's kind of the same stuff that we're looking at, I mean, and I'm going to say something I think as it's in the investor presentation that's posted to our website, that we have a term sheet on another programmatic type of transactions, $27 million transaction with one of our existing clients that we got the term sheet on, but don't have the PSA signed yet and that would be, again, probably an early 2019 transaction. But we are continuing to look at existing stuff. My gut reaction is, I think, just to feel with interest rates moving up and we are attempting to push cap rates on ---+ it's my gut feel is, is that, that the flow of property has slowed down in general. And I've noticed that some of our peers have indicated reductions in their program, we're still targeting $25 million to $35 million a quarter. This year, I wouldn't be surprised if it's not on the lower side of that than the higher side of that, but somewhere in that we still feel very comfortable with. I think the biggest bump is related to amortization of stock compensation. And we've accelerated the amortization on 3 of our guys that are reaching retirement age. So we moved that up from what we had it as a life period to looking at them retiring probably sometime in 2019. So that was, I think, $100,000, $200,000 bump in it. . Almost, $200,000. Yes, so I think that was most of that bump. Our receivables are in the best shape that they have ever been. We are very pleased with where our receivables are. We always have tenants that we're watching and making sure, doing what they're doing, but our receivables at the end of the quarter were, I mean, in the best shape we've had since we've been in existence. Wanted to get some more clarity on kind of all the transactions that closed in the development pipeline. So you're saying 1 of that development pipeline closed, that closed in 1Q or did that close in 2Q. In first quarter. In first quarter. So it's one of those in that $12 million total. Of the properties that did close. Yes. And just ---+ and then so last quarter, you said the pipeline was at $16 million that you expected to close across the first quarter, was that including that development deal in that or was that not in that $16 million that you are talking about, so. . I don't think that was in there. We had 1 property drop out because of due diligence issues. So we didn't close on 1 that we had going in because of some issues that we found with it while we're doing due diligence. Okay, so out of that $16 million, 1 of the properties dropped out, and the net $12 million is the other 2 properties, plus this 1 development. Right. Okay. That makes sense. And then just one other question. Not a big trend, but your occupancy has been modestly declining every quarter. Are we kind of reaching a stabilization point at around this 91%, 90% range. Or is there anything to be worried about. We're not worried about it. I mean, as I said, I mean, we had some great leasing stuff going on during the quarter. I think it was 21,000 that expired or terminated. And we leased ---+ extended ---+ we leased, extended or renewed close to 100,000. So we think that things are going well. I mean, one thing that will drop in, in the second quarter is the vacant AMG property that we took back. So I wouldn't be surprised to see vacancy take a little more step down in the second quarter. But we've got a big focus on leasing and feel like things are moving in the right direction. Again, we appreciate y'lls interest in taking the time to spend with us this morning. We're going to be around most of the day, I think. So if there are any additional questions, let us know. And again, thanks for your support.

2018_CHCT

2016

STX

STX #I think <UNK> gave most of the pieces of it and what we're thinking for revenue. We're not going to stay in the business of a calendar projection. We did that when people thought we were going out of business three months ago. But because we did say we'd give an update, I think the missing piece to do the model you want to do is where do we think revenues are going to come in. Right now I would say that we feel that there's going to be revenue growth year over year and it's probably going to be in the mid single digits, maybe mid to high single digits. That would imply, as you point out, beating that number by 40% to 50% with some head room. So if you landed in the $3.75 to $4 range I think that's probably right, given what we can see today. But I think the good news is margins near the midpoint of the range, operating margins probably a year ahead of where we thought we were going to be, and revenue growth, which I think we're feeling more confident that on a year-over-year basis we're going to see the revenue growth as well. Thank you. Are we at capacity. As you know, in our business you only need to be at capacity on one element and you're technically at capacity. So yes, we're pretty much at capacity. But you got to remember, we're at capacity with a portfolio that's just rolling into a lot of new products. So the yield improvement potential is fairly significant. And then how we use that yield improvement in terms of where we use those extra heads and just gets very interesting as well. So where does the biggest marginal contribution occur as we free up capacity, whether or not it's head related or disc related or test related. So yes, we're at capacity, but it's ---+ this is an extremely dynamic business that as you improve yield, you get more capacity, but as you get more capacity you may then decide to use that in more drives that have more heads and discs. So we're running the business the way we want to. Let me skip to your third question because they're related, as you pointed out. What that means is that when we scope a business to, quote, do 40 million units per quarter, then what we go do is we task the ops team to go figure out how in the same footprint and same capital budget how to get to 50 million. So it doesn't necessarily imply more capital per se. I think more capital would only be a function of was there some significant market opportunity; whether or not that was a spike in demand or a product opportunity from a technical leadership, which would then obviously be reflected in greater revenue growth or expanding gross margin. So we don't see any big change in where we run our business, and as you probably can tell we've been really lean on capital and we'll continue to do so, even though we've had some fairly significant one-time capital events like what we're doing in our factories to prepare for the consolidation that we identified. Exabyte growth, again, I think it's just really important for everyone, whether or not it's an analyst or an investor, to understand that the exabyte growth feels like it's going to continue in this 20% to 35% range on an annual basis, but that doesn't mean every year quarter over quarter it's going to go up 20%. That's what we've witnessed and that's ---+ as I said before, it's going to be like this until we get more diversification of the cloud service providers or as corporations start to deploy cloud like architectures that are using these super high capacity drives. Whether or not you ask me for the next year or two years or 24 months or 18 months, my answer's kind of the same. It feels to us that the demand is going to continue for utilizing HDDs in the very highest capacity environments, and those are ---+ that's a great trend for us because it's absorbing more heads and discs. It's a way more complicated channel. It's a way more complicated test, manufacturing tolerances are much more difficult and all of that translates into a product that has a lot higher value add. So we don't see any shift to that fundamental thesis. Thanks. This will be our last one, operator, so we can end before the market opens. I guess I don't want to necessarily say that right at this second. Again, there's no reason getting wildly speculative about being at the upper end of the range. There's a lot of issues that go into that. I'm not sure we've disclosed when the Korat facility is going to be fully operational, and I'm not sure we want to from a competitive perspective. So sometime in the next six months we're rolling into that facility. Okay. All right. Great. So we're going to end the call here. Just want to thank everybody, certainly all the employees at Seagate, our suppliers, our customers, our investors and then we look forward to talking to everybody on the next quarter call. Thanks very much.

2016_STX

2015

ORI

ORI #Good day everyone and welcome to Old Republic International third quarter 2015 earnings conference call. (Operator Instructions) This conference is being recorded. And would now like to turn the conference over to <UNK> <UNK>, with MWW Group. Please go ahead, ma'am. Thank you, operator. Good afternoon everyone, and thank you for joining us for Old Republic's conference call to discuss third quarter 2015 results. This morning we distributed a copy of the press release. If there's anyone online who did not receive a copy, you can access it at Old Republic's website, which is www.oldRepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release and dated October 22, 2015. Risks associated with these statements can be found in the Company's latest SEC filings. Participating in today's call we have <UNK> <UNK>, President of the Old Republic's General Insurance Group; <UNK> <UNK>, Chief Executive Officer of the Old Republic's Title Insurance Company; <UNK> <UNK>, Senior Vice President and Chief Financial Officer; and <UNK> <UNK>, Chairman and Chief Executive Officer. At this time I'd like to turn the call over to <UNK> <UNK>. Please go ahead, sir. Thank you, Marilyn. Welcome to everyone. As always, we appreciate your interest. And as we've done in the past, we'll cover matters specific to each of our key segments. And we'll do this in the same order as the discussion of the segments takes place in the news release this morning. So with that, I'll ask my friend here, <UNK> <UNK>, to address our General Insurance Business operations to date. <UNK>. Okay. Thank you, <UNK>. The General Insurance Group experienced 5.4% growth in net premiums earned compared to third quarter 2014. For 2015 year-to-date, the increase was 6%. We believe this growth rate should continue for the remainder of the year. While our rate increases are moderating, we still expect organic growth and strong retention ratio to persist on our existing accounts. We also anticipate continued reasonable growth of new business. So in summary, most of our operations should experience modest top line growth for the foreseeable future. Which, as always, will vary by type of coverage and our insurance products. While we operate in several distinct specialty marketplaces, we are generally seeing rate levels continuing to moderate in what is always a very competitive environment. Some of our operations are achieving low to mid-single digit rate increases. While other parts of our business that have had less than acceptable underwriting results are achieving mid to high-single digit rate increases. We're doing this in conjunction with necessary underwriting adjustments, and reorientation of the business mix from both coverages and geographical standpoints. In all this, we continue to emphasize underwriting profitability at the expense of top line growth. Particularly, with regards to parts of our construction book of business. General Insurance Group's overall composite ratio improved from 100.2% for the third quarter last year to 96.5% for the third quarter this year. Year-to-date, through the third quarter, the overall come composite ratio improved from 98.9% in 2014 to 96.9% this year. <UNK>l of this improvement is coming from the claims ratio component. The commercial auto claims ratio increased from 73.6% in last year's third quarter to 76.1% in third quarter of this year. Year-to-date, the ratio was 77% versus 74.5% for 2014. We're continuing to keep an eye on frequency and severity trends to gain the greatest assurance that our underwriting focus and rate adjustments are commensurate with these trends. The workers' compensation claims ratio improved from 86.6% for the third quarter in 2014 to 77.6% in the same quarter this year. Year-to-date, this ratio was 79.8% in 2015 versus 84.2% in 2014. We expect this claims ratio for the coverage to keep trending favorably to more historic levels, in the mid-70%s for the foreseeable future. As we indicated last quarter, underwriting performance of the general liability insurance coverage is much more volatile quarter-to-quarter, because of lower premium volume we write in it. Claims severity, therefore, can create much more volatility on such a smaller book of business. The claims ratio declined from 94.2% in last year's third quarter to 93.3% in the third quarter this year. Year-to-date, through September of this year, the claims ratio improved from 85.6% to 76.1% for the same period of 2014. The remaining insurance coverages we underwrite have continued to perform very well through the first nine months of this year. Looking to the near term, we believe that each of our specialty operations will enhance their competitive positions within their respective niche. The overall focus in each case remains on the production of favorable underwriting results. And the achievement of the long-term objectives, outlined in the five year plan we established in 2012. So, on that note, I'll turn the meeting over to <UNK> <UNK> who will address our Title Group performance. Thanks, <UNK>. It's really good to be an 108-year-old title insurance Company and still be growing very nicely. As we reported this morning, the Old Republic Title business broke an all time record for the second consecutive quarter. The record stood from 2003 until it was broken in the second quarter this year. In this year's third quarter, title insurance produced pretax operating income of $55 million. That bested this year's second quarter record earnings of $47.7 million by about 15%. We also exceeded 2014's third quarter pretax operating earnings of $28.2 million by about 95%. Moreover, the Company set an all time quarterly record for premiums and fees of $566.7 million. That's about 20.5% more than 2014's third quarter's results. We're experiencing significant and roughly equal growth across both agency and direct sectors of our business. Our market share continues to hover around 15%. And the commercial title insurance portion continues to grow, at more than a 20% clip and is accounting for nearly 20% of our business. Claims reserves established in the prior years continue to evolve favorably. Claims ratio for the quarter and year-to-date periods compares very well with the ratio we experienced in 2014. As you might expect, all of our operating ratios have improved. The expense ratio dropped from 89.2% in 2014's third quarter to 85.9% in 2015. And our operating margin in the third quarter improved from 5.9% to 9.6%. Year-to-date, the improvement was from 4.5% to 7.8%. These are very healthy margins for the title insurance business. We believe that we're in a moderately robust housing market. Last quarter, we explained how our earnings were especially significant relative to the mortgage markets of 10 to 12 years ago. Mortgage originations in 2003, we'd set the old record before the last quarter, were about $4 trillion. By contrast, 2015's mortgage origination market is probably going to weigh in at about $1.4 trillion. We ask ourselves whether we could ever see another $4 trillion mortgage origination market and of course, our answer is yes. Maybe not anytime soon, but we should see volumes trending upward for an extended period of time. As the economy continues to improve, and credit issues quiet and the effect of some of the regulatory changes abates, we think there will be a real opportunity for continued growth in the title business. And with this scenario, we fully expect to continue making a solid contribution to Old Republic's consolidated bottom line. And at this point, I will turn the meeting over to <UNK> <UNK> for comments on the RFIG runoff segment. Look at this RFIG runoff set of numbers. In the latest quarter and year-to-date statistics that we show in the news release, it's obvious that we've continued to make some additional provisions for litigation exposures that continue to exist in those two buckets of business that we refer to as the RFIG book. And we've made these additional provisions in both the MI and the CCI blocks of business. And that's the main reason, as you can readily see, that the reduced bottom lines we show for both MI and CCI runoffs, are occurring in this most recent quarter and year-to-date period in both buckets. With respect to the CCI litigation, the expense provisions this year have been somewhat less severe than they were in 2014. <UNK>though, you may remember reading the material we've put out, that in the second quarter of 2014 we did settle a large claim. Large litigation claim in the CCI area and that caused the provision for claim costs in that particular quarter to jump up. We don't have that situation this year, and that's why it's as we say, it's a much less severe type of hit. Nevertheless, the underwriting performance for the much smaller CCI block of business is not as favorable as the MI portion. In both regards, however, we do continue to expect a final resolution of the litigated claims within the next several months. Perhaps before year-end, in so far as MI in particular is concerned. And, as we've said in past occasions, our expectation is that a final resolution of both sets of cases should not have a significant adverse effect on Old Republic's consolidated financial condition. If we leave aside these litigation matters, these runoff books of business are nonetheless progressing pretty much as we anticipated. As you may have heard us say over time, over the last number of years, we do think that the mortgage guarantee business will run itself off by 2022, 2023. And we, as we have in the past, expect that the runoff will be favorable. That we have every expectation that the book, the MI book, should produce some reasonably consistent additions to the existing capital structure. And of course, the accumulating surplus in that business will continue to [enure] to the benefit of the Old Republic consolidated equity account over the runoff period. So again, leaving aside the litigation, I think we are looking at some reasonably favorable resolution of the runoff book. So on this note, I'll give the reins to my colleague, <UNK> <UNK> here. <UNK>, do you want to discuss the financials. Yes, I do. Thank you. As we reported in this morning's news release, consolidated assets grew to $17.3 billion at quarter end. While our shareholders equity account declined modestly to $3.8 billion or $14.95 per share. The highlights of Old Republic's financial condition as of September 30th are as follows. Our cash and invested assets remained more or less flat at $11.3 billion, by comparison to amounts reported at the end of June. The table on page 5 of the release, however, shows that the cost basis of the investment portfolio actually increased by approximately $440 million during the first nine months of 2015. This growth was offset by further declines in the fair value of the investment portfolio during the second and third quarters, in particular. At September 30th, the portfolio was comprised of approximately 82% allocated to fixed maturity, and short-term investments with the remaining 18% directed towards equity securities. Which is pretty consistent with the prior quarter end. Investment income increased to $104 million during the quarter or by 21% by comparison to the same quarter in 2014. For the first nine months of this year, investment income rose by nearly 14% to $289 million. As mentioned in prior quarterly calls, this higher level of investment income is substantially due to the greater invested asset base accompanied by an increase in the overall portfolio yield. Additionally, in the latest quarter, investment income benefited from a nonrecurring special dividend, attributable to one equity investment that added approximately $10 million to this source of revenue. The credit quality of the fixed income portfolio remains at an overall A rating. And the average life continues to be approximately five years. Consolidated claim reserves remained largely unchanged at the end of September, by comparison to both the June and prior year-end balance sheets. For the first nine months of 2015 and 2014, consolidated claim reserves have developed slightly favorable. As we noted in this morning's release, the General Insurance Group experienced slightly unfavorable reserve development in the third quarter and first nine months of this year. This added 1 percentage point to the reported claim ratio for both periods. <UNK>though still unfavorable, the prior year claim development shows marked improvement, relative to the same periods in 2014. And is trending closer towards the segment's long-term experience of recording adequate reserves at each period end. Consistent with the past several quarters, the mortgage insurance group experienced favorable development of prior year reserves, as quantified on the top of page 4 of the news release. And lastly, the Title Group reserves developed largely in line with prior estimates. Shareholders equity at September 30th totaled $3.8 billion, or $14.95 per share as I mentioned earlier. And that's a reduction of $0.21 per share for the quarter, and $0.20 per share for the first nine months of this year. The reconciliation of book value per share located on page 6 of the release, shows that net operating income and realized gains in excess of the quarterly cash dividends paid to our common shareholders, continues to add to the book value per share of Old Republic. The volatility in reported book value per share continues to be most significantly impacted by changes to the unrealized gains and losses in the investment portfolio particularly with respect to equity securities. Finally, the capitalization ratio shown on the bottom of page 6 are essentially unchanged at the end of September, by comparison to the prior quarter and year-end. So those are the highlights of our current financial condition, and I'll turn things back to <UNK> for any closing comments. So there you have it in a nutshell. The overall business is getting to the point where it's basically firing on all major cylinders, and it's regaining its customary stability. With regard to our general insurance book of business, we're making substantial progress in redirecting a couple of blocks of business that have been the source of headaches for us for a while, as <UNK> indicated before. And while this may be, this may cause I. e. the changes we're making may cause a bit of a slowdown in the top line growth, particularly, when it comes to the workers' compensation types of coverages in particular. That the underwriting results should and are expected to improve significantly particularly on comp where, again, as <UNK> indicated, we have an objective of driving that loss ratio down to mid-70%s, where it has been more often than not, except for the last three or four years. And I think we're going to succeed in that. And, of course as we have in the past, we'll be doing this on the basis of unquestioned financial stability and solidity, as we have throughout the rest of Old Republic's business. And finally, as we said, the clouds are parting over our business in the area of the runoff of the MI and CCI coverages. And we think, again, that the long overdue settlements of the litigation that's been a very sticky point for us for several years. That we think that those settlements are imminent, and should be out of the way in the next several months. So on that note, we'll be happy to address any questions that we may have left unanswered, either in the news release or in these brief planned comments of ours. Thank you. (Operator Instructions). Your first question will come from <UNK> <UNK> with Raymond James. Good afternoon, everyone. Hi, <UNK>. Hello, <UNK>. Couple questions. On the reserve side, I know asbestos environmental is a low ---+ has a low percentage of your total reserves, minor, immaterial, frankly. But, we did see Travelers come out in the third quarter with an addition to their reserves. Maybe you could just give us an update on your perspective as it relates to Old Republic. Then, just piggyback that into just an update through the third quarter results on the case reserves, and some of the other lines of business where you've had some challenges recently. Namely the workers' comp area. Well, I'll start by speaking to the A&E reserve question, <UNK>. And that is as you properly said, that's not been a high visibility type of issue for us for years. And a lot of it stems from the fact that we've typically, particularly in those earlier years before the rules of the game were changed in A&E, that we were typically issuing policies for $1 million or a couple of million bucks. So that when we got hit on any of these claims we tended to be ---+ they tended to be relatively innocuous. We did have a book of business that we wrote back in the early 1980s for a couple of years through an MGA operation, and that's a book of business we've regretted writing for quite a while now. But that's been the main, or a main source of whatever issues we have with A&E. The long and the short of it, if you look at the 10-K reports that we put out every year, you'll see that it's been trending down in terms of the overall reserve exposure we have there. So again, it's not an issue for us. It may be for large companies as you mentioned, with Travelers and so forth. Which were at the center of the general liability area. And they were issuing some significant policy sizes, and that's the main reason, obviously why they still may be feeling some heat from that area. As to general reserves, <UNK>, do you want to address that part of the question as to what's happening there. Well, <UNK>, is your question specific to case reserves or just the overall reserve development. I was thinking about the case side of the equation, but maybe you could broaden the response to case and IB&R. Well, I think as we've mentioned on prior calls, there are a couple books of business that we have had our challenges getting our arms around. And we've dedicated significant management time and attention and effort in addressing those issues. And have, we think, put in policies and procedures and have the right people looking at the right issues to make certain that we're setting appropriate case reserves in any given period. Such that we get to the ultimate estimate of our obligation as quickly as possible. So, that's been the source of some of the development we've had in prior quarters. We think we're getting our arms around that. And as a consequence, I think that's being reflected in the lower prior development numbers that we reported this morning. Okay. Thanks for those answers. Just two cleanup questions, one on the title and the other on the runoff business. On the title business, the loss ratio, the claims ratio, definitely for the first nine months is trending better than it did a year ago. Is that reflecting in part the growth of the commercial side of the equation that's causing that downward improvement. Or, is there some other broader macro issue that's causing that improvement in the loss ratio. And then just to the RFIG runoff business, <UNK>, if you could just ---+ as I look to the third quarter result, and you talk about the increased litigation. I'm just trying to think about what this business will look like post settlement, both from a loss and an expense ratio standpoint. And so any guidance there would be helpful. Okay. Well, <UNK>, do you want to address the trends in the loss ratio for the title business. Sure. Those are good observations, <UNK>. On the commercial business, certainly has an effect on the long-term loss history that the Company will have. As that business grows, it certainly helps the loss development on a trending basis. As you know, in the title business we have about a 20 year tail. So, it takes some time to show up in terms of the actual numbers. But we've grown that business so much, by about a couple hundred million dollars on an annual basis over the last five, six years. So that certainly, is having an effect but it will have even more effect down the road as it continues to grow. And then the other factor I think has a bigger effect, at least right now, on the loss development. Is the quality of loans that we've experienced since kind of the go-go years of mortgage originations. So I think what you're seeing is a better quality of loan with even less risk to the Title Company than we've ever seen before. I think that's probably the major factor right now. I expect the loss ratio to look continually better. Okay. And <UNK>. I think that's right. Because particularly in a good economy, in an improving housing markets, history shows that loss costs tend to come down. Whereas when housing and mortgage lending sour as they did during the great recession years, you always expect the loss ratio to go up. With respect to the runoff business, I'll say this again. That the MI business ---+ if you track, as I'm sure you do, <UNK>, and others do. If you track the trend in our earned premiums, quarter to quarter, you'll see a general decline of $9 million, $10 million per quarter in terms of earning premiums. By the same token, if you track the actual loss ratio that we've been booking, it's not inconceivable, during this runoff period for MI, that we could end up with loss ratios in the 40%s or 50%s. Because all the bad, most of the bad claims, have gone through the system now. So that we now get more into a regular type of market and therefore, a regular type of loss or claim emergence. From a cost standpoint, I think we can operate that business at a 9% to 12% expense ratio. So, you put those two elements together, albeit on a declining earned premium base and that's why we say through 2022, 2023 when the business should be basically fully off the books that will show some continuing, though declining profitability. With respect to the CCI, again, that's a much smaller book of business. And, again, the only difference, a major difference between that book of business and the mortgage guarantee business is that we do have some potential recoveries on prior paid losses by virtue of salvage and subrogation recoveries. And we just don't know the level of it at any point in time. But it's there and that should help the bottom line contribution of that business. And there again, I think we can run that business off at a 9% to 10% expense ratio. So again, once we get rid of this litigation, this thing should not ---+ should be a non-event for us and if anything, particularly with respect to MI, we should ---+ you should see an amplification of the capital bucket by virtue of the earnings we would expect to produce. As you saw this morning, MGIC reported its earnings. And even though there you've got a different story, in that it's still very much actively engaged in the business. But the trends there are the same, in terms of what's happening to their claim cost and so forth. So we're getting into a much more normalized market which should have a beneficial effect on MI companies, whether they're actively engaged or not. Okay. Thank you, <UNK>. Great answers and congratulations on the quarter. Okay. Thank you. And from Dowling & Partners, we'll go to <UNK> <UNK>. I had a question on commercial auto. There's been a mixed experience across the industry. Recently, we've seen some big corporations like FedEx talk about increased frequency, more driving, more goods. And I was just curious if what you are seeing in frequency and severity is trending up at all. I'll try to address that. I think I did touch on that slightly in saying that when it comes to our commercial auto lines, we're definitely focused on the frequency and severity trends. And we're making sure that our rate increases, particularly on that line, are commensurate with those trends that we're seeing. But it is fair to say that there are a lot of issues in the external environment that are driving some frequency and severity: distracted driving, construction, less experienced drivers, so on and so forth. So, there are factors that are out there. We're keeping an eye on them overall. We feel that the rate increases that we are getting on that line are keeping pace with those trends. Is this the line where you are getting the largest rate increase versus general workers' comp or others. No, not necessarily. As I mentioned, where we are getting the largest rate increases are on the areas of the portfolio where we have experienced some underwriting difficulties particularly on the workers' compensation and some segments of workers' compensation. So, that would probably be the areas where it's the greatest. But I would say perhaps a close second would be on the commercial auto business. But again, because of the nature of those lines, as I'm sure you are fully aware, <UNK>. It's a lot ---+ we're able to fix rate issues or risk selection a lot quicker on the automobile liability side, the trucking side of the business. And we are on comp because on comp one of the additional elements we have to deal with is the constant catch-up with inflationary cost pressures on the medical portion of that business. So that's why as <UNK> just said, that's where we're getting the largest case ---+ largest price increases. If I look at the trend of your workers' comp loss ratios, it was a very good improvement this quarter. And when I put that against the 1 point of adverse development overall, I guess it was a little bit more in general insurance but, is there at all favorable development in any of these lines. Or is workers' comp being affected by something going the other direction. Yes, most of our issues on loss development have been in the comp area. Once in a while, we get hit on general liability because of issues that again <UNK> alluded to before with respect to fortuitous events which can affect adversely, pretty quickly, a small book of business. But no, when it comes to loss reserve developments the issue for us has been comp, comp and comp. The auto line ---+ Just looking at the actual loss ratio in the quarter, though, I mean it is a lot better. I don't know how much it's better than anything in the recent past. And what was it that enabled it to come down that quickly. Well, we don't think it came down that quickly. But anyway, go back ---+ if you go back to our results for the last ---+ what would you I say, <UNK> ---+ the last 24 months through year-end 2014, particularly in the second half of last year. If you look at those quarterly results, you will see that we disclosed very consciously and consecutively each quarter the hit that we were getting on the loss ratio by virtue of adverse loss developments. And that was much more accentuated in the final quarter of last year when the thing really (technical difficulties). Okay. And I believe we said at the end of the ---+ during the second quarter conference call, we said that one of the reasons we felt more comfortable about the reserve developments fixing themselves, and therefore the loss ratio gradually getting better, was that we had hit ourselves pretty good with respect to prior year's reserves in that second half of last year. And therefore, that is the main element for the loss ratio being driven down as consecutively as you see it now in the first, second, and now the third quarter of this year. And I believe, <UNK>, you were at the recent road show and you know we said at that time ---+ we said the same thing at that time. Right, that we did not expect the remainder of this year, which when we were there would have been the second half of this year to look anything as bad as it did for last year for that very reason. So it's all fitting if you put it all in there. I guess we can express it as much more adverse development last year and less of that this year. And otherwise the underlying loss ratio is similar, improving. Well, again, as <UNK> says, our objectives, and we believe we have the basis for doing that by virtue of the rate increases that we've been putting through as well as the selection of risks that we are doing. Again as <UNK> said, we are cutting back on some parts of the business. You mentioned specifically, some construction types of areas where the combination of those three elements: underwriting selection, pricing, and being more careful about where we are writing ---+ running the business and writing the business, that we aim to get that loss ratio down to the mid-teens which is where it should be from a long-term perspective on comp. Mid-70s. Mid 70%s, I'm sorry. Mid-70s. I knew what you meant. Wishful thinking. Thank you very much for those answers. At this time we have one question remaining in the queue. (Operator Instructions). We'll take our next question from <UNK> Worely with JMP Securities. Thank you. Just one sort of numbers cleanup question. In the title line how ---+ was any of the top line strength that we saw in the quarter related to a lot of mortgage volume being pushed through before the CFPB's new mortgage disclosure rule went into effect at the beginning of October. <UNK>. Sure. I can answer that. We did see a bump just like the week before. And I think that was the matter of processing under the old rule as opposed to anything that occurred after October 3rd. But the rest of the quarter really was an increase in purchase money transactions. We had some we call them little boomlets in the refinance business because interest rates were going up and down and people thought it might be the last chance to pick up a very low interest rated mortgage. So commercial business was real high and of course that's not affected by CFPB. So, I think, yes there was a little bit. We saw a little bit of a slowdown the week after the CFPB introduced the rules. But I don't think it was a great deal of the business. It's a wait and see as to how it will affect it in this quarter when you'll really see the effect of what the rule may have done. Okay. But it sounds like generally not necessarily anything that was more loaded into the third quarter that would have happened in the fourth quarter. I mean, any slowdown we see will just be general sort of cyclicality of housing market in the fourth quarter. Yep, you got the seasonality of ---+ yes, the mortgage market, right. Okay. Perfect. Thank you very much. It appears there are no further questions at this time. Mr. <UNK> <UNK>, I'd like to turn the conference back to you for any additional or closing remarks. January. Of 2016, which is right around the corner. On that note, we'll bid you good afternoon.

