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2015

ACXM

ACXM #Thanks <UNK>. (multiple speakers) You've had a busy coverage day today. Yes, go ahead <UNK>. Yes, let me answer the second question first. And that's on the cost structure. So if you could envision what <UNK> and I are sitting in front of, we each have a binder and there are probably 3 inches of financial information in that binder. And that is night and day versus where we were, say, three years ago. Just the degree of visibility we have into each one of the businesses at a micro level has grown leaps and bounds. And it's not just <UNK> and me, but it's each of our divisional Presidents. And so to answer your question, the answer is absolutely yes. We believe that by virtue of having more sophistication in how we measure and manage our businesses, we are going to be much better positioned to find opportunities to drive out both cost, improve our efficiencies, and also identify revenue trends as well, and go after those. And those are really going to be at a granular level. You win clients one at a time, one product, one pitch, one business at a time. Likewise you take out costs and improved processes, one process, one client, one contract at a time. And so while yes, there are certainly going to be things that span divisions, we think turning our divisions loose on the unique levers that each of them have, both revenue and cost, is going to be a big driver of our future success. Then <UNK>, let me comment on the first part and I'd be the first one to say that if Rick were here with us he could do a far better job than I could in answering your question. But I will give you my perspective. First I am, in our audience solutions business, absolutely glass half-full. I think we've had some tough comps, but I believe that the team that is working with Rick has really identified absolutely the right strategies to go forward. And <UNK> mentioned those. It is beef up our sales capability, expand our TAM, get clients that we haven't hit before, look at different ways that we can drive better products through more efficient and better data procurement and fundamentally better data products. All those things I firmly believe will help this business. I am also particularly excited in audience solutions with what is going on in, what I'd call our digital ecosystem. We're distributing our data more places than ever, two-thirds of the GMS that was driven was driven by data and that is a fundamental macro trend that we are going to benefit from. And Rick and his team are all over it. So a lot of really good things. As it relates to the procurement efficiencies, if I have learned anything over the course of my career, is you seldom come in and just do one thing that suddenly creates $10 million of incremental bottom-line benefit. What you do is to come in and you identify one thing that will identify $1 million and then that leads to another million. And suddenly you get up to $10 million. It's a little bit looking at GMS from just a year ago and now thinking that we are over a $200 million run rate from where we were just 12 months ago. And that's how you do it, you do it a month by month, quarter by quarter. Andy Johnson, who works with Rick and his team, are doing exactly that. They have turned over some really positive things. Now they have to also work through some long-term contracts. But they are absolutely focused on the procurement efficiencies, doing the right things, creating great products, and then also automating this that it's much more of a DaaS service and a cloud service as opposed to something that is a series of manual processes. So work in process, but I believe we have the right people doing the right things. Thank you. Let me again just thank everyone for joining us today. We are very pleased to report our results. We are very pleased with the quarter. We are happy you are joining us today. And most importantly we're looking forward to the opportunities for Acxiom in the quarters and years ahead. Thank you very much.

2015_ACXM

2015

HSY

HSY #<UNK>, first, one thing, you're double counting on the tax, because it's included in the dilution. You don't know where we were in the $10 million to $15 million restructure savings in June. So we could have been at the low end and now at the high end, and that's a $15 million delta. <UNK> talked about the interest expense. That's now at the low end, because we ended up doing the bond deal in August. And just overall, while you're right in terms of the savings related to the restructuring that we announced in June, as I also mentioned, we're just overall holding the line on discretionary spending beyond that specific impact. And you could see that in our third quarter, where ex M&A, we were actually down year over year in our SM&A, excluding marketing-related expenses. So it's all of those movements and it's a pretty big number. I was going to make the same point <UNK> did. Just to be really clear, the tax impact related to Shanghai Golden Monkey NOLs is part of the walk of the dilution number moving from $0.20 to $0.35. I think, <UNK>, we want to go execute against the fundamentals in the business. We continue to be optimistic about the category and the role the category plays with retailers. We have a pretty balanced look at 2016 from both the top and bottom line standpoint, and we'll talk a bit more about that in January. At this point, with some of the things we're seeing with the consumer, I think it's important that we focus on the things we can control. We've got to make sure that our portfolio is compelling and we participate where we think that the consumer is going. And then we'll continue to read those things. But we have to get in a position where we're winning share every day and growing our brands. And we feel good about the plans we have. We feel good about the innovation contribution to our Business. So from those standpoints, I am optimistic. I do think there's some macro issues that are impacting retailers, as well as our Business. And so we've got to operate within that environment. Good morning, Rob. Yes, sure, I'd love to talk about that. In the chocolate segment, we believe we've been underrepresented in the premium part of the category. While it's a relatively small piece, less than 10% of the total category consumption, we recognize that we have to do a better job there. In the value segment, a lot of what happened this year was really around sugar confectionery and sweets. And we think the Allan Candy acquisition will enable us to do well there. We also think there were some manufacturers that probably benefited from the spot price of sugar, and based on where things are manufactured, that could have given them an opportunity to invest in the category more so in the past. The beauty of the Hershey brand is it's one of the most accessible brands that there is. Chocolate in our country from all manufacturers, it's the best value per pound of any place in the world. So I think frequency is something we have to make sure that we're driving. I think the portfolio is largely attractive in chocolate, but we need to work on the high end. And in the low end, we need to work on the sweet side, and that can be channel specific, as well as across many other retailers. So that's how I'd like you to think about it. We like to think that we work well with all of the retailers across their different needs and the changing initiatives and things that they may have. So we'll continue to focus on the places in the store where retailers want the merchandise. And then we have to win that. And then if the type of ---+ and if the way that we bring consumers to the category changes, we have to adapt to that. Some of that could be advertising, some of it could be different types of merchandising and so on. We always have to be flexible in the way we go to market and win, where retailers have strategies and how that they want to connect with the consumer. So I would expect us to do that. It's not the first time in the history of the world that people have had clean-floor policies or tried to clean up merchandising and get things out of the back room and a whole list of different things. So we'll adjust with that and we'll win wherever we can. Yes. One thing, <UNK>, and I think on the balance how we were thinking about it is, yes, I know we're lapping a lot of one-time type of costs related to China this year, but I think the way we've always thought about this business, and even before we got into snacks, there's never a shortage of places to invest around here. And I think we have a lot of good, big buckets that you'll see us continue to invest in, on not only our core Business, which is always number one, but always some of the snacks and adjacencies that we're talking about. I think good examples of that are Krave. We've got our Brookside bars. We mentioned Allan a little bit earlier. And as we continue to look at snacking in total, we've got a number of things that are on the innovation front that, as appropriate, we'll be bringing those things to market. So I think, as <UNK> says, a lot of places to invest that are attractive and, as appropriate, we'll continue to expand our portfolio. No, I think the way to think about is, is that first of all, I think it's important that we always act with a scarcity mentality. And certainly, you've seen some of that in the numbers that we're talking about today, in terms of where we're spending and choosing to spend. So I think we'll continue that, that way. We also want to invest in markets where we're trying to grow our brands. And volume is always the magic elixir, so pace is important to think about. So where we see there's opportunities, we need to go to the ball there, and when growth is a little tougher or less attractive, we need to moderate in those places, as well. We'll continue to do that. But we want to be a consumer-centric, brand-building Company, and we'll invest appropriately. So we're still working through and negotiating our position with them around the second closing. We're still trying to bring clarity to a number of different issues where we may have different points of view around some things. And so that's all still in process, but we feel good about the progress that we're making. I think the first place that we would start is that we continue to believe that the category historically is going to grow in the 3% to 4% range. So that's a starting point. If you look over the last decade or even longer, growth has always been a combination, almost equally split between price and volume. And as we go through this current period, it continues to track around that model. So what we believe is, as I said earlier, the real influencers on the category are really around this trips issue that has impacted the business more than it has been on price. So I don't think the historical norms have changed. Obviously, in chocolate, where we're a 45% share in the category, we have a lot of responsibility in terms of category growth. So we have to innovate and grow and compete for consumer occasions, which are growing all the time across day-parts. And so we have to participate in that. But I don't think there's anything around the category itself that would cause us to think that price, et cetera, is different. Now if we move, to your point, if we move into a period of time where commodities are less of a driver around the price piece, as we've said historically, we're a gross-margin focused company, and we would have to make sure that we continue to do that to maintain the attractive gross margins that we have today. But I wouldn't see us thinking about that significantly different. Good morning. I'm glad you asked for the clarification. No, what we're saying is after the true-up, our current net-sales estimate is about $80 million. I think it was around $90 million, <UNK>, last time we spoke to you guys. For the year. On a hypothetical basis, <UNK>, if gross sales are the same year over year, net sales would be up. Because I have all this trade running through between gross and net sales this year. So in a hypothetical situation where gross sales are the same year over year, net sales would be up, assuming there's [up] more trade. But I think it's also fair to say that it is overall just a re-base to a lower level, as well, in terms of the gross sales. Great. Thank you for joining us for this morning's call. I'll be available all morning and afternoon for any follow-ups that you may have.

2015_HSY

2018

PRSC

PRSC #Thank you, Sara. Good morning, everybody. Thank you for joining Providence's First Quarter 2018 Conference Call and Webcast. With me on the call today from Providence are <UNK> <UNK>, Interim Chief Executive Officer; Bill <UNK>, Interim Chief Financial Officer; and <UNK> Shackleton, Chief Transformation Officer. Just to remind you that during this call, Mr. <UNK>, Mr. <UNK> and Mr. <UNK> will be referencing the presentation that can be found on our investor website, under the Events Calendar, and then the current Form 8-K, which was furnished to the SEC yesterday evening. But before we get started, I'd like to remind everyone that during the course of today's call, the company's management will make certain statements characterized as forward-looking statements under the Private Securities Litigation Reform Act. Those statements involve risks, uncertainties and other factors which may cause actual results or events to differ materially. Information regarding these factors is contained in yesterday's press release and the company's filings with the SEC. The company will also discuss certain non-GAAP financial measures in an effort to provide additional information to our investors, and a definition of these non-GAAP measures and reconciliations to our most comparable GAAP measures can also be found in the press release, the investor presentation and in the Form 8-K. And finally, we've arranged for a replay of this call, which will be available approximately 1 hour after today's call on our website or it can be accessed via the phone numbers listed in our press release. And with that, I'd now like to turn the call over to Providence's Interim CEO, <UNK> <UNK>. <UNK>. Well, thank you, <UNK>, and good morning to everyone, and thank you for joining us this morning. I will start the call by jumping straight into this quarter's strong financial results as well as some of the operational highlights before handing it over to <UNK> to provide an update on the number of the strategic activities, including the organizational consolidation that we announced in April. Bill will then talk us through the earnings in more detail. Now starting on Page 3 of the presentation that <UNK> referenced. I'm pleased to report that the operational momentum and positive year-over-year earnings growth that we experienced in 2017 has continued into the first quarter of 2018. On a consolidated basis, revenue increased by 1.6% in the first quarter. Now there's some noise in this number due to our adoption of a new revenue standard, which decreased revenue by around $9.3 million. Revenue did benefit by over $6 million from favorable foreign currency movements, largely due to the strengthening of the pound in our WD Services segment. When I take out these 2 impacts, consolidated revenue grew by a little over 2%, with LogistiCare growing at 5%. Adjusted EBITDA for Providence grew by 24%. Adjusted earnings per share for the quarter of $0.63 was an 80% increase on the same period last year. Cash from operations was also very strong at $25.6 million, which allowed us to spend around $37 million on share repurchases during the quarter yet still end the quarter with $86.2 million of cash. Now then, turn to Page 4. And LogistiCare you'll see grew reported revenue by 3.9% in the quarter. However, if you back out the change in accounting on one of our contracts due to the new revenue standard, LogistiCare achieved actually 5% year-over-year growth. Now Logisticare's adjusted EBITDA margins in Q1 2018 were over 7%, a solid improvement versus Q1 2017. There are a number of factors that contributed to this margin improvement, including increases in rates to bring pricing back in line with our increased utilization we started to experience in a couple of states back at the beginning of 2017. Now in addition, our value enhancement initiatives focused on reducing transportation cost, had a meaningful and positive impact to our margins on a year-over-year basis. We expect the benefits of these transportation cost initiatives to continue to increase as we continue to implement our new costing models, technology and transportation contracting best practices across our extensive network. Now turning from our transportation cost initiatives to our operational service initiatives. On our last call, we noted that the rollout of our next-gen LogistiCare technology platform was experiencing some timing delays and cost overruns. Now to address this issue, we brought in a new Chief Technology Officer with significant experience in implementing these type of large-scale cloud-based technology solutions. The good news is that when we look holistically at where we stood on our cost saving initiatives at the end of the first quarter of 2018, particularly in light of the wins on the transportation cost work streams, our overall view of achieving $40 million still holds. Now again, remember that we are and plan to continue to reinvest a portion of these savings back into the company to support future top line growth, service quality improvements and our strong competitive positioning. Now on the people front, in addition to the new CTO we hired, we brought in a new Senior Vice President of growth whose primary role is to develop and deliver new contract opportunities. We were pleased to announce the renewal of the Virginia contract in the quarter and feel very good about the state in our pipeline and our new opportunities. Also, the addition of a new Senior Vice President of Strategy will help widen the field of future opportunities as we actively explore ways to organically expand into new service lines that leverage our technology, network development, management capabilities and capitalize on our experience with large, complex, risk-based models. Now then, turning to WD Services on Page 5. I'd like to reiterate that the underlying performance is better than the headline reported numbers would suggest, especially for adjusted EBITDA. Bill will explain in more detail later, but the adoption of the new revenue standard had a negative impact in the quarter of $5.4 million on revenue and $3.5 million on adjusted EBITDA. Obviously, the new accounting standard does not impact what we really care about, which at the end of the day is cash flow. Positive currency movements did benefit in Q1 2018, so I'll focus my commentary on the operational performance prior to the impact of the new revenue standard and currency fluctuations. Now as expected, revenue declined due to the continued wind-down of the legacy U.K. Work Program. However, our diversification efforts outside of employability as well as the new contract wins have muted the impact of the Work Program wind-down. As of the beginning of March, we were providing services in all of our awarded contract areas for the new [Work K], Work and Health Program. In addition, as volumes have gradually started to ramp up under the Work and Health Program, mobilization cost under the program had been less than expected. We also continued to develop business outside of our traditional employability programs as shown by the positive momentum under our health contracts for diabetes prevention in the U.K. As I said, the new revenue standard had a large impact on both reported revenue and adjusted EBITDA performance in the quarter. In addition to Q1 2017 was actually a tough quarter to comp up against as it included a significant positive contractual adjustment for our offender rehabilitation contract, resulting in a negative delta of approximately $4 million when compared to Q1 2018. When you combine this with the $3.5 million negative impact from our new revenue standard, you can quickly see that the underlying performance is much more favorable compared to the headline numbers and adjusted EBITDA was very strong for the quarter. Now, before Bill takes you through the financials in more details, I'd like to hand the call over to <UNK> to take you through Matrix results as well as to say a few words on the organizational consolidation plan we recently announced. <UNK>. Okay. Thanks, <UNK>. Let me now introduce Bill <UNK> who took over from <UNK> as Providence CFO on an interim basis during the organizational consolidation. Bill is expected to hold this role until we hire a full-time CFO based in Atlanta. Bill was previously Providence's Chief Accounting Officer for the last 2 years and has a great and in-depth knowledge of the financials and the operations of the company. Bill, now I'll turn the call over to you to walk us through the financials this morning. All right, thanks, <UNK>. I'll start on Page 7 of the presentation and focus my commentary on the segments as we've already taken you through our consolidated results. Starting with NET. Our reported revenue increased 3.9% in the quarter. NET was impacted by the implementation of the new revenue standard, which resulted in 1 contract now being reported on a net basis. The impact of the revenue standard was a reduction in reported revenue of $3.9 million, but this change had no impact on adjusted EBITDA. On an apples-to-apples basis, revenue growth was 5% on a year-over-year basis. The key revenue drivers were new MCO contracts in Indiana and New York, and new state contracts in Texas. Revenue also benefited from increased membership and rates across various existing contracts and favorable contract adjustments. These increases to revenue were partially offset by the ending of the MCO contracts in Florida and certain state contracts including the New York contract, which ended in April 2017, as well as reduced membership for our renewed state contract in Virginia. Adjusted EBITDA margins were at 7.1% compared to 5% last year. The significant improvement resulted from higher rates negotiated to align with the higher utilization we were seeing in the prior year, the benefits of our value enhancement efforts to lower transportation cost as well as favorable contract adjustments in Q1 2018, partially offset by higher utilization across certain contracts and the end of the state contract in New York. Our outlook for the full year 2018 for NET Services is unchanged. We continue to forecast NET Services revenue growth to be below our long-term multiyear target of 5% to 7% and for adjusted EBITDA margins to be approximately 7%. Moving to WD Services. Reported revenue for the quarter was $69.4 million compared to $75.5 million last year, or an 8.1% decline. The new revenue standard resulted in a reduction of revenue of $5.4 million. However, the significant appreciation in the U.K. pound resulted in an offsetting $6 million of benefit, thus, on an apples-to-apples basis, revenue declined approximately 9%. The decline in revenue is primarily due to the wind-down of the legacy U.K. Work Program as well as a reduction in contract adjustments for our Offender Rehabilitation business. However, during Q1 2018, we did see a favorable impact from our health contracts as well as contracts across most of our international businesses. We have also started to see referrals under the new Work and Health Program. WD Services reported adjusted EBITDA for the quarter was $2.8 million as the revenue standard had a negative impact of $3.5 million. Adjusted EBITDA, excluding the negative impact of the new revenue standard, still declined slightly as compared to the prior year, as the prior year benefited from a more favorable impact of contract adjustments in our offender rehabilitation business. These headwinds were offset by lower corporate and shared service cost due to the impact of the Ingeus Futures restructuring programs. Although we expect a continued negative impact from the new revenue ---+ on both revenue and adjusted EBITDA during the remainder of the year, we don't expect the impact to be as significant as it was in the first quarter. We still expect full year reported revenue in 2018 for WD Services to decline in the mid-single-digit range and for adjusted EBITDA margins to be consistent with 2017 in the mid-single-digit range. Turning to corporate. We incurred an adjusted EBITDA loss of $7.4 million in the quarter, which is $400,000 higher than the prior year. The major driver was an increase in expense for cash-settled awards of $1.1 million due to the significant increase in our stock price. This was partially offset by a lower underlying operating cost and noncash stock-based compensation. For the full year, excluding the organizational consolidation implementation costs that <UNK> referenced, we expect adjusted EBITDA at corporate to be approximately negative $26 million. Lastly on Page 7, for our Matrix investment, remember that Matrix is treated as an equity investment and therefore we don't consolidate its revenue or adjusted EBITDA with Providence. Matrix closed the HealthFair acquisition in February 2018. The information on Page 7 only includes the results of HealthFair since the date of acquisition and none of the information is presented on a pro forma basis. Revenue in Q1 increased by 20.7% over 2017 with approximately 50% of the revenue growth attributable to HealthFair. Adjusted EBITDA margins of 20% were negatively impacted due to start-up costs for HealthFair contracts. We expect to see margin improvement over the remainder of the year. From a Providence income statement perspective, we recorded an equity loss of $2.3 million in the quarter due to the impact of HealthFair transaction-related expenses recorded in the quarter. Matrix ended the quarter with net debt of $310 million. Moving on to Page 8 for the cash flow summary. In Q1 2018, cash flow from operations was a very solid $25 million. Note that year-over-year, cash flow is down, as Q1 2017 benefited from the timing of transportation provider payments, which reversed in Q2 2017. We are pleased with the health of our cash flow generation to fund operations, strategic initiatives and share repurchases. CapEx for the quarter was $5 million, lower than the $5.7 million from last year and in line with our expectations for the full year of $20 million. Moving to Page 9 for the balance sheet summary. We ended the quarter with over $86 million in cash and no long-term debt. Our book value in Matrix is $166 million. With the HealthFair acquisition, we feel even stronger in our view that the book value significantly understates any market-based approach to value this asset. Our share count, which is common plus preferred on a converted basis, as of quarter-end was 15 million. For share repurchases, year-to-date through May 7, we have bought back 589,000 shares for $37.4 million at an average share price of $63.46. As we previously reported, we increased our buyback capacity by $78 million and our current capacity is approximately $99.5 million for purchases through June of 2019. With that, I will now open up the line for questions. Operator. I wanted to start with ---+ I noticed there was an S-1 that came out last night that registered the shares for Coliseum Capital, both their common and their preferred shares. I wonder if you can give any commentary on that, if there's the opportunity for the company to buy back the preferreds or the common or any color around it would be great. Well, Bob, first of all, let me apologize. We're out here in Tucson this morning and allergies are catching all of us this morning so apologies for the raspy voice. But yes, thank you for the question. I guess our perspective is that Coliseum has been just an absolute terrific long-term shareholder. I guess they've been with us about 6 years, and I'm guessing they got in the stock around, as I recall, somewhere around $10 a share. Chris has been our Chairman of the Board since I think it was 2012, and really, we've just had tremendous shareholder value creation over these years. Regarding the S-1 and the shareholdings, I have no reason at all to believe that Coliseum won't remain a significant shareholder even though we're just registering the shares. Regarding Chris, personally, I interact with Chris on a ---+ sometimes daily, weekly basis and he is incredibly highly involved in leading this board, constantly talking about strategic initiatives and continuing to drive value. He is solely focused on driving value for the shareholders. So I don't view this as a significant event even though I'm sure it caught the attention. I have all the confidence in the world that Chris will remain a significant shareholder and have no reason to believe otherwise. Got it. I appreciate that. Shifting to fundamentals. Margins at LogistiCare were very strong. You highlighted them at 7% and I don't remember ---+ 200 basis points year-over-year. Could you maybe try to break down a little bit ---+ I know this is a little bit difficult. But obviously, there were a bunch of nor'easters in the Northeast, so New Jersey being the biggest contract. How much was the benefit from that. How much was from the improvements under the value enhancement initiatives, kind of bucket the opportunities. And then with that, I know you spoke a little bit about it, but maybe talk about the, I guess timing or phasing in of the benefits from value enhancement over the course of the year. Yes. I think in Q1, what we saw was the benefit from value enhancement, it was about $5 million. The initiatives have really ramped up year-over-year. There obviously was very little benefit in Q1 '17 so as we ramped up our efforts there. The question, <UNK> will kind of take you through more of the details of the phasing of the savings. But to your last question on the nor'easter. So I don't think that we really saw any significant benefit or reduced utilization from that, so it's a little bit different than some of the other actions that happened last year in Texas where there was a really drop in utilization, but we didn't really see any benefit from that in the quarter. Got it, okay. That's very helpful. I appreciate that. And then just sticking with it, obviously then given that there was no real utilization benefit that you ---+ terrific margins in that regard, but what do you think is driving the higher utilization year-over-year. Anything that you can point to. Or ---+ and how do you expect utilization to trend. Is there a reason to believe it's going to continue to increase. Or how are you thinking about that. Got it, okay. I certainly understand that. Jumping over to Matrix. Last call, you discussed a pro forma growth of 20%, I guess off of a, call it, pro forma basis of about $275 million. Obviously, you didn't have HealthFair for the full quarter this time, but can you help us think about how that growth will build out. Is there a ramping of contracts or anything that makes it nonlinear that you can help us discuss and model. And then do you still believe that 20% pro forma growth is a good number. And will that be the run rate or full year expectations that you thought before. I don't have any closing remarks. I just thank all of you, enjoy the conversations that we have during the quarters. Looking forward to meet some of you that I have not had a chance to meet so far. Strong quarter for Providence, particularly LogistiCare has gotten a terrific start. We look forward to continued conversation ---+ conversations with our shareholders. Thanks so much for getting up early and listening in this morning, guys. Bye-bye.