2015_ORI

2017

ADS

ADS #Thanks, Ed Let’s start with Slide number 3, and if you look at our start to 2017, it was better than expected with revenue of 12% to a $1.88 billion and core EPS of 2% to $3.91. Both exceeded guidance for the first quarter, which is a very good start Adjusted EBITDA net was flat at $440 million compared to the first quarter of 2016. A $72 million reserve billed at Card Services and a $17 million decrease in adjusted EBITDA at AIR MILES due to the breakage reset at the end of 2016 dampen the growth rate for the quarter As delinquency trends moderate over the course of 2017 consistent with a wedge the quarterly reserve billed will moderate while the year-over-year hole in AIR MILES adjusted EBITDA should close this program changes or implemented over the course of 2017. Starting the year, we knew we need to deliver on three major assertions First, that Epsilon could return to positive revenue in adjusted EBITDA growth and that we could stabilize the technology platform offering We would say we’re on track; especially I view it as very strong Q1. Second, the credit normalization will conclude by the end of 2017 with a check as we’re definitely tracking to the wedge on Slide 11. Third, that we can retool the AIR MILES model to replace loss to EBITDA from the breakage reset We’d say that still in the process, but we do expect EBITDA margins to increase appreciably especially in the back half of 2017. Turning to capital allocation, we were active with our repurchase program during the first quarter, spending $415 million of the $500 million board authorization to acquire 1.7 million shares Let’s go to the next slide and talk about LoyaltyOne We’ll start with AIR MILES, and AIR MILES revenue decreased 6% to $181 million for the first quarter of 2017. The decrease is largely due to a 4% decline in AIR MILES redeemed which was expected given the elevated redemption activity in 2016. The burn rate which were miles redeemed divided by miles issued was still elevated during the first quarter of 2017 due to a backlog that carried over from 2016. But we expect it to normalize at about a 78% burn rates for full year 2017. AIR MILES adjusted EBITDA decreased 32% to $35 million or a 20% EBITDA margin The decrease was primarily due to the lower breakage rate entering 2017, as you recall it’s now 20% versus historically it was 26% and that knocks about one cent or one penny off profitability per mile redeemed This is the whole we’ve talked about before We are focused primarily on lowering the cost per mile redeemed by negotiating better vendor pricing and we started to see results in March From a collector standpoint, our active collector statistics overall are down from last year but on par with 2015 levels Our promotions in market such as a recently completed cruise promotion where every mile earned during the qualifying period was an entry into one of 1,300 cruise packages are stimulating issuance per transaction which is positive news BrandLoyalty revenue and adjusted EBITDA decreased 6% to $152 million and 14% to $24 million respectively compared to the first quarter of 2016. The declines are largely due to program timing between years as well as unfavorable FX rates been a 3-point drag on both There’s really nothing new to report on the North American expansion effort at this time, but there were several high potentials for 2017. Let’s flip to the next slide and discuss Epsilon It’s the first quarter in some time that I actually enjoy talking about the Epsilon results, as we started the year very strongly with revenue up 7%, adjusted EBITDA up 5% a very nice flow through the top line growth to adjusted EBITDA And there was a better balance of revenue growth in the key product categories than we’ve seen in some time Epsilon agency, auto and CRM were all at double digits with the CRM/Direct at a robust 47% Data and affiliate product offerings increased in low single-digit range, to acknowledge in your platform which is about 25% of Epsilon’s revenue decreased 7% which was a sequential improvement to the minus 13% in Q1 of 2016 – Q4 of 2016, sorry This offering turn quickly in 2016 as growth rates went from plus 5% growth in Q1 to flat in Q2 to minus 4% in Q3 and then minus 13% in Q4. The change in 2016 was due to the loss of a few key clients midyear, importantly the client base has since been very stable Lastly Conversant Agency was down 28% compared to the first quarter of 2016. This offering has been a consistent drag now for about nine quarters, but it’s now reaching a level where at less than 5% of Epsilon’s revenue, it appears to be stabilizing Let’s turn to Slide 6 and talk about Card Services Revenue increased 22%, just slightly over $1 billion for the first quarter of 2017 driven by strong gross yields which increased 80 bps compared to first quarter 2016. Operating expenses increased only 3% to $360 million for the first quarter and expressed as a percentage of average card receivables decline to 120 basis points compared to the first quarter of 2016 that is a very strong start to the year in terms of expense leveraging Adjusted EBITDA net increased 8% to $331 million for the first quarter of 2017, despite a $72 million billed allowance for the loan losses and as we talked about before that number should drop in Q2 and Q3. Credit sales increased 6% to $6.6 billion for the first quarter aided by tender share gains to about 100 basis points Over one-third of credit sales for the quarter were through digital channels reflecting the change in retail landscape Web mobile applications increased 13% while traditional channel applications such as in-store increased 6% during the quarter Web mobile applications now count for over 30% of all applications Recognizing the shift to digital sales, we recently introduced a Frictionless mobile acquisition capability which reduces the application process to only a few keystrokes reducing the abandonment rate of over 95% These capabilities will allow us to continue to add etailers such as Wayfair and its clients Lastly to clarify the topic of raise in interest rates, yes the benefits Card Services made interest margin The APR we charged is variable rate tied to primary, an increase in prime rate will reset the APR to the card holder within 2 billion cycles Conversely funding costs which are about 70% fixed rate will reset over a two-year period Now with that, I’ll turn it over to Ed It’s a great question <UNK> Again, that’s primarily focused around the Epsilon division We are not doing any off-shoring with Card Services You’re right, we ended last year with about 1,000 associates in India We’re now up to about 1,300, I believe The target will be to continue to grow that within the Epsilon division I would not expect to see any EBITDA margin expansion Right at the moment from it, what it does allow us to do, <UNK>, is be more price competitive on that core Tech Platform offering that we have, where, as Ed talked about, we’ve seen some pressure coming through from some SaaS products and cloud based So what I’m looking for is to allow us to really grow the top line, sustain EBITDA margins but not necessarily be incremental to EBITDA margins until at a future day On the reserve side, <UNK>, the reserve was 6.6% in reservable AR at 12 – sorry, at March 31. What I would expect is the provision build, that reserve build, which was $72 million in Q1, should drop probably below $50 million Q2 – below $50 million Q3. Q4 is really going to come down to growth and whether we see any type of bulk acquisition coming through So I think that your question’s right Based on the trends we’re seeing, should it be lower than 6.6% at year-end? I’d say based on trends now, that would be an accurate assumption And <UNK>, the only thing I’d add on the cost-to-mile, the reason we’re attacking the cost-to-mile is it does not reduce the value proposition to the collector So if we can go through and negotiate better pricing for the same product, we basically fill the hole and the lost EBITDA without affecting the experience of the consumer, which is really the reason why we’re attacking it in that approach I’ll tell you what I look at most, George, is what did payroll do What did the fully burdened cost of payroll do? And it was up less than 6% in Q1 versus 7% You always have some other operating expenses if you onboard a new program, such as the rollout of some new auto programs we have in place where you get some other expenses behind the scene ahead of it But what you’re really trying to do with the Epsilon model is always make sure the revenue growth rate is better than the payroll growth rate, and we definitely did that in the first quarter And I think that’s really the trend we’ll look to continue at the back half of the year Like we said, we had a couple of new programs within the auto we’re rolling out We incur quite a bit of costs up front before they come functional, and that’s part of the pressure why you didn’t see a one-for-one flow-through But really, it’s the comparison of revenue to payroll that’s relevant to us Yes, the only thing I would add, and I think this is a very important piece, historically, when we’ve had a retailer just basically go out of business, going through liquidation, the loss rates in that portfolio are no different than the overall portfolio experience So to Ed’s point, you lose the opportunity They can’t go on to the store and spend But the good cardholder does not and of itself they’re going to walk away from this account I’m going to charge it off and run the risk of basically cross-defaulting a different credit card So our experience in the loss rate is basically similar to what the overall portfolio experience is I’d say there’s none in particular We had two small retailers go into liquidation, but they’re very small portfolios, really aren’t affecting us In terms of any material client, there’s none that have given us any pause at this point I’d say, <UNK>, I think that the three clients we lost last year midyear definitely affected us They did shift to a little bit different model than what we’re providing for them As part of what Ed talked about, how we had to shift to a little bit more of a packaged product to lower the costs, lower pricing, what you have seen us do is as we’ve had renewals since then, we had come down a little bit on the pricing We had to offset it by lower operating costs primarily in parallel with our off-shoring to India So we’d say that base is stable As Ed talked about before, we’re expecting it to basically return to flat growth year-over-year probably as early as Q3. So we think that we’ve addressed the salient issues with the technology platforms We’ve not seen any further client attrition And we think the changes we’ve made have really put this back in place frankly to return it to a growth offering versus where it declined over the last three quarters I’d say, <UNK>, it’s a little bit early We’re just now introducing the packaged offering to the market I would expect that – the EBITDA margins to be fairly consistent with the full service, maybe down a little bit But it’s too early for us to really know what the answer is going to be there Q3, Q4. Both would be strong Obviously, Q1, it was extremely good I don’t expect it to be quite that good for the full year As Ed talked about, probably 20, 30 basis points versus a very strong start to the year I’d say it’s coming from pretty much all angles So it’s the growth in the portfolio Obviously, it’s the influence of co-brand that we put in there over the last few years, which has a little bit lower OpEx But it gets into the way we do collection activities, whether we source within our own operations or we allow people to work from home I would say there’s really no one silver bullet It’s a combination of different factors that really allowing us to drive that operating leverage Sure You’re going down the right area, which is the way that CRM signings work is almost like a vintage, where in the first year you’ll sign a group that maybe they do $50 million of revenue first year, $75 million second year, $100 million third year, and we are definitely benefiting at the same time that we are definitely benefiting from new clients Last year, we added about 33 new clients with CRM This year, it could be an estimate as high as 50. So it’s the combination of both the ability to leverage a new client for three to four years, get revenue growth, plus we’re continuing to onboard new clients as people see – companies see the value of the proposition we bring The way we look at it, <UNK>, we knew that we had a little pressure early in 2016 that will play through starting this year at 25.5% gross yield is consistent with the average we had last year So we would tell you there could be a little positivity to it based upon, obviously, any changes with the Fed raising rates and so forth It could pass a little bit through to gross yield The thing that always creates noise within your gross yields is if you do find a bulk file and you acquire it, it puts temporary pressure So there’s a lot of moving parts But we would say steady state 25.5% feels good for the year It could up maybe 10, 20 basis points given further interest rate increases coming through But really, it goes back to mid-2015. If you remember, we’ve put some changes in place that were cardholder friendly We had to burn through those issues in the temporary pressure we put And we would tell you at this point, we’re past that No, nothing to add to that

2017_ADS

2015

MOV

MOV #So we expect to introduce this, as we mentioned, in the fourth quarter. And it will be supported appropriately, to make sure the consumers know that we now have this with the Movado brand. And it will be within not only the design aesthetics of the brand, but also within the price points that our consumers expect for the Movado brand. So we really have not given out any information yet about the product that we will launch. And we would anticipate giving out that information during the third quarter as we prepare for deliveries and introduction in the fourth quarter. But it's a product that we are very excited about, and hits the sweet spot of the Movado brand, both from a design and price point. Be for holiday. (Technical difficulty) store for holiday. And it will have limited availability as well. We haven't finalized that yet. No. The increases ---+ some of the increases began late in the first quarter. And then by the beginning of the second quarter, early in the second quarter, most of the price increases did take place. I think it would be very difficult to quantify exactly the impact to gross margin, but it did offset, more than offset, a negative currency headwind of 200 basis points. That and our cost reductions. It was mixed pricing and our sourcing improvements, correct. Obviously, that was when ---+ a year ---+ at last year end when we were looking forward into this year. That was our estimate of what the impact would be, and because of that, we did things like the price increases and took other actions. So our guidance does reflect all the actions that we're taking to react to what is now the new reality of currency. Okay. I would like to thank all of you for participating on today's call. And we'll obviously update you again in our third quarter call, and wish everybody a very happy end to the summer. Okay, thank you very much.

2015_MOV

2017

OLN

OLN #Good morning, and thank you for joining us today. During this morning\ Thanks, <UNK>. Let's turn to our 2017 cash flow forecast, which is on Slide 11. We expect to generate $500 million of free cash flow before dividend payments and before the $209 million ethylene investment that we expect to make soon. Our expectation is that by the end of 2017, the combination of debt reduction and EBITDA growth will reduce the net debt-to-EBITDA leverage ratio to the range of 3.1 to 3.3 times. Starting with the midpoint of our full year adjusted EBITDA forecast of $1 billion, on the far left of the waterfall chart, we add back $10 million in taxes reflecting the proceeds from an income tax refund in 2017. In 2017, we continue to believe that the book effective tax rate will be in the 25% to 30% range and we do not expect to be a cash taxpayer in 2017. This reflects the utilization of net operating loss carryforwards created over the last two years. We expect net operating loss carryforward to provide a cash tax shield of approximately $70 million in 2017. Additionally, we currently expect to exit 2017 with unused operating loss carryforwards to provide a cash tax shield in the future years of approximately $60 to $70 million. Column three shows capital spending we expect to make in 2017. The $325 million is the midpoint of our current forecast for capital spending, with annual maintenance capital spending of between $225 and $275 million. Last year, Olin entered into a program to accelerate the collection of receivables, which create a permanent working capital reduction of $126 million in 2016. We expect to expand this program in 2017 and realize an additional $50 million reduction in receivables. This, when combined with an inventory reduction at Winchester, will generate $75 million of cash flow from working capital reductions in 2017. The next column, one-time items include integration and cash restructuring costs of approximately $50 million. This is consistent with our prior forecast. The next column reflects an estimate of interest expense. We have approximately 30% of our debt at variable interest rates, and we're forecasting 2017 interest rates will be higher than those we experienced in 2016. On the far-right column, we are forecasting $159 million of free cash flow after paying our normal quarterly dividend totaling $132 million for the year and the $209 million investment for 20 years of additional ethylene at producer economics. Finally: Last Thursday, July 27th, Olin's Board of Directors declared a dividend of $0.20 on each share of Olin common stock. The dividend is payable on September 11, 2017, to shareholders of record at the close of business on August 10, 2017. This is the 363rd consecutive quarterly dividend to be paid by the company. Operator, we are now ready to take questions. Yes, this is Jim <UNK>. Yes, over the last month or so, with the success that's taken place in the caustic market, there's been more incremental players that come on with EDC into the market trying to get at the caustic. So that's caused us to lower a little bit our forecast year-over-year, but we're still showing a 20% increase that we're estimating for EDC prices '16 ---+ '17 over '16. What we said was that we were basing our outlook on what we've seen in terms of the July change in the price indices and our expectation of what we're going to see in August and September. Could you describe your exposure to EDC prices. Do you have exposure to spot or contract, other lags. And also, do you think your realized EDC pricing is more or less volatile than the spot market. I would say, generally, the EDC realization by Olin is less volatile than the spot market, and I would say we try to keep a balanced mix between contracts and spot exposure. You've talked about 8% increase sequentially in your realized caustic soda price in the second quarter. Does this reflect any of the actual second quarter index increase. Or are those still to come in the third quarter with a lag. And I guess related to that, do you expect to see higher or lower sequential increase in caustic soda in the third quarter compared to second. I would say that what you saw in the second quarter does not reflect anything you saw in the second quarter price indices. So those are still to come. I would just say, sequentially, we believe we will see better pricing on caustic soda in the third quarter than the second and in the fourth quarter than the third. This is Jim <UNK>. What I would say is that the short-term impact of the Formosa force majeure is not factored into EDC forecast or pricing. And other than that, the dynamics that I mentioned earlier are intact. And we are seeing the price declines in the third quarter. And we would expect to see volatility in EDC that we normally see. And oftentimes, it bounces back in the fourth quarter. And year-over-year, we're looking at that 20% increase. I'm not sure how Dow interprets the word imminent. I would say we just said we expect to receive the second tranche of ethylene sometime in the third quarter, and our full year outlook reflects that. Yes, we do. I think what we ---+ I believe we've experienced the worst that we're going to experience in Winchester in the first two quarters of this year. And I think what you'll see is a run rate in the second half that would support $125 million a year of EBITD<UNK> The further increase in the upside in Q4 is upside to our guidance. Our guidance reflects the 30 that you discussed. IHS is showing I think 15, 10, and 5, and that's what we based our guidance on. Don, this is Jim <UNK>. We have had success with our contracts in a number of different ways, whether they be removal of discounts, lowering of discounts or just resetting the bar in certain parameters. So we do ---+ we are making progress as those ---+ as each contract comes up and we look specifically at areas to improve those contracts. And our contracts run in 2- to 5-year ranges, so we will continue to be able to upgrade those contracts as they come due over the next couple of years. I think the biggest difference between how we view our full year guidance today and where we viewed it 90 days ago when we last spoke was the impact of the unplanned outages in the second quarter, the extra $45 million to $50 million that we incurred to complete the planned outage and to remediate the unplanned outage. I think it was second quarter of last year that we had some problems with export prices. And I think if you look, export prices year-over-year are actually up more than they are in the domestic market, and we're at a point where they're very close to parity. Well, as we said in the remarks, most of our big customers during the first half of the year were selling more than they were buying, and that's not sustainable long term. Second, we do ---+ this is the strongest seasonal period for the business, Q3. And yet, we've had years where 35% of ---+ 40% of our revenue occurs in Q3. And we've also said that we've got a better outlook for military business, and that ---+ really, the biggest impact on that is in the second half, not in the first half. And that impact will also carry us through most of next year in terms of the military. So I'd say there is really three or four factors that give us confidence there, <UNK>. There's no change in our outlook in synergies. The biggest revenue synergy that we talked about, the growth ---+ 15% year-over-year growth in the bleach business, that is really the largest revenue synergy that we have going on right now. The maintenance ---+ the chlorine business is primarily the merchant business, and the merchant business was ---+ is not ---+ was not really affected by the outages. Those outages were more around the internal and other products where the chlorine goes, such as VCM and epoxy. So the merchant chlorine business was generally unaffected. The unplanned outages did affect the amount of caustic soda we had available because we weren't running chlorine for the vinyls piece. We weren't running chlorine for the epoxy piece. And so that's sort of the mix. We have quite a bit ---+ as you know, just from our sensitivities, we have quite a bit more caustic soda to sell in any quarter than we do chlorine ---+ that we sell as chlorine. Yes, this is <UNK> <UNK>. It was more centered around the upstream. And also, Europe continues to grow nicely as well on the midstream. So those were the two primary areas. We said that the prices sequentially were similar, that the second quarter was up 5% year-over-year. Yes, you should. And I would take you back to the comment we made, which is we believe that the combination of the price increases and the higher hydrocarbon costs in the third quarter will allow the business to return to the margins you saw in the third quarter of last year. Yes, again, this is <UNK> <UNK>. I would tell you that in the month of June, we saw prices stable. We think the demand is starting to show some modest improvement in North America. You've got to remember last year, North America actually contracted mainly due to oil and gas, so we're starting to see improvements there. Europe continues to grow very nicely, and we think most of the bottom out in Asia Pacific has been seen and we're starting to see some improvements in demand there as well. We haven't really commented on a specific amount, <UNK>. We would expect by the end of this year, with the improvement in EBITDA, to be in that 3.1 to 3.3 net debt-to-EBITDA range. And as we move into 2018 and beyond, we expect to use excess cash flow from the business to de-lever. I would answer that with a third comment. The majority of it was due to reduced sales volumes and an unfavorable product mix. Based on what we know right now, I would tell you that 2016 would be at the low end of what we would expect and 2017 would be at the high end of what we would expect. It will be lumpy, but I think those two probably bracket what we would expect to see. I guess I'm confused by the question. Very little of our caustic soda is converted to anything. The majority of what we make is all sold. Some of it is sold to our pipeline customers. The rest of it is sold to the market. The question may be, how much of our chlorine that we produce which goes into derivatives. But maybe you can clarify for me what you mean. The only place that we use significant amounts of caustic is in the manufacture of bleach, which is chlorine and caustic together. That's a relatively small percentage of our business. I would tell you, however, that bleach pricing does reflect the underlying market price of chlorine and caustic soda. What we said was that the first and second quarter merchant chlorine prices were similar to each other and that we expected chlorine to improve sequentially in Q3 versus Q2 and then again in Q4 versus Q3. We said that 2018 would be meaningfully lower than 2017. <UNK>, this is <UNK>. We had estimated at the beginning of the year that between restructuring and acquisition integration costs, that would be about $50 million. And I think we're still on track for that to be the expense for the full year. I would agree with your basic premise that high operating rates are going to lead to more frequent maintenance turnarounds. And I would just offer that not only do we have newer assets in Freeport, our plant in St. Gabriel is less than 10 years old, our plant in Charleston is less than 10 years old. So, I think across the Olin system, we have relatively young assets versus the industry. I think if you look at 2016, which is the only real market we have for the new business, the third and fourth quarters were very similar. Thank you all for joining us today, and we look forward to speaking with you about our third quarter in about 90 days. Thank you.

2017_OLN

2015

POOL

POOL #Sure. Going back to California, California started off from a winter standpoint, and you live in California so you know this firsthand. California started the year with very mild winter, so it started off with a very strong start to the season, but then they had cooler-than-normal temperatures particu<UNK>rly in May and June. And what that does is basically water ---+ the chemicals don't burn off the water as much so therefore you need less chemicals to maintain the water properly sanitized, so that really impacted our business. But then it reverted back to normalized weather in the third quarter in California from a temperature standpoint and, therefore, chemical sales picked up back to normal. So nothing from a competitive standpoint unique or different. It was mainly due to little shifts of weather; not little, but the shifts of weather from period to period versus normal. In terms of California and El Nino, all the expectations for next year, the first expectation or the first hope is that the increased rainfall is in fact retained in California and not shift into the Pacific Ocean as California tends to do with a lot of its rainfall every year. So that's hope number one and, therefore, they do a better job of managing the water they do get naturally. If that's the case, how that impacts our business, well ---+ and again, these are offsets. Water tends to unba<UNK>nce the water, the pool water. On the other hand, the cooler temperatures means that you burn off less chlorine, so those two wash off against each other. When you talk about more rainfall in California, this is not like what happened in Texas this year or what happens in Florida every year when you may be receiving 10 inches of rain in a month. California may go through 10 inches of rain in a year and that would be a great thing for California. So, therefore, you don't have the issues of really affecting the water temps that much or the water unstabling that much. Net-net it's going to affect our business. And just like this year, it may affect is positively a little bit one quarter, hurt us a little bit in the other quarter, but when I look at the entire year for California net-net I'm not expecting any big swings one way or the other from an El Nino impact. And then in terms of Texas, Texas really we lost a couple of months or really our sales were down for those couple of months year on year, very unusual. Picked back up to normal as soon as the rains went away. And we did get that, in essence, value back in Northeast, Midwest, and Canadian markets with a little bit extended season. (<UNK>ughter) Well, 20 years is a long time. But, you know what, those that still hold on to their shares 20 years from now I think will be very richly rewarded. Well, I think it's better, <UNK>, if you look at things from a year-to-date standpoint or quarter on quarter is the same thing. What you've seen is in our history, up until 2006, you saw a gradual increase of our operating margins year on year as we continue to invest in people, technology, tools, etc. Therefore, become progressively more efficient in providing our value to the customers and our suppliers and doing that more efficiently. So that pattern continued steadily until 2006. 2007 through 2009 ---+. By the way, our operating margins were 8.8% in 2006. Which was a previous peak. Previous peak on that. Therefore, what happened is 2007 to 2009 you saw a significant reduction, basically 80% reduction, in new pool construction in the United States as well as close to a 40% reduction in rep<UNK>cement activity, the more somewhat discretionary areas. Huge hits which affected us adversely in our structure, but the way we look and manage our business is longer term, so we didn't make any short-term decisions or short-sighted decisions. We continued to make investments as we needed to and we took a hit knowing we took a hit in 2007, 2008, 2009 where our margins contracted given the industry impact on the reduced new pool construction and reduced rep<UNK>cement and remodeling activity. Beginning in 2010 that was really more of a transition year, but after 2010 you have seen a gradual recovery of remodeling and rep<UNK>cement activity. You have seen very little recovery overall in terms of new pool construction over that period time, but you've seen more consistent recovery on the rep<UNK>cement and remodeling activity. So, therefore, the industry has begun to recover; still 70% less new pools being built this year than were built back in 2005. But through that we continue to invest, continue to get better, continue to carry market share and continue to gain efficiencies in how we do our business. So you've seen a constant, gradual process of recovery and increase in operating margins really following along the same patterns that we had from our genesis in 1994 through 2006. Sure. Puts and takes, well, we've got 2.5 months left to go. We have certain expectations on sales; that could be plus or minus a little bit. Gross margins, again our assumptions are basically f<UNK>t for the quarter, but that could be plus or minus 10, 20 bps depending on mix of products primarily. So those are the two biggest factors. Not anything to speak of on the expense side. So that's really the main factors. Anything else, <UNK>, that you can think of. Just a reminder, this time of year we're really talking about Southern market, year-round markets and the Northern markets really shutdown. Weather becomes important in those markets. If El Nino should hit sometime next week, next month, whatever that would obviously have an impact given the overweighting of the Southern market business to our results. Net $0.05 is a comfortable range, given the fact that we've got 2.5 months left to go. Sure. Currently ---+ again some states <UNK>g in their reporting; we see the bigger states on a monthly basis. Overall, we're still looking at 60,000 to 65,000 pools for the year domestically and then for next year we're expecting that to improve a little bit, probably to the tune of 65,000 to 70,000 for next year. Again, it pales in comparison to the 215,000, 220,000 that the industry did back in 2005. But I think here what we are looking at is the <UNK>ck of a robust recovery in single-family home construction, particu<UNK>rly the medium to upper end of single-family home construction. We have seen new home construction recover in the multifamily side, which is really not reflective of the environment that would prompt people to put a pool in their existing homes. So I think until such time as you see a real recovery of the single-family homes, particu<UNK>rly on the mid to upper end of single-family homes, you won't have the environment for a really robust recovery where we could see 15,000, 20,000 more pools built a year. Again, we are waiting for that to happen. We are anticipating that will happen. We have been ---+ it's a little <UNK>ter than we would've expected it to happen at this juncture, but nonetheless we are still plugging along and gaining share and building out our services and tools so we can compensate for that. I think there are two factors here. Certainly the psychological impact of home values declining is one since they were viewed as ---+ homes were viewed as the ideal and most important investments for most households and had a pattern of never going down since World War II. So I think that is important and certainly a factor. I think the other factor is, given what happened economically and the shock that our system had back in 2008/2009, you have had people deferring basically getting married, deferring having children. So all those factors I think is a postponement of what will, in theory, take p<UNK>ce; it will just take p<UNK>ce <UNK>ter. Again, a generation ago people were getting married an average four or five years earlier than they are in this current generation. So I think that's just ---+ that deferral is all part of the process and I think that generational change, coupled with the psychological change, I think those are the two that are causing this de<UNK>y in terms of homeownership and young people's desire to invest in homes. They would be up like 2% to 3% both in the quarter and year to date. And then if you take out California, it would be humming along just like the blue business at the 8% type range. First of all, understanding criteria. Criteria is entering markets that we are currently not in. Certainly there's more open space or green space in our green business, given that we are basically only covering about half of the Sun Belt. So that is certainly something that we continue to look at. There are very few pockets like that on the blue side of the business domestically. There are some pockets internationally, but again we were very deliberate as to the markets and how we enter those markets there. So that's one. The other factor is where we have a weaker share we look at it as well; the criteria is a little different than what we have no presence whatsoever. So those are the two. It's not going to be a big part of our business. When you look at ---+ from our transaction standpoint, in the <UNK>st 10 years, I think after 2005, 2006 to 2015, probably our sales contribution from acquisitions averaged probably no more than 1% of total sales per year with a negligible contribution of any bottom line. So it's a form, a way for us to enter the market. We compare that always with opening up our new locations and, in fact, we have probably done more in terms of new locations over the 10-year period than we have in terms of acquisitions. And again, those are more resource intensive; sometimes more challenging than doing more of the same. So our first bias is always growing more of the same and then looking at what else we can sell to existing customers. An example of that would be building materials and then after that then we get into new markets because the return on capital and the risk profile, the resource intensity is greater in those areas, so therefore we have to ba<UNK>nce the whole equation. Thank you, Kate, and thank you all for listening. Again, we have had a very good 20 years. Some of us in the Company were disappointed that we were ninth in terms of 20-year return; okay that we were in the top 1%, but still we were ninth so we have eight more to go. Hopefully we will be there at the next mark in five years. Our next earnings call is scheduled for February 18, when we will discuss our full-year 2015 results. Have a great day, thank you.

2015_POOL

2016

POOL

POOL #Good morning everyone, and welcome to our Q2 2016 earnings call. I would like to remind our listeners that our discussion, comments and responses to questions today may include forward-looking statements including management's outlook for 2016 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. Now I will turn the call over to President & CEO, <UNK> <UNK> de <UNK> <UNK>. Thank you <UNK> and good morning to everyone on the call. Our team managed to navigate the stops and starts of the season to realize 21% earnings-per-share growth year to date and 13% earnings-per-share growth in the quarter. While generally favorable industry conditions contributed to our results, it is our execution derived from the commitment of our people that make it all happen. Looking at sales, our domestic blue base business sales were up 8.6% year to date including an increase of 5.1% in the quarter. The lower second-quarter sales growth was re<UNK>ted to the early start of the season as communicated <UNK>st quarter with our sales as projected in the second quarter. We believe that we continue to grow market share especially in targeted product categories like building materials and commercial consistent with our history. Building materials realized 11.6% sales growth year to date and 9.4% in the quarter. We continue to gain share with building materials, as well as expand the market working in conjunction with our customers and our suppliers. Equipment sales increased 11% year to date and 8.1% in the quarter reflecting both the gradual recovery of rep<UNK>cement activity and an improved mix with higher-priced, more energy-efficient products. Commercial product sales were up 18.4% year to date and 17.9% in the quarter as we continue to capture share in this product category. Base business retail product sales increased 7% year to date and 3% in the quarter reflecting our acceleration of early buy shipments in the first quarter. Within retail chemicals, by far the <UNK>rgest product category sold in the retail channel, our sales were up 6% year to date, which is greater than the industry as we, together with our customers, continue to gain market share. Separately we estimate that industrywide Internet retail sales were up 10% to 12% year to date maintaining, the trend of the past 5 to 7 years, with sales growth a bit greater than storefront retail but with growth not as significant as was taking p<UNK>ce 10 to 15 years ago. An estimated 5% of the domestic blue industry activity is via the Internet channel. Staying within the blue business, our international sales were up 9.9% in US dol<UNK>rs year to date and 9.7% in US dol<UNK>rs in the quarter, with a modest adverse currency impact as we continue to grow share. Turning to our green business, our base business sales were up 6.1% year to date and up 9.6% in the quarter. Here are the results are due to the slower start of the year in the Western markets where our business is weighted with a seasonal recovery in the second quarter. In addition to our base business, we also closed on the acquisition of a regional irrigation distributor earlier in the quarter that contributed $8 million in sales and $1 million in operating profit. Our gross margins were up slightly due to improved purchasing and logistics execution. Basis expenses were 5.6% in the quarter and 4.2% year to date due primarily to volume and performance-based costs. Our base business operating margins increased by 90 BIPS to 12% year to date and by 35 BIPS to 15.5% in the quarter. Our year to date base business contribution margin on sales was 22.6% and 72.3% on gross profits. In the second half, we expect to see sales growth more like the second quarter on a base business level together with comparable growth margins and the usual disciplined expense controls. Altogether, we should have another year of solid operating profit and earnings-per-share growth as reflected in our updated annual earnings-per-share guidance of $3.30 to $3.45 per diluted share. Our results and our success are founded on the commitment of our people. It is their dedication, their engagement and their use of the tools and resources uniquely avai<UNK>ble to them that enable us to provide exceptional value. Now I will turn the call over to <UNK> for his financial commentary. Thank you, <UNK>. At this, the midpoint of the year, I'm very happy to report that we are on track with our financial objectives for the year pretty much across the board. Our sales and gross profit growth, which <UNK> has just provided additional color on, are doing well so far for the season with base business gross profit up 9% year-to-date. Operating expenses are growing to support our expanding business, but by focusing on efficiencies and leveraging our existing infrastructure, we are growing expenses at a rate well less than gross profit growth, which is 4% year to date resulting in base business operating income growth of 17% year-to-date. Working capital is also right in line with expectations for the year as both inventory and receivables ba<UNK>nces are adequate to support our business growth but not excessive. As a result, our seasonal cash use is moderate and we are on track towards meeting our annual goal of generating cash flow from operations exceeding net income for the year. With our earnings growth, strong working capital management and limited cash usage we were able to pay down debt resulting in low leverage at the end of the quarter. On a trailing 12 month average debt to EBITDA basis, our leverage at June 30 was 1.5 times, which is right at the low end of our targeted 1.5 to 2 times range. With our strong start to the year and assuming we are able to post a solid second half, we have a shot at achieving a double digit operating margin for the year for the first time and exceeding 20% return on invested capital. Both milestone operating performance metrics for us. I will also take a moment to note that this, the second quarter, marks our 25th consecutive quarter of year-over-year growth in sales, gross profit and operating earnings. Before beginning our Q&A, let me provide you with an update on our share repurchase program. We continue to buy back shares on the open market in the quarter adding 166,000 shares repurchased an average price of $88.11 which used $15 million in cash bringing us to 988,000 shares repurchased for the year and what is now a bargain average price of $78.74 for total use of cash of $78 million. That leaves us with $144 million under our existing authorization for additional repurchases. At this point, I will turn the call back to the operator to begin our question-and-answer session. Thank you, good morning. We see it in two areas, <UNK>. First, and by the way, this is all within the context of remodel and rep<UNK>cement activity. Obviously maintenance and repair is not affected and new construction, the impact there has been very modest. So really the biggest component of the increase has been within the context of remodel and rep<UNK>ce and particu<UNK>rly in the product areas that are more discretionary. If you go to the equipment pad it's would be in items like heaters and lights and controls. Obviously in terms of the remodel it would be the remodeling of the pool itself rep<UNK>cing the p<UNK>ster finish. And associated tile and coping. The other element which you touched on is that as part of that process, there has been a gradual migration to higher end products. If you go to, for example, p<UNK>ster, we have several brands of a proprietary pool finishes and the highest end of those brands, JEWELSCAPES, which is a g<UNK>ss beech finish, is capturing progressively a bigger share of the pie and we just <UNK>unched that a few years ago and that is again, gaining progressively more traction every year. And the same thing applies when you go to the equipment pack, the rep<UNK>cement, the enhancements, given the investments and developments part of manufacturers in those product categories as they develop new tools that make the equipment either more energy-efficient or providing more value in terms of, for example, I will call it the light show that you can create in your pool, increasing aesthetic appeal all the way around. All of those kinds of investments and development on their part have also increased the mix in terms of, again within remodel and rep<UNK>ce, to a higher end product line or more higher end products. <UNK>, just recall that in <UNK>st year we had a re<UNK>tively weak second-quarter and therefore our incentive costs for the year were low, so looking at the year-over- year incentive they were up about $4 million due to better performance this year re<UNK>tive to <UNK>st year. Two parts. One is the $0.05 is what we realized in the quarter. The benefit from an accretion standpoint for most transactions happened, in fact, in the second quarter with the contribution and the ba<UNK>nce of the year being either very modest or nonexistent. And we're shooting for 10%. That's our goal to achieve and, again, that is on the high end as you well know and it's something we're striving for but not something that may very well be realized this year but certainly next year. Exactly. I did not comment by states. You will have to bear with me for a second. First, <UNK>st year in Texas, we had very high levels of rainfall. This year the impact was still high levels of rainfall but not as bad as <UNK>st year. So Texas, in our blue business, which is obviously the biggest part of our business, was up 4%. Now, again that 4% means that it wasn't particu<UNK>rly great either. So Texas was again re<UNK>tively modest a little lower than our 5% overall growth in the domestic blue business. Yes for the quarter. In terms of California, California was a bit cool <UNK>st year. This year the weather was, frankly, nicer. You live there yourself, so you experienced it and in that particu<UNK>r case, our domestic blue business sales quote for the quarter there was just over 10%. So California lifted our average up a little bit. Texas brought it down hair, again in terms of our 5.1% that we realized in domestic base business for the quarter. I wouldn't read too much into it. For the total year, <UNK>st year California was up seven so it was fine. Exactly. This year on a year-to-date basis, California is up nine. So again, not earthshaking. (<UNK>ughter) No, they don't show up at our door. First of all, it's tough to get to Covington without directions. So therefore that's highly unlikely to happen. We have ongoing contacts within the domestic and international pool business and within the domestic irrigation business with distributors, period. There is an openness that we tried to convey in terms of knowing who they are and knowing what their objectives are. And within that context, to the extent that a particu<UNK>r distributor falls into our target geography, we try to cultivate a greater re<UNK>tionship to see if they want to be part of the organization. That sometimes takes a year or two years to come to fruition and sometime it's taken more than ten years to come to fruition. We are, <UNK>, as you know, very deliberate and patient in our approach in terms of building our business and we're not going to run and try it to do 20 transactions in one year because first of all, integrating those is a nightmare, and secondly, our key is building value and over time for shareholders and that's not going to happen if we try to rush and do too many things at one time. It's a very deliberate process and its looked at on a market by market basis looking at the attributes of the market and whether an acquisition makes sense. We've also opened up over 100 of our own locations where an acquisition didn't make sense and we just decided to do it ourselves. So we look at, and as you also know, our markets are very unique, so our customers are unique to the market and in many cases our products are unique to the market, that applies whether blue or green, or teal or brown. And therefore given the uniqueness of each market we look at the dynamics of the market, the attractiveness of the market long-term, how that market is currently being served and by who and whether an acquisition or a new opening is best, and if it's an acquisition being best, then we look at who the best one or two alternates to be and fill that void for us. In terms of that comps by month, I don't have it readily avai<UNK>ble but I will tell you that May was the softest of the three months. And particu<UNK>rly in the season markets in the sun belt, it was <UNK>rgely the same or very close to the same. Each one of the three months adjusted for the sales date of the month but in the seasonal markets, snow belt basically, May was soft and in June got back to normal. In terms of July, pretty much as expected, pretty much as we expected it to be happening for the first 13 businesses days. First of all, and just for context and color, we highlight the acquisition in Texas that we did on the irrigation side but we also did a couple of smaller acquisitions on the blue side, well blue and the brown. Blue was a three location distributor in the Northeast that closed at the end of <UNK>st year and that, by the way, all of those are referenced in our schedule that we have for base business in our release. As well as two location distributor on what we call the brown side, the NPT side, in Arizona and California. One location in Arizona, one location in California. Altogether those acquisitions will contribute somewhere in the neighborhood of $0.03 a share of accretion this year. Basically with probably $0.02 of those $0.03 coming in the second quarter and basically that $0.01 would be over the other three quarters of the year. In terms of valuation and multiples, different dynamics in each particu<UNK>r case. We typically don't disclose that but to the extent that it made sense and there was goodwill paid, That would have been typically in the, I'll call it, 6 to 7 range whereas in most cases it averages more like 5. Two parts. As we all know Internet has been around for 20 years. It was ---+ I can't say disruptive is the proper term because that would be exaggerating the impact. It was a factor, started becoming a factor in the <UNK>te 1990s and early 2000's. It's really moderated over the <UNK>st five, seven years of terms of its impact. Having said that, it still continues to grow at a rate a little bit faster than storefront retail. A lot of that, <UNK>, perhaps in contrast with other retailers that you would follow, is given the nature of the products that we sell and that the great majority of them are not friendly to the Internet channel. Leslie's has had an Internet presence for at least 10 years if not 15, and over the past several years they've acquired individual Internet retailers, or companies that had [awaiting] of their business toward Internet retail. In part because those businesses, the growth of those businesses were moderating and the attractiveness is that those principles had in terms of increasing the value of the business was virtually nonexistent, so Leslie's opportunistically stepped in and has acquired several of them again over the <UNK>st four years or so. And that really complements their store network as a result of that they are doing what any good retailer is doing, which is complementing their store network with an Internet presence. The so-called omni-channel. Not a new concept and that's something that we've been encouraging our retail store customers to do to better serve the local markets that they are in. The difference that Leslie's, given their <UNK>rgely national footprint is that they can be a little bit more efficient in that regard, than perhaps a local or regional retailer could. In terms of our business with Leslie's, certainly as they continue to grow, we continue to support them in terms of they buy more from us. And secondly, in terms of the fact that being on the Internet, the breadth of offering may not be all that they carry in their DCs. We can serve them further as a customer and us being their vendor to the extent that it makes sense for them and for us. That's a very good question, <UNK>. Properly maintained, the Gunite Pool can <UNK>st somewhere between one 1,000 to 2,000 years. (<UNK>ughter) And the caveat is properly maintained. Just like a house needs the roof to be rep<UNK>ced every so often and painted, the same thing applies to a pool. The actual structure itself again, properly maintained, can <UNK>st virtually forever at least longer than our lifetimes. The caveat is the individual products, right. So for example let's take the pool structure of the pool surface itself, not the structure but the surface. The surface is analogous of the paint on a house or on a wall. Typically the challenge there is the water and how well-ba<UNK>nced the water is not. If the water is well-ba<UNK>nced, the pool surface can <UNK>st 15, 20 years and not have any real significant discoloration or impairments. On the other hand, if the water chemistry is not properly ba<UNK>nced, that life could be shortened to maybe as little as seven or eight years. So the big variable there is the water and how well ba<UNK>nced the water is or not. In terms of the equipment, there's some degree of impact there in terms of how the equipment is run and how often is used and how it's used. But typically of the equipment pad items, the pump is usually first one to break down and historically the average life on a pump is something in the neighborhood of seven to eight years. That may change a little bit over time with variable speed pumps that are not stressed as much as what I'll refer to a single speed pumps and then the other items on the equipment pad did tend to <UNK>st a little longer whether it be the filter or the heater or the controls. Great question <UNK>, thank you very much, because it is important to distinguish B2B versus B2C. As you all know, we don't deal in B2C but we are very active in B2B. Pool360 is a tool that we <UNK>unched a number of years ago which is a further enhancement of previous versions of a tool since we <UNK>unched B2B back in the year 2000. When you look at the comprehensive nature of Pool360 in terms of all the functionality that is provided and you talk to, and I talk to all the time, to for example, retail store customers that tell me they run their business around Pool 360, you talk to service guys that have that, particu<UNK>rly the mobile version of the app on their phone or on their iPad and the fact that they use that and have it with them religiously all the time as they look up products and try to find solutions, try to see the schematics online that we provide. It's invaluable and really endears us to the customers because it helps them run their businesses far better than the otherwise could. And it's something that, while we <UNK>unched it, I think it was six years ago now, what we now coin Pool360, we have two releases per year of upgrades, and we have, call it high use customers, throughout the country that are constantly providing us insight that help further enhance the tool and again our software engineering team have that as well as a number of other projects that they work on, but have that as one that they upgrade every six months or so. Yes, there's two parts to that. One is, when we look at our business, the highest leverage growth opportunity is selling more of the same to the same type customers or the same customers. And to that end, initiatives are focused on even further refining and improving our service levels as well as our sales execution to drive awareness and further integrate ourselves with the customer using tools like Pool360 that I had mentioned earlier, as well as a plethora of other tools, marketing and technology tools that we have to again, help our customers sell more so we in turn sell more to them as well as gaining share of existing customers. So more of the same to the same is a big driver, highest leverage item overall given the leverage priority number one. Part two is selling more products to existing customers and again, second-highest in leverage, selling more products to existing customers. For example, best example of that is order of magnitude is building materials. As we have broadened our offering and brought that offering to more and more individual markets, that's enabled us to grow our share of customers high for products they may have been buying from other sources, because frankly, we did not offer those products in that market. So as we brought those products to market in those markets it's enabled our customers also to be much more efficient, dealing with one supplier that provides, again, a higher level, a much higher level of service than the marketp<UNK>ce does as well as all these tools and all these programs that we have to help them grow their business. Third in that spectrum of order is selling the products that we sell to a broader array of customers and that's finding tangential opportunities, for example we touch on commercial products. There is a crossover opportunity with distinctive customers in the commercial space that focus on commercial pools, these are usually the pools, competitive pools and greater from a vessel size standpoint and again we have a number of individuals that have the technical expertise and are more astute in the longer sales cycle process that is involved with commercial, a particu<UNK>r <UNK>rger commercial, that cater to that customer base, selling products that, in many cases are the same as existing products that we sell in the residential space and in other cases they are distinctive products. So that's the third highest leverage but another one very complementary to the overall base. Within everything we do, it goes without saying that we are constantly challenging how we do it in order to drive a higher service level, higher value add to the customers more efficiently. And in that regard, we are constantly trying to ferret out what best we do in multiple areas looking specifically at the better distributors that serve other segments, other customer segments or channels and trying to learn from them so we can adapt and deploy within our organization to the extent it makes sense. Yes. Yes, great that you picked that up. As I mentioned earlier, I think in the question from <UNK> <UNK>, on a bimonthly what happened in the quarter, basically the season got off to a really strong start because as a, re<UNK>tively speaking, milder winter, so guys that were involved remodeling pools started working earlier than they otherwise would or certainly earlier than they did <UNK>st year as one example. Retail stores, because of the mild winter were stuck earlier than they otherwise would have been. But what happens is, once you got to the third week of April and this is more in the snow belt ---+ third week of April it got cold. For the better part of a month or so it was a lot colder than normal. Basically the season got off to a very strong start and then it kind of stopped and then just before Memorial Day, it got warm again and then it got back to normal, the ba<UNK>nce of the quarter. So the impact there and maybe given the waiting that the snow belt has, to our business, particu<UNK>rly in the May-June months, May, June, and July months, the fact that it started, stopped and started again is the point I was making and the impact again is what I just described. Yes. $0.02 already in the bag of sorts and the other $0.01 is factored in, yes. I believe that nothing significant, because our second-quarter share repurchases were pretty modest in the big picture. So no changes of note there. Thank you Keith and thank you all for listening. Our next earnings call, mark on your calendars, is scheduled for October 20. Thursday, October 20 same time, 10 AM Central, 11 AM Eastern, 8 AM Pacific. Where we'll discuss the third-quarter results. Have a great day.

2016_POOL

2016

LRCX

LRCX #Yes, I mean, obviously, you have to ask them not us but clearly, the opportunity that exists from demonstrated performance benefits at the 10- and 7-nanometer technology nodes make it a very strategic and legitimate target for every Foundry and certainly, from the seat we have, everybody's focused on doing their best to get their fair share. <UNK>wever, they define that technology inflection and none of this is easy and so we support all of our customers in whatever ambition they have to the best of our abilities. I sense people are broadly focused on it and doing the best they can. <UNK>, I would just point out that we're continuing to see nice investment profiles at 28-nanometer and above and obviously, that stuff is much broader based. Yes, I think for sure, there are ambitious plans stated and there are active discussions, I think between customers and potential new domestic customers in <UNK>a with Lam and presumably with every other equipment company. Our position and presence in <UNK>a is historically very strong in etch and deposition, both, so I think we have kind of good platform. And as best we can tell, there are up to 20 active projects, certainly that we are focused on tracking in <UNK>a. And I think the spending, or at least the significant spending, is more likely to be a calendar 2018 statement than calendars 2017 but I think there's a decent amount of statements that towards the end of 2017, we could start seeing something emerge. So that's about the best I can give you at this point. Thanks, <UNK>. I think you just did a pretty good job answering your own question, actually. Clearly, the single biggest SAM expansion in Foundry/Logic is patterning. We've got some pretty important headlines that are Company-unique, I think, relative to microprocessor share gain momentum. And our presence and share gains are both etch and deposition and they are on the front end and back end as far as interconnect as well as transistor level footprint. So pretty holistic, pretty comprehensive and patterning is obviously a key driver. Well, I say our view and it's still forming. We are a long way from being definitive on it. We said kind of flattish to maybe slightly down is the reference we have for Foundry. We do expect that 28-nanometer and above investments in 2017 will be greater than they were in 2016, but to your point that's a capacity addition that is much cheaper than a leading-edge capacity addition. Whether it turns out to be sufficient to make it neutral or grow kind of time will tell. As best I can tell from customer disclosure, there's kind of a common view that capital intensity in Foundry is assumed to be kind of flattish and certainly, we're not in a position to message any different from that. There's clearly a large amount of investment going in this year for 10. And there's commitments and significant interest in what I think now is generally accepted to be a more valuable and probably more significant technology node at 7 and that looks like that's more of a second-half statement than first half at this point. <UNK>, it's still kind of early for us to have a formulated view on 2017. As we get closer to 2017 itself and we would normally give you more color when we are a quarter further down the road. So check back with us in a quarter. We will give you an updated view. Well, certainly systems integration and packaging are very prominent parts of the strategies of our customers to overcome the limitations of physics in the front end and I think demonstrated performance and cost benefit is showing up there. It's one of four technology inflections that we identified three or four years ago now that are relevant to the future of our Company. It was then and still is the smaller of the four but as time passes, the through silicon etch via position and the strength that we have becomes more valuable and obviously, the presence of the Company in interconnect, copper position is also very strong. So over time, I would expect the advanced packaging SAM to be more relevant and I think you know from prior disclosure where we're strong and where we're not. I would say not as strong right now as it has been but reasonable evidence that strength is beginning to emerge. So whether that's the first half or second half kind of reality, we will see. I think it's more of a node transition statement. Arguably, there are kind of 50,000 wafer starts per month, contractions in one year and maybe additions in another year and if I were to place a bet, I would say we probably end next year at or about the same in terms of wafer starts that we began the year but as you know, this has been a year of significantly reduced spending. Our estimate is that DRAM investments is down 40% this year. By the end of this year, we believe that approximately 50% of the installed base is 20-nanometer capable. So there's a pretty significant opportunity for value creation for the customers in terms of cost reduction and performance from continued conversion and as is also true, the 1X world for DRAM is just beginning in calendar 2016. And we think it will be the primary change to the installed base in calendar 2017 and if I were to guess, I would guess that at the end of next year, about half of the installed base in DRAM is a 20-nanometer maybe a quarter of the installed base is 1X and a quarter of the installed base is at 25 or above. I think that's approximate segmentation of the 1 million, or 1.1 million wafer starts, depending on how you calculate it is kind of what we're looking at right now. I said just on the 700, I said that was kind of the shipped capacity statement that we were coming up with, and I'm seeing other people say the same thing, slightly above 700,000. That compares with the 425,000 that I referred to today in my prepared comments for the end of calendar 2016 and our estimate is that probably that's ---+ there's about 100,000, or slightly more than 100,000 wafer starts unqualified at the end of this year. Probably a similar number at the end of next year and obviously, that exists in the context of 1.4, 1.5 maybe million wafer starts per month of capacity by the end of next year. So a little bit more capacity and a lot more 3D NAND but in relative terms still 3D NAND installed base is the minority of the installed base by the end of next year. Thanks, Wes. I'm not sure I have something to hands ---+ to answer that question, <UNK>. I apologize. Obviously, at a macro level, when we last reported our $3 billion SAM reference, we framed SAM growth opportunity in DRAM at the 50% to 60% level through calendar 2018. And in the patterning area specifically which is the single biggest kind of market expansion in DRAM that's relevant to our Company we characterized 15 to 25 steps; that's 20 nanometer going to 25 to 30 steps at 1X. So that's about as helpful as I can be at this moment and we will take that question as long as ---+ as well as I think it was <UNK>'s question earlier around the SAM for each of the 3D NAND implementation scenarios and we will try and get some more information for you at the Analyst Meeting. We will update that page for you, <UNK>. We actually have more flexibility than perhaps you realize. It takes a huge amount of effort so these are not kind of five-minute investments. We are constantly assessing, not just capacity in our own factories but our supply chain and in our field service organizations for the installation because if you can make something but can't install it, you have a problem. If you can install it but not make it, if you have a problem; if you can make it but not buy it, you have a problem. A lot of effort focused on that. We have nor will we ever have disclosure that speaks to the maximum capacity of the Company but it is more flexible. We are challenging and stretching the entire Company, to be honest, but we believe we are executing with appropriate discipline and we are making investments to make sure that we have capacity to meet the expectations of our customers and continue to position the Company for sustainable growth. So lots of moving parts, very complex, but we feel like we are doing a pretty good job, all things considered. <UNK>, we have a phenomenal supply chain organization. These guys are just super good at what they do. So the execution of the Company has been really, really good from those guys. Thanks, <UNK>. <UNK>, I'd just point you back to the existing disclosed financial model is the best way to be thinking about the Company and obviously, I'll give you an update on that when we get to the 18th of November. I'm not going to apologize for a 30 basis point, slight below midpoint on gross margin. It's really hard with all the moving parts and different customer mix, things you have going on. There's always going to be variability and we've been pretty consistently in that 45% to mid-46% gross margin range and that's kind of where the business runs. It runs pretty effectively. I think in context, again, just to put some more substance around what <UNK> just said, in our long-term model for calendar 2015 and 2016 in a world of $35 billion WFE, which we think is greater than the world we are actually living. We said the ---+ we said we would aim for a $5.8 billion to $6.3 billion revenue range. The sum of our reported results and guidance are at $6.3 billion. So at a revenue level as a commentary on SAM and share; we are performing higher than we indicated in our long-term financial model. In terms of targeted profitability levels, which includes gross margin and the investment in operating expenses, and as we said many times, our focus is more on OpInc than gross margin, our long-term model said we were targeting at 22 percentage points operating income and the sum of the results and guidance we've just given are 23%. The long-term model also said there was a range of EPS targeted between $6 and $6.75, on by the way, a lower share count because when we put the model out, we weren't signaling to you that we would be in essentially a blackout period for 12 months because of the KLA transaction but against that $6 to $6.75 EPS reference, the sum of our results and guidance today are about $7. So I would like you, in context, if I may ask for that. I think the Company's performance financially is really nicely balancing growth and profitability and the trick here is balance. It is super easy to drive profitability up and not grow. It is really hard to architect a vision and then perform consistent with delivering profitable growth; that's our vision. And that is what we believe we are executing and delivering and of course, if you're a member of Lam Research, long may that continue. Thanks, <UNK>. Well, As I know that you know <UNK>, nothing is quite as simple as it just transfers but obviously, demonstrated performance at 10-nanometer for positions won is a very strong reference point for selection at 7-nanometers and we feel very confident about that. We are investing to achieve more than ---+ more market share at 7-nanometers than we have at 10-nanometers and I believe there are some pretty compelling reasons why we can deliver that. Again, consistent with our long-term aspirations of the 3 to 5 percentage points and the 4 to 8 percentage points that we have for each of the product lines for the Company. Thanks, <UNK>.