2018_PRSC

2016

M

M #Yes, we are rolling out Bluemercury both freestanding and in-store, so I would say both there. We are planning to open 24 freestanding stores this year and 18 shop-in-shops for Bluemercury. And we're very excited about how they are performing and what they are going to be able to add to the Macy's location. So that we feel good about. We're also rolling out beyond these stores the proprietary brands from Bluemercury, M-61, which was just recently launched on Macys.com. So that's also adding to our beauty arsenal. And in terms of more brands, we are doing that in a couple of ways. One is we have our Impulse beauty installations in so many of our stores, which are a combination of smaller brands. We continue to bring new brands in and add to that footprint as we go forward. On the upper end, you've got Bluemercury that also has a lot of these smaller brands. So, yes, we will continue to do so and, at the same time, fully support the big cosmetics brands that are the bread and butter of our beauty department. I would say if you look at the number of transactions, in the fourth quarter it was down 4% and in the first quarter it was down 7%. So something really changed on that dynamic which negatively impacted the business. Yes, center core did get weaker, but I think that's those key categories in center core, but I think a lot of that relates to the international tourist business. So I think that's more of a factor there. I think I would say we're just assuming that as we are giving guidance, and more importantly planning internally, that we don't think it's going to get better this year. No. Great. Thank you all for your interest and your support. As always, if you have further questions, reach out to Matt, reach out to me, and we will try to get them answered as quickly as we can. Thank you.

2016_M

2016

ZBRA

ZBRA #Good morning. I think our goal is to pay down $300 million of debt. We are confident in our ability to do that. Again we expect some improvement from our EBITDA margin expansion and just regular business growth. We also know that we have improvements in our working capital which should drive at least $75 million of additional cash flow from what we had last year. We will have $90 million to $100 million less integration spent from 2015. We also have our CapEx that is not related to integration down by about $30 million. I think <UNK> mentioned the fact that we had some spending in Illinois to bring the facilities together for the two companies. We also expect to reduce our cash levels by about $50 million. So when you put it all together, we are very confident in reducing our debt by $300 million in 2016 and $350 million in 2017. Again, to get our leverage below three times debt to EBITDA. There are no Windows 10 mobile products on the market at the moment. But I will put it in context maybe of what is more going on from an OS migration perspective. Today, virtually all our customers or certainly most our customers are well aware of the need to migrate to newer, more modern operating systems. Android has been the primary beneficiary of this so far. We were early investing in android and saw that as a great opportunity for us. Microsoft is planning on coming out with Microsoft Windows 10 later on this year and there will be some customers who believe that are very loyal to Microsoft and would like to have Microsoft 10. We have some Microsoft 8 products today but which we would upgrade to 10 and then come up with some more products later on in the year and we want to be, basically operating system agnostic when we talk to our customers. We don't want them to feel that we are only supporting one operating system. We want to be able to go in and have a conversation with them about their unique situations and be able to offer the right type of solutions for them. Maybe, Joe, you have some. What I would say is first we should recognize that still the majority of our revenues today come from Windows based operating systems. The transition to Android is happening very fast as Windows 10 Mobile ---+ the mobile version of Windows 10 had not been released for a very long time. With that now happening we do see some customers and it is very specific to the needs of individual customers. Logistics is a vertical where we see a bit more of it than others, express a need and a desire, in fact, to be on a Windows 10 mobile platform. And as such we are developing those devices and we will see that they will occupy a significant portion of the market. Hi, <UNK>. I think that the strength of the printing business is really driven I think by a number of different factors. Ultimately, I will bring it back to, I think we have just executed well on our overall print strategy over many years. We have gained a lot of shares, so this upgrade or refresh cycles but we also gained a lot of share. I think according to VDC we have gained about a percent of market share per year for the last several years. And I would attribute that to us having a very compelling and competitive product lineup. Some of the new things we had talked about like [Linkquest] is one that unifies the look and feel and the user interfaces and how you interact with the printer across our entire portfolio. Some things are very difficult to replicate for smaller suppliers. I think the way we engage with the Channel also gives us some benefits with the scale that we have there and how we can provide very compelling value propositions to our Channels and our end users. So I would say it's not really one thing that is driving the strength in the printing business. It is really a number of different things. Joe might have some more comments. Yes. I would say we have seen a market share expansion in the printing business and I would attribute at least a part of that, a significant part of that, to the Better Together to the ability to operate and cross sell between them. I'll give you a generic example of that. The strongest vertical for the Enterprise business was ---+ and is retail, right, in which we have mobile computers and scanners which we deploy and there are applications such as when you change the pricing at the retail level, where you would like to not only scan and understand the pricing on an item in the store as it is, but change the label immediately. This plays right into our technology of mobile printing which goes very well with that scanning capability that we already have on the retail floor. So we have seen an expansion of solutions like this where we are able to put the two technologies together to a solution to solve a problem like price mark downs and changes. Thank you all for your questions. Have a great day.

2016_ZBRA

2016

REX

REX #Good morning and thank you for joining REX American Resources fiscal 2015 fourth-quarter conference call. We'll get to our presentation and comments momentarily, as well as your Q&A, but first I will review the Safe Harbor disclosure. In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risks and uncertainties within the meanings of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements reflect the Company's current expectations and beliefs but are not guarantees of future performance. As such, actual results may vary materially from expectations. The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the Company's filings with the Securities and Exchange Commission, including the Company's reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements. I have joining me on the call today <UNK> <UNK>, Executive Chairman of the Board, and Zafar Rizvi, Chief Operating Officer. I will first review our financial performance and then turn the call over to <UNK> for his comments. REX is pleased to report on its profitable fourth-quarter earnings results. Sales for the quarter declined approximately 16%, primarily due to lower ethanol pricing. Sales were based upon 61.1 million gallons in this year's fourth quarter versus 57.8 million gallons in the prior year. Sales declined approximately 24% for the full 2015 fiscal year, primarily reflecting lower ethanol pricing but also impacted by lower DDG pricing. Gross profit declined from $30 million to $9.2 million for the fourth quarter as the crush spread was approximately $0.16 in the current year versus approximately $0.56 in the prior-year fourth quarter. Gross profit for the full 2015 fiscal year was $50.8 million versus $141.9 million in the prior year, again reflecting the crush spread was approximately $0.17 this year versus approximately $0.59 last year. SG&A was consistent between years with this year's fourth quarter being approximately $4.2 million versus approximately $4.1 million in the prior year. Equity method income was $1.1 million in this year's fourth quarter versus $7.9 million last year and $9 million versus $32.2 million for the full fiscal years. This reflects the lower operating performance of these plants, consistent with the industry this year versus last year, and the fact that we stopped recognizing equity income in the Patriot plant at May 31, 2015, upon the close of that sale. We have no interest expense in the current year as a result of paying off the debt at the consolidated plants during fiscal 2014. Our tax rate for fiscal 2015 was approximately 31% versus approximately 36.4% in the prior year, net of noncontrolling interest. There can be and are fluctuations in the tax rate based upon the level of income and the amount of tax deductions received for production, as well as fluctuations in state tax rates and apportionments. On a normal basis, I would expect our tax rate to be approximately 36% to 38% after consideration of noncontrolling interests. Our net income for the quarter was $3.7 million versus $20.3 million in the prior year and $31.4 million for fiscal 2015 versus $87.3 million in the prior year. Diluted earnings per share for the quarter was $0.54 versus $2.55 last year and $4.30 for the full fiscal 2015 versus $10.76 in the prior year. I would now like to turn the call over to <UNK> <UNK>, Executive Chairman, for his commentary.

2016_REX

2015

HCA

HCA #Thank you very much. <UNK>, you want that one. Obviously, we finished 2014 very strong, and we carried a lot of momentum into the first quarter of 2015. You don't always know how that momentum is going to fare as you cross calendar, but given our really strong performance in the first quarter, felt really it was necessary to update our guidance. The majority of the updated guidance came from the strong performance in the first quarter. Clearly, our raise of almost $200 million of adjusted EBITDA factored in continuing momentum in the balance of the year, and so we think ---+ we really feel very confident in that revised guidance. It's largely continuing to carry the momentum we saw in the fourth quarter of 2014, in the first quarter. We're not revising our volume of [rate, that] guidance that we gave in February during our call. At this point in time, I think we still need some more quarters to get into detail, but given the strength of the first quarter performance, we thought it was necessary to up our guidance. In fact if we hadn't, and you applied to the guidance for the balance of the year, we'd be relatively flattish year over year. We feel very confident with the momentum we've got right now, and that really is what led to the revised guidance we previously released. I think it's both. <UNK> mentioned it in some of his comments, it's really hard to dissect individual contribution, but I think the overall Company momentum contributed to that. Clearly, I think increasing enrollment in Medicare, more in the Medicare Advantage as well, we're benefiting from. But, kind of the other marketplace dynamics are in the Medicare payer class as well as in our other payer classes, so I think it's really a combination of a variety of factors that really go along with the volume drivers of our own core business. This is <UNK>, let me just add. We believe that Medicare business in general is not as economically dependent, obviously, as the commercial book, so the movement in Medicare is not going to be as pronounced as what we've seen on the commercial side of the equation. So the aging of the baby boomers is going to continue to create opportunities for Medicare volume growth, and then gains in market share and program development and so forth are going to hopefully add additional volume opportunities for the company. Ann, I thank you. Thank you, <UNK>. And let me just add one thing, there. We do have certain markets, as I mentioned in my call today, where there are more pressing demand needs, and more pressing capital needs and so the Company will be focused on a handful of market share there. We haven't finalized that plan specifically, yet, but we do see some opportunities specific to certain markets where there could be a little bit of an enhanced spend in those markets to really take advantage of the situation. Thanks, A. J. <UNK> will take ---+ Let me try to cover some of those. First, let me address kind of on the Texas waiver. As we indicated at the end of last year, we planned on reducing our revenue recognition to the Texas waiver. In the first quarter, we recognized about $77 million of waiver revenues in Texas, compared to about $112 million in the first quarter of 2014. So it was down $35 million, which is really consistent with our expectations, and I think the items we talked about last year. We understand the CMS inquiry in Texas is continuing. We don't have anything new to report on there, and so we're still keeping our eye on it. Clearly, a lot of discussion with various programs, whether they come under the form of provider tax, UPL, low-income pool, it's ---+ we understand that all of those are really [approved and funded] with CMS, either as a state plan amendment, or a [115] waiver program. And there's differentiating characteristics, as you know. The state plan amendments are not time-limited, and generally, the state does not have to be asked to be reapproved for those, unless it modifies its Medicaid program. Then we've got the 1115 waiver programs, which are time-limited, and states must ask for reapproval, and those are the issues in both Texas and Florida. The Florida [LIF] has had a lot of publication on there. We receive about $75 million annually from the Florida LIF funding. We think it's really early to talk about what might happen with these programs. With Texas, we know we have a waiver that goes through [930] at [16]. All of these programs are extremely important for the safety net of the hospitals in those states and communities. So we'll continue to keep our eye on what's going on between CMS and so forth. You think ---+ if there's programs at risk, it's in those 115 waivers and those non-expansion states, and really that's Texas and Florida for us. Kansas City ---+ or Kansas and Tennessee are others; those are really smaller programs on there. So we're going to keep our eye on it and see where that flows, but we don't have anything new to report on Texas, and our revenue recognition is really in line with what we talked about last year, until we get some more clarity on that. Thank you, A. J. Thanks, <UNK>. We've got time for one more question. Yes, we sure can, <UNK>. I won't say it was ---+ hey, <UNK>, this is <UNK>. I'm [not sure] about 40%, we were really well represented, I think, with all but a couple of markets in [first-year] reform. We did see some out of network in year one. As <UNK> mentioned, I think, the increase in exchange contracts that we saw in year two addressed some of those. So I won't say it was material. We were seeing some out-of-network business in the reform, and the exchange business, in year one. In year two, in several of those markets, we've gotten into the contracts in there. So I won't classify it as it was a material driver for us, but it was a factor. All right, thank you. Thanks, <UNK>. Thank you, everyone, for being on the call. Mark Kimbrough will be here all day to take any questions you have, and I thank you very much.