2016_LRCX

2017

LOGM

LOGM #As we speak, our teams, our product teams, are in Budapest right now working on our long-term product strategy. So, that work is really underway, but really early. So I think you're going to have to wait a little bit until we are ready to provide more details about the integration of our different products. This is <UNK>. As <UNK> said, we are early days in the integration. We're going to have an analyst day in Q3. It's really too early for us to get into much more detail around reporting around what we used to call clouds, if you will. It's likely it looks different once we do report it, but it's too early. And that would be information that we would be ready to share at our analyst day. Thanks, <UNK>. This is <UNK>. Look, it's really clear that integration is job one, and synergy capture is closely linked to that. As I said earlier, those two things are well underway and they will continue throughout the year. The product strategy is we are now kind of turning our attention now with 30 days into the close now we've got a lot of that work, the integration work, kicked off, really digging in on the product strategy. We don't need to be disruptive and generate any kind of disruptive customer experience, so that is something we are being cautious of as we develop these product strategies. But that is something we'll start providing more detail as we work through the year. I think that's something to look for, as well as a longer-term financial model. Our hope is, on our analyst day, we're going to be talking about a three to five-year plan that we'll be prepared to share that's in line with and supporting the things that we've already been talking about in terms of long-term financial profile. But look, I think, right now, our focus is on synergy and integration, delivering on those things, and then the product component of our strategy will be shared as we work through the year. Yes, I think it's fair to say a little bit will be a little bit more frontloaded. That work is, as I said, it's underway, and we I think started very strong in February making some ---+ moving quickly. We wanted to get a lot of the hard work underway and behind us so we can start focusing on long-term growth. And I think that's representative of where we are. <UNK>. Yes, and I think, as <UNK> mentioned earlier, I think a good spot to also keep your eye is on our EBITDA results. And particularly we gave EBITDA guidance, adjusted EBITDA guidance, at the high end of the range at 35% today. So I think that's another good way to track our progress going forward. Thanks for the question. That's been part of the integration. I think a lot of that work is now behind us. We were ---+ we had planned and we executed a reorganization kind of within the first two weeks after we completed the merger. We wanted ---+ my goal was to get people really aligned and the people who were here and the people going forward and working as one team, and I think we are there. So I think we've had good employee retention. I think the employee base ---+ I know the employee base is really excited about being one company. And I've spent a lot of time with the employees from the former GoTo business as well as the LogMeIn business, but I can tell you that everyone is really excited, and now, with all that work behind us, now can focus on the go-forward business. Thank you for your questions tonight. LogMeIn finished 2016 on a high note, and with the merger now closed, we believe we have the opportunity to create a unique SaaS profile. Our focus in 2017 will be making the integration a success and laying the foundation for a company that, over the long term, is targeting 10% compounded annual revenue growth, 40% adjusted EBITDA margins, and 30% cash flow, all while returning up to $700 million to our shareholders. And we have a lot of work in front of us, but we are executing well, and it's an incredibly exciting time in our history. We look forward to sharing our progress when we report our Q1 results in April. Thanks again for taking the time this evening.

2017_LOGM

2015

NUVA

NUVA #What we would want to acquire is a Company that in a fairly shorter, medium period of time could be restored if it doesn't have it already, to margins that are the same or in line with ours, as they are today, or one that has our margins today, and we could make even more profitable. We're not looking for big turnarounds. I don't think we're in the position quite yet to do that. So we're looking for things that are running well, but we could make them run a bit better and just, again, enhance our position in this global spine industry. You can put that concern to rest. Just to put it in an overall kind of narrative, there was a narrative when we had the change with Alex at the top that there would be a max exodus. It has been anything but that. I think the field is more energized than ever, that the headquarters team is listening, we're going to be even more responsive, both in terms of our time and our actions to support them, and we head into 2016 with extremely good plans to, I think, increase our share-taking, increase our revenue growth, in line with what you expect NuVasive to do. Okay. <UNK>, this is <UNK>. I'll tell you, one thing that we've done is, we've learned a lot of lessons from the XLIF experience, and I think that if you look at how we've gone into Japan with XLIF, we're going to do the same as we go into really the entire international market space, which is be highly deliberate, be extremely focused, and really make sure that the clinical experience is reflective of the same things that we're seeing here in the States. And so it's going to be a methodical walk into those things, but I think the point that was made earlier in the call is, you look at where we've been successful internationally, and it's been where we've been extraordinarily disciplined, extraordinarily focused. The clinical experience was very consistent with what we've had in the States. And where we haven't done that, and we've in essence obviated to more of a local flair, we've not done as well. And so I think that's the commonality associated with how we're going to march into the marketplaces, based upon the lessons we learned on the XLIF front. This is <UNK> here. I think the opportunity in front us with posterior fixation is significant, both from a top line perspective, I don't think we have any more than 6% to 7% of that overall market, currently. I think the opportunity to bring that in line with the overall share that the Company enjoys of 10% in the US is certainly realistic, and no reason we can't take it to the 10% and even elevate beyond that when you start to look at the differentiation that iGA brings, and pulls posterior fixation in with it. I think the opportunity on the top line is significant. When you look at it from a margin perspective, the reality is that posterior fixation has a better gross margin profile to it than what our overall business does today. As we drive more mix towards that, we're going to see a benefit of the gross margin as well, which ends up benefiting profitability for the Company. At times, people will ask about the price pressure in that space. Even with incremental price pressure there, the gross margin profile still is well above the corporate average, that we'll be able to offset that, and see a nice mix benefit for us. I think it helps us all the way around, both top and bottom. Thanks so much. <UNK>, this is <UNK> here. I think when you look at the results that we've put together over the last three quarters in our implant business, you're seeing sequential improvements in traction being gained. My view is the overall market continues to be relatively steady, so I think that leads directly to the fact that we continue to take share. I don't know if <UNK> has anything he'll add, with respect to being out in the marketplace, but my own checks have indicated the market's flat, and we continue to execute on the share taking strategy. I was just going to add really as much of a follow-on to <UNK>'s last point about posterior fixation. As I'm out in the marketplace, the one thing that I see is the fact that we're making more and more progress on what would be called the anterior column or the front of the spine, and if you look at the harder one to earn, oftentimes it's spine-approach related. What happens is you pull through the posterior fixation. So generally, you're seeing stability in the marketplace, but I've been very pleased with regard to the type of movement that we're making from a competitive perspective, because we're earning the harder part of the surgery, which ultimately becomes the approach-related segments. Hopefully that makes sense. One, we're seeing strength certainly in the lumbar side of the business that's offsetting any of the decisions we're making around the services business. At the same time, we've been pretty effective in that services area of really increasing the utilization and driving the productivity out of that business, that's resulted in some nice results. So the headwinds that we had spoken to early in the year are not materializing like we thought they would, and I think the opportunity to pull through the hardware business and really capitalize on that opportunity has been more significant than anticipated. That's what you see reflected in the revised expectations for the year today, and the new guidance we put out. Go ahead, <UNK>. I was just going to say, this is <UNK>, Mike. My channel checks, or when I'm in the field, I'm hearing less and less about them. If anything, flat to going away is my experience. Same as mine, <UNK>. I think more than anything we're just trying to be thoughtful about the headwinds that are out there, and to the extent we continue to execute well against those, we hope to be able to over achieve those expectations. The one thing I would point to specifically is cervical. We're three quarters into the launch of Archon, it does incredibly well. We're growing at a double-digit pace, and right now, Q4 is dialed in somewhere around a mid single digit pace. We'll continue to watch that play out without getting out ahead of ourselves at this point in time, but certainly excited about what we see in that US business. We're not going to get into quantifying 2016 revenue drivers at this point in time. When we come out and talk about 2016 guidance, we'll be sure to contribute, build in the contributions from it, but at that point, we'll speak to it and not before. This is <UNK> again. We're going to further enhance ReLine. We're going to move ---+ excuse me, iGA, we're going to move up the spine to cervical. There's the same type of reasons that you want to align the thoracolumbar spine, you want to make sure alignment becomes a meaningful element in the cervical spine. So those things are foundationally important. The other elements that will continue to evolve are making sure that, from an implant portfolio perspective, what we're reflecting is all of the requirements associated with a TLIF and a PLIF and all of the other types of procedures that will ultimately integrate the whole integrated global alignment strategy. So it's continuing to round out the entire portfolio, one, but it's also moving up to the cervical spine, and make sure that we're reflecting the iGA strategy there, as well. Thank you, operator, and thank all of you for joining us today. As always, we appreciate your interest in NuVasive, and we look forward to talking to you next quarter. All the best.

2015_NUVA

2015

SNV

SNV #Thank you. Yes, <UNK>. We're glad we found a front end and pushed it like we said we were going to do and we discussed the ASR and we executed I guess last year. So the average price of $26-plus has been ---+ I think we executed very well with the help of our friends in the investment community. So we continue to watch that price. I don't watch it every day in terms of what we're buying back, but we're trying to be smart about it. Again, we think it's still been a very good buy for our shareholders to see us pull 7.5 million shares off the market at those average prices. This is <UNK> Let me take that. From an SBA standpoint, we have, as an intentional investment at the beginning of the year in SBA, we, for the first half of the year, on a production standpoint, almost doubled what we had done from the first half of last year. In addition to that, same thing, we had almost doubled in fee income. The way we do SBA I think is an important piece. We do it within our footprint currently and we engage the local bankers, but yet, we have designated SBA reps to help those bankers in the footprint. It is widespread across the entire footprint today and that is how we're originating those loans. We expect the second half to be a lot closer to the first half of this year as opposed to dropping off. We do not think it's an anomaly for the first half. This is <UNK>. I think we're well-positioned for that, currently. Honestly, when you go back through the place we've been, assuming that there would be rate changes, you wouldn't want a bad bet to take for long time. Nobody really knows when that will actually change and I think we're well-positioned as we stand. This is <UNK> What I would say on the NIM compression is mainly across the board. It's highly competitive in all of the different segments with which we are competing. Even the variable rate corporate debt has seen tremendous pressure, as well as the community and even the retail side. I would say we see pressure across the board and that's one of the things we have to watch on a daily basis to make sure we're selective to do what's profitable for us and the bank folks that we think we can build long-term relationships with. It was up 1 basis point. I think it's flat to possibly down a little later in the year. That's correct. Yes, the lower sensitivity was just change in the mix. We had more money market accounts than CDs, that was a factor. Just the fact that we had a greater level of deposits was a factor. Correct. Mostly on the on the liability side. None. Thanks, <UNK>. Again, Mike, I don't want to [raise] the percentage of earnings. We have a wide audience on this call, so I'd like to say that we're going to continue to look at certainly earnings are part of the equation, overall capital levels are part of the equation, concentrations are a part of that equation. So without getting specific about what percent of what, I'd like to just say we're going to be very mindful of how important efficient capital management is to us and we'll continue to try to speak to that when appropriate. We're not waiting. If we waited for rates to come up, we'd still have a much higher run rate. We think whether rates go up in the near term or not, driving expense out is critical to us and really to every player in our industry. <UNK>be you add more on the production side as earnings increase, but we've been very mindful that when we add people, it's got to generate revenue. We need to look for ways to get expense out. Certainly, we would benefit from rising rates, but it's not causing us to pause on expense initiatives. In fact, even as we prepared for this call yesterday, we were in other meetings talking about ways to drive expense out and rate movement doesn't add to or temper our enthusiasm there. We know it's got to be done, so we'll continue to do that. Thank you, <UNK>. If there was a follow up in there, I'm sorry we missed that and we'll certainly follow back up. Just send us an e-mail if you had a follow-up question. I just want to thank all of the ---+ certainly the callers, the analysts, the questioners. We thank and respect very much what you do and how you follow our Company. Thanks for your attention this morning, to our shareholders, to our team members who call in because of their interest in our Company, not just short-term but long-term, thank you all for all being on the call. We'll continue, as a Management team and leadership team, to execute on this plan we described and are excited about the back half of 2015 and 2016 as we continue to execute to drive improved financial performance. Thank you all. I hope you all have a great day.

2015_SNV

2017

HSY

HSY #$55 million. Thanks for the question. Yes, we continue to feel really good with the programs that we have on the core brands. And so I think in terms of continuing the growth on something like Reese, it is continuing the news, and some of our incremental investments in advertising towards the back part of the year will be made against those core brands to continue to leverage the momentum. And then at the same time, we are absolutely focused on turning around and accelerating our growth trajectory on some of the other pieces of portfolio, namely on the non-chocolate sweets area. So we will be increasing our investment there, although at the same time, we've right-sized those brands a bit. So as <UNK> mentioned, SKU rationalization, there are some areas where we had extended those brands and we had items in the marketplace that just weren't productive or profitable and so we made the decision to take the hit on pulling back on some of that. But we do have teams very focused on accelerating the growth there, and I think that's an opportunity for us going forward. No, I don't really think it's not as well positioned. I would say I think that we have opportunities to just fix our execution on that piece of the portfolio. There was a little bit more competition from smaller players last year where they went really aggressively on price, some of the things that we weren't willing to do given our focus on margin. So I really think it's more about what we do versus that there's any kind of consumer trend issue there. Sure. So let me start and then I'll transfer it over to <UNK>. There is almost no ---+ there is no shipment impact from that timing of Easter. I mean, we shipped almost nothing in terms of Easter into the second quarter. So that's not an issue at all. And relative to the write-offs, we feel great about Malaysia. So the write-offs that we've talked about are not at all related to Malaysia. And in terms of the cost base, that came online April 1 of last year. So that impact will be getting smaller going forward or really going away in terms of fixed cost absorption. Yes. It's all in the base now. Yes. We still feel good that we're in positive territory. Yes, the quarters always come in a little bit different depending on promotion and innovation calendar. But there's nothing that would be falling off that kind of a cliff in the second quarter. So as part of our margins for growth and margin expansion program, we've started immediately in terms of taking the necessary steps to reset our investment in that marketplace and make some of the tough decisions. At the same time, the local teams have built very focused plans in terms of where we are focusing to grow and build a sustainable business model. So we are focused on a multiyear program but beginning now to really focus on a couple of key provinces on our core portfolio and on profitable mix of brands across the portfolio. As you all know, the cost structure in some of the channels in China have changed and so we are shifting to more profitable channels and really try to capture some of the growth, both in the second- and third-tier cities as well as e-commerce. So it's a multiyear program that's under way now, and I'd say we can continue to update you as the year goes on. Yes. I mean, I think for competitive purposes, we\u2019d prefer not to go into all of the details. But we can give some thought to what we can share that might help you as you're building your models. We see ---+ we've done very well with online e-commerce in China. As it's a big piece of marketplace, it's been a nice growth driver for our business. We\u2019ve continued to see nice growth there and it is clearly, amongst the channels, probably our #1 area of focus from a channel perspective in that marketplace. So we have ---+ we've built some infrastructure and that will continue to be a place that we'll want to invest in China going forward as in the U.S. Okay.

2017_HSY

2017

BLD

BLD #Welcome, and thanks for joining us today. We are very pleased with the successful execution of the various initiatives supporting our long-term growth plan. The final quarter of 2016 and the full year provide clear evidence that the trajectory of this execution is ramping up very quickly. We believe that significant shareholder value is being created by the following five initiatives that are listed on slide 3. Number one, driving top-line growth in our core residential business ahead of the ongoing increase in housing starts, thereby increasing market share. Secondly, increasing market share in our commercial business, a space within which we have been inactive for many years, but now focusing on the substantial share gains possible in this very large market. Third, improving operational efficiency throughout our entire Company to facilitate strong conversion of top-line growth to the bottom line. Number four, utilizing our dedicated M&A resources to acquire quality companies that add market share and value to both our residential and commercial businesses. And number five, returning capital not required to fund organic growth and M&A to shareholders efficiently. So having just wrapped up another quarter and our first full year as an independent public company is a good time to discuss where we are in these initiatives. Turning to slide 4, regarding the top line, our primary benchmark is 90-day lag housing starts, which were up 4.5% for the year. TopBuild sales increased 7.8% with the volume component of both TruTeam and Service Partners easily surpassing that benchmark. Also embedded in those totals are sales in our commercial business which were up almost 11% for the year. <UNK> will comment further on the detail of our sales activity. As a reminder, TruTeam is the industry-leading insulation installation company and Service Partners is the industry-leading insulation distribution company. Leveraging these two creates significant scale advantage, enables us to reach to a very fragmented builder community and is an important differentiator for TopBuild. Moving on to the conversion of that strong top-line growth to the bottom line, the drop-down to adjusted EBITDA for the quarter was 23.2%, bringing the total year in at 29.4%. An important driver of that performance was the operational improvements we have implemented throughout our Company. While these numbers indicate substantial progress in 2016, we believe there's more to come in 2017 and beyond. <UNK> will talk further about these fundamental operational improvements that are driving this strong margin conversion. As you can see on slide 5, M&A is an important aspect of our projected growth and our number one capital allocation priority. As we've commented on prior calls, we have increased dedicated resources to execute on accretive acquisitions. Our definition of accretive includes not only sound financial fundamentals but also improved share in targeted regions and management talent, all of which, over time, will have a halo effect on overall Company performance. With the two acquisitions just announced, we have now acquired four companies that fit these criteria in the last six months. In total, these companies will contribute approximately $41 million of annual revenue and provide some seasoned talent to drive performance. The further good news here is that the acquisition pipeline is full. That's very important because for a variety of reasons, not all of those in the pipeline reach the finish line, but we're confident that a steady stream will be completed as we move forward. Finally, on the subject ---+ important subject of capital allocation, we believe acquisitions are the best use of capital to drive value for our shareholders. However, we currently have a conservative balance sheet and an expectation that significant cash generation will continue as we improve our operations within the context of a housing recovery that we believe has several years yet to go. That will create additional capital available to return to our shareholders. Therefore, our Board has authorized a $200 million share repurchase program over the next 24 months that we plan to aggressively execute. Before turning the call over to <UNK> and <UNK>, let me say a few words related to the external environment. In short, we see it as a net positive. The new administration in Washington DC has articulated an agenda from tax reform to fewer regulations that is generally positive for US business. This agenda would only add to the current tailwinds. More specific to TopBuild, the builder community remains optimistic around the supply and demand fundamentals. Household formations continue to increase and the pent-up demand for new construction may take several years to satisfy. So this external environment, largely beyond our control, shapes up as a big positive for TopBuild. In addition, we have previously discussed top-line, bottom-line, M&A and capital-allocation initiatives that are under our control. We believe the result will be significant top- and bottom-line growth in 2017 and beyond and value creation for our shareholders. Let me now turn the call over to <UNK>. Thanks, <UNK>. As <UNK> pointed out, results for the fourth quarter and full year were strong. The operational improvements we have made at TopBuild over the past 18 months continue to deliver outstanding results through solid growth, expanding margins and cash generation. Turning to slide 6, total revenue in the fourth quarter increased 4.1% to $444 million and grew 7.8% to $1.7 billion for the full year. This was driven primarily by a residential and commercial growth at both businesses and improved pricing at TruTeam, partially offset by lower pricing at Service Partners. On a reported basis, fourth-quarter gross margin declined 80 basis points to 23.7%. As you may recall, in the fourth quarter of 2015, we had a one-time favorable reserve adjustment related to an employee benefit policy change at TruTeam totaling $9.9 million, of which $6 million was included in cost of goods sold. Excluding this one-time adjustment, fourth-quarter gross margin increased 60 basis points from fourth quarter 2015. For the full year, adjusted gross margin was 23%, up 120 basis points. Our fourth-quarter adjusted operating margin was 8.3% compared to 7.8% in the fourth quarter of 2015. For the full year, our 2016 adjusted operating margin was 7.2%, a 160 basis point improvement from 2015. Improvements in both gross margin and operating margin were due to improved pricing at TruTeam, lower material costs, improved labor efficiency and volume leverage, partially offset by lower Service Partners pricing, higher insurance costs, higher stock-based compensation and higher bonus expense. Adjusted EBITDA for the quarter was $42.1 million, a 10.8% improvement year over year. Full-year adjusted EBITDA was $144.5 million, a 34.5% improvement from 2015. Incremental EBITDA margin for the quarter was a strong 23.2% and 29.4% for the full year. This significant pull-through was a direct result of the greater operational efficiencies we continue to deliver across the entire organization. Processes and procedures have been streamlined and optimized, unprofitable branches have been closed and redundant positions eliminated. Now let's turn to segment results. As you can see on slide 7, our TruTeam segment had an outstanding year with revenue growing 8.8%, exceeding lagged housing starts. The increase was driven by volume growth in both residential and commercial along with improved selling prices. Adjusted operating margin for TruTeam in 2016 was 8.6%, compared to 5.1% in 2015, an outstanding 350 basis point improvement. The gains were driven by improved pricing, better labor utilization, lower material costs and volume leverage on our national footprint. Moving to the next slide, Service Partners 2016 revenue increased 4.7% to $677 million, primarily driven by a 7% increase in volume, partially offset by a 2.3% selling price decline due primarily to lower fiberglass material costs from excess supply in the industry. 2016 adjusted operating margin for Service Partners was 8.9%, a 20 basis point improvement from prior year. During the fourth quarter, Service Partners was able to balance the relationship between selling price and material costs, facilitating a 20 basis point operating margin expansion. As we have previously discussed, the Service Partners model is more variable cost driven and does not leverage to the same extent as TruTeam. Despite that, and notwithstanding the challenging industry dynamics driven by excess capacity, Service Partners delivered strong growth in operating margins above an already strong 2015. TopBuild's reported fourth-quarter SG&A increased $7.6 million, or 12.3%, to $69.1 million primarily as a result of the prior-year, one-time favorable reserve adjustment related to an employee benefit policy change at TruTeam, of which $3.8 million impacted SG&A, as well as higher stock-based compensation, bonus expense and legal settlements. As a percentage of sales, SG&A was 15.6% compared to 14.4% a year ago. For the 12 months, SG&A as a percentage of sales was 16% versus 17% a year ago. This decrease is a direct result of lower corporate expenses and cost savings initiatives we have implemented over the past year, partially offset by the items I just mentioned. Turning to slide 9, on an adjusted basis, income per diluted share from continued operations was $0.59 for the fourth quarter compared to $0.52 for the prior year. For the full year on an adjusted basis, income per diluted share from continuing operations was $1.96 compared to $1.33 for full year 2015, a very healthy 47.4% improvement. Our actual tax rate for the fourth quarter 2016 was 38.6% and the full year finished at 37.6%. We continue to believe the normalized tax rate for the business is 38%. As you can see on slide 10, reinvested to support our growth remains very moderate. We reinvested $14.2 million in capital spending, below our investment guidance of approximately 1% of sales. Working capital as a percent of sales at the end of the fourth quarter was 7.3% compared to 6.2% a year ago. The 110 basis point increase is the result of a combination of higher accounts receivable due to an increase in our commercial business and a change in supplier and material mix which has led to some reduction versus our historical AP balances. We would advise on a year-end target of approximately 7% of sales when modeling working capital in 2017. At the end of December, we had cash and cash equivalents of $134.4 million and availability under our revolving credit facility of $75.9 million for total liquidity of $210.3 million. Our total debt to adjusted EBITDA was 1.25. Before turning the call over to <UNK>, I want to briefly discuss the $200 million two-year share repurchase program we announced today. We remain committed to a blended capital allocation approach emphasizing accretive acquisitions first and share repurchase second. As our recent M&A activity demonstrates, we have an active program with a good pipeline that we expect will deliver strong results now and in the future. That said, our ample liquidity, moderate leverage and the ability to generate strong free cash flow led the Board to authorize the $200 million share repurchase. We view this as an effective vehicle to return capital to our shareholders, while at the same time optimizing and resetting our capital structure, and we expect be aggressive in utilizing the Board authorization. We are excited about delivering strong shareholder returns through our blended approach. <UNK>. Thanks, <UNK>. Good morning, everyone. I would like to begin my remarks by thanking all of our TopBuild, TruTeam and Service Partners employees for their hard work, dedication and focus on working safely, servicing our customers and continuing to push for operational excellence throughout our Company. We have accomplished a lot this past year for our shareholders and customers and I'm proud to be part of this energized and very engaged team. Turning to slide 11, our Company today is more efficient, more focused and more aggressive. We're growing market share, building upon our strong customer relationships and expanding our commercial capabilities while optimizing our footprint. Operational efficiency has been a key focus since our July 2015 spinoff. We have made great strides in this area. We continually evaluate our footprint across the country, optimize our coverage and operations. As in 2016, at times this leads to branch closures that are either in nonstrategic, slow growth markets, or represent some redundancy in our footprint. We are also adding new branch locations either through acquisitions or organic growth. In 2016 we also made decisions to eliminate headcount at our branch support center in Daytona. We continually look for opportunities to drive efficiencies and we recently made the move to combine some of our back office operations. We anticipate incurring approximately $2 million to $2.5 million in expenses related to these actions and expect a pay back in savings in less than two years. Initiatives to increase labor productivity have also been successful. Even small improvements leveraged across our installer base of over 5,000 can deliver significant savings to our bottom line. This improved productivity is a distinct advantage for our business as the industry faces labor constraints. Our hiring process has improved dramatically, and new installers can be on the job in 24 hours instead of the 4 to 5 days it used to take. And it should be noted, we're still performing the extensive background checks required of all employees prior to joining our team. In this tight labor market, we feel we are taking proactive steps that are allowing us to grow our business and provide great local service to our customers. All of these initiatives, as well as others, are in large part responsible for the significant improvement we've seen in our incremental EBITDA and adjusted operating margins. We continue to be relentless in the area of operational excellence. We have made some changes at Service Partners, including the appointment of Sean Cusack as president of this business. Sean served in a number of senior roles with Service Partners for 15 years prior to his brief departure in 2015, and we're thrilled to have him back on our team. Sean is well on his way to driving positive change within Service Partners that will deliver both short-term and long-term results. Enhancements to our management team continue to yield solid results. We believe we have the best operators leading our business and driving the strategy to deliver growth in both the residential and commercial businesses. Our energized regional and branch leadership teams helped increase 2016 sales at TruTeam by 8.8% ---+ well ahead of lagged starts. Volume growth at Service Partners last year was a healthy 7%. Moving to the next slide, in 2017, our TruTeam results will be bolstered by the addition of four acquisitions, three of which were completed in the past 60 days: Midwest Fireproofing, EcoFoam and MR Insulfoam. Combined, these four acquisitions are expected to contribute almost $41 million of revenue this year. These companies complement our growth strategy with experienced management teams and strong customer relationships. We are confident they will significantly enhance our footprint and market share in their respective regions. As both <UNK> and <UNK> have mentioned, we have significantly ramped up our M&A capabilities and are pleased with our robust pipeline of acquisition targets and the progress being made to close deals. I think it is important to point out that as we evaluate our acquisition opportunities, we're particularly focused on deals that are appropriately accretive to our existing footprint and current operations, our strategic growth initiatives and deals that leverage our scale advantages in a meaningful way. We have a team of industry veterans now dedicated 100% to executing our M&A strategy ---+ our number one capital allocation priority. On the commercial front, TruTeam achieved solid revenue growth of 13% for 2016 with this business now accounting for approximately 18% of our total TruTeam revenue. Midwest Fireproofing, acquired in January, expands our product offerings and opens the door to a broad array of well-established contractor relationships. Looking at 2017, we are extremely excited about our prospects for profitable growth at both TruTeam and Service Partners. During our last call, I talked about price increases announced by the fiberglass manufacturers that were to take effect in January. While these increases have not been to the manufacturers' announced thresholds, we have seen some traction with increase in our local markets. Assuming positive housing trends continue and the labor market remains tight, we expect both businesses will see stronger selling prices this year. We also believe that we will see a good uptick in our single-family business as the single-family starts growth is strong. Our team is focused on continuing to grow market share, including custom builder business, increasing our share of spray foam with our installation and distribution businesses, as well as identifying additional areas that will continue to enhance our operational efficiencies. I will now turn the call back over to <UNK> for some summary comments. To put a wrap on our opening comments, we're very confident. External environments are positive and should remain that way, and we have a business model that includes both installation and distribution as a differentiator, have a set of strategic initiatives that are simple and direct, and most importantly, a team that is executing well. For all those reasons, we expect 2017 to be another year of significant growth for TopBuild. Operator, we are now ready for questions. Thanks, <UNK>. Good morning, <UNK>. This is <UNK>. So obviously a great quarter ---+ Q1 of 2016. I would say right now we are very busy across the footprint. Spring selling season, as we talked to our builder customers, has been strong and off to a good start for them as well. So the builders, in general, are optimistic. So we expect absolutely a positive comp to last year. Backlogs relative to commercial look at good as well. So I would say we're very positive and very optimistic here as we're finishing up the second month of the quarter. Again, this is <UNK>, <UNK>. I think we feel good about that. We are doing a great job of growing the business on distribution in some of the key strategic areas that <UNK> mentioned. If I think about commercial, nice growth on the commercial side on the distribution. If I think about spray foam ---+ a key thing that we have been driving relative to TopBuild. We saw nice growth in those areas in the distribution business last year as well. So, no, we feel like there absolutely should be nice buying growth on the distribution side here in 2017 as well. <UNK>, one thing I would add to that ---+ this is <UNK> talking ---+ is that is that for the kind of reasons we've spoke about, Service Partners is a real key element to our overall model. They provide a lot of balance. In a full cycle, full housing cycle, we know from history that Service Partners is a real important piece to have to our puzzle. But even aside from that, we view Service Partners going forward as a growth vehicle. You can look for us to be more aggressive relative to the kind things we may do with that model ---+ it is more, it is not just a defensive piece of our portfolio. But we are going to be viewing that as much more aggressively, looking to understand things that we can do. And our M&A pipeline could include some aspects of distribution. That's certainly not off the table at all. And there's lots of things we can do with that model. And our Sean Cusack, our new president there, is going to get a lot of attention from ---+ probably more attention than he cares to get from <UNK> and others here as we chart a path forward for Service Partners that we are optimistic about. <UNK> here, <UNK>. I would say that one thing I think that is a bit unique about us, we have a fairly mature national footprint. So not always but generally when we are acquiring a company, we typically have an operation in that geography. So in many cases what we're doing is understanding how we can combine the acquired company with our existing operation there. Now that is not always true, but I would say more often than not it is. And so what we're doing is finding a way to obtain any synergy that we can from a back-office standpoint while at the same time not disturbing the go-to-market and the customer we're facing. Because one of the things we look at and we look for with an acquired company is a strong brand and lasting thing in the world we want to do is to disrupt that customer approaching. So it is looking at ways to synergize with our existing operations and that's the relationship to the acquisition world. But even aside from that, as <UNK> spoke to in his prepared comments, it has been a huge focus of ours coming out of our previous world with Masco as the parent company. We really did turn ourselves loose on thinking about all kinds of things differently and as a result of that, we have driven some nice improvements in efficiency in 2016. Now I will tell you that it is going to be hard to top the trajectory of what we did in 2016. But we still believe we have further improvements to make and we are all about looking at ourselves ---+ and this relates to not only the branches, this also relates to our various corporate centers which we now call branch support centers because that is how we view ourselves here in Daytona. Our purpose in life here is to support our branches and help them make money. So it is about an overall Company mindset here relative to how to improve our cost model. We would. We have an open mind relative to what to do with service partners going forward and how to grow it. If some key ways of looking at that, <UNK>, would be ---+ it would have to be something that we think either from a margin perspective or from a return on assets perspective would be good news for us. So it's got to be something that is financially sound and typically, what leads to making that happen is something that we could be significant enough with where we would have a reasonable purchasing advantage from that perspective. So that's one thing. But we have a footprint on the Service Partners side that is broad. So we have over 75 branches in Service Partners and there are situations that even exist today whereby we do something at a particular branch because there is a unique set of circumstances with a customer or whatever whereby we can do something effectively. And we are already doing that. And we certainly will be looking forward to continuing to do that on selective basis. And then to your question directly, if there is something that we can come up with or something that we are looking at that could be a broader approach to add to our insulation world there, we will certainly be looking at doing that. <UNK>, this is <UNK>. Yes, I think we expect in both businesses to see that we've ---+ as there was growth last year in housing, we expect growth, obviously, again this year in housing, which impacts capacity. Obviously some maintenance going on in the industry relative to furnaces ---+ that type of thing. So we expect it to be positive on both businesses. <UNK>, this is <UNK>. It was basically all price for the most part. So I think we reported a 2.3% decline for the year and 2.8% for the quarter. And that was basically all price ---+ most of that in fiber glass pricing. You are welcome. Thank you for your support. Please follow up with us regarding any remaining questions. And we look forward to talking to you in early May when we report our first quarter 2017 results.