2015_HCA

2016

IIIN

IIIN #Good morning. Thank you for your interest in Insteel and welcome to our fourth-quarter 2016 earnings call, which will be conducted by <UNK> <UNK>, our Vice President, CFO, and Treasurer, and me. Before we begin, let me remind you that some of the comments made on today's call are considered to be forward-looking statements which are subject to various risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SEC. All forward-looking statements are based on our current expectations and information that is currently available. We do not assume any obligation to update these statements in the future to reflect the occurrence of anticipated or unanticipated events or new information. I'll now turn it over to <UNK> to review our fourth-quarter financial results and the macro indicators for our markets. And then I'll follow up to comment more on market conditions and our business outlook. Thank you, <UNK>. As we reported earlier this morning, excluding the nonrecurring charges and gains that were noted in our press release, Insteel's net earnings for the fourth quarter improved to $11.5 million from $9.4 million a year ago. And earnings per diluted share rose to $0.60 from $0.50, bringing the total for fiscal 2016 to $2.04 a share, the second highest in our history. The strong results were achieved despite weaker-than-anticipated conditions in our construction end markets, with shipments falling 15% sequentially from Q3 and 2.9% year over year on a comparable basis, adjusting for the extra week in the prior-year quarter. The slowdown appeared to be driven by a combination of factors, including project delays related to the uncertainty in the economy, the ongoing construction labor shortage, and adverse weather conditions in certain of our markets. NOAA reported that August rainfall in the south-central states, which includes our largest market, Texas, was the wettest on record at more than double the historical average. Adjusting for the extra week in the prior-year period, our shipments into Texas for the quarter were down 15% from a year ago, while our total shipments into all other markets were relatively flat. The Ohio Valley and upper Midwest regions also experienced unusually heavy rainfall during the quarter, which slowed construction activity. Shipments have improved thus far in October, although the day-to-day trends have remained choppy, making it difficult to determine whether the recent softening we experienced was temporary or will redevelop as we move into what is typically our slowest quarter of the year. Average selling prices for the fourth quarter were up 4.9% sequentially as we benefited from the full-quarter impact of the price increases that were implemented during Q3 and at the beginning of Q4. Gross profit for the quarter rose $0.7 million from year ago to $22.6 million, with gross margin widening 340 basis points to 21.9% due to higher spreads as the year-over-year reduction in raw material costs exceeded the drop-off in ASPs. The widening in spreads was partially offset by the lower shipments and higher unit conversion costs on lower production volume. On a sequential basis, gross profit fell $4.9 million and gross margin narrowed 190 basis points due to the lower shipments and higher conversion costs. Spreads for the quarter widened from Q3 as the increase in ASPs exceeded the increase in raw material costs. The weaker-than-anticipated sales drove our inventory up to four months of shipments on a forward-looking basis from a little over three months at the end of the third quarter. Considering that our quarter-end inventory reflects higher average unit costs than at the end of Q3, spreads are likely to narrow during the first quarter for an interim period until we begin to consume more recent lower-cost purchases. SG&A expense for the quarter fell $2.5 million from a year ago to $5.2 million, primarily due to lower incentive compensation expense under our return on capital plan together with the relative year-over-year change in the cash surrender value of life insurance policies and lower bad debt and workers comp expense. We did not incur any incentive comp expense during the fourth quarter as we had previously accrued the maximum amount payable under the plan in our third quarter based on our strong year-to-date results. Cash flow from operations for the quarter was $8.9 million, bringing the total for the year to $54.5 million. We began fiscal 2017 with $58.9 million of cash or over $3 a share and no borrowings outstanding on our $100 million credit facility, providing us with ample liquidity and financial flexibility. Turning to the macro indicators of our construction end markets, after getting off to a strong start to the year, the monthly construction spending trends have moderated since March, similar to what we've seen in our order book. Despite the recent slowdown, total construction spending through August remained 4.9% higher than last year, with private nonres up 7.8% and private res up 6.4%, while public was down 1.3%. Public highway and street construction spending, which had risen 15.8% year over year during the first quarter, benefiting from the unusually mild winter weather, has fallen off since then, with the August year-to-date total now flat compared to a year ago. The most recent reports for the Architectural Billings Index and Dodge Momentum Index have reflected some weakening, although it's too early to determine whether it represents the beginning of a downward trend. Yesterday, the American Institute of Architects reported that the ABI fell to 48.4% in September from 49.7% the prior month, marking the first consecutive declines in demand since the summer of 2012. In its release, the AIA indicated that the recent drop-off could be driven by election-related uncertainty and that billings maybe resume their growth in the coming months. After rising for 5 consecutive months, the Dodge Momentum Index dropped 4.3% in August, but was up 5.1% year over year, reflecting similar improvement in both the commercial and institutional components. The three-month average, which smoothes out the month-to-month volatility, was up 11.5% from the same period last year. We continue to believe the federal highway funding provided for under the FAST Act will have a greater impact on infrastructure construction activity and demand for our products during 2017 and in the coming years. Unfortunately, the 5.3% funding increase that was authorized to go into effect on October 1 for the new fiscal year has been delayed due to the political dynamics in Washington. In order to head off a potential government shutdown, Congress passed a continuing resolution maintaining federal transportation funding at prior-year levels through December 9, which will defer the favorable impact from the increase for at least two months. When lawmakers return after the November elections, they will need to negotiate an overall budget accord during the lame-duck session that provides for the increase or potentially pursue another short-term extension that pushes the resolution out into the 2017 calendar year. The outlook for infrastructure spending at the state and local level continues to be positive in view of the additional funding that's being generated through fuel tax increases and the reassignment of other revenue sources, together with the sharp increase in bond issuances to capitalize on the low interest rate environment. I will now turn the call back over to <UNK>. Thank you, <UNK>. As reflected in our release and <UNK>'s comments, our fourth-quarter results were adversely affected by weaker-than-expected demand for our reinforcing products. The underlying drivers of the disappointing volume are not entirely clear, given the mixed signals from macro indicators for our markets versus the generally positive outlook of our customers. Accordingly, we are unsure whether the slowdown will persist or if the pickup in demand that we've seen so far in October will continue. Given the short lead times and minimal backlog in our business, our visibility is always limited. The underlying demand trends will likely be difficult to discern during the first fiscal quarter due to the usual seasonal factors, including holiday schedules, implying that we may not have better clarity until our second quarter. While we benefited from widening spreads during Q4, competitive pricing activity picked up over the course of the quarter, likely driven by weaker business conditions together with the decline in steel scrap prices and a related reduction in wire rod costs. After escalating sharply during Q2 and 3 of 2016, wire rod costs have fallen in recent months, reflecting the weakening market for steel scrap. We expect the pressure on spreads and margins will lessen as we begin to consume more recent lower-cost purchases most likely in our second quarter, assuming that ASPs fall less than raw material costs. We mentioned on previous calls that a PC strand competitor was starting up a new manufacturing plant in South Carolina during our second quarter. Events have unfolded substantially as expected, and we continue to experience pricing pressure related to their ramp-up during the fourth quarter. Another competitor has announced plans to build a strand plant in Texas that is expected to start up in 2017. While the future growth trends for the Texas market continue to be attractive, we could experience additional pricing pressure until the incremental capacity is absorbed. Turning to CapEx, last quarter, we scaled down our estimate for 2016 to less than $18 million. Due to delays in certain outlays that were expected to occur before the end of the fiscal year, we wound up at $13 million, with the shortfall moving into 2017. Considering these carryover amounts and the new investment opportunities that have been identified, we believe CapEx will increase to as much as $25 million in 2017 as we pursue continued upgrades of our production technology and information systems, further expansion of our ESM capabilities, and the completion of the <UNK>ouston PC strand expansion project. I would point out, however, that our historical estimates have tended to be on the conservative side, which could turn out to be the case again in 2017. To conclude our prepared remarks, we are continuing to closely monitor our markets to determine the extent to which softening we experience during Q4 is likely to continue. Despite the recent slowdown, customer sentiment for 2017 remains positive and our markets should begin to benefit from the impact of the FAST Act during 2017. Additionally, we expect to begin to realize the anticipated benefits from several of the significant investments that we've recently undertaken. We'll also continue our ongoing efforts to further improve the effectiveness of our manufacturing operations, identify additional opportunities to broaden our product offering, and grow both organically and through acquisition. This concludes our prepared remarks and we'll now take your questions. TR, would you please explain the procedure for asking questions. <UNK>, let me address the first part of the question concerning timing. Our view is that the weather neither creates nor destroys demand for our product, but it can shift the consumption of products from maybe within a quarter. But no demand has been destroyed by weather. We had customers who were unable to ship their products to construction sites because they were out of space. So it affected their production rates, and therefore our shipments. But particularly with respect to Texas, we don't see any negative trends that would fundamentally change the outlook there, which is positive. And then on the second part of the question concerning the potential for another continuing resolution, it may be a likely outcome, but it's hard to say until the lawmakers return to Washington. But to lose an entire season, I wouldn't expect ---+ keep in mind that the increase is only just a little over 5% that we are expecting to see from the FAST Act. So a continuing resolution, while not desirable, wouldn't be entirely negative. Yes, that's correct. I think the biggest benefit coming out of the FAST Act is just the improved visibility through the longer duration versus the short-term extensions that we've been dealing with for an extended period. Right. The reference was sequentially where we would see some narrowing relative to Q4. And that's just based on our beginning inventory valuation for the quarter being higher than the prior quarter end. Yes. We are focused right now on finishing the project that is underway. Future editions of capacity will be driven by the market needs in the Texas environment. And I would just repeat that we view Texas as a very attractive market long term. And I think over time that you'll see a disproportionate amount of our CapEx heading to serve the Texas market. But right now, we're just focused on finishing up the project we have underway and bringing it online efficiently. No, we won't have that issue this year. It'll be on the same 52-week period. So the comps for the coming year should be on the same basis. Yes, I think just on driving it off the current the total-year amount would be appropriate. The fourth quarter was skewed lower by that incentive comp issue that I mentioned. But if you just consider the total-year run rate, that should be just pretty representative of what we'd be looking at next year. Okay. Thank you for your interest in Insteel. We look forward to talking with you next quarter.

2016_IIIN

2018

ENTA

ENTA #Thank you, <UNK>. Good afternoon, everyone, and thank you for joining us today. I'll begin by providing updates on our key development programs, and then <UNK> <UNK> will discuss our financial results for the quarter. We had another productive quarter, enhanced by the growing market share of our licensed product included in AbbVie's MAVIRET regimen for HCV, which I will discuss in a few minutes. But right now, I'd like to talk about our exciting internal R&D pipeline including our 3 wholly owned clinical stage programs in NASH, PBC and RSV. Our most advanced programs are for NASH and PBC, where we are conducting Phase II clinical studies with EDP-305, our FXR agonist candidate. In NASH, our Phase II clinical study named ARGON-1 is a 12-week randomized, double-blind placebo-controlled study evaluating the safety, tolerability, pharmacokinetics and efficacy of EDP-305 in subjects with NASH. As primary endpoints, this proof-of-concept study will assess safety and changes in alanine transaminase or ALT levels, an important measure of liver injury in NASH. The study will also focus on evaluating multiple secondary endpoints that play a significant role in NASH, including imaging and noninvasive markers of fibrosis and steatosis. In PBC, our Phase II clinical study named INTREPID is a 12-week randomized, double-blind placebo-controlled study, evaluating the safety, tolerability, pharmacokinetics and efficacy of EDP-305 in subjects with PBC, with or without an inadequate response to ursodeoxycholic acid, currently available in chronic treatment for PBC. The efficacy of EDP-305 will be assessed by evaluating reductions in levels of alanine ---+ of alkaline phosphatase, or ALP, versus placebo. Both Phase II studies are ongoing and we plan to share data from them in 2019. In parallel, we continue preclinical studies to better understand the nuances of EDP-305's mechanism of action and recently 3 posters presentations on EDP-305 were made at the International Liver Congress in April. One focused on efficacy and highlighted new preclinical data demonstrating that EDP-305 favorably regulates the expression of key fibrogenic genes in vitro and in vivo. And the second focused more on safety and showed that EDP-305 had distinct transcriptional and post-transcriptional regulatory mechanisms for LDL receptor and SRB1 gene expression. The third presented data from our previously released Phase I study of EDP-305, highlighting its pharmacokinetics, pharmacodynamics and safety of EDP-305 in healthy and presumptive NAFLD subjects. Our next most advanced program is a Phase I clinical study of EDP-938, which is being developed for the treatment of RSV or respiratory syncytial virus infection. RSV infection is an area of high unmet need, particularly in infants less than 2 years of age and immunocompromised adults. Currently, there are no effective therapeutic treatments for RSV. EDP-938 is a potent inhibitor of the N protein in RSV. And I'm pleased to announce that EDP-938, the only N inhibitor in clinical development today, has recently received a fast-track designation by the FDA for RSV infection. This inhibitor of the N protein works by blocking the replication machinery of the virus and as a result, has the potential to be more effective at later stages of infection than fusion inhibitors. We believe this differentiates this class from fusion inhibitors, a mechanism under evaluation by several of our competitors. The Phase I clinical study of this inhibitor is currently ongoing. The objective of this study is to evaluate the safety, tolerability and pharmacokinetics of single-ascending dose and multiple ascending dose, or MAD, levels of EDP-938 in approximately 80 healthy volunteers. We've recently begun dosing the MAD portion of this study and PK data from this study, coupled with our preclinical antiviral data will guide us to the effective dose range for the Phase II challenge study. The 7-day duration in the MAD study is comparable to dosing durations for our planned Phase IIa challenge study and will likely be applicable to Phase IIb; studies as well. From a timing perspective, we expect to have top line data from the Phase I study later next quarter, and we expect to begin the Phase II proof-of-concept challenge study in RSV-infected humans by the end of calendar 2018. Let's move on to HBV. It's been estimated that 250 million people worldwide are infected with HBV and there's no effective cure. Our HBV program continues to move ahead and is generating promising inhibitors of the core protein. Core inhibitors, sometimes referred to as capsid assembly modulators or core protein allosteric modulators, are a new class of HBV inhibitors that can disrupt the assembly and replication of this virus at multiple steps in the viral life cycle. Preclinical data on EP-027367, one of several core inhibitors we are evaluating in advanced phases of preclinical testing represented at the 2018 International Liver Congress in Paris on April 12. The data demonstrated that in a chimeric skid mouse model with human liver cells, EP-027367 reduced viral DNA and RNA levels of HBV by up to 3 logs from baseline with 4 weeks of treatment and demonstrated favorable tolerability and pharmacokinetic profile. This compound also demonstrated potent pan-genotypic anti-HBV activity capable of preventing the establishment of cccDNA in vitro. We will continue to strengthen our patent portfolio and advance multiple new core inhibitors through preclinical testing, and we hope to announce our first HBV candidate later in 2018. I'll now comment on our licensed HCV products. We're very impressed with the high level of sales already achieved by AbbVie with the new MAVIRET regimen, which contains glecaprevir, a protease inhibitor that Enanta invented with its collaboration with AbbVie. On AbbVie recent financial results conference call, they stated that MAVIRET had climbed to a 45% market share position in the U.S. And internationally had strong position in major countries such as Japan, Germany, Spain and in Italy. As a result, AbbVie increased its global HCV sales guidance for calendar year 2018 to approximately $3.5 billion. In addition, AbbVie provided calendar year second quarter HCV guidance of $950 million. This correlates to Enanta's fiscal third quarter 2018. Given this guidance from AbbVie, the potential for increased royalties to Enanta for MAVIRET is significant. And I'll remind you that Enanta is eligible to earn annually tiered double-digit royalties on 50% of AbbVie's global net sales of MAVIRET. We look forward to AbbVie continuing to expand its successful launch of MAVIRET worldwide. In summary, Enanta's in a very strong position as a result of a dedicated group of employees and a disciplined approach to drug discovery and development. Enanta earns royalties on what is now the leading HCV product on the market through its partnership with AbbVie. Enanta also has 3 clinical-stage, internally-invented and wholly owned programs in areas of high unmet need namely NASH, PBC and RSV. And I would note, all 3 of these development programs now have fast-track designation. I'll stop here and turn the call over to <UNK> to discuss our financials for the quarter. <UNK>. Thanks, <UNK>. I'd like to remind everyone that Enanta reports on a fiscal year schedule. Our year ended September 30, and today, we are reporting results for our second fiscal quarter ended March 31, 2018. For the 3 months ended March 31, 2018, revenue was $44 million compared to revenue of $9 million for the same period in 2017. The increase in revenue in the current quarter was due to an increase in royalties earned on AbbVie's $919 million in global sales of hepatitis C virus regimens, including royalties on 50% of the $850 million of MAVIRET sales in the quarter. Moving onto our expenses. For the 3 months ended March 31, 2018, research and development expenses increased to $21.5 million compared to $13.0 million for the same period in 2017. The increase was primarily due to greater preclinical and clinical costs associated with the progression of our wholly owned R&D programs in NASH, PBC, RSV and HBV. General and administrative expense for the quarter was $5.7 million versus $5.5 million for the comparable quarter in 2017. Enanta recorded income tax expense of $5.4 million for the 3 months ended March 31, 2018, compared to an income tax benefit of $3.6 million for the same period in 2017. The company's estimated annual effective tax rate for fiscal 2018 of 27.1% includes the impact of a noncash revaluation charge against deferred tax assets to reflect the reduced federal corporate income tax rate as a result of the enactment of the U.S. Tax Cuts and Jobs Act. Net income for the 3 months ended March 31, 2018, was $12.6 million or $0.61 per diluted common share compared to a net loss of $5.4 million or $0.28 per diluted common share for the corresponding period in 2017. Enanta ended the quarter with approximately $289 million in cash and marketable securities as compared to $294 million at our September 30, 2017 fiscal year-end. We expect that these cash resources, our receivables for the royalties earned this quarter and our future royalty cash flow from MAVIRET will be sufficient to meet our anticipated cash requirements for the foreseeable future. Further financial details are available in our press release, and will be available in our Form 10-Q for the quarter when it is filed. I'd now like to turn the call back to the operator and open up the lines for Q&A. Operator. Sure. So this is <UNK>. I think one of the things we did at EASL is we looked at ---+ drilled down further on an observation that we had made previously. And that in a nutshell, is that EDP-305 seems to cause an up-regulation of LDL receptor, particularly when we compare it against another FXR agonist, which is OCA. And so mechanistically, we were very intrigued by this, because of course LDL receptor is the body's way of sponging up excess LDL that you have in the body. And so an up-regulation of LDL receptor then should help mitigate an effect that you might otherwise see with an FXR agonist. And so that was certainly the observation that we had made pre-clinically. It was born out in Phase I and studies where we didn't see an increase in LDL during the course of our Phase I study. And so really, what we've done is just taken that biology and dug deeper into how that whole regulatory process is happening. So that we can inform future decisions about candidate selection and also just better understand EDP-305, the molecule that we have underdevelopment today. Sure. So just maybe to back up a little bit, in Intercept's PBC study, they used alkaline phosphatase decreases as a marker for efficacy. And in fact, that's the FDA approved endpoint for registration. What is known is that alkaline phosphatase is a protein that can be regulated by FX<UNK> In fact, there are FXR response elements in the alkaline phosphatase gene. So what you have is sort of a potential anyway for a confounding situation, where clinically, you may see an increase in alkaline phosphatase at some dose level because you induce the alkaline phosphatase transcription. On the other hand, you may have a beneficial effect in a disease where you have ---+ such as PBC, where you have a lot of liver damage going on and you do see as a cause ---+ or as a consequence of the disease progression, pathological increases of alkaline phosphatase. So a drug, in theory, could reduce alkaline phosphatase as it improves the course of the disease. But it could also, in theory, cause the up-regulation of the very endpoint that you're looking at. And so I think that tug-of-war is a theoretical possibility going on. Clearly, Intercept did show, net-net, a decrease in alkaline phosphatase, as did Novartis. I think at 2 of their 3 doses ---+ well at all of their doses we saw decreases in alkaline phosphatase. It's just that they saw a less robust decrease with their highest dose. And so that led to a lack of a dose response. When you look at GGT, another liver marker, they saw a dose-related change in GGT. So I think that possibility is out there as a confounding influence. But I do believe that it is certainly possible on a steady design and the types that we're looking at to be able to demonstrate a net decrease on alkaline phosphatase. Sure. So the ---+ we, as we've said, we're targeting to announce a finalist candidate later this year. What we did at EASL was put up a representative molecule that's ---+ I would call it a contender but not yet a finalist, sort of as a calibration of the sort of state of play of the Enanta program. We have a sort of ---+ it's sort of a 20-dimensional problem that you're trying to solve. And at any time when you're coming up with a finalist candidate, in terms of optimizing lots of preclinical activities, lots of activities across multiple species in terms of pharmacokinetics and metabolism, metabolite profiling, safety, synthesis, scalability, CMC-related matters. And so all of that's beyond just the basic virology, which in itself, has a lot of different dimensions to it. So we're ---+ I think, the molecule that we showed at EASL, 367 is a very fine representative. But quite honestly, we got that one and bake off with some other molecules, and we're very close to wrapping up that very comprehensive exercise. And then out of that, if it's not 367, we hope it'll be a molecule that's even better than that. So getting back to what we showed at EASL, we showed just really good potent virology, looking at a number of different cell lines. Some people characterize activity in one or another of the cell lines, and we sort of wind them all up and profile their molecule across all of them so that we could benchmark our molecule to every other one that's been reported. And if you look at that data set, and that will be up in our presentation I think later today, if it's not already posted on our website, you'll see that 367 compares virologically really well across many of the core protein inhibitors that people have talked about to-date. And further, we put this one through a really rigorous animal model, where you basically take out the immune system of a mouse and ---+ so that you can reconstitute the liver with human hepatocytes. And so it's an immune-compromised mouse model. We test the drug in that model. And then when you're doing that study, you know that you're seeing a pure drug effect, you're not getting any help from the immune system, obviously. So it's a very high standard that we put that molecule through. And in fact, achieved the best results that anybody has reported in that particular model, which we think is the hardest one ---+ has been. So we've got, effectively, the best data in that model. So the virology is lining up, I think, really well. And we know that HBV is a tough virus and it's not likely to be a single mechanism that's going to take it down. But the beauty is, and others are starting to show this, you can go in and do some very basic viral kinetic studies over a few weeks of dosing. We are seeing with other core inhibitors that the mechanism is validated. And so now the next question is, if you add that on top of sort of a combination that you get for free by just using already on the market nukes, can a 2-drug combination, a core on top of a nuke provide some real advancement for HBV patients. And so we'll be looking at that data very carefully as we're bringing our first molecule forward, announcing it later this year and into the clinic in 2019. We'll have more to say about that at a future time. So thanks, for the questions, <UNK>. So RSV is going on track, where as I said in the prepared remarks, we're now dosing the MAD portion of the study. And we expect to report top line data on this Phase I study next quarter. And then in the fourth calendar quarter, we expect to start our Phase II in humans infected with RSV. So what we like about the way the plan is shaping up so far, as I indicated and maybe it kind of a cost over a little too quickly is in Phase I, we're dosing the MAD portion for 7 days. It's really unusual that in Phase I, that you capture the duration of treatment of most of your Phase II studies. And so I think that becomes really interesting, at least for us, a de-risking exercise in terms of looking at safety in PK over the course of a 7-day course in a Phase I, gives us a tremendous amount of information, and sort of confidence building as we head into Phase II of an equal duration of therapy. The other thing is that with most viruses, and I'll set HBV off to the side for the moment, but with most viruses and certainly bacteria, if you have good potency in the lab in terms of knocking down the particular bug, and if you deliver good exposure in humans, there is a pretty good chance that things are going to demonstrate the desired effect of knocking down the bug in the human. So again, we're looking forward to this Phase I dataset next quarter, and we'll try to put it all together with our antiviral potency, which is quite good as you know. And then get on with that Phase II study in calendar Q4. Okay, yes, the other question I think you had was about our other NASH programs. We have ---+ obviously, we've got a follow-on FXR program that's extremely active, and we've got another program that we haven't really disclosed the target on. So I think we probably won't say too much more about those today. But I think we will be later in the year.

2018_ENTA

2016

VRA

VRA #Let me start with the wholesale channel. We still saw softness in the specialty channel so their orders are still below what our expectations are so I wouldn't say we have stabilized that channel as of yet. You will see in Q3 the Indirect segment we are expecting to be around flat. Now we will expect that to come down in Q4 so that really relates to timing of our release for winter so there will be a little more sales in October than there will be in November. So really if you think about the Indirect channel I would look at it Q1 and Q2 combined and then you will have to look at it Q3 and Q4 combined as well. So we haven't stabilized that. Though we are seeing some good progress with some of our big accounts on the wholesale side so we are very happy with that. As it relates to factory, what we have seen out there with the competitive set is there is a lot of competition and the discounts have gotten really high in the factory channel and we expect that to continue over the course of the year. So we have baked that into our gross margin guidance as it relates to factory being a little less than what we would have anticipated from a margin perspective. As it relates to operating margin, <UNK>, on the Direct side of the business, we need to get the web growing again obviously and we're going to be able to leverage SG&A expenses when we get the web growing again in Q4. As it relates to stores, really the same thing. As we see positive comps in the stores, we will be able to leverage SG&A. That is really where we can improve our operating margin. On the Indirect side, you will see that it came down a little bit in the quarter but that was really because of the shipments in Q1 having about $2.5 million more sales in Q1 due to timing than Q2 on the specialty side. So that impacted that operating margin on the Indirect side for Q2, so a little lower than what we would expect on a yearly basis. But on the Indirect side, we don't expect huge gains from an operating margin percentage. I think what we will be doing is trying to keep that relatively flat especially as we move into department stores where you have a little more challenges as it relates to chargebacks and returns and things like that. So expect flat from the Indirect side generally speaking and improvement on the Direct side as we get sales going again. In terms of our total campus business overall, generally about 30% of our business is in campus. We were encouraged with the back to school performance, we had a lot of new product innovation that was brought in backpacks this year. So as we added a lot more solutions into our backpacks, brought the laptop functionality and other functionality into the backpacks, we saw nice improvements. So it is encouraging to see that category for us continue to be strong. Sure. So we do expect that number to be relatively flat this year but what we did do is we took some marketing dollars from Q1, Q2 and Q4 and we really put that into Q3 really to center around all the great marketing that is occurring in Q3 as it relates to the new marketing campaign, etc. So there is about almost $2 million of additional spend as it relates to marketing going into Q3 versus last year. And then you see a reduction really across the board in Q1, Q2 and Q4 related to that $2 million. Also what you have in Q3 is the renovations so there is a lot of stores that we are redoing. As <UNK> mentioned, about 16 of them in Q3 so a lot of, there is about a little over $1 million going into those renovations that will be expensed as well in Q3. So that is really the $3 million of additional spend in Q3 versus Q3 last year. I will have to look at that and get that to you, <UNK>. But we spend about $38 million in total in marketing but I will have to get that to you if you want that. But it is about $1.9 million of additional spend in Q3 but I'm not sure as a percentage what that represents offhand. It varies across the store base. There will be some stores that don't need as much work and we may not have to close much and then there will be some stores that will have to be closed a few weeks to get the work done. But part of the reason we are doing it in September, October, <UNK>, is October is the smallest month of the year for us. So that is a lot of the reason for the timing is just so we don't impact sales too dramatically. That is why we have timed that to redo the stores in September and October versus doing them earlier during back to school period. As you can tell, we are really excited about all of our rebranding initiatives that touch product, distribution and especially marketing. Our team has been diligently and collaboratively working on these efforts for many months and we are all focused on superb execution as we finish out this year. In the nearly three years since I've been at Vera Bradley, I believe we have never been better positioned to generate long-term growth. Thank you for joining us today and for your interest, time and questions and we look forward to speaking to you on our third-quarter call in December.

2016_VRA

2016

PG

PG #I will take each in turn. On all three, yes, there are innovation. Importantly innovations coming in FY17. Some of them they have not been announced, so I will not get into any specifics. Diapers, we know we've got behind in diapers and it shows up and it's one of the most acute categories in terms of share loss. Period. The category is very ---+ understands it and the category as we focused on winning in China. We six, nine months ago made a choice that we were going to win in China and allocated the resources and the capital to ensure that we had the appropriate product innovation coming. It's not yet publicly announced when some of these major innovations are coming, but on both diapers and pants we're very committed to win. An encouraging sign to me about the future in China is to look at what we've been able to do recently in Japan. Where in Japan you're seeing is now taking share leadership, and frankly we're losing to primarily Japanese competitors have done extremely well in China, as well as KC. And the innovation that we have coming over the next fiscal year and beyond, we think will position us well. On Olay, our first step was to get our portfolio cleaned up. That's been done. If you step back and look at the four core collections on Olay, we're starting to see a meaningful difference, which is to me a very positive sign and that's Total Effects, Regenerist, our whitening segment and ProX, on those we see back half doing better than second-half. We still have to anniversary some of the discontinued SKUs. And the second key innovation on Olay will be getting our counters right. Our counters, and having been to China many times and previously lived in greater China, our counters have gotten quite tired and have not been upgraded recently so we've shut down the counters that are in stores that aren't productive, and we've made meaningful investments in upgrading the counters in the stores that we think have a basis to ---+ places where we have a basis to compete. So counter innovation is coming, it's already happening, it is funded and showing up now. And the innovations will be coming on primarily the four core collections and then some new innovations that we will be bringing in. The last category is hair. Hair is our largest category in China. We have meaningful innovations coming on both the conditioner that are superior, and I mentioned earlier, it's already been launched in the US and launched in China. It is superior performing. We have hair innovation coming on many of our brands. Pantene and Head & Shoulders, historically been stronger. VS is actually growing share, and we've got innovation coming on with [Joyce] which has been the weakest of our brands in China. So on each one of the brands there's focus. We've also made the choice, funded and staffed on the ground resources to ensure we keep up with the pace of innovation required in the beauty segment, which to me is an important choice about winning in the future in China. Thank you.

2016_PG

2016

JCOM

JCOM #You're welcome. Because you have a different mix in revenue, particularly as you move from Q4 to Q1. So in Q4 to Q1, you have in Q4 incremental display and video advertising revenue that comes in at very high marginal margins. That drops off as you enter Q1. Yes, <UNK>, if you can realize or visualize this business, it's a business that has almost fixed costs, so once you pass a certain threshold, it goes all the way to the bottom line. So we passed the revenue, and usually Q4 is very high while costs maintain the same, so it drops all to the bottom line. But your mix of revenues changes from quarter to quarter. That's why you have to look at the margin in the same fiscal quarter, so Q1 to Q1, and not compare it to a different quarter even though there might have been the same level of revenue, because it's likely that the mix of revenue is different. See, we are catering to technology, PCs and everything strong in the last quarter. Everybody wants to buy towards the end of the year. Games ---+ the same, men's lifestyle. Everything that we do is geared towards the end of the year, when we have even the carriers that want to do this year's special, so everything is geared towards the end of the year, when we basically have much stronger ---+ and that's one of the challenges of forecasting how our year is going to end up, because our first quarter ---+ how much was the first quarter last year, a percentage of total year, <UNK>. About 30% of revenue and 40%-some of EBITDA. Right, so instead of 25%, 30%, so that's the challenge. It's also the upside of this business. Look, it was a strong quarter. I will tell you that it beat ---+ it beat both our internal budgets, it beat our own organic growth rate sort of expectation. Yes, I understand you have a different issue than I do. So I've got a range for the year, and as I said, we're not changing the range even though we might be shifting within the range. I think it would be ---+ I think if you took the Q1 results, where everything went almost perfectly, and extrapolated that out, that could lead you to a conclusion that is somewhat aggressive. Well, I can give it to you for Q1 of 2016 versus Q1 of 2015. The media business was a low double-digit organic growth rate, which is also where it was in Q4. The Cloud Connect business was about 1%, and the cloud services was also about 1%. Going back to 2015, I only remember it ---+ and by the way, that's in US dollars, so we have ---+ it's not a huge issue, but we have about a 1-point currency headwind in Q1 of 2016 versus Q1 of 2015. Two million dollars, yes. Yes, it was about $2.5 million, so it's a little over 1%. In 2015, I know that there were some analysts who did some work on the various pro formas and disclosure in the K's and came up with an aggregate growth rate in 2015, in US dollars, of about 2% to 3%, and then in 2015 we had a 2% FX headwind that you would add to it if you wanted to look at it in constant dollars. And it would be a little bit higher growth rate for the media and lower for the cloud business. Yes, and I also tried to predict this question and the answer. The smaller units are growing faster organically than the larger ones, and the reason is because they have less churn to cover for, but all of them are growing organically. Excellent question. Well, I'd say a few things about the patents. First of all, we have a very robust portfolio, so we've got about 200 patents, of which about 130 are in the US. They relate predominantly to the cloud business, and most of them have applicability to the Cloud Connect business, including the fax business. Historically, for the portfolio we own, including patents that have already expired, we have about 125 companies that have taken a license. We have patents that extend out to 2032, most specifically in the fax space, and I think they're interesting ones because they cover the outbound portion of fax to email. And some of those patents have been actually recently asserted against some of the outstanding litigants that we have, because as you know, these patent cases tend to go on for years, so you'll find in our K and our Q a few cases that have been around for a while, so we have now added additional claims to those cases and specifically on some of the patents I'm referencing now that have elongated expirations and deal with the outbound sending. But I would also say this ---+ and I know that people have commented and they've put undue emphasis on the patents ---+ we are big believers in intellectual property. You can see in the chart here we invested $70 million over the year in acquiring IP, developing it internally, et cetera. It's important. We think it's an important element to our business, but we also don't believe it is a seminal piece or the seminal piece. Obviously, the SaaS and cloud space is not like a drug company, so others are in all the spaces that we are in today. As I mentioned, a number of companies have a license from us, but there are others who don't, hence the reason for pursuing them either with litigation or trying to reach a settlement through a licensing program. And what I would say is that when you compete in a space, it's nice to have the patents, and it might marginally change the cost of doing business for someone because either they take a license and they've got to pay you a fee or they litigate with you and they've got those costs, but the real day in and day out benefit and ability to compete against third parties is about your operational focus and excellence. So in the Cloud Connect business, it's the fact we've been doing it for the better part of 20 years. It's the fact that we have very strong brands both regionally and globally. It's the fact we have millions of telephone numbers around the world on a very cost-effective basis, which is hard to come by. It's the fact that we have specific programs to target customer acquisition on a discipline basis in terms of cost per acquisition for each sub-segment of the market. That's the real benefit. The patents are nice. They're an added increment, but if you don't have those other things, the patents are not going to save you or protect you. Yes, and to add to it, every large player that we are aware of or mentioned in any of those lists is already licensed with us, one of those 125 companies that did, and anybody new that wants to enter this space, it is not very expensive to license it, so that's not a barrier. But we'd like to. You saw our patent license revenue. It was only $1 million a quarter in the last quarter, so we're open for more licenses for those that are out there. So <UNK>, if you want to start to compete with us, I'll get you a plan. It's not so expensive. Okay. So we are selling the product for the same price of the website, $16.95 for eFax, and I believe it's $10 ---+ $9.95 for MyFax. Yes, around $10 for MyFax, and so we are selling it at the same prices. We are giving very similar ---+ one month free or not. Usually, actually there's a free trial and then ---+ so pricing is the same. Long story short, pricing is the same. Deliverability is a little bit different. People that use it only on the mobile are more exposed to the ability to sign the documents and to ---+ there are some interesting features that are easier to use on the mobile, but basically the pricing is the same. Did I answer you, <UNK>. Oh, yes, I mean, in terms of the revenue contribution, again, and all the signups we do in digital fax, it's small, but it's encouraging both in terms of in the last probably six, seven months since we launched it, the last ---+ We launched it ---+ In December. Yes, it's ramping sequentially week to week. Right. That's what's encouraging. And then we started only with the Android, and now we've brought in the IOS, and we can go into other brands, other countries. It's US only. And I think the other thing that's interesting about it, even though the revenue is de minimis today against the base of the digital fax business, I'm sure it's counterintuitive to a lot of people thinking, well, if I've got a mobile device, why would I either be having fax as a service or certainly engaging and signing up through a mobile device, but that's exactly what we're seeing happening. So I think it'll be a while before it would be millions of dollars in incremental revenue to eFax, but if it's keeps accumulating each week over the remaining portion of this year, it will start to have some impact. Very good question. You mean, for cloud as a whole. No, only for email security. Or email security. Yes. Email security, okay. So FuseMail is a business that has several elements. We have in the Nordics Comendo and Stay Secure, which are ---+ Comendo is a public company that we acquired in Demark in the end of 2014, I think, and we paid ---+ there was a question before about how time it takes to integrate. Usually we try ---+ if the integration is slow, we are very careful that it would be reflected in the lower price of the acquisition. So this was an example of a company we didn't pay a lot knowing that the integration would take a longer time. So that's one part of the business. The largest part of the business is Excel Micro, which is 20 ---+ I think $5 million out of the $40 million, which is basically ---+ am I right, <UNK>. Yes, that's about right. Right, which is basically licensing of various providers of cloud backup. The largest would be McAfee. Second largest probably is ourselves, our own product. Cloud security. You said cloud backup. Oh, sorry. Sorry. Email security (inaudible) anti-virus. So basically the more we migrate from foreign and different systems into ours, the higher is the EBITDA. The cost of us providing the service from our own system is like less than half with what we would pay McAfee. So if McAfee is announcing end of life, there are less choices in the market. People are buying from us, and the EBITDA increases. I think that we should have Q4 at over 40%, and it depends on the next acquisition, but if we don't acquire, it should go organically, naturally, to 45%. You have to remember also in the migration, you have to keep resources to serve the old and the new system, and you have stuff that is busy in migration. Once it's stabilized, there is a lot of synergy out of that, so 45% I think is easy to achieve, unless we will do acquisitions that will throw us again into additional work of integration. Did I answer you, <UNK>. Thank you. All the best. Okay. Thank you very much for your time and attention today for listening in on the Q1 2016 earnings call. We will have a press release out shortly announcing a series of conferences that we will be presenting at over the next several weeks, primarily on the East Coast and the Midwest, although there's also one here in California. I believe there are four of them. So look for that. If you happen to be in one of those regions and would like a follow up in the form of a one-on-one, let us know. And then we look forward to speaking to you again to report Q2 results in early August. Thank you.