2017_BLD

2015

CYTK

CYTK #Good afternoon and thank you for joining us on this conference call today. Leading today's call is <UNK> <UNK>, our President and Chief Executive Officer. Following <UNK>'s initial comments, <UNK> <UNK>, our Senior Vice President and Chief Medical Officer, will provide an update regarding our planned Phase III clinical development program for tirasemtiv, our first-in-class fast skeletal muscle troponin activator, which we are developing for the potential treatment of ALS. Afterwards, <UNK> <UNK>, our Senior Vice President of Research and Development, will provide an update on our clinical development program for CK-2127107 or CK-107, our next-generation fast skeletal muscle troponin activator, and our plans for a Phase II clinical trial in spinal muscular atrophy or SMA. <UNK> will then provide an update on the clinical development program for omecamtiv mecarbil, our first-in-class cardiac myosin activator, which is being developed for the potential treatment of heart failure. I will then provide a financial overview for the quarter and <UNK> will conclude the call with additional perspective and comments regarding our future plans and key milestones for 2015. We will then open the call for questions. Please note that the following discussion, including our responses to questions, contain statements that constitute forward-looking statements for the purposes of the safe harbor provision of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to our financial guidance and collaborations with Amgen and Astellas; to the initiation, enrollment, design, conduct, and results of clinical trials; and to other research and development activities. Our actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause our actual results to differ materially from those in these forward-looking statements is contained in our SEC filings, including our most recent annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K. Copies of these documents may be obtained from the SEC or by visiting the investor relations section of our website. These forward-looking statements speak only as of today. You should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Now I will turn the call over to <UNK>. Thank you, <UNK>, and thank you to everyone on the line for joining us for this Q1 earnings call today. As we review activities from the first quarter of 2015, we are very busily preparing for the initiation of Cytokinetics' first Phase III clinical trial. The initiation of a Phase III clinical trials program for tirasemtiv is a very important event for our Company and, importantly, for the ALS community as we believe this may be the only international Phase 3 clinical trial expected to enroll patients with ALS in 2015. Data from our Phase II BENEFIT-ALS clinical trial showed that tirasemtiv was the first investigational drug candidate to have a statistically significant and clinically meaningful effect on measures of respiratory function and muscle strength in an ALS patient population. During the first quarter, we had further interactions with each of FDA and EMA to review the results from BENEFIT-ALS and to further refine our plans to advance tirasemtiv into a Phase III development program. More and more, the urgent unmet need of patients with ALS is gaining media and other high visibility attention from the broader community. We are proud to stand together with patients and caregivers in our relentless pursuit of what we believe can be the very first new medicine for patients with ALS to address respiratory and other functional endpoints. With that said however, we are keenly aware of setting proper and realistic expectations and as such we continue to engage cooperatively and collaboratively with the scientific and clinical community as well as regulatory authorities to conduct rigorously designed, comprehensive, and properly conducted clinical trials of tirasemtiv and that importantly build on prior peer-reviewed studies. Only by working collaboratively with all stakeholders in the fight against ALS do we believe that the shared interests of all of the ALS community can be well served. In addition to our preparing to initiate a Phase III clinical trial for tirasemtiv, we are also readying for a Phase II trial with CK-107 later this year. This Phase II clinical trial will evaluate CK-107 in patients with SMA, a similarly devastating neuromuscular disease which can be fatal, especially in infants and children, or otherwise extremely disabling for those adolescents or adults living with the disease. After years of pioneering research, we know with exquisite detail how each of tirasemtiv and CK-107 work mechanistically. I mentioned that because therapeutic hypotheses underlying the development of investigational medicines in neuromuscular diseases are not always anchored in rigorous scientific research. We do not believe that is the case for either tirasemtiv or for CK-107. Both are proceeding in clinical trials that build on pharmacodynamic evaluations performed in prior preclinical and clinical studies. Similarly, we are proceeding forward with both compounds following thorough and careful evaluations of safety, tolerability, pharmacokinetics, and drug-drug interactions. Now turning to our heart failure program, COSMIC-HF, the last planned Phase II clinical trial of omecamtiv mecarbil, has completed patient enrollment. <UNK> will elaborate on design elements of COSMIC-HF in a moment. In anticipation of data from that study expected later this year, we have begun planning activities with our partners at Amgen for a potential Phase III program, which would evaluate omecamtiv mecarbil in heart failure patients and which could begin in 2016. Let me now turn the call over to <UNK> so that he can get us started today on elaborating on these development programs, starting first with tirasemtiv directed to the potential treatment of ALS. Thank you, <UNK>. As you may recall, BENEFIT-ALS is the Phase IIb, multinational, double-blind, randomized, placebo-controlled clinical trial designed to evaluate safety, tolerability, and potential efficacy of tirasemtiv in patients with ALS. The results of BENEFIT-ALS showed that treatment with tirasemtiv resulted in a statistically significant and potentially clinically meaningful reduction versus placebo in the decline of SVC, to slow vital capacity, at each assessment time point over 12 weeks of double-blind treatment. These effects also favored tirasemtiv versus placebo in all prespecified subgroups we examined and, thus, we believe these data to be robust. Vital capacity is a clinically meaningful measure of respiratory function that treatment guidelines specify should be used to determine important clinical decisions in the treatment of ALS and is also used to aid prognosis. Given these findings from BENEFIT-ALS and following discussions with neuromuscular and pulmonary specialists and regulatory authorities, we chose to advance tirasemtiv to Phase III. We believe BENEFIT-ALS provides a solid foundation on which to plan the next steps in the clinical development of tirasemtiv. The objectives for the Phase III development program are to confirm and extend the results observed in BENEFIT-ALS. The upcoming trial will be conducted in the same eight countries and most of the same treatment centers as BENEFIT-ALS. In this trial, double-blind treatment will continue for at least 48 weeks, thus substantially extending the treatment period relevant to BENEFIT-ALS. The endpoints will include measures of clinical benefit related to respiratory function in patients with ALS, including effects on SVC, but also including other functional assessments of respiratory and other skeletal muscles. We believe the information we received from neuromuscular and pulmonary experts, both in the United States and internationally, market research, and regulators provides an actionable trial design and underscores the importance of respiratory function for patients with ALS. We will describe the design of this Phase 3 clinical trial in more detail during our upcoming R&D day and at that time ---+ and at the time we open the trial to enrollment. For now, I will say that the objectives of the trial will be to assess measures of respiratory function, including SVC, following 24 weeks of treatment with secondary endpoints assessed at 48 weeks. We also plan to lengthen the duration, both of the open label lead-in phase prior to patient randomization as well as the duration of each dose titration step based on our experience with BENEFIT-ALS, in an attempt to improve the tolerability of tirasemtiv in patients with ALS. In the first quarter, we made important progress in preparing to begin our Phase III trial of tirasemtiv for the potential treatment of patients with ALS. Last quarter we reported that we met with the FDA and EMA and have now implemented refinements to the protocol based on their advice. Those interactions are continuing. Prior to and subsequent to those interactions, we have been busy performing other activities necessary to start the Phase III clinical trials including vetting and selecting CROs, designing and building randomization and data capture systems, drug product packaging, and of course, engaging clinical sites and clinical trial investigators. With that update on our plans for tirasemtiv, I will now turn the call over to <UNK> for an update on our SMA and heart failure programs. Thank you, <UNK>. Turning first to the development of CK-107, our next-generation skeletal muscle troponin activator partnered with Astellas. As <UNK> previously mentioned, I am happy to report that in the first quarter we began the planning of a Phase II clinical trial to evaluate CK-107 in patients with SMA, which Cytokinetics will conduct in accordance to an agreed plan with Astellas. As part of that planning process, we engaged leading neuromuscular physicians who are expert in SMA to discuss and inform the potential design of this Phase II clinical trial. In addition, we initiated formulation development and manufacturing activities in advance of the planned trial. Like ALS, SMA is also an orphan disease and is one of the most common fatal genetic neuromuscular disorders responsible for infant death. We believe that direct activation of skeletal muscle may address neuromuscular weakness that characterizes SMA and could demonstrate effects on key functional parameters, including breathing. Our Phase II trial will explore pharmacodynamic endpoints in patients with SMA. We expect to target for enrollment those patients with SMA who have survived adolescence with the disease, but who may have gradual and progressive weakness in the proximal muscles of the extremities, resulting in mobility problems and other functional limitations. Few treatment options exist for these patients, resulting in high unmet need for new therapeutic options to address functional limitations and modify disease progression. We believe that our approach to developing CK-107 in patients with SMA is complementary to the approach that is being pursued by other companies. Turning now to the development of omecamtiv mecarbil. In the first quarter patient enrollment was completed in COSMIC-HF and to date over 275 patients, or nearly two-thirds of those enrolled in the study, have already completed a 20-week duration of dosing in the expansion phase of the trial. Also in the quarter, the data monitoring committee met and reviewed the accumulated safety and pharmacokinetic data from COSMIC-HF. They recommended the study proceed without change. Substantial progress on this clinical trial conducted by Amgen in collaboration with Cytokinetics is exciting. We believe this trial, nearing its conclusion, is the last study in the Phase II program meant to inform the progression of omecamtiv mecarbil in Phase III. To remind you, COSMIC-HF is a Phase II, double-blind, randomized, placebo-controlled, multicenter clinical trial designed to assess the pharmacokinetics and tolerability of omecamtiv mecarbil in patients with stable chronic heart failure and left ventricular systolic dysfunction. Secondary objectives are to assess the changes from baseline in echocardiographic parameters and n-terminal pro-brain natriuretic peptide during 20 weeks of treatment. While COSMIC-HF was not designed with a prespecified primary clinical efficacy endpoint, it is meant to assess safety, tolerability, and pharmacokinetics and the pharmacodynamic effects of longer-term treatment with omecamtiv mecarbil. In particular, COSMIC-HF may afford us first glimpses into the effect of prolonged treatment of omecamtiv mecarbil in the enlarged heart found in heart failure as measured by end systolic and end diastolic diameters. All patients in COSMIC-HF have echocardiograms at baseline and again at 12 and 20 weeks following randomization. Echocardiograms in COSMIC-HF may provide quantification of changes in cardiac shape and function, which we hope may be predictive of long-term clinical outcomes. In anticipation of completing COSMIC-HF, Cytokinetics and Amgen are collaborating on clinical and nonclinical development activities, as well as regulatory and other planning activities. In addition, Cytokinetics recently convened a meeting with experts in matters of reimbursement and market access to discuss pharmacoeconomic considerations associated with novel heart failure therapeutics in order to potentially inform Phase III clinical trial design. Lastly, during the quarter Cytokinetics and Amgen agreed to extend the joint research program directed to next-generation cardiac sarcomere activator compounds. Terms of the amendment to the Company's collaboration provided for Amgen's continued sponsorship of Cytokinetics' scientists through 2015 and potential additional milestone payments payable by Amgen to Cytokinetics for compounds that may arise out of the collaborative research. And with that update on our cardiac and scalable sarcomere programs, I will turn the call over to <UNK> for an update on our financials. Thank you, <UNK>. As our press release contains detailed financial results for the first quarter 2015, I will refer you to that public statement for the details of our P&L and balance sheet. We ended the first quarter with $117 million ---+ sorry, $117.5 million in cash, cash equivalents, and investments, which represents over 20 months of going-forward net cash burn based on our 2015 guidance. Our guidance includes estimated cost of planned Phase III development activities for tirasemtiv in 2015 and 2016. Revenues for the first quarter of 2015 were $4.4 million compared to $8 million during the same period in 2014. Revenues for the first quarter of 2015 included $1.6 million of licensed revenues, $2.1 million of research and development revenues from our collaboration with Astellas, and $0.7 million in research and development revenues from our collaboration with Amgen. Revenues for the same period in 2014 included $2.1 million of licensed revenues and $5.2 million of research and development revenues from our collaboration with Astellas, which included a $2 million milestone for research activity and $0.7 million of research and development revenues from our collaboration with Amgen. Our first-quarter 2015 R&D expenditures totaled $9 million. From a program perspective, for the first quarter approximately 71% of our R&D expenses were attributable to our skeletal muscle contractility research and development activities, which included both expenses associated with tirasemtiv and CK-107; 16% to our cardiac muscle contractility activities; and 13% to our other research activities. We ended the first quarter in a strong financial position with sufficient cash resources to execute on all of our development plans, including our Phase III clinical trial for tirasemtiv. That concludes the financial portion of today's call. With that I will now turn the call back over to <UNK>. Thank you, <UNK>. So in summary, the first quarter of 2015 was a period of intensive planning for Cytokinetics. Preparing to conduct our first Phase III clinical trial at the Company requires us to critically evaluate CROs and to ensure all systems and standard operating procedures are compliant with applicable standards and best industry practices. We look to our upcoming Phase III trial of tirasemtiv as a key pivot point for the Company and we have upgraded capabilities throughout the Company. We foresee these changes potentially serving us well also as we prepare for potential Phase III activities alongside Amgen in 2016 for omecamtiv mecarbil. By the end of 2015 we look forward to having two clinical development programs advancing either in or to Phase III trials with another enrolling in Phase II. Achieving those objectives of 2015 with novel mechanism drug candidates would put Cytokinetics on the top step of the ladder amongst biopharmaceutical companies. Moreover, ongoing collaborative research programs with each of Amgen and Astellas are advancing towards designation of development compounds. We believe Cytokinetics continues to execute effectively and prudently; scientifically, operationally, and financially in building a robust diversified pipeline of muscle biology-directed drug candidates. Cytokinetics discovered compounds have now been the subject of over 50 clinical trials. We enter the next phase of our company's development much like we have approached the conduct of our R&D activities: with sound, careful, and rigorous planning and with the continuity, expertise, and experience of seasoned industry veterans leading the way. Nearly every member of our executive team has worked together on these programs for over 10 years. That matters when a company is pioneering a new pharmacology. It is important to Cytokinetics to also be good listeners and partners with the patient and disease advocacy groups for whom our drug candidates are intended. We always intend to support patient and disease education. We have meaningfully engaged on a local basis, as well as nationally and internationally, with the over 60 advocacy organizations that represent interests of the ALS community. In much the same way, we are engaging key stakeholders who represent patients and caregivers in the area of SMA. In addition to underwriting grants, sponsorships, and continuing education, we were very proud to participate in Rare Disease Day on February 28, 2015. We learned so much from these groups and will continue to seek their guidance in our drug discovery and development initiatives. With that said, let me now turn to our expected milestones for 2015. For tirasemtiv, Cytokinetics expects to initiate a Phase III clinical development program for tirasemtiv in patients with ALS in this second quarter of 2015. For CK-107, Cytokinetics expects to initiate a Phase II trial of CK-107 in patients with SMA in the second half of 2015. And for omecamtiv mecarbil, we expect results from COSMIC-HF to be available in the fourth quarter of 2015 and Cytokinetics expects to continue joint development activities in collaboration with Amgen directed to the potential advancement of omecamtiv mecarbil to Phase III clinical development. As I mentioned in our last quarterly earnings call, we look to 2015 with great anticipation. This year marks a major fulcrum for our company as we hope to leverage our past to catalyze a promising future. With that in mind, I will also mention that Cytokinetics is hosting our next R&D day on May 12 in New York and which will also be webcast. At that time we will have an opportunity to delve more deeply into these and also other programs, as well as engage key opinion leader clinical experts as faculty members to provide perspective and commentary on our results and also our plans. Operator, that concludes the formal portion of our call today. I would now like to open up the call to questions please. Sure, so I will start and then I will turn it over to <UNK>. With regard to enrollment timelines, based on what we know today ---+ and we're going back to nearly all of the centers that participated and enrolled patients in BENEFIT-ALS, so we think we have reasonably good calibration on their ability to recruit and enroll patients. But based on what we know from that study and the design of the trial that we'll elaborate on in the next few weeks, we're expecting that the study is going to enroll over the course of what amounts to about six to nine months, give or take, as we will see with the first initiations. But I think that is a reasonable assumption at this point. That would mean that the first patients would be completing their 24-week analyses to enable the possibility of data by the end of next year, we hope. Again, with the study design we will be able to speak more to that. As was pointed out, we are also looking to learnings from BENEFIT-ALS in modifying the open-label lead-in and also the dose titration steps. I will turn to <UNK> maybe to speak about the rationale for that. Great. You may recall that in BENEFIT-ALS all patients received a week of open-label treatment with tirasemtiv, a total daily dose of 250 milligrams per day given as a 125 milligrams twice daily. For two reasons. The first was we expected and, in fact, we demonstrated that about 40% to 50% of those patients would experience a dizziness that was usually mild. And then based on previous early Phase II studies, and again demonstrated in BENEFIT-ALS, tended to resolve even if the patient continued treatment on tirasemtiv. So generally goes away. This helped maintain the line so that if a patient experienced dizziness on tirasemtiv and it resolved after randomization, it really wasn't possible to determine whether or not that's because the patient was withdrawn on the double-blind placebo or they just continued on tirasemtiv and the dizziness went away, because it really almost always does. The other reason was to eliminate from randomization the minority of patients who can't tolerate even that starting dose. So I would say the lesson from BENEFIT-ALS is that the first purpose, maintaining the blind, worked pretty well. Second didn't work as well as we would've liked to. We lost 16% of the patients who began in open-label before randomization. So while we would have preferred to have lost fewer, that's the time to have them drop out if they are going to drop out, not after randomization. But as you know, we lost 3 times as many patients after randomization from tirasemtiv as from placebo. So we think lengthening that open-label period from one to two weeks might help investigators and patients make better decisions about whether they are really in a position to tolerate whatever adverse experiences they may be having. And this time it would be not just for 12 weeks but for 48 weeks. We had a lot of feedback actually from our investigators. They felt rushed and the patients felt rushed. They wanted to get into the trial and giving them another week to make that decision would probably yield better decisions. The other thing we found is that we increased the dose during BENEFIT weekly, and you could just see every week as we were titrating we would lose another ---+. I mean it wasn't even 10%, but it was a chunk of patients from the tirasemtiv treatment arm. Again, we think that escalating more slowly, so every two weeks, may reduce the number of post-randomization dropouts. Honestly, we won't know until we do it and see, but it seems like a rational approach to try to improve the tolerability of tirasemtiv in these patients. There are some other steps that we will elaborate on once the study design is announced that may also address some of the other issues relating to tolerability from BENEFIT-ALS. You might recall there was some nausea, there was some weight loss. There are some other ways that we think we can address some of those matters. With that said, ALS trials are notorious for a high dropout rate and we are not going to eliminate the early terminations. This is a terribly devastating disease; patients will drop out for a number of reasons. We just want to give the drug a fighting chance to be able to demonstrate what we know are its functional effects. So we do think that the steps we're taking will go a long way towards addressing some of the issues we saw in BENEFIT-ALS. What I did cover was we had $117.5 million in cash and that is well over 20 months of going forward cash. And that includes what we have as the estimated cost of the Phase III clinical trial for tirasemtiv. We haven't provided any other detail on that. The only thing I would clarify is that based on the revenue guidance that we had given before of the $40 million to $43 million in cash revenue, that does include $30 million of revenue that is deferred. That is the upfront payment. So that is deferred on a proportional basis over the achievement of the activities that are underlying that. In other words, the research activity for Astellas as well as the development activities. And those aren't evenly spread over the next two years; they are kind of chunky. It's probably also worth noting, <UNK>, that the guidance that <UNK> is referring to does not include expectations relating to potential milestone payments that could be payable in 2015 and 2016. We are focused just to those committed revenues from our existing collaboration agreements. I don't think there any remaining discussion points per se. We are proceeding to initiate the study in the second quarter based on what we already know. As we have laid out here on these calls in the past, interactions with regulatory authorities are a continuum and we have ongoing interactions, not only with respect to the protocol but also other matters that are nonclinical and other things that warrant discussion with the FDA in order to best be positioned for a registration. So if we implied that we are still awaiting any feedback prior to readying for this trial, that is incorrect. We are in fact proceeding to the study with expectation it will does its first patient in this second quarter. So we think about SPA; we think about breakthrough designation. We talk a lot about those things including with advisers and with regulatory authorities. We will let you know if that comes to be, but we are not going to, on a call like this, speculate about those matters. So with regard to the SMA study, that is a trial that is already agreed between Cytokinetics and Astellas. It's part of a development plan for which there is already a negotiated budget. We are performing that study and it will be at the expense of Astellas. We will start that study later this year. It will be enrolling with data expected afterwards, but there's no option or uncertainty about whether that is something that we intend to do. The codevelopment option that we have with Astellas, not unlike the one we have in our Amgen agreement, speaks to our auction downstream to co-fund certain development activities in order to buy up our royalty economics. But it's not an option with respect to whether we are conducting development activities. With Astellas this Phase II study is already agreed; we will conduct it and they will reimburse our costs. So the question is have we taken a more conventional route. I'm not sure I understood what the (multiple speakers). I don't want to get a he-said/she-said over what other companies are doing only to say what I think that Cytokinetics is doing well. So to answer your question, what I will underscore is I think we are approaching FDA very thoughtfully with regard to an honest understanding of what our BENEFIT-ALS trial teaches us, both the good and the bad, frankly. And, candidly, we recognize that there are some things we want to improve upon from BENEFIT-ALS as we approach Phase III. We went into our end-of-Phase-II meeting with FDA, much like with EMA, somewhat sober to the reality of what are those issues that we were contending. We had a study that was a very large eight-country international trial, we believe the largest Phase II study ever conducted in ALS, but however, it missed on its primary efficacy endpoint. And there's no denying that we have prospectively defined that ALSFRSr would be the primary endpoint. Unfortunately, the study we don't believe was of sufficient duration and for other reasons the drug did not move that endpoint. That will be an endpoint that we will assess as a secondary endpoint in Phase III, but we will go with what we learned from BENEFIT-ALS. And it seems that the most meaningful clinical effect was on respiratory function and slowing the decline of respiratory function we think, and I think FDA and EMA have echoed, could be very meaningful to these patients. Ultimately, they die of respiratory failure and pneumonia in most cases. So we have been approaching this series of regulatory interactions in a way that is very scientifically rigorous, that has the benefit of outside advisors and consultants who have accompanied us to the meetings with regulatory authorities. And I think in working with the largest network of clinical trial investigators in ALS we have credibility that hopefully will afford us more constructive interactions. I will turn that over to <UNK> to answer. I think SVC is a quantitative measure of breathing function, but there are sort of milestone metrics in terms of people's respiratory function that you can imagine as well, such as their use of assisted ventilation either at nighttime or full time. There are questions in the ALSFRS that are specific to respiratory function that one can focus on. And so some of these secondary endpoints are constructed from those clinical measures of respiratory function. This is where it is especially important to note that slow vital capacity, or vital capacity in general, is used very routinely by researchers but also by clinicians who are managing the treatment of ALS to guide prognostic and interventional decisions. And as such, the guidelines are very clear about the role vital capacity plays in the things that <UNK> was mentioning. So we think there is a congruence of interest with respect to our stated objective, which is that the Phase III study should confirm and extend the findings from BENEFIT-ALS. That really is exactly what we observed in BENEFIT-ALS. That once patients got past dose titration, and recall in BENEFIT they were allowed to down-titrate and you may recall that, although we attempted to get all the patients to 500 milligrams a day, in the end those who completed the study, about half of them were on 500 and about a quarter were on 375 a day and a quarter were on 250 a day. At those doses and with that distribution of doses, once we got past week four or five, the dropout rates between placebo and tirasemtiv were pretty parallel. Right, we didn't actually in BENEFIT-ALS and something you may have seen us present is there are two things that I think really, really contributed to that. First of all, our entry criteria resulted in a population of patients whose slow vital capacity at baseline was almost 90% predicted, so practically normal. Almost all of them were scored as 4, which as you know is no deficit on the respiratory insufficiency and orthopnea items in the ALSFRSr. And the great, great majority of them were 4 on the question number nine, dyspnea. So those are the three elements. Even with the big difference in the decline in vital capacity between drug and placebo, it still wasn't long enough that you might expect any of them to drop down a level. And in fact, that is what we saw. Most of the patients were scored as 4 coming in ---+ and this was on tirasemtiv and placebo ---+ and most of them were scored as 4 coming out. Now, as you suggest, in a trial of longer duration I think we may see a difference between tirasemtiv and placebo in the number of patients who drop a point or more on those respiratory domains of the ALSFRSr. So I want to thank everybody for their participation in our call today. Clearly, the first quarter was a very busy one for us, especially in light of planning for the initiation of the Phase III study of tirasemtiv to occur in this second quarter, but also across the Company and in connection with activities directed to omecamtiv and also CK-107. We're expecting it to be a big year and we look forward to updating you on progress throughout the year. We hope that you will be able to attend our R&D day on May 12. It will be in New York at the Hyatt Grand Central. Any questions, please direct them to us at investor relations here at the Company. With that, I will end the call. Thank you for your interest in Cytokinetics and we look forward to being in touch.

2015_CYTK

2017

LXP

LXP #We are changing the stripes slowly and steadily, <UNK>, and we have accomplished a lot. I think the picture that we have of our company in our mind is still one where we would argue there are several turns of multiple expansion ahead of us. Right now we have a very, very strong cash position and I don't see the value in issuing a whole lot of equity and putting cash in the bank and then running out into the market to chase transactions in a competitive acquisition environment. You are right. Our cost to capital is good and our currency is good and we will take advantages of opportunities to use it, but having a massive equity raise is not part of the plan. <UNK>, management has compensated a lot through the issuance of lots ---+ no, issuance through common shares and as the share value has increased the compensation along with that has too. The governance committee and the comp committee get benchmarkings against other REITs and they are extremely diligent in making sure that management is fairly compensated and within the peer group. Thank you. Well it was a termination that we received to get a new tenant in. The previous tenant occupied the property about 60% and the new tenant wanted the property all of it, 100%. So it was an opportunity to get somebody in there for 100% and the calculation of the $7.7 million was the difference between the rental streams between the two leases, plus to reimburse us for the cost that we were going to incur in getting the new tenant in, whether it is TIs and leasing commissions. From a standpoint of accounting that's how we tied it in. To the new lease. But during the fourth-quarter close, we reevaluated that treatment and felt it was appropriate not to tie it to the new lease but to take it into income immediately in the quarter. And lease terminations are not a big part of our business. As a single tenant owner of property, that is not the world we live in. I respect the nerd comment, actually, but yes, we looked at it as tied to the new one but we realized that was not the appropriate way of treating it and in our footnotes we restated the impact it had each quarter. Thanks again everybody for joining us this morning. We appreciate your continued participation and support. If you would like to receive our quarterly supplemental package, please contact <UNK> <UNK> or you can find additional information on the company on our website at www.lxp.com. And in addition, as always you may contact me or the other members of our senior management team with any questions. Thanks again.

2017_LXP

2016

ROCK

ROCK #It's approximately 10%, <UNK>. The range of revenues on prospects that we continue to research and think about and come to our attention range from the double-digit millions to triple-digit millions. I'd say upwards of $250 million in revenue size to as small as $25 million, $30 million, $40 million on the other end. And, as far as leverage, today, as I think people could compute off the earnings press release and its balance sheet, our gross leverage on an LTM EBITDA is probably around 2.0. So, very manageable, very modest. And with pro forma, with an acquisition of a particular size, at the higher end of that range I just cited, our leverage could even get to 3.0, mid-3s and I'd still feel very comfortable being able to service our debt level at that point. Because, understand, this Gibraltar has made money, thick and thin, every year, generally averaging 5% to I think we got to 7% of revenues last year. We're keen on managing our CapEx closely. The operations continue to produce, in aggregate, good profitability, even in the lean years, post-2008. I only see that expanding as these simplification initiatives continue to increase our profitability, take down our operating assets, and I am anticipating that the recent historical and very effective cash flows, free cash flows out of Gibraltar, will continue to keep overall leverage coming down when we do take on additional debt for acquisitions. This company generates, year-in year-out, positive free cash flow on a very healthy level given its relative small size in revenue. It depends on the seller and their appetite and what's negotiated. But I don't think we're seeing anything that approaches the high-tech industry and internet companies. So, we're still in single-digit multiples. I believe we could still come to agreement with interested sellers in assets that we're interested in and would still be in single-digit multiples on EBITDA. I echo those. At this point, I'm not sure what those numbers will look like because, as you know, this is kind of a new product introduction that's gone on over, kind of a test market, over a couple years. So, how quickly it's going to ramp now, I think, as people really engage, we haven't been down this path before so it's hard to put a number to it. These are being marketed to the largest of the multi-family apartment property owners and managers in the U.S. So, there are several customers have bought multiple units of these parcel lockers that they've installed in a number of their properties that span across the continental U.S. So, the number of units that we have installed are owned by a fewer number of actual property owners. At least a factor of three probably is a reasonable relationship. Thanks, <UNK>. Thank you. That was the ---+ Contract. That was the revenue in calendar 2015 for that discrete contract that we spoke of. Yes. Yes. I'm saying yes to your 5% statistic. Well, one nuance that comes to my brain is that we do not have buy-in programs to speak of. So, channel inventory could be quite different between the channel partners they have for asphalt shingles compared to what our roofing-related ventilation stocking levels would be. That probably would be the first nuance that I'd offer up, <UNK>. We have that information from retail channel partners. But it's irregular on national wholesalers and contractors that we sell to. I think overall, I think that's true, <UNK>, over a long multi-quarter time period. But the focus on one 90-day period, I think there's ---+ The first quarter this year, <UNK>, benefitted primarily from RBI's being now part of Gibraltar. And RBI had a really strong sales quarter in the fourth quarter of 2015. And what we saw primarily affecting the positive cash flow here in the first quarter was collections and cash coming in from RBI's customers. So, I'd like to think in every Q1 going forward we're going to have the same circumstance. But that was the underlying driver for the first quarter's improvement. And then the second quarter, to your other aspect of the question, we have some build of working capital as we're now getting into the seasonally-stronger part of the calendar year that will influence both inventories and, to a lesser degree, receivables. You're welcome. Thanks, operator. And thank you, everyone, for joining us on our call today. We look forward to speaking with you on Thursday, July 28th when we expect to report our second quarter results. Thank you again. This concludes our call.

2016_ROCK

2016

GNTX

GNTX #Yes, it's a new market that is still in development, obviously. We have low-volume production vehicle that is going in there right now, late this year. A couple more OEMs that start production with HomeLink into the China market, beginning of 2017. Our only constraint is that it's still a new market. Lot of vehicles. Easy implementation, but it's the selling and creating a business case for the OEM on why it's a necessity. Thank you. Nothing that we are going to break out specifically in the region. It was really driven by growth and penetration of, again, the same OEMs that we are shipping to in all the regions, just further penetration and uptake of our primarily inside mirrors in that region. Looking at the luxury OEMs in Germany are the primary drivers of that. But we did fairly well with Volkswagen during that time as well. We continue to see strength with all of our German OEMs. Between 5% and 6%. I wouldn't look at it as a trend. If you back up more than the last few quarters you are referencing and look at the two years prior to that, outside mirrors were outpacing inside mirrors. Outside mirrors in fact in that two-year period prior to the quarters you referenced, some of those were in between 15% and 20% growth rate. Part of it is just the law of large numbers and the compounding effect of those large growth rates on outside mirrors, and then them coming back down to a more normalized level. Additionally, what we talked about was we had one luxury OEM who was going through a de-contenting to try to address some cost concerns. So, we did have some fairly small but somehow still changing the numbers, obviously, change based off that OEM going through those cost pressures, and then de-contenting some outside mirrors. When you see that and you look at those, if those units had stabilized and that hadn't occurred and you look at the growth rates, it would have been right in line with what our historical growth rate, and more in line with what those inside mirror growth rates were. Good morning, <UNK>. Any time we get below ---+ as sales drop in the mid-single-digit range, that is when you start to see pressure. If they start to flatten to zero and then they decline, obviously, we invest heavily in automation. There is some fixed cost base. We do have some natural hedges built in with the way the variable compensation works with the Company. But, again, outside of product mix, if we can be in the mid-single digit, to close to double-digit growth rates, we feel like we can manage it in the range we have been talking about for a long, long time, 38.5%, 39.5%. Obviously, when the stars align, we did better this quarter. So, we feel like, given our forecast and everything outside of a macro event, we feel fairly comfortable that margins are going to be in the range that they have been. If you back up, just to walk through the progression is the best way to look at it. If you back up a year, I'd say they were all optimistic. The Detroit 3 and the international guys were looking at the North American market as solid growth driver for them. I would say now I would characterize it more as cautiously optimistic. You start to see a few people that are a little more negative than the cautiously optimistic. That is about the product lineup and how their vehicles are doing inside the marketplace today. The one thing that's very interesting is trucks and SUVs continue to do really well in this market. So, from a content standpoint, that usually bodes really well for us. We continue look at it and say, hey, what is the mix change going to be. One thing that's interesting is when you watch fuel prices drop like they have been recently or continue to at least be at lower levels, you tend to see the mix move a little bit away from A and B segment and more towards trucks and SUVs, which obviously plays well for us. We have an expanding book of business, however, in the B and C segment in North America. That's where a lot of the growth has come from for us over the last 18 months to two years. So, we feel like we are well positioned. I would say OEMs are a little more cautious than they were a year ago on the North American market, but we continue to see content and features being the key to driving growth rates for this marketplace. If you look at a lot of the technologies we have been working on over the last several years, if you look at the HomeLink play, talk about the integrated toll module, and what we are working on is a connected car strategy, that includes HomeLink and includes the transactional vehicle in our toll module product. We believe we have a very unique position in the marketplace to be able to help equip cars and OEMs with the type of technologies they are looking for. If you look at our camera technology, our full-display mirror system, all these technologies align well with what OEMs are trying to accomplish inside the autonomous vehicle space. It doesn't mean that everyone views autonomous as if you are the algorithm provider for autonomous that that is the only play. That is clearly not the case. You are looking for comfort and convenience, security, those type of features that can help drive Gentex growth into the car of the future. Thanks, <UNK>.

2016_GNTX

2016

SLM

SLM #The portfolio is performing, as I said earlier, pretty much well within our expectations. Seeing increases in charge-offs of the magnitude that we did, 0.83% to 1.08% and for the full P&I from 1.9% to 2.2%, given the amount of loans that we have now in full P&I, it's up 65% from a year ago, and 35% from the prior quarter. That's significant growth and seasoning. The provision miss, as <UNK> explained was principally due to the over discounting of the seasonality and roll aways. If anything, we're factoring in, probably, superior performance than what we are seeing here in the portfolio's performance, as expected. No. Again, it grew from 0.93% to 1.03%, it's going to be obviously be higher than that over the course of the year. I don't want to throw out a specific number at this point in time. It is the case that we are constantly looking at the performance by school, and in particular, the for-profits. Over the course of three years, have culled that down significantly. And the schools that we currently have in our portfolio of new sales, are schools where they have big graduation rates, good placement of students after. The percentage of our total volume that is related to for-profits is less than 10%. As a category, we are lending to that category. As a school, it is dependent on their proposition with students and their results. When we share our forecast with regulators, we have, for the last two years in a row, done simulated stress tests, knowing that the DFAS requirement is not upon us until July of 2016. We have used the assumptions that are the assumptions in DFAS, so far as environmental change, consistent with the Federal Reserve guidelines. We have showed that to our regulators in all cases, for any stress level, for any year, we had very good results. We continue to make money. We continue to have capital ratios that are well above well-capitalized. So, what we have tried to do, is to make the events of July 16, when they occur, to simply be the next turning page in regard to this type of analysis, which we've been doing for two years, now. We are trying to make that, and we believe it will be, a non-event. <UNK>, you might be well served to look at the default emergence curve that we put out one year ago today, or maybe it was in the second or third quarter earnings call. But, typically, you see, I want to say 60% of the defaults are going to emerge from the portfolio, in really, the first 2.5 years to 3 years. Charge-offs are going to be ---+ to put a handle on it above 2% in the first year or two, and then decline significantly, and fall below 1% in pretty short order. There is significant front loading of defaults in any repayment cohort. That's correct. We have an allowance for one year of expected reserves. Thank you, and thanks for your attention, and for your questions. This is a very good day for us, as it announces that we are moving to a different level of maturity as a new company. It is the case that we've maintained all of the virtues that got us here, including a very good market share, a terrific group of people who are our national sales force, a great brand that is a core brand for the entire industry, our products fit our audience well. We have opportunity in adjacencies. Our credit is unchanging, and of very high quality. I'll remind people that 748 through the door of FICO for approvals is an excellent number. We're starting to see, now, in our projections, that the franchise is leverageable, as the improvement that we are forecasting in the efficiency rate, clearly, given the entire tone of this conversation, we had very good and valued relationships with our regulators. We have, as we model it forward, and already built into our market share and the development thereof, excellent growth prospects for the P&L going forward, with concomitant excellent returns. The lower volatility, that chapter that we're moving into here from the funding standpoint, will take significant noise out of our communications going forward. So, it's a very good day. Thank you all for your attention. Thanks for your faith and staying with us over these first couple of years, and we look forward to the next chapter. Thank you.

2016_SLM

2017

HES

HES #Thanks, Greg Let me start by discussing our recently announced asset sales and the use of proceeds We expect the sales of our interest in Equatorial Guinea and Norway to be completed by year-end 2017. And together with our Permian EOR sale, total proceeds are $3.25 billion from the announced transactions Additionally, we anticipate that the Denmark sales process will be completed in 2018. As the proceeds from these transactions are received, we intend to reduce debt by $500 million and are evaluating plans to add up to two additional rigs in the Bakken during 2018 for a total of six rigs The proceeds from asset sales along with our current cash position and importantly, our free cash flows from our low cost cash generative assets in the Gulf of Mexico and Malaysia, provide us the financial flexibility to fund our growing world-class investment opportunity in <UNK>ana in an extended $50 oil price environment without the need to access the debt or equity markets We do not intend to pursue any M&A activity, and believe that our reshaped portfolio provides us with superior returns compared to other outside opportunities We are highly cognizant of the importance of cash returns to shareholders, given the strength of our current liquidity position However, we need more visibility into Exxon's plans for phase 2 and 3 of the Liza development in <UNK>ana Until we have this clarity, we initially plan to maintain a strong liquidity position, but will clearly consider cash returns to shareholders as appropriate I would also like to provide some additional comments on the deals just announced The Equatorial Guinea and Norway asset sales will not incur any transaction taxes We also will not incur any taxes on the repatriation of these proceeds Additionally, the company has settled open tax matters with the EG taxing authorities for the tax years prior to the effective date In this regard, the company will release $85 million in related tax reserves on the balance sheet, which it had accrued in prior periods for the years in question These reserves fully cover the company's tax obligation under the settlement Now turning to our results, I will compare results from the third quarter of 2017 to the second quarter of 2017. We incurred a net loss of $624 million in the third quarter of 2017 compared with a net loss of $449 million in the previous quarter Our adjusted net loss, which excludes items affecting comparability of earnings between periods, was $324 million in the third quarter of 2017. Third quarter results include an after-tax gain of $280 million associated with the sale of our enhanced recovery assets in the Permian Basin The sale transaction included both upstream and midstream assets, and as a result, an after-tax gain of $314 million was allocated to the E&P segment, and an after-tax loss of $34 million was allocated to the midstream segment Third quarter results also included a non-cash charge of $550 million after-tax for the sale of Norway In the fourth quarter, an additional charge relating to the Norway cumulative translation adjustment included in shareholders' equity will be recognized The cumulative translation adjustment for Norway at <UNK>eptember 30, 2017 was approximately $840 million Turning to E&P E&P had an adjusted net loss of $238 million in the third quarter of 2017 compared with a net loss of $354 million in the second quarter of 2017. The changes in the after-tax components of adjusted E&P results between the third quarter and second quarter of 2017 were as follows Higher realized selling prices improve results by $37 million Higher sales volumes improve results by $10 million Lower operating costs and expenses improve results by $18 million Lower DD&A expense improve results by $33 billion Lower exploration expenses improve results by $12 million All other items improve results by $6 million for an overall improvement in third quarter results of $116 million The E&P effective income tax rate excluding specials and Libyan operations was a benefit of 18% for the third quarter of 2017 compared with a benefit of 8% in the second quarter For the third quarter, our E&P crude oil sales volumes were under-lifted compared with production by approximately 280,000 barrels, which did not have a material impact on our results Turning to Midstream, on an adjusted basis, the Midstream segment had net income of $22 million in the third quarter, which was up from $16 million in the second quarter Midstream EBITDA before the non-controlling interest and excluding specials amounted to $109 million in the third quarter, compared to $96 billion in the second quarter of 2017. Turning to Corporate, after-tax corporate and interest expenses excluding items affecting comparability were $108 million in the third quarter of 2017, compared to $111 million in the second quarter of 2017. Third quarter 2017 results include an after-tax charge of $30 million in connection with vacated office space Turning to third quarter cash flow, net cash provided by operating activities before changes in working capital was $415 million Changes in working capital reduced operating cash flows by $327 million Additions to property, plant and equipment were $513 million Proceeds from the sale of assets were $604 million Net repayments of debt were $19 million Common and preferred stock dividends paid were $91 million Distributions to non-controlling interest were $33 million All other items were a net decrease in cash of $2 million resulting in a net increase in cash and cash equivalents in the third quarter of $34 million Changes in working capital during the third quarter of 2017 were net cash outflows related to Norwegian abandonment expenditures, advances to operators, premiums on hedge contracts and the timing of interest payments Turning to cash and liquidity, excluding midstream, we ended the quarter with cash and cash equivalents of $2.48 billion, total liquidity of $6.8 billion including available committed credit facilities, and debt of $6.16 billion As previously mentioned, we also have a strong crude oil hedge position through 2018 to protect our cash flow Now turning to guidance, but before I give the guidance for the fourth quarter, I will provide third quarter pro forma financial metrics that remove the EG, Norway and Denmark assets being sold, but exclude the projected $150 million of cost savings to assist with your modeling of the portfolio post asset sales Our third quarter pro forma cash costs were $12.80 per barrel as compared to actual reported results of $13.67 per barrel Our third quarter pro forma DD&A per barrel was $23.72 and actual DD&A was $24.79 per barrel Finally our pro forma tax rate excluding Libya was a benefit of 2% as compared to our reported benefit of 18% I will now provide fourth quarter guidance with a cautionary statement that this can be impacted by the timing of the asset sales Also, our DD&A rate will be lower than expected because DD&A will not be recorded on EG and Norway post the contract signings, since these assets will be classified as held for sale The lower DD&A will improve results and therefore also impact our tax rate significantly since Norway has a high statutory tax rate For the fourth quarter of 2017, E&P cash costs excluding Libya are projected to be in the range of $13.50 to $14.50 per barrel of oil equivalent and full-year 2017 cash cost guidance remains unchanged at $14 to $15 per barrel DD&A per barrel excluding Libya is forecast to be in the range of $22.50 to $23.50 per barrel in the fourth quarter of 2017, and $24.50 to $25.50 per barrel for the full year, which is unchanged from previous guidance As a result, total E&P unit operating costs are projected to be in the range of $36 to $38 per barrel in the fourth quarter and $38.50 to $40.50 per barrel for the full year Exploration expenses excluding dry hole costs are expected to be in the range of $75 million to $85 million in the fourth quarter with full-year guidance of $225 million to $235 million, which is down from the previous guidance of $250 million to $270 million The Midstream tariff is projected to be in the range of $135 million to $145 million for the fourth quarter and $535 million to $545 million for the full year, which is updated from previous full-year guidance of $520 million to $535 million The E&P effective tax rate excluding Libya is expected to be an expense in the range of 16% to 20% for the fourth quarter For the full year, we now expect a benefit in the range of 5% to 9%, which is down from previous guidance of 11% to 15% due to the asset sales For Midstream, we anticipate net income attributable to <UNK> from the Midstream segment to be in the range of $15 million to $20 million in the fourth quarter and $70 million to $75 million for the full year, which is updated from previous full-year guidance of $65 million to $75 million Turning to Corporate, we expect corporate expenses to be in the range of $30 million to $35 million for the fourth quarter and full-year guidance of $130 million to $135 million, down from previous guidance of $135 million to $145 million We anticipate interest expenses to be in the range of $70 million to $75 million for the fourth quarter and $300 million to $305 million for the full year, which is updated from previous full-year guidance of $295 million to $305 million This concludes my remarks We would be happy to answer any questions I will now turn the call over to the operator Question-and-Answer <UNK>ession This will clearly improve our F&D costs as we move forward I mean, part of our strategy of divesting these high-cost assets is to free up capital, accelerate value and be able to put that capital into our high return <UNK>ana and Bakken assets <UNK>o if you look at <UNK>ana, I mean, right now, if you just take phase one, that's a $7 F&D If you just look at the gross costs there associated with Liza and the reserves that we're going to get, it's a $7 F&D Take our Bakken numbers Again, under $10 F&D <UNK>o we'll have a substantial improvement and that is, again, part of the key of this portfolio strategy moves are to get this capital to invest in these great return assets The other thing, the other aspect of it, as you said, Norway was not generating much cash flow from us at all We have significant abandonment expenditures Actually Norway was only going to provide us $20 million of net cash flow in the quarter I mean, sorry, for 2017. EG, like you said, was in decline <UNK>o there was $170 million of net cash flow in 2017, but we weren't investing because it didn't compete for capital <UNK>o the way we look at this, from a net cash flow standpoint, the proceeds that we got, we received a 14 times multiple on that net cash flow <UNK>o again that – and also that net cash flow on Norway was not going to improve here through 2020. EG was going to decline, so that wasn't going to be generating much free cash flow for us in our portfolio As <UNK> mentioned too with the high costs of all these assets coming out of the portfolio and our cost reduction program, we can really start driving down our break-evens on F&D and our portfolio cash costs will be driven down under $10. <UNK>o, again we just think just great strategic moves for us and our portfolio And can I – I just also want to clarify one thing on your question, because again we're seeing all positives But the way – when you asked the question you said the increase in costs from second quarter to third quarter If you're looking at our supplement, make sure you look at the footnote down there We have apples and oranges between the second and third quarter If we had broken out in the second quarter the 60, 140,000 wells and the 50, 70,000 there was no increase actually in cost from the same type of wells being drilled The thing was we were just doing pilots here in the first and second quarter, so we were only putting the 50-stage fracs with the 70,000 pounds proppant there And so now in the third quarter, since we've moved basically to the 60, 140,000s, we're just including all the wells there <UNK>o I just wanted to clarify that there's no real increase in our well cost At this point, I'd still – I'd stick with that guidance and here's what the difference is from that last quarter is <UNK>o we do have the asset sales <UNK>o Norway, you're in that $120 million to $130 million of capital this year that will not be there next year EG was very low Now, as Greg mentioned, we are considering adding two more rigs in the Bakken during 2018. <UNK>o you do have that type of offset <UNK>o, we're still looking at being flat, but we're going to be going through our normal budget and plan process and we'll be updating that with our fourth quarter numbers <UNK>o in the third quarter when you compare the third quarter to second quarter, actually even with DAPL, the Clearbrook was essentially unchanged, the second quarter to third quarter And now, a good majority of our production doesn't go to Clearbrook Just like all other operators, you have to get it out of the basin <UNK>o with Clearbrook essentially unchanged, and you're moving your product outside of North Dakota, you just have some additional cost comparatively between the second and third quarter even with DAPL starting up <UNK>o that's where that is in the third quarter Now right at the end of the third quarter going into the fourth quarter, Clearbrook has clearly improved <UNK>o, those values from Clearbrook would show up more in the fourth quarter Well, first you should start with that, that the new projects or the projects like Bakken and <UNK>ana, they're going to have better returns than the assets that we're divesting <UNK>o clearly, that's going to drive improvements in cash costs and DD&A and F&D, everything as we spoke about before As far as just accounting, we go through and it goes on a quarterly basis You evaluate what prices are We'll be going through our budget and plan with the board and setting price (00:55:57) in the fourth quarter and we'll look at all assets at that point in time on where prices are, and then you go through your normal impairment reviews at that point in time But that will happen on a quarterly basis Yes <UNK>o I mean, just now when you look at our portfolio now and as we get through to 2020 with <UNK>ana, we want to be in a situation right that we set ourselves up in this portfolio that we've got a low-cost, cash-generative portfolio and have the ability through these asset sales to bring cash forward to pre-fund effectively <UNK>ana What Malaysia now provides us, and I'm saying now is because we were developing North Malay Basin North Malay Basin now is coming on It's ramping up to its full production capacity Putting North Malay Basin and JDA together, I guess the best way I'd describe this as a nice long-term infrastructure asset that provides this cash brick Just cash flows year-in, year-out in your portfolio and it's both the JDA and North Malay Basin Obviously their P<UNK>Cs, prices go down, you get coverage as prices go down <UNK>o it's a great part, that this Malaysia asset is just really key for us to drive our cash flow to help fund our assets Now, go forward, you never know long-term what happens, but Malaysia is right now a key core asset for us to generate cash flow and drive us through to 2020 as <UNK>ana comes on <UNK>ure <UNK>o I gave on – when I gave the pro forma numbers, you saw the benefit that we were recording was – our actual was 18% in the third quarter and on a pro forma basis, that goes down to 2% <UNK>o it all depends that – what that means is as you can tell, those assets had losses and were generating losses in the portfolio And so, we'll have less losses and you won't be benefiting, just like you said, at those higher tax rates <UNK>orry, I must have missed that One other question for me <UNK>o last month, the International Tribunal of the Law of the <UNK>ea decided in favor of Ghana in their maritime dispute with the Ivory Coast How do you guys expect to proceed with your, I guess, acreage in that region or in the offshore of that country Are you guys planning to continue drilling or monetize that acreage? I mean obviously I think we've said it over and over The whole goal of our strategy here in these portfolio moves are to improve the returns on invested capital <UNK>o that's what we're focused on <UNK>o now by selling those high cost assets and just from that prior question, as you know, those assets, just from, as I told you on a pro forma tax rate, were generating losses in the portfolio, and you're right We are doing all this and planning for, can you call it a low price or an extended $50 oil price environment, and we believe we set ourselves up to win in this $50 environment because one, now we have the cash to be able to fund <UNK>ana just like you said And then the assets that we will be investing in which are <UNK>ana and we've gone through the returns there, and I know we've gone through this, we have it in our investor deck of how <UNK>ana can compete and actually do better than even some Permian, Delaware type assets in a low price environment <UNK>o, that will improve our returns And like we said earlier, Liza has a $7 F&D, so that will drive down DD&A The Bakken as well will continue with the investments that we have at four rigs and as you know, we're evaluating going to six rigs The reason we're evaluating going to six rigs is because of the tremendous returns that we see in our portfolio there and we have plenty of well locations that work at sub $50. <UNK>o that will also, a low F&D and improved returns in both Bakken and <UNK>ana are going to be at a cash cost lower than our current portfolio average <UNK>o the returns that we generate there are going to improve and the point and the goal and I guess the way you can measure it is, as we say post <UNK>ana in a $50 world, when that comes up, it's all these investments will be generating free cash flow post the <UNK>ana production starting up And then as you will start to see that, we'll generate, post the <UNK>ana production again, net income will continue to increase along with that cash flow <UNK>o it is all about trying to shift and reallocate the capital in our portfolio to the highest returns and we believe these Bakken and <UNK>ana investments will really drive that improvement in return on capital employed Okay <UNK>o I mean, you heard at least from a pro forma standpoint, we're dropping in the third quarter It went over $1. <UNK>o that's one thing just starting there When these assets come out of the portfolio, you're going to get that Every time we bring on a new barrel in the Bakken, with this F&D, that's driving down our DD&A rate And then <UNK>ana, now the big change there with the F&D there, that won't happen until 2020. <UNK>o it's just going to be a progression as we move through from 2017 to 2020 on driving down that DD&A rate And like you said on the – we talked about on the cash cost, you can just start from where we are right now at $14 driving it down to under $10 as we go to 2020. <UNK>o it's just going to be that slow progression on cash costs and DD&A as we move through No, I can't exactly at this point, but I can do that on the fourth quarter With all else being the same, you would use this pro forma number of that I said were $23.72, and then that would come down based on the investments and the growth that we have in the Bakken coming through <UNK>o it'll be lower than that number in 2018. And then we'll continue to look at all the assets and on our portfolio mix, it depends on where production is as we go into 2018. And I'll update on our call then <UNK>o what we have in those numbers to get down to the $10 is, I'm not assuming any efficiencies per se in there <UNK>o, I mean, again our teams have been really good on continuing to drive down our cash costs across our portfolio <UNK>o there are potential upside to those numbers <UNK>o you do have the higher-cost barrels that will be coming out and then you have the $150 million of cost savings which I did not factor into those numbers there Then, what helps to drive is kind of the – going back to what Greg was talking about on the pro forma production momentum <UNK>o you have North Malay Basin which is coming in at the full rate starting in 2018. That is one of the lowest cash cost assets we have in the portfolio <UNK>tampede coming on Gulf of Mexico assets very low cost, so that will continue to drive down the cash costs and then you have the Bakken <UNK>o activity levels that we talked about in here, we've got four rigs in there We know we're considering going to six We have the four rigs and the additional production, as you can talk about our oil production growth of 10% per year With that our low cash costs will also drive down the cost And then obviously when <UNK>ana comes on you get the final piece to drive it down <UNK>o, yeah, no, we're not assuming any heroic efficiencies or anything in there It's the quality of our assets and the investments in these high-return assets along with the start-up of our developments that will drive these costs down to $10 and below <UNK>o it will be across the board I mean, I think, you will see the majority from an income statement line item will be in the G&A line item But we will have some that will be – some of our reduction will be in our operating costs as well And just so – like we will be finishing all our work on that and our organization redesigning in 2018 and we will have transition costs in 2018 that offset some of these savings <UNK>o it's really, from 2019 on is where you'll see this $150 million cost savings kind of flowing through our numbers No, I This will be – it'll be a Yeah It's a big number I mean obviously with Norway, EG and then Denmark being sold, there is a reduction in our portfolio and what we're doing is just rationalizing our fixed cost base that we have here to support our production portfolio And it's just going to be part of that We've done high level design on this The reductions will be across all aspects be it central functions, be it corporate, be it E&P <UNK>o we're looking at all of that And as I said, you'll start to see it in 2018 because we will be enacting it It's just that we will have transition costs in 2018 and get the full benefit in 2019. <UNK>o look, we have put it on paper and we feel comfortable, very comfortable with that $150 million You've got to factor in a lot of ancillary costs <UNK>o you've got supply chain activities in every one of those areas We've got tax activities in every one of those areas We do have finance support in all of those areas, IT support in all of those areas <UNK>o we've looked at all of that And so, it will be head count, it will be other operational type costs that will be reduced and I will tell you I feel very comfortable about the $150 million by 2019. Again we will incur this transition cost in 2018. The bulk of this was because the support is really for our E&P, so the bulk of it will be in the E&P numbers, being able to reduce our costs within E&P, but there's going to be clearly corporate cost reductions as well <UNK>o, at this point, we're not going to provide that number The cost reduction of $150 million are going to run across the board There will be head count reductions, there will be vendor cost reductions, just due to the size of the portfolio getting smaller But it's just premature for me to give those type of numbers <UNK>o, your estimates are exactly right on the cash flow and that the asset sales are coming into to fund this great opportunity that we have in <UNK>ana As you said, you have that phase one cost We don't have any guidance out there The only thing I will tell you is that the initial phase one FP<UNK>O has a capacity of 120,000 barrels per day It has not been landed what phase two and phase three are, but it could be likely to be at a larger size than that 120,000 [barrels per day] But outside of that, we haven't had any additional guidance that we're able to give out at this point in time