2016_JCOM

2016

NWE

NWE #Hi, <UNK>. No, it's an accounting issue that any increase or decrease in your stock price has an impact, in terms of your carrying costs, associated with those assets. So any increase you'd have in your operating expenses, you'd have a decrease in other income, and vice versa. So, it is from a P&L perspective, no impact, whatsoever. We've had some initial discovery, which has been just very straightforward, looking at the data underlying the case. And there's been really, almost no public discussion about the case. We are, obviously, communicating what we're doing, and why. But there really has not been much conversation about it. I would like to think, that in part, that's simply a result of the fact that gas bills have been trending down so consistently for the last 10 years, and we've done a very good job managing those costs for customers. I think we'll speak from our perspective, the most recent ROE from our perspective, is from the hydro case, was 9.8% ROE. No, what I wanted to be very, very clear on that, is, just because we didn't include the slides this time, that they are going to change. They're not going to change. We didn't really have anything, incrementally, to tell you on this call associated with that. So that's why they weren't included. And now that I'd known there's been this many questions, I would have had <UNK> keep them in. (laughter) Oh, its been a tradition everyone loves every year now (laughter). And yes, we will give you ---+ we call them the drivers. We will give you the drivers at EEI. Way to sell tickets <UNK>. (laughter) Okay. Well thank you all, again, for your interest here at the end of the quarter. We certainly are pleased with where we are right now. And it sounds like we'll be seeing many of you in just a couple of weeks. Take care. Thank you.

2016_NWE

2017

ORI

ORI #Okay. Thank you, and good afternoon from all of us at Old Republic. So to just get the ball rolling, I'll just point to a few key items and takeaways from both the release as well as the financial supplement that <UNK> just mentioned. Starting with the results for the most recent quarter. We would say that they were relatively stable for the General Insurance business. And in this, I have to say, we were a bit disappointed by the relatively tepid growth at the top of the income statement and ---+ as well as the bottom line, which was obviously pressured, as you see, by greater claim costs. As I'm sure that as <UNK> <UNK> will note in a few minutes, our General Insurance business does continue to improve very gradually on the underwriting front, and that's our main focus, as you know. The slower progress that we're experiencing in General Insurance, however, was remedied as ---+ by the very fine results we are posting in the Title Insurance part of our business. And in this case also, <UNK> <UNK> will go over the key elements that continue to drive the underwriting results in this part of the business, and of course, in Title Insurance more so than any other Old Republic business. The results from underwriting and related services are important elements since the business is not one that generates the same degree of investment income as we have elsewhere in our business. And then when <UNK> <UNK>'s turn comes, he'll point to some of the more important financial elements of our ---+ of the makeup of our company's financial wherewithal and ---+ which is all supportive of the progress that we are making from a consolidated standpoint. So now I'll ---+ without much more ado, I'll just turn the discussion over to you, <UNK> <UNK>, and for your comments on our General Insurance business Okay, all right. Thank you, Al. As the press release indicates, the General Insurance Group reflected increases in net premiums earned in the second quarter of 3.7% and year-to-date up 3.5% when comparing this to the same periods in 2016. We experienced greater writings in most lines of coverage, especially in commercial auto where rate increases continue to earn through. However, positive changes were offset by a reduction in workers' compensation writing where rate increases are currently more difficult to achieve in that coverage. We have experienced strong persistency ratios in our renewal business as well as reasonable growth of new business, including increasing premiums that we're seeing in our newest underwriting operation that we announced back in 2015. As is always the case, all of our underwriting operations are operating in a very competitive environment fueled by a perception of excess capital in the insurance and reinsurance marketplace. But we think that we're more than holding our own in most parts of our business at this point of the cycle. The group's overall composite ratio increased just over 2 percentage points to 100.1% in the second quarter compared to 97.8% for the same quarter last year. Year-to-date, the composite ratio is relatively stable compared to last year at 98% versus 97.4%. The group's expense ratio of 26% ---+ excuse me, of 25.6% for the second quarter was slightly less than the 26% in the same quarter last year. Year-to-date, these results are relatively stable at 25.2% compared to 25% last year, in line with the past 10 years average and our long-term expectations. As shown in the statistical exhibit, the commercial auto claim ratio increased to 79.8% this quarter compared to 78.4% last year. And in a similar vein, the year-to-date claim ratio came in at 81.1% this year compared to 79.4% last year. We're experiencing further rate increases in the commercial auto coverage to offset the loss cost trends we've been seeing of late, and our objective remains to bring this claim ratio down to our historical experience in the low to mid-70s. We also think that advances in technology relating to safety and accident avoidance should, at some point, help offset the increases in frequency and severity trends that we've been seeing, particularly with commercial trucking as greater use of newer technology continues, as that's adopted by carriers and as the Federal Motor Carrier Safety Administration's requirements for electronic logging devices goes into effect at the end of this year. Our second quarter workers' compensation claim ratio increase to 77.4%. This is up from 76.2% in the same quarter last year. Year-to-date, it's at 76.5% compared to 75.3% in the first half of 2016. Our general liability writings are small in comparison to the other lines that I just reviewed. And as such, we experienced more volatility in this coverage. As shown in the supplement, our result in the latest quarter was a claim ratio of 75.4% compared to 52.4% in the second quarter last year. On the other hand, the year-to-date results reflect a lower claim ratio of 65.9% compared to 75.1% in '16. As <UNK> <UNK> will discuss shortly, it's important to note that all of the claim ratios that we post and discuss are inclusive of both favorable and unfavorable claim development. And as I say, <UNK> will talk a little bit more about that shortly. From both a premium and claims standpoint, most remaining coverages performed within our expectations. In light of the competitive marketplace, all of our underwriting units remain very focused on underwriting discipline, with a profitability focus taking a much greater priority over top line premium preservation or premium growth. So with that said, I'll turn the discussion to my colleague, <UNK> <UNK>, for his comments on our high-performing Title business. Great. Thank you, <UNK>. I appreciate it. Well, I'm happy to report that the Old Republic title business achieved new highs in each of the first 2 quarters for pretax operating income. After recording $40.4 million of pretax operating income in this year's first quarter, we followed that up with a gain of $65 million in the second quarter. First quarter operating income represented an 89% increase over the previous year's quarter, while the amount posted for the second quarter represents a 46% increase year-over-year. With 2 record quarters like that, I assume we set another record for profitability in the first half of the year. And pretax operating income of $105.5 million this year represents a $39.4 million or 60% increase over 2016's midyear high watermark. I guess, noteworthy that the mortgage banker's association originally recorded that residential mortgage originations were down about 14% for the first half of the year. And most of that decline can be attributed to refinance transactions, which were down about 40% for the first 6 months. On the other hand, purchase money transactions were up year-over-year by about 10%. Our commercial activity, on the other hand, was flat, and from everything I've read, is expected to lag a little bit in 2016 ---+ or from the 2016 results. In light of this, we're proud of the fact that our revenues were up in both residential and commercial title operations. Second quarter premium and fee revenue was $55.6 million. That was an increase of $31.1 million or 5.9% over 2016. And for the first 2 quarters, total premium and fee revenue was up $74.9 million or 7.5% over 2016. And there have been a number of factors that have contributed to our gains. First quarter market share reports show that we grew to a 15.3% share versus the full year share that we recorded for 2016 of 14.8%. Average premiums were up as orders trended away from the refinance activity that we've been experiencing and towards purchase money transactions. A lot of the credit for growth in average premium levels goes to our commercial title operation, where we continue to exceed our own lofty expectations. Average premium on commercial transactions climbed over 10% year-over-year. And again, following the favorable trends we've been experiencing in our claims ratio over the past few years, the first half of the year provided more of the same. Favorable claims provisions have certainly proven themselves not to be an aberration in the title industry or even to ourselves. We think that tightened lender standards and better technology, improved internal auditing controls have all led to a more predictable and improved result. It's our job as an insurer, probably as it would be in any industry, to select and monitor and control the risk that can be related to claims or operations. They go hand-in-hand and affect our results proportionately. We don't focus on one area exclusively. And when things are going as right as they are now, we're active on all of our cylinders. As for our other ratios and metrics, they have all improved as revenues and profits increase. And that's a good sign as they indicate that our management is operating as it should be. Well, in summary, what's up for the future with title segment. And all I could say is we promise that we'll do at least as well as the market will allow. Certainly, our objective is to maximize our success under a variety of market conditions. But right now, I have to say that it's a pretty steady course without the potential for a whole lot of surprises. And that sort of does it for the report on Title Company. With that, I'll turn it over to Al for comments on the Run-off business Okay. So let me talk a bit about that business. We ---+ the MI portion of this segment continues to move along on the basic runoff model that we constructed back in 2011 or thereabouts when the business was moved to a run off mode. And as we look ahead, we anticipate a fairly decent housing and related mortgage banking sector just as <UNK> explained. And as a result, we still believe that this business is likely to run off positively until the policies that remain in force today ultimately drop off the inventory by 2022 or thereabouts. And ---+ so that between now and then, we're reasonably certain that we are ---+ I should say, we're real certain that we're going to figure out the most appropriate way for activating a best long-term outcome for what we consider to be a most valuable and very viable operating franchise that we have in our RMIC companies. As to the other part of this run off, mainly the consumer credit indemnity or CCI portion of the business as we call it, that run off continues to perform as anticipated, but ---+ and that means in a fairly volatile mode. And among other things, of course, what's driving that volatility, to a large degree, is the fact that we're still dealing with an 8-year plus litigation saga with one of our country's largest banks, and it's ill-fated purchase of those countrywide mortgage banking business subsidiaries that it acquired during the Great Recession years. So far, obviously, a mutually satisfactory settlement of the dispute has been challenging and obviously has eluded us. It just remains to be said ---+ to be seen whether our 2 sides in this saga will be able to see eye to eye and come to a reasonably fair resolution and provide the necessary financial redress that each side is looking forward to. Having said that, I do have to say that we're not without hope that this, as well as a much smaller dispute in the CCI area with another former customer, can yet be resolved within realistic parameters of indemnification. That's about it with respect to this run off business. It's fundamentally steady as she goes, and we think we'll come out of it okay. So I think we can continue this discussion now with you, <UNK>, and for any ---+ for your additional comments on the financial aspects of our business. Sounds great, Al. As was mentioned earlier and as usual, I'll focus my comments this afternoon on some of the key elements of Old Republic's financial position. So starting with the balance sheet. The investment portfolio grew by approximately $182 million over the first 6 months of this year, $74 million of which rose from market appreciation. Fixed maturity and short-term investments make up right at 75% of total invested assets. I would say the overall credit quality retains its A rating overall with an average maturity of almost 5 years. Equity securities make up the remaining 25% of the total portfolio, and that's up from approximately 23% allocation at the end of 2016. The equity portfolio grew by $285 million over the first 6 months of this year to almost $3.2 billion as of June 30. Of that growth, approximately 18% is attributable to market appreciation. I will say that we remain focused on high-quality dividend yielding stocks. The portfolio at June 30 consists of a few more than 100 individual equity securities, and those represent primarily blue-chip companies, a REIT index fund and utilities. We manage the equity portfolio to ---+ within internally developed risk tolerance levels. As of June 30, we are trending towards the top end of those levels. Net investment income grew about 6% period-over-period, and that's largely attributable to a rising investment balance in a relatively stable yield environment. Another contributing factor impacting investment income is the increased allocation to state and muni tax exempt securities that generally carry a lower stated yield and are reported as held to maturity investments on the face of the balance sheet. The balance has grown from $629 million at the end of June 30 of last year to almost $1.1 billion this year. They represent about 8% of the portfolio as of midyear 2017. So as a consequence of this changing mix, the overall pretax yield on the portfolio has declined slightly year-over-year. However, these securities do tend to produce better post-tax yields. And I would say, the vast majority of these munis are held in our General Insurance group, which is also a contributing factor in the moderating growth in that segment's net investment income. Moving to the liability side of the balance sheet. The consolidated claim reserves experienced favorable development overall during the second quarter and first 6 months of this year. The effect was to reduce the reported consolidated claim ratio by 0.2 percentage points for the quarter and 0.6 percentage points for the year-to-date period. This compares to favorable development of 1.7 and 1.0 percentage points for the same periods of 2016. As noted in this morning's release, the General Insurance group experienced unfavorable development for both 2017 periods. That development is largely centered in the commercial auto, in other words, our trucking operation, the general liability and the workers' comp insurance coverages. And that said, we believe that we're being more assertive in addressing issues as they become evident and are optimistic that these unfavorable development occurrences will moderate, if not turn themselves around as the year progresses. On the other hand, the title group claim reserves reflect favorable development as we've noted in the release. These developments are reflective of a continuation of favorable loss development trends that we've seen in recent history. As we've done in the past, we draw your attention to Page 5 of the financial supplement and to the line that's titled Reserves to Paid Losses Ratio. This ratio measures the carried reserves and relationship to the average of the past 5 years paid claims. In our opinion, the higher the ratio, the greater the Title Insurers' ability to meet its obligations to policyholders. And the ratio that we posted as of June 30 is 9.4:1, and that remains essentially unchanged from year-end 2016. And again, we believe that's indicative of the segment's strong reserve position. Claim reserves in the mortgage insurance business of the RFIG run-off segment developed favorably during 2017, as we've noted, although to a lesser degree as the book value of the business continue ---+ excuse me, as the book of business continues to shrink. Turning then to operating cash flows. These were up by $95 million to $259 million for the first 6 months of this year compared to the same period last year. The increase was driven primarily by a combination of higher net written premiums and lower paid losses. And finally, Old Republic's book value per share at June 30 increased by 3.8% to $17.85. And we've summarized the main elements of this increase on Page 7 of the release. The capitalization ratios that we show in the table on Page 7 are essentially unchanged from those reported at the end of 2016. So those are the highlights I want to address, and I'll turn it back now to Al for some additional comments. Okay. So there you go. That's our embroidery on this morning, this earnings release. I have to say that the totality of our underwriting focus as is shown on the various pages of the earnings release remains very stable. For example, if you look at Page 5 of the release, you can readily see that the consolidated composite ratio of claims and expenses to premiums and fees continues in the proximity of about 95%. And we think that this is reasonably good in context of the underwriting and overall economic cycles in which our entire business is operating. This is especially so we think in the context of the positive operating cash flows that our collective businesses are contributing. Again, if you look at the earnings release on the bottom of Page 5, you'll see that if we exclude the negative cash flows, which is expected in the run-off segment, that the consolidated business, the other parts of the major parts of the consolidated business is producing operating cash flows that were about 46% higher, $320 million roughly for the first half as we show at the very bottom of Page 5. And of course, this level of cash flow is providing very good operating liquidity to benefit both additions to the investable funds account as well as our ability to upstream sufficient dividends to the parent holding company for shareholder dividends and debt carrying costs that we need to honor. Also, from a liquidity standpoint, I might note that in addition to <UNK>'s points just now, we do have ample liquidity funds in the nonregulated parts of the consolidated ORI business. And those are sufficient in our view to take care of possible cash calls from capitalization standpoints as well as for any midterm capital support needs or commitments that we currently have to various insurance underwriting subsidiaries. Overall, we think that the North American economy to which we are committed and in which our focus remains, is likely to remain in a slow growth mode for the foreseeable future. But nonetheless, we believe that our services in some of its more important industry sectors should really allow us to grow the consolidated business at a faster clip than the economy at large. So when all is said and done, we are able to manage our business on the strength of a very strong balance sheet, as <UNK> just mentioned. And this will certainly continue to allow us to compete on a level playing field with all comers in the various areas of underwriting and related services where we have long-term expertise. So let's see. So let's stop on this, what I think is a positive note on our outlook for our business, and let's turn it to any questions that may be out there among the participants in this discussion today. So operator, are you still there. Al, you want me to take that one. Yes, yes, yes. Okay. Well, I think we take a critical look at our reserve position each and every quarter and feel very good about our process overall. In terms of what's driving some of the development and ---+ it really is going to vary from one type of coverage to another. In short-term business such as our auto physical damage coverages, it tends to develop a lot more quickly than some of the other longer tail lines of business. So from that standpoint, we've seen some trends that we've tried to address as soon as the evidence presented itself, and we think we've done that. We've also taken action relative to case reserving in instances where that was necessary. And all of that is factored into our decision-making process when we set the reserves each and every quarter end. So all that to say that we feel very good about the process and feel as though some of the issues that we've been addressing are closer to the end than the beginning. Why don't you answer that, <UNK>, since it's right up your alley. Sure, sure. Greg, it's probably a combination of those things that you referenced. We still have been experiencing a very competitive environment in our large construction book of business, and that will result in lower writing because, as I mentioned in my commentary, we will not chase after retaining business or writing business if the bottom line profitability isn't there. So that's an example of where there's reduced writings. As I think we also mentioned in the release, the oil and gas business has offered less opportunities to write business and continues to pull back in the U.S. or moderate. And then the other issue that I mentioned in my comments is that you look at what the rating bureaus are doing, and for the most part, they're filing rate decreases in a lot of states because of favorable results that have been coming through on workers' compensation. So the negative part of that for us is that it's difficult to get rate increases, as I mentioned on that line of business. So you don't have the top line growth coming either organically or coming from rate increases. And as such, you have a more muted top line on that line of business. Let me add, Greg, a couple of thoughts as I reflected on your question that <UNK> addressed before and addressed it correctly, I might say. The one other thing that we focus on and I think you and others need to focus on is the fact that quarterly trends and happenings really don't mean very much. And I think you need to look at the quarters in the context of similar quarters in the past and what they indicate occurred for the full year. And I know that you ---+ since you, in particular, have followed the company for a long time, that if you focus on the reserve development percentages that we have been posting for quite a number of years and you focus on the annual amounts or percentages of either positive or favorable or unfavorable development, you will see that ---+ particularly since we took a big hit in 2014, that the trend has been definitely moving downward fairly strongly. And I think that's why <UNK> said what he said about being optimistic, that this thing has been and will continue to turn itself around. For example, we went from ---+ I'm looking at some numbers that I picked up, as <UNK> was talking just now. If you go back to '13, we had a 0.9% favorable development. And then, wham'oh, in '14, we had an unfavorable development of 3.9 points. And then in '15, that improved to a much smaller, less than half unfavorable development of 1.5 percentage points. And then last year, in its totality, we had 0.3%. So our guess is that for at least on a full year basis, we should continue to see that kind of alignment in trends of developments. Yes, that's probably right. We only ---+ we recognize ---+ we've got such a long tail on losses in our business, Greg, that we can ---+ 8 years ago, 5 years ago, 10 years ago with 20-year tail, makes it more difficult to kind of peg those loss provisions on an annual basis. So we're constantly doing adjustments that may not be as current as you might be able to peg with current type of evaluation. I'm sorry, go. No, no, go ahead. It's certainly a goal, and we're constantly improving the way we do business to attract new customers and more business from existing customers. And so we always anticipate that we're going to be able to grow market share. And you've got to look at it as a trend instead of maybe quarter-to-quarter because it will vary amongst the companies and depending on the mix and where our markets are strong. If Florida is doing really well, that helps us. Different things influence market share. So we don't really drive the company by market ---+ going after market share. But we certainly see a trend upwards, and we work hard to improve everything. So that's just one of the elements we're after. Well, I meant activating in some fashion outside of the Old Republic holding company system. We think that down the road, there's going to be a basis for activating that company in one fashion or another, even though we do not, at the moment, have any aspirations to forcefully reenter the business. But you can, Greg. Go ahead. Well, there's no question that some parts of the business, both for us and for the industry at large, carry a higher expense ratio. And that's driven by, one; market considerations on the one hand, i. e. competition. But just as importantly, that's driven by the long-term claim cost component of underwriting. And part of our ---+ one of the important jobs we have as underwriters is to be selective about those types of coverages that we will emphasize or deemphasize, but also take full advantage of the law of large numbers and the absolute necessity, just like in the investment business, to diversify the book. And when you diversify as you change some of those diversification aspects, you will inherently change the overall expense ratio. That's a long-winded answer to your question about what to expect on the expense ratio. Yes, Greg, I'll try to give you a little more color around that. This initiative has been in the works for a while, and most of my comments here relate to the trucking business. And it's the case that ---+ I would say the majority of our fleet that we insure already have onboard, automatic onboard recording devices. And as you may know, part of the Federal Motor Carrier Safety Administration requirement that the electronic logging devices are implemented by the end of this year is that, if those vehicles already have the automatic onboard recording devices, they're grandfathered to move to the electronic logging devices by the end of 2019. So what it is, is really a much more gradual impact on the business when it comes to this particular technology, and most of our fleets are already operating with some form of technology. So as we continue, I don't know that the ELDs are going to have that much of a different impact than the automatic onboard recording devices already have in the fleets. There probably will be more of an impact on the single unit and smaller trucking fleets that maybe have not yet adopted the ---+ any automatic onboard recording device where they will, for the first time, implement the ELD by the end of this year. But again, the vast majority of the trucks that we insure on the road have ---+ do have something, and therefore, I think it will be a much more gradual impact in that respect. I would tell you that, virtually, every one of our fleets have this issue at front and center within their safety program. And certainly, our folks that focus on risk control and safety have it at front and center of their safety initiatives as well. So distracted driving is one of those things that has, I believe, contributed to the increase in frequency and severity that we see in the marketplace in general. And that is recognized by the industry, and there are numerous technologies and different types of safety standards being enacted to try to mitigate those issues. And then, of course, you have a lot of other technologies that are accident avoidance types of technologies that also are being taken up and ever increasing in the vehicles as well that should help mitigate the frequency and severity that's been caused by distracted driving. I think depending on what new technologies continue to appear on the shelf. With respect to existing technologies, I would say that we're in the middle innings. And again, it's very similar to the feedback I gave you on the electronic logging devices and the automatic onboard recording devices. It's the case that the larger fleets have implemented many new technologies, and that continues to progress down to smaller fleets as time goes on. Well, thank you. And thank you, Greg, for bringing some outside life into our discussion. Appreciate that very much. And the first thing I have to say, given the dearth of questions other than yours, Greg <UNK>, that, that would seem to imply that we're doing a reasonably good job of reporting on our results in a straightforward fashion and focusing on both the formal earnings release, as well as in our commentary, on what we think is important to understand what is happening with our company and what is likely going to happen to it going forward. So on that note, again, we thank everyone for participating in this call, and we look forward to our next semiannual discussion, which will take place in January of next year after the full year results are published. So thank you, and you all have a good day.