2017_HES

2017

POWI

POWI #Thanks, <UNK>, and good afternoon. Our second quarter revenues were a record $107.6 million, up 10% year-over-year. That's our fifth consecutive quarter of double-digit growth and brings our growth rate to 14% for the first half of 2017. We also saw a significant increase in our gross margins in the second quarter, grew our non-GAAP earnings per share by 13% from a year ago and generated $24 million in cash flow from operations in the quarter. Our second quarter results showcased the diversity of the growth drivers across our business. We achieved double-digit top line growth in the quarter despite an inventory correction in the Communications category where distributors serving the China handset supply chain cut back purchases following the recent softness in that market. The impact of this correction was more than offset by year-over-year growth of better than 20% in the consumer category and more than 15% in the industrial market. In Consumer, our growth is being driven in part by strong demand for convenience and comfort appliances in emerging markets but also by expanding dollar content as OEMs incorporate more electronic controls and intelligence into their products all while trying to comply with stringent energy efficiency requirements. The reliability and efficiency benefits of our highly integrated products have earned us a substantial share of the worldwide appliance market, giving us a strong incumbent position from which to capitalize on these strengths. While the long-vending product families like TOPSwitch, TinySwitch and LinkSwitch continue to do extremely well in appliances, InnoSwitch strengthens our position by further enhancing reliability and efficiency while increasing our dollar content thanks to its higher level of integration. We won several appliance designs in Q2 with InnoSwitch products, including an electric fan for a major U.K. customer and a dishwasher for a Chinese manufacturer and a room air filter for Japanese customer. In the industrial category, growth has accelerated this year with a 15% increase in the first half after mid-single-digit growth in 2016. We are seeing growth across a diverse range of vertical markets, where technological changes are creating demand for reliable, efficient power electronics. These include applications like e-bikes and lawn equipment, where lithium ion batteries are replacing gasoline engines and plug-in AC motors; utility meters, where mechanical meters continue to be replaced by network smart meters; home and building automation, where devices such as thermostats, smoke detectors, power strips and door locks are being connected to networks; and of course, lighting, where not only are LEDs replacing older lighting technologies, but where smart and connected lighting is becoming a significant factor in the market. The efficiency of the power supply is a critical factor in smart lighting systems, where standby power consumption of the lighting controllers can otherwise negate the energy savings of LEDs themselves. In fact, this is a serious concern, not just in smart lighting but in all IoT applications, where network connectivity and other forms of electronic intelligence will result in billions of new loads being permanently connected to the grid in the coming years. The energy efficiency and low standby consumption of our products combined with the reliability benefits of integration make such applications ideal targets for us. Meanwhile, revenues from high-power products, which account for a significant portion of our industrial revenues, are on track for a strong growth this year, driven by renewable energy applications as well as DC transmission projects in China. In Q2, we won one of the largest designs to-date in the solar energy market, a multimillion dollar design for a major European customer with our SCALE-2 drivers, which should begin ramping shortly. Also as we discussed on the last quarter's conference call, China is undertaking a multiyear upgrade of its national power distribution infrastructure with a 8x8 grid of long-distance DC transmission lines, which require sophisticated power conversion electronics to ensure reliability, safety and stability on the grid. We expect to garner a significant share of this business with our scale IGBT drivers with shipments likely to begin ramping over the next few months. We're also seeing strong customer interest in our new SCALE-iDriver products for the 10 to 100 kilowatt range with designs set to begin production shortly in electric buses, commercial air conditioning and power quality markets. Despite the soft patch in Q2, we also expect Communications category to remain strong growth driver in the years ahead as InnoSwitch continues to penetrate the mobile device market. Faster charging is quickly becoming a critical feature for smartphones, and we expect the USB PD standard to drive power levels higher and stimulate adoptions of rapid charging in the years ahead. We are currently shipping to all of the OEMs that have adopted some form of rapid charging and believe we are well positioned to continue growing in this market. As discussed on our prior calls, USB PD is applicable not only for the smartphones but also for other mobile devices, including tablets and notebooks. We plan to address these higher power applications with our next-generation InnoSwitch products, which we expect to launch for general availability in the next few months. In summary, we are excited about the breadth and diversity of growth opportunities across our business, and we're making significant investments to prepare for the growth we expect over the years to come. Our capital expenditures this year will be in the range of $30 million to $35 million, significantly above our typical annual spend, primarily for the addition of capacity at our foundry partners and back-end subcontractors. We have also added a new foundry partner and a new back-end subcontractor to help ensure that we have ample capacity to support the growth we anticipate going forward. And now, I'll turn it over to <UNK> for the review of the financials. Thanks, <UNK>, and good afternoon. In my remarks, I will quickly touch on a few financial highlights, focusing mainly on the non-GAAP numbers, which are reconciled to the corresponding GAAP figures in the tables accompanying our press release. Then we will open it up for the Q&A session. Second quarter revenues were $107.6 million, up 3% compared to the prior quarter. The sequential growth was driven by double-digit increase in the consumer category, reflecting seasonal strength in air conditioning and continued design-win momentum across a variety of appliance and consumer electronic applications. Industrial revenues also contributed to the sequential increase with growth in high single digits, driven by high-power applications, building automation and metering applications. The computer category also increased in high single digits sequentially, which is difficult following the seasonally weak March quarter. Communications was the only category with a sequential decline, primarily reflecting the work done of the channel inventory and weaker recent softness in the China handset market. Revenue mix for the quarter was 41% Consumer, 33% Industrial, 22% Communications and 4% Computer. The relative strength of the higher-margin consumer and industrial markets drove a sequential increase in non-GAAP gross margin, which expanded by 170 basis points sequentially to 50.9%. Also a factor in the increase was the postelection rise in the dollar versus the yen, which had a beneficial impact on the cost of wafers from our Japanese foundries. Non-GAAP operating expenses were $32.7 million, up $600,000 from the prior quarter but below our forecast due mainly to the timing of headcount additions. As expected, the sequential increase was driven by annual merit increases as well as our annual worldwide sales conference, which took place in May. Non-GAAP operating margin for the quarter was 20.5%, a sequential increase of 200 basis point. Non-GAAP net income was $0.69 per diluted share for the quarter, up from $0.63 in the prior quarter. Cash flow from operations was $24.1 million for the quarter while capital expenditures were $16.5 million. As <UNK> indicated, we're adding substantial manufacturing capacity in support of new products and the overall growth we expect in our business going forward. Despite the higher-than-normal CapEx in the quarter, cash and investments in the balance sheet increased to $254 million at quarter-end. Reflecting the continued strength of our balance sheet and confidence in our growth outlook, our Board of Directors has expanded our buyback authorization by $30 million, bringing the total available allocation to $53.6 million. Looking at inventories. Internal inventories rose slightly during the quarter to 88 days on hand, up 2 days from the prior quarter while channel inventory fell to 6.6 weeks down from 7.3 weeks in the prior quarter. Looking ahead, we expect third quarter revenues to be in a range of $111 million, plus or minus $3 million, which would be an increase of 9% year-over-year at the midpoint of the range. Looking at gross margin, while the dollar-yen relationship should provide a slight benefit again in the third quarter, we do expect end market mix to be less favorable, reflecting an expected rebound in the Communication category. Specifically, non-GAAP gross margin should be around 50.5%, about 40 basis points lower than the second quarter. We expect non-GAAP operating expenses to be approximately $33 million in the third quarter, just a slight increase from the second quarter. I expect our effective tax rate for the third quarter and the balance of the year to be roughly 5%. And with that, I'll turn it back over to <UNK>. You're correct. It is a short-lived correction. And we also helped that by cleaning up some of the overbookings at distributors. And we think we are pretty much back to normal. There may be some lingering effects in Q3. But overall, we think Q3 will be a growth quarter for Communications. I believe so. There are, certainly, areas of market that are growing really well. High power is one of them which should do very well this year. And meters and e-bikes and so on and also the tools. So I think Industrial looks really, really strong for us going forward. <UNK>, typically, if you remember, we spend about $20 million. Last year, we spent ---+ on an average. Last year, we spent about $12 million. If you take last year and this year, we're slightly ahead of that. And we are basically doing this to add to our capacity as we look ahead to our growth, and that is why adding capacity and when we need it, you have to do it a bit in advance. So that's where ---+ but if you look at it on an average basis, yes, it's a little more than normal. But if you average out the 2, it's not totally out of whack. No, we have been planning for a period of time. And we're not yet ready to disclose who it is, but it is a Japanese company. So it has the same kind of yen [relationship,] if you will. And we expect this foundry to start production in reasonable quantities starting first quarter of the next year, 2018. I mean ---+ if you look at it, we should see some reasonable growth back in the third quarter. I mean, you saw us decline in that category quite a bit, but I think we should rebound nicely in the next quarter. We think we are getting back to normal on those specific products, and we expect, in the next 2 or 3 months, we'll be pretty much back to normal on our lead times. And that is one of the reasons we added capacity. The other reason is longer-term growth prospects. So if you look at it, the yen got ---+ was probably benefiting about, let's say, 50 basis points and mix probably contributed a little over 100 basis points. It's hard to look at it just by the end application because it is mixed between mix. But directionally, that's what I think you would look at. The yen, basically and the mix, you look ---+ this is for Q2, right, you're talking about. Or are you looking for Q3. So for Q3, it's basically, if you really look at it, it's the ---+ it's about half and half going. I mean, basically, if you look at it, we're going downward. The mix is going unfavorable, whereas the yen is still benefiting. Yes. So we'll get about roughly 50 basis points of benefit from the yen, but it's more than offset by the mix change because of expected growth in Communications business. I would say that this year is a little bit more than normal because we're trying to bring on an extra foundry and an extra subcontractor for test and assembly. And when you do that, there's always some expenses. And this sets us up very nicely for more than sufficient capacity for not only our growth but also have enough upside capacity because it's not going to be uniform every year. Some years, we'll grow a lot more than other years. And so it's important to have that excess capacity to handle upside. So yes, any time you add a new foundry and subcontractor, it is somewhat of a binary addition in cost. And that provides us with a capacity for the future. So the addition is binary if that's the question. Well, I think, we will continue to grow. But I think the growth is disproportionately a little bit more because you'll see the decline in the Communications was quite steep, and we will climb back. So as a percentage of revenue, Communications would increase. And typically, what happens in the third quarter is that Consumer comes down because air conditioning typically becomes a little softer after having a very strong second quarter. So you should see ---+ really what happened is that Consumer comes down and Communications goes up as a percentage of total revenue. That should be the directional. Well, it's a combination of a number of things, including the InnoSwitch. But InnoSwitch is still relatively small, I would say. We expect InnoSwitch revenue outside of Communications to be in the mid-single-digit millions this year. And that's certainly helping. But the biggest change or our increase is coming from air conditioning. Air conditioning has grown relative to last year. This year, it's expected to grow for us nearly 50% in unit volume. And this is driven by not only consumption within China but also consumption in places like India, where there is a much larger middle class who can afford these room air conditioners. They don't have central air conditioning, so each house could easily have 2 or 3 or 4 air conditioners. So there's a huge increase in demand for air conditioning. And our customers in China are gaining a huge share, and also their SAM is growing across the geographies. The other thing, of course, that's helping is the global warming. We've had a very warm year. And so people who can afford air conditioning, they're putting air conditioners in. So that's the big one. But we've also seen significant growth in all of the other appliances. Like major appliances has been a strong growth for us, small appliances, things like coffeemakers, shavers and so on. Those have also grown very well. Yes, we did. We definitely saw a slowdown in the end customer demand. We realized that there was more inventory at the distributors than needed given the softness. So we're very careful to make sure that we clean up that extra inventory during the quarter in Q2. And that's why we feel now that inventory is back to normal. If you look at the number of weeks, we're at 6.5. . 6. 6 weeks. 6. 6 weeks, which is very close to our normal inventory level. And that's why when we guided the quarter also, we had shown that the margin improvement would happen because we knew about the mix directionally. And that's why we had given the guidance on the margin accordingly, too. Yes, the reason we're able to do, <UNK>, is because we had a lot of the revenue booked in the beginning of the quarter. Our turns was less than 10% in Q2. Well, we are a single-sourced product. So really, this doesn't have any impact necessarily on pricing. It is not easy to just switch to somebody else. No, that's really not related to that. It's really related to adding more capacity. So when ---+ we have a lot of proprietary packages that we use. So when we bring on a new assembly and test partner, we not only had to buy equipment that's specific to our packages, but also we had to buy testers and handlers, which we always have owned. We own all of our testers and handlers because we use high-voltage technologies so it requires some specialized testing. So we always own them. But that's the expenditure on the subcontractor for assembly and test. On the foundry side, the only thing we really buy on equipment that are unique to us, there's usually 1 or 2 pieces of equipment that the foundry may or may not have, and if they don't have it, we usually buy it for them. And so it's more of a capacity expansion not a cost-reduction exercise. Yes. So basically, it's pretty fair to assume that the board definitely adjusted the matrix. It's a matrix that the board ---+ we have a discussion with the board. And obviously, we, as a team, take into consideration the confidence in our outlook, the market conditions, the current valuation. Having said all that, we are very opportunistic, and we'll continue to be opportunistic and keep using the price sensitivity approach that we have used in the past. Yes. There's lot of design work going on in USB PD, but the standard had some changes in the last few months, primarily driven by some of the OEMs, both the cell phone OEMs and also the tablet and notebook OEMs, who have asked for some modifications to USB standard to make it more suitable for their own products. And so the good news is more and more of the OEMs have now decided to move to USB PD because of the improvements that have been made to USB PD standard. The bad news is it has delayed the implementation of USB PD to some extent. But there's a lot of design activity. But in terms of revenue, it's been delayed a little bit. And we think that the real growth in USB PD revenue will happen in the second half of next year. The tablets and notebooks will go into the Computer revenues. And once again, we think the next generation of switches are a very good fit for that. And the USB PD will be the catalyst to convert that market to InnoSwitch. As you know, the notebook and tablets currently use the older ---+ their legacy technologies, which has been standard for a long time now. But all of that will have to change with USB PD. And I think InnoSwitch ---+ the next-generation InnoSwitch is a very good fit in terms of efficiency, in terms of form factors, in terms of lower consumption and just having all the hooks to implement USB PD. So this is a great opportunity for us to get significant share of the tablet and notebook market starting, I would say, the middle of next year.

2017_POWI

2017

BOBE

BOBE #Good morning. I think, <UNK>, that your assumptions are probably fairly correct in that we've still been in a fairly lower priced sow environment, and with our higher mix of side dishes. But as we look into next year and we see sow prices potentially starting to move a little bit higher than maybe we were this year, I would expect to see a corresponding change, as well. That will continue to fluctuate as we see that sow market move up and down. I think it's important for shareholders to know that as the sow cost goes up, so does our pricing on the shelf, so that helps to increase sales; therefore, at the end of the day whether or not the sows are going up or coming down, the margins are remaining to be the same, and profitability of those transactions are there. I think we will continue to look at that. It's a small part of our business. We pared a lot of the offerings down to what really fits our core, more in the really breakfast sandwich. Breakfast is our heritage and our equity. That's really where our focus is. A lot of those items that we may have a co-packer, we've pared those down, as well. There won't be a lot of emphasis on that. Where it makes sense in our core markets that people want the brand, want to use the brand, we'll continue to focus on that. Thank you. Thank you everyone for joining us today. <UNK> and <UNK> will be presenting at UBS Global Conference tomorrow, and Bank of America Merrill Lynch Consumer Retail Conference on Tuesday, March 14. We look forward to meeting with you, if you are going to attend. Mean time, have a wonderful day, and we look forward to talking to you next on the next conference.

2017_BOBE

2016

NBL

NBL #Okay. Let me start on Tamar with what the announcement on Tamar where we reached an agreement to sell 3% and I think that's a great marker. That's a good marker for the asset. I think, as far as the timing, I would expect timing of that to close by the fourth quarter. So definitely before year end. And we'll just ---+ we will obviously announced that as it happens. I think on the midstream IPO, that'll be ---+ we've kept this one alive so we've kept that available as to enter the market when the market conditions kind of dictate that. So we'll ---+ that's about all I can say on that at this point but that's something we're keeping alive. I think on Mustang, that's an area that's probably our next IDP area, <UNK> can mention a little bit on that but I think it just the initial results very encouraging there. Yes, <UNK>. I think very happy with the first results. It's like we said a ten well pad, seven of which tested enhanced completions. It's one part of the IDP, obviously with it only being one pad ---+ so but very encouraged with what we've seen so far. It's only coming on right at the end of 2Q so a bit early to start putting numbers out there. But I think when you look at how much the enhanced completions have improved the performance of the wells and Wells Ranch at East pony and again that's on one of the slides in the pack and you can see how much of lift we're getting from that. You can see why we're excited from similar levels of improvement in Mustang with just the first pad there. Yes. I think we've said it for quite some time that in the DJ Basin it takes three to four rigs to keep production flat. We've been running two obviously for a while now balancing part of that is clearly the fact that we've seen better result from these enhanced completions. I think in 2Q you had the issues that you mentioned, the turnaround at Wells Ranch central processing facility as well as some third-party gas plant downtime of that impacted volumes as we mentioned. And you've reiterated there we've also held back on some work overs and repairs especially on vertical wells that just don't make sense in this price environment, those have impacted vertical volumes. I think when you look at our level of activity going forward with the type of performance we're seeing on these enhanced completions, even with two rigs we are probably flat on horizontal production through the end of the year, vertical will decline a bit so overall you'll be declining through the end of the year as we kind of suggested in the past. But horizontal program is holding in there quite nicely with just two rigs. I think to that point, <UNK>, and it's worth emphasizing and <UNK> mentioned it is we are actually on the horizontal program doing as well or better with the amount of capital that we're spending then we would've laid out before. What's masking it a little bit are some of these decisions which are the right economic decisions and the fact that everybody is looking at everything as a business decision on some of these vertical wells. And some of that production can be brought back at a later time and the right price environment, right now is not the right price environment to be trying to maximize the vertical production up there. We've got plans to test it. We've got one third Bone Spring well that will spud around the end of this year. We won't have any completions on this year, but we will towards the end of the year. With everything we've seen from offset operators and our own mapping, we believe that the majority of our increase we would consider probably tier 1 perspective for the third Bone Spring. Yes. I think we've done so far is Wolfcamp A and really the upper part of the Wolfcamp A. As we get into the latter part of this year, as I mentioned, we will test the Bone Spring, we will test the lower Wolfcamp ---+ or we will spud a lower Wolfcamp A, probably won't be on this year. So we will continue to delineate through that vertical section. I think it's probably a bit early to zero in too much on how many wells or what spacing we think will ultimately end up at given that we've only brought our third Noble operated well on so far. I think it's a pretty wide range we're looking at right now when you consider all the way from the third Bone Spring through the upper A, the lower A and maybe even into that B could be as many as 15 to 25 wells. I know that's a wide range but give us a bit more time than three completions and will narrow that going forward. The Delaware Basin ---+ I don't know the exact number, <UNK>, I mean what we've seen in the DJ Basin with those fracs is its $300,000-$400,000 savings from slick water it's probably along the same order of magnitude in the Delaware. Hey, <UNK>. I think <UNK> touched on it we just need to get more wells on production. We need to get more time and history on the Wells we have on production. Some more extended production periods, not only ours but even the offset operators, even some of the more recent wells there that have been highly encouraging. We're not going to rush to revise the type curve and then have to rush to revise it again. We will get a little longer extended production period, both for ours and offset operators and watch them both and then get some more wells online. I was going to say I think what's encouraging for me, again, even though it's only three wells, it is three wells that are spaced across the acreage and all are above the type curve which is obviously intended to be an average of the acreage. So I think we'll continue to see improvement and the completion designs there and hopefully we get a few more than three under our belt we can talk about what that 700 goes to. Right. And to the same extent we're looking at that same opportunity in both where their both well outperforming the type curve. So we have to take that into account as we look at setting our plans for next year. Yes. And in the Delaware ---+ you look at a well in the Delaware that 75% above the type curve in the early days, obviously huge impact on the economics of that. But as <UNK> points out, we're seeing very nice improvements in economics in the Eagle Ford too which we are already very robust. And when you look at the 500, foot spaced wells that are in line or above with 3 million barrel type curves it was based on spacing twice as wide as that. When you look at Northern Gates Ranch where we are above a 3 million barrel type curve which is three times what we assumed when we did the acquisition. And when you look at Briscoe Ranch where we are significantly above the type curve that we assume that the type of the acquisition and we haven't even brought those enhanced style completions to all the areas yet, I think there's tremendous upside potential in both of these areas that will be very economic even in this price environment. Well, yes, I think extremely glad we put the work in that we have over the last couple of years. I think we're doing the things we need to do. And I'm comfortable we're doing the right things to stay out in front of this. We've stayed focused on, engaged on being out in front of and defeating any potential ballots if they get enough signatures. And we'll wait and see how that plays out. But either way were staying out in front of this. The nice part is we've built a strong coalition in the business community up there. You've got landowners, farmers, homebuilders that all were affected by this and greatly affected if something like that went through. So they are out in front of this also and working hard on this. I think the governments been supportive of what we're doing and very engaged in this effort. So the other part of it is the public education has worked. I mean, you can see that from a polling. You can see that from the results. Their increased support, awareness and understanding. So again I'll go back to where I started with, we're doing the right things and we're in the right position to stay in front of this. As I said, it'll be ---+ we'll test drill a third Bone Spring and probably a lower Wolfcamp A later this year, half dozen or so I additional completions that we will bring on production this year, I think are all Wolfcamp A upper. And as far as arial testing, they're all probably in that east central part of the acreage block for the rest of the year. Yes I mean I'd say for both of those we baked in some of what we're seeing but given the early days on both of those, we probably been a bit conservative in the guidance. Well, I think as I mentioned earlier, we're working through the process now and obviously you are seeing a lot of volatility on the pricing still. We've seen even 2017 outlook for prices continue to change but we'll ---+ the benefit we have is we've generated excess cash this year. And as we look at that and as we look into next year, we'll look at our cash flow projection and what other opportunities we have to support cash flow next year on various things. So we'll look at the whole picture of things and setting the budget and focus our capital activity on what we need to do to support the Leviathan development based on wherever it is and most of the rest of it will start with our onshore activity and how we allocate between the different plays based upon the things we talked about this morning. It all depends, <UNK>, on how long the laterals are and how many wells there are on the pad so it's hard to give you kind of an average number. What I will say is that it did push some completions from 2Q into 3Q. We're addressing some of that by bringing a third frac crew out to help bring some more wells on before we get to year end. But it's going to vary quite a bit based on how long the laterals are and how many wells there are on a pad. And it goes to really more how many stages or what the cluster spacing is, the stage spacing is on the wells probably even more than the sand concentration. Well, I think when you look at the debt ---+ we look at a number of different factors and we haven't set a specific number. The nice part about that is with how we've continued to build liquidity somewhat this year it doesn't become an either/or discussion from debt versus investment in the business. I think we will have the abilities to pay down some debt by the end of the year and at the same time not reduce our capacity and maintain our capacity to be opportunistic, whether for accelerating opportunities, in the portfolio ---+ the environment dictates or if there are other new opportunities. So the nice part about is it we've maintain the capacity to look at all those spectrums. Good morning, <UNK>. Well, I think, we've been following the plan we laid out for the year as we continue to learn, we will continue to adjust especially as we are looking into next year. But as <UNK> said the performance has been better than we would have even expected and the nice part about it is it's been across the spectrum of the acreage. I think when you look at other opportunities, yes, we're looking at the other opportunities at the right opportunity for the right price comes around we'll move on it. But in the meantime we got 1200 locations on our position that we're focused on now and to your point, the extent and how we manage that and how we set up the program is important. As <UNK> mentioned we've kind of model this a little bit after some of the DJ portion where we use the IDP concept with what the facilities in and we make sure we're optimizing the value not just the value for this year but the value for the whole play. I'd say we're definitely not at any disadvantage. I think from what I've seen and our ability to execute and our ability to take advantage of the learnings and take advantage of the learnings quick, we're in a great position. I think on the three projects, the deer point we brought on three major projects over the last year on time, performance has been as expected or better, and on cost. So again that is a testament to our major project execution that is showing up here are very visibly in the Gulf of Mexico over the last year. I think ---+ no. As we look forward, here, I would expect some decline now that we've had Dantzler and Big Bend on for about a year. That's in line with what we said originally. Gun Flint we'll see to what extent it ramps up after we get it ramped up. And as I mentioned before we've built in some downtime expectations from some of that onshore facility coming back online or some of its downtime and some storm downtime near term. So everything is performing as expected out there, at least as well as expected. Yes, thanks, all, for joining us today on the call as well as your interest in Noble. Megan and I are available for calls all day today. Appreciate your time.

2016_NBL

2016

ODFL

ODFL #It's a good question and the feedback we get, and from the data that we have, we think it's a general trend across all the customers. But another point that I'm not sure we as a company or industry even, have talked much about, is this whole energy industry. That is probably affecting our economy all across the board, with what's going on with the price of oil. You would think that the price of oil being down would stimulate more consumer demand than it has. And there are some economists who believe that the consumer is going to pull us out of this slump next year. And perhaps that will be the case. But the industrial economy that supports the energy industry has a lot of tentacles, and we haul ---+ what's our percentage of industrial. About 40%. About 40% of our freight is industrial, and embedded in that piece are industrial customers that are tied with the energy industry. So that's probably where we're seeing some of the business softness. Correct The year-over-year trends in weight per day were, it was plus 4.4% in October, plus 3.1% in November, and plus 1.1% in December. And those are all year over year. No. That's just what we're thinking about, that we think we can achieve this year, and obviously that can go up or down depending on all the variables that go into it. But I think we're just trying to be a little bit more targeted, with what we think, and we've achieved rates greater than 20% in the past. And we feel good about what our opportunities are for this coming year. So historically, when LTL weight per shipment goes down, it has been tied to an economic ---+ the economy slowing down. When the economy picks back up, the weight per shipment, the orders that people order, get larger. So I do believe part of the weight per shipment decline is due to the soft patch we're in, in the economy. So therefore, if we get some economic improvement, you would think the weight per shipment would come back up and those headwinds that we, that I have mentioned would turn around and be a positive benefit for us. 2016 is 64 the first quarter, which is one extra day compared to 63 in the first quarter of 2015. For the second quarter, 64 in the third quarter, 62 in the fourth quarter. And that compares to 63 in the fourth quarter of 2015. I don't have 17 in front of me by quarter. I'm not sure we've ever seen a correlation between market share gains and what kind of pricing we can get. We're winning market share by winning new customers on board, and by winning additional lanes, and states, and shipping locations, and so forth, from existing customers And the pricing or program that we have is individual to each customer. And when you look at revenue per hundredweight, it's all the result of looking at the whole operating ratio of an account. And it's hard to say, you could gain new short-haul lanes from a customer and the revenue per hundredweight be less than your average, and you can drag down your revenue per hundredweight and it looks bad from a pricing standpoint, the way that the industry, the way you all look at pricing, and hell, we might be operating the count at a 75 or 80. On that lower revenue per hundredweight. So it's all about pricing to the operating ratio of each individual account. And the revenue per hundredweight is merely a result of that type of approach to pricing. I'm not sure if I understood your question correctly, but we don't try to go into a new account by means of pricing. Whereas we try to put a lowball offer in, and then anticipate we can get our pricing up later So we try to treat any new account just like an existing account, and go through our costing process to ensure that each account is contributing to the overall operating ratio. And we arrive at a fair and equitable price for us and for the customer. We just gave the 3.5% wage increase September 1. So obviously, that will be in inflationary factor as we go through next year. But we've long maintained that a key to our success has been taking care of our employees. Our employees are what drives the results of the Company, that's given this best-in-class service 99% on time, cargo claims at 0.3%. So that is something that is near and dear to our hearts, and we believe strongly in. So we will always look at, and historically have said, so goes the success of the Company so goes our employees' success as well. So that's something we look at and evaluate every year. Typically it's something that goes into effect on September 1.

2016_ODFL

2018

MOV

MOV #Thank you. Good morning, everyone. With me on the call is <UNK> <UNK>, Chairman and Chief Executive Officer; and <UNK> <UNK>, Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with. The statements contained in this conference call which are not historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. Now I'd like to turn the call over to <UNK> <UNK>, Chairman and Chief Executive Officer of Movado Group. Thank you, <UNK>, and good morning, everyone. I would like to welcome all of you to Movado Group's first quarter conference call. I will first provide some highlights of the quarter and discuss our strategic initiatives, and then <UNK> will review our financial results. We will then open the call up to questions. We're extremely pleased to report a strong start to the year, driven by a double-digit growth in sales and adjusted earnings per share. Sales surpass our plan, growing 28.1% to $127 million and 22.2% in constant currency. The quarter included $2.2 million of additional revenue from a timing shift based on a new accounting standard for revenue recognition. This shift will continue to impact each quarter for the balance of the year. However, for the year, we expect it will be revenue neutral. <UNK> will review this in greater detail. Our adjusted operating profit for the quarter was $8.9 million versus $2.7 million last year. Our adjusted earnings per share grew to $0.37 versus $0.01 last year. We also continued to maintain a very strong balance sheet with a cash position of $177 million while repaying all of our bank debt. Our teams did a tremendous job of managing our inventory levels, reducing inventory by $1.3 million from the same period last year despite the strong sales growth. Now I'd like to spend a few minutes on our key strategic priorities for fiscal 2019. Coming off a strong finish to last year, our teams around the world have been energized to build on that momentum for our brand and regions. We are continuing to make progress on our digital transformation to become a leading omnichannel consumer-driven watch company. In our regions, our domestic Wholesale business in Movado continues to perform well in our department and specialty store channels with a leading market share in the $300 to $3,000 price range and high single-digit sell-through growth for the season today. We showed very strong double-digit growth in Europe led by France, Germany and the United Kingdom, driven by the performance of our licensed brand portfolio and the addition of Olivia Burton, which helped fuel our International growth. We also had growth in our Latin America, Middle East and Asia Pacific markets. We saw continued growth and excellent performance in our Movado company stores with double-digit comps and total sales growth of 24.3%, with continued strong gross margin ---+ with continued strong gross margins. In our e-commerce business, we are very pleased with the positive momentum we are seeing from the Movado and Olivia Burton brands. From a brand perspective, our Movado brand experienced modest increases in the U.S. as well as in our international markets. On the product side, Movado's Bold men's bracelets performed well as well as Esperanza and the ---+ and classic Museum in the core collection. Movado Connect is also continuing to help drive retail performance. For Father's Day, we will deliver our new men's Museum Sport, which received a very positive reaction from our wholesale customers. We continue to focus on driving performance with our digital marketing efforts, both in paid and social initiatives. Olivia Burton continues to deliver excellent results since we acquired the company during the summer of last fiscal year. We continue to focus on global expansion with limited distribution and building a powerful e-commerce business. The Olivia Burton design team continues to innovate and excite women in both the watch and jewelry marketplaces. Some of our best sellers in Olivia Burton are in our Marble Florals collection, and we are getting a very good reaction from consumers to our new Bejeweled Florals. There are also still tremendous growth opportunities for the Olivia Burton brand, and we are looking forward to opening our first Olivia Burton retail store in early fall in Covent Garden in London. Our licensed brand division generated very strong results in the first quarter, particularly in Tommy Hilfiger, HUGO BOSS and Lacoste, driven by growth in Europe, the Middle East, Latin America and Asia. In Tommy Hilfiger, we continue to perform very well, especially with our campaign styles featuring Blue IP in watches for both him and her. In HUGO BOSS, our strong performance continues to be driven by our iconic Grand Prix and Companion collections for men. We are seeing an increasing opportunity in HUGO BOSS watches for women, beginning with the strong performance of Allusion and our Classic Sport families. We continue to see an improving trend in the retail performance of Coach, driven by our Grand collection. We are positioning well ---+ we are positioning ourselves well for some very strong product introductions in Coach for the fall season. We are seeing strengthening momentum in Lacoste, especially in Europe, driven by our Ultra Slim Moon collection and our iconic Lacoste 1212 watches. We continue to grow our kids business in Ferrari and are excited about new product introductions for the balance of the year. In Rebecca Minkoff, we have learned a lot since our initial introduction and are introducing a more refined product assortment at appealing price points for the fall season. We are very pleased with our first quarter results. While we are increasing our outlook today, we recognize that our first quarter is our smallest quarter, and we do not expect the benefits from the weaker dollar to continue for the balance this year. Over the last year, we have fine-tuned our strategic direction and have made great progress in transforming the company into an omnichannel leader in the watch category. I would now like to turn the call over to <UNK>. Thank you, <UNK>, and good morning, everyone. For today's call, I will begin with a review of our first quarter financial results and balance sheet and then discuss our outlook. Before I begin, I would like to point out the special items included in our first quarter results for fiscal 2019 and fiscal 2018. Our press release also describes these items and includes a table of GAAP and non-GAAP measures. Movado Group acquired Olivia Burton on July 3, 2017. Included in the results for the first quarter of fiscal 2019 was $767,000 of noncash amortization of acquired intangible assets. After tax, the charge related to the acquisition equates to $621,000 or $0.02 per diluted shares. Our GAAP results for the first quarter of fiscal 2018 include a $6.3 million pretax charge, which equates to $4.4 million after tax or $0.19 per diluted share in connection with our cost savings initiatives. The balance of my remarks will exclude the special items just discussed. Now turning to our results. We are very pleased with our broad-based sales growth across each of our categories, owned brands, licensed brands and Retail. The company adopted the new revenue recognition accounting standard as of February 1, 2018, which resulted in shifts in timing related to the recognition of returns and markdowns between quarters. As <UNK> mentioned, for the first quarter, our sales were favorable by $2.2 million due to the net decrease in returns and markdowns, which would have historically been recorded in this period. This change impacted operating income by $666,000 and after tax equated to $0.02 per diluted share. We anticipate a corresponding offset later this year. Sales for the first quarter were above our expectations and increased $27.9 million or 28.1% to $127.1 million. Our newest brand contributed to this growth as we did not own it for the first 5 months of last fiscal year. Yet even without Olivia Burton, we experienced high double-digit growth in the first quarter. In constant dollars, net sales increased 22.2%. By geography, International sales increased 33% in constant dollars. And in the U.S., sales increased 9%. Wholesale segment sales were $112.1 million, increasing 28.6% from $87.2 million in last year's first quarter. In constant dollars, Wholesale segment sales increased 21.9%. U.S. Wholesale sales increased 3.4% to $33.8 million compared to $32.7 million last year. International Wholesale sales increased 43.8% to $78.3 million compared to $54.5 million in the prior year, an increase of 33% in constant dollars. Sales were strongest in Europe, Brazil, the Middle East and Asia. The company's Retail business continued to be a positive contributor with sales up 24.3% from last year. At the end of the period, we operated 40 outlet locations. Gross profit was $67.5 million or 53.1% of sales compared to $50.5 million or 50.9% in the first quarter of last year. The 220 basis point increase in gross margins was primarily driven by the favorable change in foreign currency exchange rate and the increased leveraging our fixed costs due to higher sales. Operating expenses were $58.6 million or 46.1% of sales this year as compared to $47.9 million or 48.2% of sales for the same period of last year. The decrease in operating expenses as a percent of sales was driven by sales leverage while also demonstrating disciplined cost control as we continued to invest in our growing business. The dollar increase in operating expenses was primarily the result of the following: a $6.1 million increase in marketing expense, a $1.3 million increase resulting from the unfavorable impact of foreign currency exchange rates and a $3.4 million increase in other operating expenses to support our sales growth. Strong sales growth and the expansion in gross profit more than offset increased operating expenses, leading to better-than-expected operating income for the first quarter. To this end, operating income was $8.9 million or 7% of sales compared to $2.7 million or 2.7% of sales in the same year-ago period. Income tax expense of $5,000 in the first quarter of fiscal 2019 compares to an income tax expense of $2.2 million recorded in the first quarter of the prior year. The effective tax rate for both years is impacted by the timing of discrete items, although in opposite directions. The first quarter of fiscal 2019 is lower than our expectation for the full fiscal year due to the favorable timing of approximately $2.1 million or $0.09 per diluted share and the aggregate of a few discrete items, including the release of a valuation allowance on certain deferred tax assets. The effective tax rate for the first quarter of fiscal 2018 was higher than expected for the full fiscal year primarily due to the unfavorable timing of the impact of stock-based compensation, which increased last year's tax provision by $960,000 or $0.04 per diluted share. Net income in the first quarter was $8.7 million or $0.37 per diluted share versus net income of $258,000 or $0.01 per diluted share in the year-ago period. Now turning to our balance sheet. Cash at the end of the first quarter was $177 million as compared to $233.6 million last year. The year-over-year decrease was driven by the repayment of the $25 million outstanding on our revolver and the acquisition of Olivia Burton in the second quarter of fiscal 2018. Accounts receivable was up $13.5 million as compared to the same period of last year primarily due to the increase in sales. Despite a sales increase of $27.9 million or 28.1% for the quarter and the Olivia Burton acquisition, inventory decreased by $1.3 million as compared to the same period of last year. In the first quarter, we repurchased $1.2 million of stock under our share repurchase program primarily to offset the potential dilution from stock award. Capital expenditures for the quarter were $1.7 million, and depreciation and amortization expense was $3.4 million. This included $767,000 related to the amortization of the acquired intangible assets of Olivia Burton. Now I'd like to discuss our updated outlook for the current fiscal year. Our outlook assumes currency rates consistent with recent levels. Our results may be materially affected by many factors such as changes in global economic risk, customer spending, fluctuations in foreign currency exchange rates and various other causes referenced in our 10-K filing. For fiscal 2019, we are raising our outlook. Sales are expected to be in the range of approximately $615 million to $625 million. We expect our gross margin percent to be slightly improved from fiscal 2018. Our outlook estimates that gross margin will be in a range of approximately 53% to 53.5% for the full fiscal year. We have a track record of disciplined control of our operating expenses, but we are also investing behind our International teams to support our growth. And with that, operating income is now projected to be in the range of approximately $71 million to $73 million. Based on the lower U.S. corporate tax rate, coupled with our jurisdictional earnings, the company now anticipates a 22% effective tax rate. And net income is expected to be in a range of approximately $54.9 million to $56.4 million. We expect diluted earnings per share in fiscal 2019 to be in a range of approximately $2.35 to $2.40. Capital expenditures for fiscal 2019 are estimated to be approximately $12 million. The outlook we have provided assumes no unusual items for fiscal 2019 and excludes the noncash amortization of the acquired intangible assets related to the Olivia Burton brand. I would now like to open the call up for questions. So I'll take those, <UNK>. So on the first one, the investment is really behind some people in growing markets and as well as increased marketing expense behind our brands. And we're seeing very strong momentum in those markets, and you can see that by our International sales growth in the first quarter. And on the U.S. side, we're seeing improving trends in the U.S. department store business. We believe that overall, those businesses are improving both in the watch category and overall and that we're cautiously optimistic about the trends of those businesses in the second half of the year. And with those improving trends, the retailers, I think, are stocking their positions appropriately. Sure. It's very early on for us. So we just really launched that at the beginning of this fiscal year, and we're in the process of staffing that area and placing a greater emphasis on digital throughout the company. So I think this year will really predominantly be an investment year in that area, and I would expect to begin really seeing a real impact towards the latter half of this year and the beginning of next year. Well, I think we have both opportunities to drive ourselves organically as well as we're still proving out our Olivia Burton model. And that's been a great acquisition for us, and ---+ but it's very early in that stage. So we have a very strong balance sheet that really does continue to give us a certain amount of flexibility in the marketplace as well. So I think I'll answer the first part about ---+ Movado is really ---+ we're seeing actually a revitalization in our core business and strong ---+ continued strong performance in Bold. Heritage is still a very limited collection. And we're also seeing improving trends in our e-commerce business over the same period last year. So we're excited about that. Rebecca Minkoff is still a very small part of the overall business and really a brand that we're incubating right now. We actually noted it has a very limited and exclusive distribution, and that actually makes it a very interesting opportunity for the company. And it's a millennially based brand, which also makes it an exciting opportunity for us. Again, thank you for joining us for our first quarter conference call, and we look forward to seeing you again at the end of the summer for our second quarter. Thank you.

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2016

EBS

EBS #So, as we've talked about, and obviously Building 55 was always intended for large-scale manufacturing, it's an extremely efficient building. And as we've talked about in the past, we anticipate being able to leverage the efficiencies. And as <UNK> indicated earlier, if the government is interested in long-term significant quantity purchases, we're willing to be aggressive on pricing. We'll have to see how this all settles out with the follow-on contract, both procurement as well as development contract. And when we reinitiate guidance, all of the answers to your questions will be baked into that. But, right now, it's just premature to speculate on pricing and margins until we have those contracts negotiated. The way it's structured in the RFP is the development, as well as procurement, is part of the base, and I think the initial dose quantities is 2 million doses with options to procure 12 million, up to 25 million dose regimens. And a dose regimen is the number of doses in order to protect an individual. And so, for NuThrax, it's a two-dose schedule, so that would be 50 million. So, the way the contract is structured is development plus a preliminary procurement, and then options for additional procurement in that 12 million to 25 million dose range; so for us, 12 million to 50 million. Yes. So, they do go together. There is specific numbers in the RFP with respect to the doses. And again, there is a base contract, and the 2 million is in the base, so that will be part of the award as is currently structured. We'll have to see what happens in the negotiations, of course. And then, the options are just that. They are options to procure additional doses of the products at the government's discretion. That remains to be seen as part of the negotiations. The soonest date it could be approved or available for purchase. I'm not sure ---+ you're talking about approval. So, as you know, there's this emergency use authorization process that's available for products that are in advanced development. And so, we would anticipate within the next two to three years the product could be available for purchase under emergency use authorization. The approval timeline, of course, is beyond that. Yes. I think the answer to that is we need to work that through with the government before we can give firm timelines within the plan. Certainly the research and development expenses that we've reported that are attributable to the biosciences division, those obviously will no longer be incurred by Emergent after August 1. However, if you're referring to the SG&A expenses and some of the other related costs, I wouldn't look at it as a straight elimination based on how those have been allocated or broken up between the two divisions. Again, as soon as we work our way through these contract negotiations, we will come out with some updated guidance which will incorporate the new spending patterns, going forward. Yes, I think the plan is to do a complete switchover for a host of reasons around why Building 55 is so much more effective, efficient, and favorable. So yes, it'll be a complete switchover. So, I think we are right now in the process of making that transition, so we see this as a very near-term transition from Building 12 to Building 55. Let me start with Zika, and I'm actually going to ask <UNK> <UNK>, President of the Biodefense division, to address that. As you know, it's in our Baltimore site, our ADM site. <UNK>. So, basically at this point, we've been awarded I think the only government contract related to Zika, and we're working very closely with BARDA developing a Zika vaccine with some technology that they provided to us. And over really the next year, we're going to be doing some process development work, manufacturing vaccine that would be able to be tested in a Phase I study. So, we're excited about that technology and looking forward to leveraging that ADM contact in the facility in [Baden]. On the EBITDA question, so if you go back to what we included in our presentation when we announced the intent to spin the Biosciences business back on August 6 of 2015, we included a page that summarized that, when you looked at the revenue that would go with Aptevo, as well as the cost savings through R&D and SG&A, we were projecting that, if the spin were to have been in place for all of calendar year 2014, we were estimating an EBITDA pickup of somewhere between $40 million and $50 million. I guess the other data point I would remind you of, or provide you, is when we reported EBITDA for 2015, it was $130 million. The initial guidance we gave in 2016, while that has now been postponed, was closer to $150 million, which would have incorporated a half a year of improvement in EBITDA as a result of the spin. So, those are a couple of data points that I'd suggest you consider when you look at that question. And obviously, as we look to resume guidance at the appropriate time, we will incorporate current thinking on EBITDA savings as a result of the spin. We're going to resist the parsing out of partial guidance here on BioThrax, as well as the other Biodefense. Again, I think we'd ask that you be a bit patient. We expect to be able to work through these contract negotiations and discussions between now and the end of September. And when we reinitiate guidance, it will incorporate all of the current thinking on all of the parts of the business, but, for now, we're not going to discuss or even give any partial guidance on pieces of the business. We actually don't have sufficient visibility to give meaningful guidance to you and to the others on the call. So, I think it is important that we all be patient. Give us the latitude to work through this. And as we track towards completion and get these contracts signed, we'll be in a much better place to provide you with the guidance that you need and that we want to give you. But at this point, we just don't have adequate data to provide the kind of guidance that you would need. The way I look at this, and you've been with the Company ---+ you've been following the Company for a while ---+ these transitions with the government have always been difficult. You probably remember the last one. It was a very difficult negotiation. And in leading up to this, I think in the quarterly calls we had, I put out there that this is also going to be a difficult negotiation, and it's further complicated by the transition as we see it. So, my belief is that the government remains firmly committed to the anthrax space. They're continuing to target that 25 million lives. BioThrax is the only available and licensed countermeasure by way of vaccines, both on a GUP and PEP indication. NuThrax is the leading next-generation candidate in the queue, having passed a lot of the tests. So, we do have a great deal of confidence, given the fact that we've been partnering with the government, both on the development side and the procurement side, including when we think of development, the completion of the Building 55 scale-up for the desired purpose of having additional capacity to address the anthrax threat. So, there are a number of indicators out there. You can look at the dose requirements, or the specifications of doses in the NuThrax contract, and prior statements by the government. So, we have, and I personally have a high degree of confidence that this is absolutely the right move for the organization and that, with the passage of time, we'll have much better clarity to share with you on where things stand with both NuThrax and BioThrax. So again, I appreciate the comment and the question. I think, it's spot-on, but given our assessment of the landscape, we think this is the right move for the organization. Thank you, Charlotte. With that, ladies and gentlemen, we now conclude the call, and thank you for your participation. Please note, an archived version of the webcast of today's call will be available later today and accessible through the Company website. Thank you again. We look forward to speaking with all of you in the future. Goodbye.

2016_EBS