2017_ORI

2016

STMP

STMP #Yes, in terms of the guidance, the sales and marketing spend is always ---+ we do plan for it to be higher this year than last year. And it's really a dynamic process, monitoring the different types of spend, the efficiency, the results we are seeing, the expected ROI. And optimizing that mix may be increasing some channels and cutting other channels that aren't working as efficiently. So it's really a dynamic ongoing process to optimize the sales and marketing investment in the customer base. Thank you, everyone. As always, if you have follow-on questions, you can contact us through our website at investor. stamps.com, or you can call our investor hotline, 310-482-5830. Thanks so much.

2016_STMP

2017

WWE

WWE #Sure. On the first part, we are going to do more events. As we've mentioned before, once we executed our brand extension and we had separate talent rosters for Raw and SmackDown, it allowed us to add an event on Monday night, a SmackDown event Monday night, a broad live on Monday. So that's going to drive the increase. So the short answer is yes, there will be an increase in events. We don't believe there will be a material impact in profits in 2017 because we're also dealing with a different stadium capacity for WrestleMania, which offsets some of the growth in attendance revenue that we'll see from the additional events. So obviously, we set a record at AT&T, over 100,000. The Citrus Bowl has a smaller footprint, so you have a year-over-year comp. And then on the second element of your question where you talked about the profitability, we did increase our marketing spend in Q4 on the live events side, both for events in 2016 in the quarter, but also for 2017. We had, obviously, a really successful Royal Rumble at the Alamodome with over 50,000 in attendance. So you had some of the timing of that because even though it's for a January 2017 event, we expense it in the period. So in essence, the answer to your question is the profit was impacted by timing somewhat. So I'm going to correct the premise of the first question. We didn't really predict the sub levels last year. We gave in essence a hypothetical construct where we said if the sub levels fell within a certain range, here would be the range of our OIBDA. To your point, it ended up those subs came in within that range, but we won't take credit for being so accurate. We wanted to give people ---+ given that we weren't giving OIBDA guidance, give people a construct that they can lock into. This year, we feel more and more comfortable in our ability to forecast sub growth, and that's why we just focus on giving the OIBDA guidance. So we're not going to go into a full-year sub guidance. We will keep doing what we do, which is in the quarter. As far as Q1, we're not being conservative. There's the mechanics of the sub growth when you have a good month of sub adds, as you would expect, for a really large amount like WrestleMania, on a smaller scale, Royal Rumble, the combination of future month sub growth versus the attrition that you see from that previous month has an impact. So we're not being conservative. As far as March, we're guiding to average daily paid, so any adds in March, the big gross adds coming in from the promotion would in effect average daily paid. It will affect the total, but not the average daily paid. You wouldn't see that in the Q1 guidance. So there's some ins and outs there, but the main thing I would correct is that we are not being conservative. We feel the forecast, the point we've given is as best visibility as we have right now. On the first one, we're going to stay away from commenting on individual promotions. <UNK> asked about the three-month, mentioned the Crunchyroll. Again, like I said, you will see us do different things throughout the year, and probably more and more, but we're not ---+ we're going to stay away from commenting about individual ones. We'll learn from them, and on the ones that work well, we will do more like them, and the ones that don't, we will do less. As far as Amazon or any other third party, our perspective on doing deals like that really come down to three things: number one, the economics; number two, the sharing of the customer information; and number three, the sharing of consumption. As we build a direct-to-consumer business that's anchored by the network, we are starting to see the immense value of having all that information. It really makes us a lot smarter both on a business side and on the creative side. So if we can't strike a deal with someone where we feel comfortable with the economics, where we're getting the customers' information, and where we're getting the consumption data, we're not going to do that deal. It would be accurate to assume that we haven't gotten comfortable yet doing a deal like that across those three levers. I don't want to really speak about one particular potential partner or not. In addition to general corporate purposes, we've said that we want to continue to invest in the growth strategy, which is about content, it's about technology, and it's about expanding our global presence. And one example I mentioned on the CapEx guide being on the high end of our historical range, that facility we purchased back in the third quarter we'll begin retrofitting the facility out to serve our production need, so that's an example of us having ---+ or why we did the convert to support that. And then finally, in addition to general corporate and investing in our strategy, in the media sectors, you know <UNK>, is fairly consolidated, which means that when we're talking to potential partners about potential commercial relationships, we are usually dealing with organizations that are much larger than we are. And what we've found ---+ and we've formed a perspective ---+ is that having the balance sheet with significant cash on it is good for us. I think it shows we have the wherewithal to take advantage of a variety of options and how we execute it to the future, so we think it's beneficial for that purpose as well. So those are the three reasons we did it. As you know, <UNK>, because I know you pay attention to a lot of what we're doing, we've made a lot of investments over the last few years, so we think there is flexibility in the cost structure. The tough thing for us is always going to be we're so bullish about the future, is we want to make sure we are investing for the long term. We've always said we prefer a lumpy 15% CAGR than a straight-line 10% CAGR, so we're willing to take hits in the short term if we think over the long term we can deliver a bigger result. And by the same token, we wouldn't have made a public commitment if we weren't willing to do everything in our powers to deliver on that. We will continue to balance those two things. We don't break the subscriber levels down by market, but what we have said, if you think about WWE Network's international presence, it's an English-only network. It's priced in the US dollars. It doesn't have things like download [digital] functionality right now, which you need in markets that have low broadband penetration. So we always talk about the international rollout as a soft launch, if you will. And then over time, we will figure out where we want to invest in the product to localize it more, and we're doing more and more localization. Starting last year, we were offering next day of our pay per views in multiple language as an example. <UNK> mentioned the UK tournament. That's another example. So you'll see us do more and more, but we don't give out specific countries. As you know, there's a lot of discussion about corporate tax rates going on right now. We are a full taxpayer, so our assumption is that if any of the plans as they currently have been detailed were to be executed, we'd be a beneficiary because we're at the top end of the tax rate. But I don't want to start talking about specific assumptions because we need to let the federal government sort that out. I'll let <UNK> handle that aspect of revenue, but as far as the UK tournament, it does allow us to capitalize on specific as well as a much larger pool of talent. And again, it's somewhat localizing. Obviously, for the UK in May, as I mentioned, developed more into a European-type show, which again, allows us to more localize yet in Germany, Italy, et cetera. So we can do a lot more live events. We can do a lot more in terms of growth as far as specific talent to these specific countries, so there is just so much opportunity out there on a global basis. We haven't tapped into it really very much at all, and this is our first venture into tapping to that specifically, notwithstanding the fact that Paul has done extraordinary job of attracting talent from all over the world in an effort, obviously, to go back into the specific countries which they represent and continue to build a localized audience there as well. Our expansion internationally as far as talent is concerned is mammoth. <UNK>, on the ad revenue question, we're not believers in the premise you laid out. We think the monetization of this passionate fan base that we're super-serving with a subscription service, that the best path to monetization is to keep increasing the number of subscribers. For us, when you look at the way we monetize content, we have the subscription service, we license our content to partners, and really, our ad model is more on the AVOD platforms, on YouTube, on our own O&O, maybe someday other players like Facebook and Snapchat and so on where we have incredible engagement as they build out their ad tech. So that's the way we think about advertising. We have a light advertising load on the network right now, but I wouldn't expect that to grow. Our expectation is we'll keep the model we've had now for over year and a half of a 30-day free for new subscribers. It's for new subscribers only. And as we mentioned before in the discussion about promotions, we will continue to experiment. So the answer is yes, we will try some things around WrestleMania. Obviously, we think if you come in for our premier event, you will get a real good feel for the value of the network. So we will do some things. Let me just say there's no one talent that makes this big wheel keep on turning. And there is a mixture of combinations in the storylines and of the resolution of those storylines at WrestleMania or Royal Rumble or SummerSlam or any of our other events. You will see some vacillation from one pay-per-view to the next, and it's just the nature of the business. As far as momentum is concerned, I think we have more momentum this year than we did last year. And as you mentioned, fewer individuals are injured, so that always gives us a larger talent pool and more players to deal with and more storyline. So there seems like there's more momentum coming into this year's WrestleMania. As far as the brand extension is concerned, it's working extremely well. It's working exactly like we thought it would. If you like the product Raw, you are more likely to watch the product on SmackDown. There is some crossover, which is what we wanted. At the same time, we are building ---+ new viewers come in. We're introducing new viewers in SmackDown, and that just in an of itself is what we're trying to do as well, and are doing. And more viewers come to SmackDown, then more viewers are likely to watch Raw as well, so it's a big wheel keeps on turning. That's our strategy. And also it's like you have fresh talent coming from one brand to the next, so in essence, if you haven't seen a Roman Reigns on SmackDown, then what he does if and when he does come to SmackDown, then that's really a big thing. So it freshens up talent. It gives us much longer range in terms of the use of those talents and the IP that goes with them, so that's obviously that in addition to more live events. And more room for more talent to be able to rise to the top. If you have only one show and one ---+ or two shows with the same talent, it's difficult to create new stars because the tendency is to just keep the new larger talent on top all the time. So it allows other stars to be able to climb the ladder of success. So there is so many reasons why that ---+ and multiple touring. Again, if it was just one show, both Raw and SmackDown, you are limited to your international touring for argument's sake. And we can have the SmackDown tour in December and a Raw tour three weeks later or the next month. So it allows us a lot more flexibility as far as the brand growth is concerned. And of course, the other aspect of that is that SmackDown is now a live television show. Television ratings on SmackDown have been extraordinarily good, much better than previous years. Raw rating continues to decline somewhat, much like the NFL ratings. <UNK>, we've been doing that now for about a year. So early in 2016, we started making available within a few hours after the end of the broadcast multiple language versions of the pay-per-view. Fans in Germany, if they want, they can enjoy it in German. Fans in Spain or in the US who prefer in Spanish can do that as well, and they can do that live in Spanish. So yes, we've been doing that. We've got some surprises in store here coming up. But we think over time, you'll just see more localization of all different forms. There's obviously other destinations, but if you looked at the increase ---+ Yes, the increase is primarily around space. Obviously, we've grown the headcount quite significantly over the last four years, and it's a way for us to consolidate a lot of our creative folks, so we are excited about the buildup. But yes, that's a big driver of the year-over-year increase Thank you, everyone. We appreciate you listening to the call today. If you have any questions, do not hesitate to contact us. Thank you.

2017_WWE

2016

ITW

ITW #I wouldn't say, <UNK>, it's necessarily a slowdown, I think again, if you go back and look service in North America was up 4% in Q3 last year, we're up 2% this year. That's pretty solid. But we've also talked about the fact that we think there is more potential here for organic growth, that's probably closer to what we're seeing at least on the equipment side. No, that's not it at all. I think if you go back and look, I don't we've put up 4% to 5% in service since 2014. But I think that going forward, that's not an unrealistic expectation. Service is stable here. We had, we talked about this last quarter also, a little bit of PLS in some parts of the business, but overall in this low single digit is a pretty good way to think about the business on a go-forward basis from a growth standpoint. And then obviously as you know, this is a very profitable part of the business, more profitable than the equipment side. Yes, that's exactly it. So it's really a product mix issue. So 25.5% in automotive, pretty solid margins. And you're right to point out that the volume leverage really here is the reason why it didn't show up is a product mix issue. It might be. It's hard to forecast at that level of detail, but what is going to be with us on a go-forward basis are these core margins in the mid 20%s. Yes, I think rather than go through the individual pieces here, <UNK>, I'd rather wait until we can give you the complete picture also and include in that the guidance here for next year. What I will tell you is that the business is actually performing a little bit better than what we thought from an operational standpoint. The operating margins are right where we thought they were going to be, there were no surprises from a purchase accounting standpoint, and like we said there was no EPS impact here in the quarter. Which in fact means that the charges basically ate up what the business earned for the next couple of quarters. That's exactly right. So that's the way to think about it. And we've talked about this, <UNK>, when we give you guidance for 2017, we'll give you a complete picture. Yes, I think automotive aftermarket was pretty stable here again, flat to slightly positive. The decline is really tied to the maintenance, the industrial MRO side of that business. So some of the industrial lubricants and consistent with what we've seen in prior quarters, that is still somewhat challenged, the industrial MRO side. Good morning. I think Europe was pretty good this quarter, up 2%, pretty steady and really nothing unusual as we went through the quarter or nothing really material to point out on a country level. So pretty steady state, feel pretty good about the demand levels obviously up 2% and feel good about it going into Q4. Not at this point. No, overall UK, as you know, our UK business overall not talking construction is about 4% of sales, and it was actually positive in the quarter. Like we talked about before, the impact right now what we're seeing is on the currency side really on the translation side of things, but we haven't seen anything other than that that's worth mentioning. We're producing and selling in the UK. The impact is really on the translation side, so we are ---+ we have run profitable businesses in the UK. And when we bring those, we translate those British pound earnings into US dollars, there's a headwind. So that's really what we are talking about. Yes, what we are talking about is product mix I think in North America. And so depending ---+ our content per vehicle might be slightly different by product line, and that's really what we are talking about. Yes, that's correct, yes. Well I think what I would prefer to do is wait till we go through this planning cycle that we just talked about. We will give you a good update on the end of December. But I think before we do any speculating, we'll let our businesses run their plans for 2017 through and then we'll have a better picture there. Clearly at some point, it will start winding down. I would also argue on the other side that we have ---+ this is activity that is very healthy from the standpoint of profitability and focus. So to the extent that there's continued activity there, we're going to continue to support it until we get all the stuff out of here that we think needs to go so we can really focus on the highly profitable parts of our business that we think have long-term growth potential. So we're not ---+ so we'll see what happens. I would expect that certainly things start to at least stabilize there, if not start to slow down. But until we go through the actual details of what our businesses have in mind for next year, it's hard to comment. Yes, pricing is not a big margin driver for us here, as really the big margin driver is and has been I think <UNK> mentioned 12 quarters in a row of the enterprise initiatives, and that's really what's driving the margin expansion. And the incremental margins, if you go back and look historically, that's where the Company has been for a long time in that 30% to 35% range. And really on the pricing side, all we're trying to do is to offset some material cost inflation, but it's not the key driver of our growth or of our margin expansion. No, there's really nothing interesting to report. I think I said, all we're trying to do is offset to the extent that there is material cost inflation, we're trying to offset that with price. We've been in this 10 to 20 basis points range for a number of quarters here, actually longer than that, and we expect it to stay in that range on a go-forward basis. We're not seeing any material cost inflation at this point. And when we do, we will react, like I said, and do our best in the divisions to offset that with efficiency and with price. I think on the free cash flow, like I said, on a year-to-date basis, we're exactly where we were last year. So there is ---+ things can move around a little bit on a quarterly basis. For example, our CapEx number is up a little bit this quarter, but year to date it's exactly in line with last year and then maybe some larger payments that go out one quarter versus another. We fully expect we'll be at above 100% for the year, which would imply a strong Q4 which seasonally that's what we usually do. So other than that, feel very good about the free cash flow performance. And on the construction side, I'd just add similar to what we said earlier, demand is pretty steady state. There's some comp issues that we're dealing with, but we feel good about the using current run rates to model the fourth quarter and we're not expecting any big changes from where we are right now. Very good. Thank you very much and have a great day.

2016_ITW

2016

SKYW

SKYW #Caty, it's <UNK>. Thanks for your question. It's a very good question. We monitor a lot of things in the industry, and most of it has to do with some of the things that <UNK> pointed out in his script, of working with our partners to see how we can best add value in their various portfolios. I can't speak for everybody in the major partners that may be interested in your question, but from our perspective, we have not seen any information that goes along the lines of what you are speculating there. And our focus is certainly, one, it's unique, and we want to differentiate ourselves from our various competitors. But we believe, for the reasons that we've discussed on the call today, with making sure that we have outstanding performance at competitive costs and doing the right things with our fleet, that we will always remain in a very strong competitive position and work well with our partners to find ways to evolve and add value to them. Yes, Caty, this is <UNK>. I still think even as of today we still see strong demand. But we have to take into account various other variables that we have going on within our fleet that have an impact on the duration and type of contracts we do at those 50-seaters. I will say with regard to 50-seaters, that 2017 will be a relatively pivotal year for 50-seat aircraft. But again, I will go back ---+ as you seen with <UNK>'s script and the things we've outlined with the fleet changes, we are trying to evaluate with our partners what happens in 2017 with 50-seaters. And we would certainly anticipate that there would be a lot of mixed philosophies and strategies surrounding pilot availability, what our partners need, and these various potential contract extensions. We just don't have a significant amount of visibility of that right now. We probably will have more visibility on it in the next quarter. Thanks, <UNK>. Thanks for the question. As you look at it from the perspective from Q1 to Q2, I think you have to look a little bit about what <UNK> has disclosed about the significant fleet transition. We will say that the rates that we were getting on 700s when we pulled them out and put them back to a market rate compared to where they've been, comes into it with improvement. But I think that we've proven that model over the last couple of years how that works. The other thing is, I am not going to let go how well our performance was even from ---+ Q2 from Q1. Q1 was an exceptional quarter. Q2, you have significant block hour increases with the seasonality of flying. And when you deliver as strong as our entities did on that scheduled block hour assumption, really good things happen within the business model. Yes, I don't know. It's certainly within the last 3 to 6 months. I would say even before Republic went into bankruptcy, we had good, strong dialogue about the entire fleets and opportunity to grow the fleet. If it were up to me, would I say that the bankruptcy had any type of effect on that. To be honest with you, I really couldn't say so today. But I will say that we continue to have a good, strong dialogue with all of our partners relative to their fleet needs. And we don't necessarily get into as to the why. We are mostly concerned with the what and how to best execute on those opportunities. Let me start with the first part and that is just a high-level feel for our pilot situation. And we do update that for you guys quite often. I will say that where we are sitting today ---+ and understand, I think that we're being very clear ---+ we are not immune to this pilot situation. I would say that the other thing is, is that things can change very quickly, specifically when you are sitting here at the end of July and you have a fall drop off in the schedules and there tends to be a lot of hiring. But all that considered, as of today, we are very comfortable with our short to extended range scenario of pilots at both entities. Recruiting remains I would say strong at both of them, and we watch the attrition models very, very carefully. And we are comfortable where we are today with pilots. Transitioning that into incremental growth for 175s, I would say that, taking our pilot situation and also looking at, as we've said in the past, fleet flexibility and some transition opportunities, would we have the capacity to take more 175 in the future. I would say yes we would. We have enough flexibility with these variables that we could take more 175s in the future. Well, what we said about EPS growth for the second half of the year is that we expect it to be in the low double-digit range, when you look at the second half of 2016 compared to the second half of 2015. And that would be excluding any of those unusual items. So, we do expect somewhere in the neighborhood of $10 million a quarter in the second half, roughly, of these special charges related to the early lease returns of the 700s that <UNK> spoke about the moment ago. But other than that, obviously we've got ---+ our growth is going to come from the delivery schedule. We've got eight E175s that we put into service during Q2. They will have a full quarter of service for the first time in the third quarter. In addition, there will be 30 new E175s come into service during the second half. So, the growth engines remain the same I think as we go into the second half, and that was the root of <UNK>'s comments. Yes, that's right. Both of those items are included in the $0.77 we reported. I think that this call would probably not be long enough, <UNK> ---+ I'm sorry, this is <UNK> ---+ to go through all the hundreds of things that we had to do to make sure that we developed the model the right way to get here at both entities. Admittedly, as you go back in history, ExpressJet has been an entity that has been really engineered for very top level performance. SkyWest has also done a very good job. If there's one big thing that I would say at both entities, it has certainly started within the maintenance programs, and that's the first thing. The second thing, to be candid, is working very closely with our partners and giving them some credit for this as well, because of how they helped us within the scheduling time frames and the things of how we've operated this. It has been a very good journey for us to work that closely with our partners to understand the value that they see in this, and the value that we see in this. So when it comes to an investment of capital in this, it did take some investment in capital, but the returns ---+ when you have a quarter like this, and you have an engagement in an employee group ---+ with the employee groups that we have, and strong performance, it just has a huge, huge return on it. It's also ---+ when you have 99.9% controllable ops, it does provide a very strong, efficient system whereby you can be cheaper. But there is certainly a price to pay in the beginning, and we feel like we are continuing to evolve. I'm not going to say that we are done in our process of improvement, but we certainly have seen some good benefits of it, and we are going to continue to evolve with our groups and with our partners to make sure that this is something that is just the expectation. <UNK>, this is <UNK>. So we've got at this point, with another 30 planes in the second half of this year and then another 18 on top of that, that's about another $1.1 billion, roughly, of debt that we will be putting on our balance sheet. We are extremely comfortable with that, again, given the nature of these ---+ the long-term nature of these contracts matched against long-term debt at very attractive rates. So I think from a leverage standpoint, based on our view right now of 140 175s in the pipeline, that our debt needs should peak by sometime in the middle of 2017. Yes, <UNK>, thanks for the question. We obviously have been working with our partners on transferring some of our United aircraft into the American and also Delta portfolios. We are not going to get into the specific numbers on each one of those, but we've been working with our partners, making sure we are helping them out with their fleet needs. And then also making sure the economics work for both them and for us. So it has been a very good partnership with our major partners, and we will continue to work with them on their fleet needs and making sure the economics match their needs and then also our needs as well. The number of aircraft that we have dedicated to it, we are somewhere in the range of around 50 aircraft that we operate today in that model. You don't get into specifics on what the margin is in that model, either. <UNK> did outline a couple of things on the fuel. Fuel, there was ---+ we were at $2.35 last year; we are at $1.69 this year. Year-over-year and then quarter-over-quarter it actually was a little bit of a headwind Q1 to Q2. We were at $1.49 in Q1, and then it has ticked up a little bit to the $1.69 range. So, there has been some headwinds on the fuel in the Q2 area. Well, I think if you look at it from a seasonal perspective in Q2, we are optimistic that we will do probably the same thing in Q3. And look, to be honest with you, we are very, very impressed and we are very excited about the progress and the movement that the entity is making. As we continue to go forward, we love that momentum. As we go into 2017 I would say we have to have a strong look at our 50-seat strategies with our partners. As you know, there is a fair amount of opportunities in even 2017 to continue to do some fleet transitions with 50-seaters. And as we evaluate that and evaluate it with these other variables of pilot availability, extension opportunities, and what the partners want in 2017, we will probably be able to provide more color next quarter, if this is a trend. But I think that we are not certainly sitting here thinking that breakeven is where this thing needs to be. We want it to be a long-term, stable, solid entity and we still have quite a bit of work to do on that. Honestly our folks in Atlanta, the leadership and the employees have done a great job of doing some tough work to get us to this point, and I think they are excited about continuing to do what we need to do to provide value for our partners and keep some momentum here. That's a great question, <UNK>, because we have a lot of these coming off. Most of them are ---+ or almost all of them are coming off out of contract flying. So, certainly when the extensions come due and the partner does not want the 50-seaters anymore, we certainly evaluate if that is a possibility. But again, it has to be balanced with the pilot availability. It has to be balanced with a lot of these other variables if that model is going to work. So it's not necessarily our intention to really jump out and start growing prorate. Our focus is to continue to execute on a larger fleet transition plan, and it's not necessarily prorate, or increasing prorate or dramatically changing prorate. It's not one of the variables that we are looking at executing over the next little while. Sure. It's actually pretty similar in the second quarter. I think the numbers were about 45% of our fleet were unprofitable a year ago, and that number still is about 25%. And that 21% is just largely one contract at ExpressJet that's still out there. So again, it's not a lot of change from Q1. Really, the bulk of that is one contract at ExpressJet. Correct. Okay. Thank you, Keith. This is <UNK> and I want to thank everyone for their continued interest in SkyWest. As you can see, we are still pleased with our progress and we recognize there is still a lot of work ahead of us as we continue to differentiate SkyWest from the rest of the industry, and we look forward to updating you again next quarter. Thank you.

2016_SKYW

2015

TG

TG #Thank you, Danielle, and welcome to the Tredegar 2014 annual financial results review. Our earnings for the fourth quarter and full-year 2014 were released after the market closed today, and you'll find our press release, 10-K and supplemental materials including non-GAAP reconciliations on our website under the Investors section at www.tredegar.com. As a reminder, some of the statements made here about the future performance of the Company constitute forward-looking statements within the meaning of federal securities law. Please note the cautionary language about our forward-looking statements that is contained in our press release. That same language applies to this call. Please note that our comments today regarding financial results exclude all non-operating or special items, and reconciliations related to any non-GAAP financial measures discussed today may be found in the slides accompanying this presentation and our supplemental materials on our website. With that, I'll turn it over to <UNK> <UNK>. Good afternoon. I'm <UNK> <UNK>, Tredegar's Chief Executive Officer. With me today is Kevin O'Leary, Tredegar's Chief Financial Officer. Thank you for joining us today for our annual financial results review. The agenda for today's call is to discuss our year-end performance for 2014 and update you on our outlook for 2015 and beyond. We issued our earnings press release after the market closed today. So, as you have seen, 2014 was a year of mixed results, a tough year for our film products business and a breakout year for Bonnell, our aluminum extrusion business. I'll get to the performance highlights shortly. First, a minute or two on our strategy. We've been focused on long-term growth to diversify our markets and customers in both of our businesses. As part of that strategy, we've made significant investments in our businesses. Those investments, which have been thoughtful and deliberate, lay the foundation for Tredegar's long-term growth. As we wind up recent investments to add capacity and capability, we are now in a position to take advantage of favorable growth trends in several of our markets, which in turn should drive earnings growth and strong cash flow generation. Now moving to our 2014 performance. I'm going to discuss our performance highlights, and then Kevin will walk you through the numbers. As tempting as it is to start with Bonnell's terrific performance, I'll begin with film products and in particular the issues around our flexible packaging films, which were the biggest drivers in film products overall performance in 2014. Throughout last year, we commented on the three major issues that negatively impacted the contribution of our flexible packaging films: operational inefficiencies in our Cabo, Brazil plant; the five-month delay in the startup of our new flexible packaging line; and very challenging market dynamics. Two of those areas were within our control, the third less so, but still necessitated decisive actions on our part. So I'd like to provide more color on those issues and our actions to address them. Our operational inefficiencies in our Brazil flexible packaging plant created supply constraints and increased cost. As discussed on the midyear call, we were slow to recognize that we needed strong local leadership to drive the changes, processes and resources required to address the issues. On that call, we committed to resolve the issues by the end of the year and we did that. Our local leadership has done a super job of delivering operational improvements while placing a high priority on the sustainability of those improvements. Now that the team has stabilized operations, they are focused on continuous improvement, which means optimizing production and reducing costs. We also experienced a five-month delay in the startup of our new flexible packaging line in our Cabo, Brazil facility. I want to remind you that this was a very significant project for Tredegar: an $80 million investment over two years. The delay of the project played a significant role in film products against our 2014 volume growth target, and had volume from the new line been available earlier in the year, it would have relieved the supply constraints created by the operational inefficiencies in the rest of the Cabo facility. The good news is that the project came in on budget, and the pace at which we've been ramping up the production on the line has exceeded our expectations. As for the challenging market dynamics, we've previously described the global PET flexible packaging market as being in an oversupply situation. In anticipation of continued double-digit growth in emerging markets, significant capacity expansion commitments were made by an array of PET producers in the 2011 and 2012 timeframe. While that capacity has been coming on stream in the last couple of years, the forecasted growth and associated demand in key markets like China and India has not materialized due to the economic slowdown in those regions. Unfortunately, due to the attractiveness of our market, PET film producers from Asia and the Middle East, along with a new PET film producer in Peru, have targeted Brazil for their excess capacity. This has made the global oversupply situation very real in Brazil. As you can see from this graph, industry projections indicate that this new global capacity will get absorbed over time. The overall trend toward flexible packaging is positive, the market continues to grow, and we remain excited for the longer-term prospects for flexible packaging film. In the meantime, we're working hard to mitigate the impact of current market conditions by leveraging our value-added films and services, a competitive advantage that we have over most of the importers in Latin America, and driving continuous improvements in our flexible packaging films operation was a key focus on cost. It's important that film products 2014 successes in other markets don't get overlooked. In personal care, the previously announced loss of the baby care elastic laminate volume in North America impacted our volume growth. Through product mix and the introduction and expansion of other personal care materials and surface protection films, we were able to offset a very significant portion of the profit impact of that volume loss. When you consider the estimated $7 million profit impact, I'd call that a success, and this is a demonstration of how our strategy to diversify our customer base with a focus on launching new products is paying off. In particular, we are delighted with the strong customer response we've had to the rollout of our Forcefield Pearl product in service protection and our lines of FlexAire products in personal care. Product innovation was critical to our organic growth in 2014. We also had strong operational performance across the vast majority of our film products facilities. Notwithstanding the issues in our Cabo facility, our film products operations around the world are delivering on our promise of operational excellence. Bonnell Aluminum had a great year in 2014. In addition to the solid volume growth in the nonresidential construction market during the second half of the year, Bonnell took big steps forward in executing on its market diversification strategy. Our new automotive prep came online at the beginning of the year, and we continue to be excited by the opportunities for this new capability in Bonnell. We also experienced growth for value-added fabrication and anodizing, so much so that we are expanding our anodizing capacity as we speak. Bonnell demonstrates operational excellence throughout its organization from reducing working capital to new lows to record-setting performance in safety. We are convinced that our strategy has reshaped Bonnell into a much stronger company today than it was before the great recession. Translating strategy into action continues to be the overarching focus for Tredegar, and a little later on the call, I'll discuss what that looks like in 2015. Now I'll turn it over to Kevin for more detail on the financial results of the quarter and the year. Kevin. Thank you, <UNK>. I'll start off with an overview of reported net income for the fourth quarter and full year for Tredegar Corporation. For the fourth quarter, diluted earnings per share from continuing operations were $0.40 per share. Excluding special items, earnings per share from ongoing operations were $0.23 per share, and for the full year, diluted earnings per share from continuing operations were $1.11 per share. Excluding special items, earnings per share from ongoing operations were $1.13 per share. Details of special items, which include the impact of non-operating investments, asset impairments and restructuring charges, are available on our website, along with additional information on discontinued operations. Now let's focus on earnings-per-share from ongoing operations. The key components of variance for the quarter and full year were similar. So I'll focus my comments on the full year. In 2014, as I mentioned, earnings-per-share from ongoing operations was $1.13 per share compared to $1.15 in the prior year. Key drivers were as follows. Earnings before taxes from ongoing operations was up $2.4 million. A couple of key drivers here. The combined operating profit from our business segments ---+ film products and Bonnell ---+ was $5.5 million below 2013. I'll get into the detailed results for our business segments in a moment. Non-cash pension expense in 2014 was $6.7 million, a decrease of $7 million compared to 2013. As we've discussed on previous calls, the lower pension expense in 2014 was primarily a result of an increase in a discount rate of 78 basis points to 4.99%. Other corporate expenses were down approximately $1 million for the year. And finally, the full-year effective tax rate on income from ongoing operations was 35% compared to 31% in 2013. The increase, which was driven primarily by geographical income mix, had an unfavorable impact on earnings per share of $0.07. Looking forward into 2015, our projection for non-cash pension expense is approximately $12.3 million or an increase of $5.6 million over 2014. The increase is driven primarily by an 82 basis point reduction in the discount rate, dropping the rate to 4.17% for 2015. The discount rate for 2015 is actually below the 2013 rate. Also, the impact of our decision to freeze all future service benefits for certain pension plan participants is essentially offset by the impact of new mortality tables. And finally in 2015, we expect an effective tax rate on income from operations to be approximately 35%, similar to the 2014 rates. Now let's focus on the financial performance of our business segments. Before getting into the specifics of results for the quarter and full year for film products, I'd like to highlight a couple of points that <UNK> made at the outset. The loss of the baby care elastic laminate business in North America was mitigated in large part by the favorable results of other personal care materials and surface protection films. And clearly the biggest drivers of unfavorable performance for film products in 2014 were competitive pricing pressures and operational inefficiencies for our flexible packaging operations in Brazil. As <UNK> mentioned, we committed to resolve production outputs and operational inefficiencies in Brazil, and by year-end we did just that. Now for the numbers. For the fourth quarter, film products net sales of $140 million were 7% below prior year, and operating profit from ongoing operations of $13.2 million were 16% below prior year. The key driver in lower net sales for the quarter was the loss of the baby care elastic laminate business in North America, which reduced sales by $10.6 million or 7%. While there were a number of offsetting impacts to operating profit, key elements of the $2.4 million variance in the prior year were as follows. The loss of the baby care plastic laminate business had an unfavorable impact of $1.1 million. Excluding this impact, higher volume and other products had a favorable impact of $4.4 million. Competitive pricing pressures and operational inefficiencies reduced operating profit by $1.2 million and $4.4 million, respectively, as unfavorable results in flexible packaging films were partially offset by improved pricing and operational performance and surface protection films and personal care materials. Now looking at the full year, film products net sales of $579 million were 7% lower than prior year, and operating profit of $58 million was 18% below prior year. A key driver in lower net sales was the loss of the baby care business, which reduced sales by $34 million or 5.5%. The year-over-year change and profit for the full year was driven primarily by the following. Again competitive pricing pressures and operational inefficiencies reduced operating profit by $3.4 million and $6 million, respectively, as unfavorable results in flexible packaging films were partially offset by improved pricing and operational performance and surface protection films and personal materials. The baby care volume loss had an unfavorable impact of $7 million. And for the full year, the change in the dollar value currency had a positive impact of approximately $4.5 million. EBITDA margin for the year was 15.3% below our 16% target, driven by the performance in flexible packaging films. Now let's take a look at Bonnell. As <UNK> mentioned, this business had another strong year with broad-based volume growth in its key markets. Bonnell's success is a testament to translating its strategy of profitable growth and diversification into action, and it's the result of years of hard work by Bonnell to drive costs out of the business and increase its presence in non-construction markets. For the fourth quarter, compared to prior year, net sales were up 24%, and operating profit was up 20%. Key factors improving profits were volume growth of 13% year over year, including 7% volume growth in nonresidential building and construction, and favorable product mix reflecting continued strength in anodized and painted finished products and fabricated components. Higher volume and favorable product mix in the quarter were partially offset by operational inefficiencies associated with meeting the growth in demand for anodized products. Looking at the full year, net sales increased $35 million to $344 million in 2014. Volume grew in all key end-use markets with year-over-year growth of 7%, and after a difficult winter, we saw solid growth in the second half of the year in the nonresidential building and construction market with volume up 6% year over year. We believe that we successfully held our market share in this important market. With the successful expansion in the automotive extrusions market, Bonnell increased its presence in this rapidly growing market. Operating profit improved to $26 million, up 40% over the prior year. Higher volumes and improved product mix in line with what I just discussed in the fourth quarter had a favorable impact of over $5 million. EBITDA margin of 10.3% was at the high end of our target range for this business. Now moving onto some other key financial measures, you can see that we finished up the year with cash flow from operations just above $50 million. Capital spending for 2014 was nearly $45 million, coming in just below 5% of net sales. We project capital spending for 2015 of just over $40 million, which includes the completion of our new surface protection line in Guangzhou, China and the upgrade and expansion of our anodizing capacity at Bonnell's Carthage, Tennessee plant. And in May of 2014, we raised our quarterly dividend to $0.09 per share. Our fourth quarterly dividend increase in less than four years. For 2014 the total annual dividends paid was $11 million or $0.34 per share. And our balance sheet remains strong with net debt of $87 million and total debt to adjusted EBITDA of 1.42 times. So, as I've said before, 2014 was a building year for Tredegar, and our return on invested capital of 8.5% reflects that. We remain committed to our return on invested capital targets of 11% to 12% in 2015. As we drive solid execution in 2015, we will continue our focus on cash performance and returning capital to shareholders while maintaining our financial strength and flexibility. Now with that, I'll turn it back to <UNK>. Thanks, Kevin. Now let's talk about 2015. As Kevin said, 2014 was a building year, and 2015 will be a year of execution for Tredegar. While we have a couple of key strategic projects that we'll complete during the year, for the most part, we've put the investments in place to drive top and bottom line improvement, and that's what we intend to do in 2015. For film products, that means leveraging our value-added capabilities for our flexible packaging film and driving continuous improvements in our flexible packaging operations. It also means the continued successful ramp-up of our new flexible packaging line. As I mentioned earlier, we expect market conditions for our flexible packaging films to be difficult, particularly in the first half of the year, but should see our commercial efforts translate into improved results as the year progresses. In the first half of the year, mainly in the first quarter, we will be impacted by the remaining year-over-year profit impact of the loss of the baby care elastic laminate volume in America, which we estimated at about $2 million. During the first quarter, we will be expanding our anodizing capacity at Bonnell to address our customers growing demands. While this temporarily requires us to take capacity out of the system and will impact first-quarter results, this expansion positions us well for the long-term. As we look at the full year, we expect year-over-year volume growth for both film products and Bonnell in 2015 driven by solid market growth in our key market segments. In film products, we're really pleased with the results from our new product and expect them to drive growth. As I mentioned earlier, our new surface protection film, Forcefield Pearl, has been a major success in the market. We expect to continue to grow Pearl in 2015. We also see opportunities to expand our customer base for our surface protection films. We expect several new personal care product introductions to support topline growth. These include elastic films and laminates, as well as acquisition distribution layers for adult incontinence and babycare applications. As we said before, our product innovation is creating value and positioning us well for organic growth for 2015 and beyond. For Bonnell, the rollout of the new automotive programs will coincide with the continued successful ramp-up of our automotive prep. We've expanded our medium strength capabilities and look to grow in those end markets. And, of course, we expect to realize growth for nonresidential construction consistent with the continued recovery of that market. As we look beyond 2015, we expect to continue to build on the momentum that should become evident during the second half of 2015. On our call last year, we shared our performance targets for 2016. Our main reason for selecting 2016 was that we saw 2014 as a building year, and we wanted to give investors some sense of when they should expect Tredegar's return on the significant investments that we've made over the last few years. While outlook for 2016 hasn't changed in any meaningful way, we have restated the 2016 volume growth targets to reflect a two-year compounded annual growth rate now that we've closed the books on 2014. Our key volume drivers in film products will be the incremental volumes on the new flexible packaging line, as well as continued growth for surface protection and personal care materials, resulting in an overall compounded annual growth rate of 8% to 9%. We are targeting film products adjusted EBITDA margins to rise to the 17% to 18% range from just above 15% in 2014. This target reflects some downward pressure versus our original target of 18% from the impact of competitive pricing for our flexible packaging film and lower volumes. While slightly down from 2014, Bonnell's volumes should grow at a healthy compounded annual growth rate of approximately 5% to 6%. We expect growth in the nonresidential market to be in line with this target, along with mid-single digit growth in some of our non-construction markets. We project the continued ramp-up of automotive with the press at full capacity in 2016. The adjusted EBIT margin for Bonnell was 10.3% in 2014, exceeding our original target of 9% percent. As we move forward, we anticipate that Bonnell's EBITDA margin will be in the 10% to 11% range. As for Tredegar's return on invested capital performance, total Company returns came in at 5% and 8.5% for 2014, smack in the middle of our 2014 target range, largely as a result of the new capacity investments that came online during the year. With those capacity expansions projects finishing up, we expect return on invested capital to be in the 11% to 12% range in 2016. We are committed to our strategy, one that focuses on our manufacturing capabilities and innovation. We believe that the actions we've taken in executing this strategy will drive sustainable long-term growth, and we continue to look for opportunities to return capital to our shareholders. Our overarching objective is to create shareholder value, and Tredegar's management team is committed to doing just that. And with that, we'll take questions. Danielle, may we have the first question. Hi, <UNK>. This is Kevin. Thanks for your question. A couple of things. The $4.4 million number is the operational impact for film products. It's not a one-time non-recurring thing. There are some one-time adjustments for inventory that we will describe as roughly $2 million. We also expect that the spending that we had to improve the efficiencies in flexible packaging over the second half of the year were approximately $2 million that we don't expect to happen again in 2015. Well, we expected ---+ certainly we have $40 million in 2015. I don't think we project anything much beyond that. I mean our feeling is we'll ---+ if we have opportunities that require investments, we are comfortable doing that. But right now, if you look at the target for 2016, we don't require significant incremental investments beyond the $40 million range you see in 2015, to be honest. Yes, Taleo, and that is ---+ they used to be called IntelliJet. So it is the one of the same. You want to it is ---+ Kevin, do you want to answer it. Yes, the valuation we have on our balance sheet is, I believe, $39 million at year-end, and you can see the description of it on page 59 of our K. We basically do a number of cash flow projections, and we discount those cash flow projections and come to an estimated value for the Company. (multiple speakers) Just under 20%. Just 20%, yes. No. This is not considered in our ongoing operations. It's just (multiple speakers) Cash in was roughly $2 million in 2014 and (multiple speakers). Yes, about the same 2015. No, it's across the year. (multiple speakers) No, no. No, other issues there. Well, thanks for listening in, <UNK>. Appreciate it. Thanks, <UNK>. Great. Thank you, Danielle. Well, thanks, everyone, for joining in today, and we appreciate your continued interest in Tredegar. Have a good evening.

2015_TG

2017

YUM

YUM #As far as the 2019 target for EPS, obviously, there are some FX headwinds to that that are setting us back, but our interest rate has come in a little bit better than we expected. So there will be pluses and minuses as we go along the journey. And as far as our pressure on G&A, I am really pleased that the organization has embraced our effort to get more efficient and we are certainly looking for G&A efficiencies continuously as we go forward on this journey. But at this time, our long-term guidance remains the same. Obviously, our bold goal, <UNK>, as you know, is 7% system sales growth and as <UNK> outlined, we believe we can get to 2% to 3% same-store sales growth next year and 3% development. I think what's very clear is that we are much more focused on these two. So as I work with the leaders in the organization. I would say we've raised the awareness on the importance of net new unit growth, not just in the US, but outside. In that context, obviously, we had a very strong year at Taco Bell. Obviously, at KFC, in the US, we've been a net closer. I believe that by the time we get to the end of 2019, we will be a net builder of new units at KFC, so I think that will be a turnaround. We have signed significant development agreements with Pizza Hut International with a number of franchisees around the world. These are in the order of magnitude of 200 to 300 restaurants over like five years and I think that, on the KFC front, our ability to continue to penetrate in emerging markets you know remains. So I feel very good about our ability to continually grow our net new unit growth and I think there is an equal focus on same-store sales growth getting back to really understanding consumer insights, really getting to what makes the consumer different and really understanding that what we are delivering is a food experience, not just food. And I think all of that will help us enormously. So I feel confident that I think we probably grew system sales around 4% last year. We are [tithing] at least 5% this year and I think we are definitely on our way to delivering close to the bold goal of 7% by the end of 2019. Yeah, as far as the components of our journey to the 2019 EPS guidance, as we have said before, we are not going to get into specific details around sales guidance, for example, other than to just say the reasonable assumptions consistent with historical and our modest expectations for going forward. I will just remind everybody that share repurchases, things that are very much in our control make up the vast majority of this journey, which is why we have confidence in being able to hit the targets. And to answer the second question, I think there's really three things, <UNK>. I think the first one is we are much more focused as an organization. We are absolutely focused on driving same-store sales, net new unit and obviously shareholder returns. I think there's four areas that we are more focused in building distinct and relevant brands, obviously enhancing our franchise capability, this bold asset development and unrivaled culture and talent. And internally, even as we did the 2017 AOP, it was very clear across all the divisions that they are more focused on these four things, which we believe will ultimately lead to stronger system sales growth. I think the second thing is we are running the organizations really through what I call a global leadership team, so it's not just the Yum! executive team, but we meet monthly as a global leadership team, which is obviously the division CEOs and Presidents and I think the last meeting, which we had two weeks ago, they remain incredibly confident and optimistic about both 2017, as well as hitting all the three-year transformation plans. And then the last one is we are going to have our first global leadership conference in five years in about a month. This will be bringing the top 200 leaders of the organization together and essentially the core of this meeting is about how do we go from good to great. How do we go from growing 5% system sales and get to 7%. And my objective is to use those 200 leaders to essentially be co-authors of this growth because we are going to have to do things differently. We are going to have to be bolder and I want them to co-author that sort of how. I know they are excited about it and I believe that we will leave with everyone having absolutely clear clarity on what we are doing on the focus that we are changing and I think hopefully bolder and more courageous decisions that will get us from 4% to 5% system sales growth to the 7% number, which is our bold goal. Sure, <UNK>. So let me just say I think we did deliver 6% net new unit growth in Pizza Hut International last year and I know the team because of the development agreements we've already signed, very, very confident that we continue to grow net new units in the Pizza Hut world. There are some very good examples, as you mentioned, about what we are calling the repeatable model. So in Thailand, we've turned that business around. I think we've delivered at least 18% sales growth for three quarters in a row. We've obviously captured what we've done there and as I alluded to in my remarks, so taking that to Korea and Malaysia. I'm very excited about the master franchise agreement that we've done in Australia. The results in Australia have improved markedly. I happened to meet with the master franchisee when I was there in December. I'm very impressed and I think that you will see both stronger same-store sales growth, as well as, as I said in my remarks, the opportunistic ability to acquire another pizza company and transform those assets into Pizza Hut. So on the international side, I feel very good that we have captured the repeatable model, the things that work and that we have an accelerating net new unit model in place. In the US, I think it's very clear ---+ in fact, the way I look at it, I go back to what is the underpinning of why Taco Bell has had a pretty successful ten-year run and what is it that helped us turn around the US KFC business. I think it's really two things. It's the partnership and relationship we have with the franchisees and that then leading to an aligned long-term strategy. And so I think if I look at Taco Bell, I think our relationship with our franchisees is world-class and that enables us not to be in a week-to-week, month-to-month planning cycle, but to be really looking at the long term and have great sort of trajection. I think as I said on the KFC US turnaround, I think Jason Marker and the team, they've changed the relationship with the franchisees. On the basis of that change in the relationship, we've now got a much more long-term sort of strategic alignment. On the Pizza Hut side, I think the good news is I know that both the franchisees and us want to replicate the results of both Taco Bell and KFC. I think both sides recognize that we need to improve the relationship and out of that relationship will become hopefully a more long-term aligned strategy. So, while there are many things to do at Pizza Hut, as we have talked about, there's assets, there's technology, there's operating systems, there's communication, I think fundamentally when we get ourselves into an aligned long-term strategy that executes the plan ---+ we know we've got a plan ---+ then I believe we will start to see an improvement in Pizza Hut. So I remain positive that we can do this. We know what's got to get done and I do believe our franchise partners at Pizza Hut want to be successful just as much as we do. And on the refranchising question, of the 427 units that we sold in 2016, 195 of those were US Pizza Huts. So we have reduced our exposure to the US Pizza Hut business a little bit and certainly as we go forward, selling stores in Pizza Hut is part of our strategy along with the other brands, but I won't provide any more specifics on the go-forward plan, but we will update you as we move forward on that. Well, obviously, the Pizza Hut business is a delivery business and I think in the US, well, through delivery and carry out, more than 90% of the sales come from that now. So the other thing I'm really excited about is Roger's commitment to take KFC and make it more of a global delivery brand. As I said in the prepared remarks, we are already in 5000 stores doing delivery. Obviously, we have over 20,000 KFCs. The great thing about KFC is it is perfectly set up to be delivered. There is nothing better than a bucket of Original Recipe chicken in terms of a transportation vehicle, product that holds its heat, delivers well. So in that sense, I do believe and I know Roger believes that accelerating delivery is a key part of it. And on Taco Bell, obviously, <UNK> has started to roll out Taco Bell delivery. This product isn't as well set up to be delivered as the other two brands, but what is interesting is that when people want this product, they will have it delivered. I think we are already in about 400 stores in the US. It's not a huge part of the business at the moment for Taco Bell. I know that <UNK> and the team are committed to accelerating that. Where we do have delivery, particularly around college towns, it can actually be I think about 4% or 5% of sales, but still a long way to go. So to answer your question, we are focused on it. We really have to turn Pizza Hut into a delivery brand. We are still probably well-known as a dine-in brand, but the delivery brand is what we've got to change the consumer's perception. KFC, we are committed to growing delivery and we have a great product to deliver. And on Taco Bell, our customers want it; we just got to work at how we get it to them. So the answer is we are very focused on that and that will be one of the drivers of growth. The other thing I would add is that Taco Bell is actually in over 900 stores with delivery now and when you think about the Pizza Hut business, one of the challenges we have in the US is more than half the stores have dining rooms attached to them and aren't really ideally set up for delivery. So that is ---+ part of the journey at Pizza Hut is getting into more delivery-friendly assets over time. Here's what I will say on the G&A front. If you look at what we've released in 2016, it looks like G&A went up about $60 million, but the reality is, if you back out special, it went down about $50 million and that's before the effect of inflation. So we made some considerable progress on G&A in 2016. In 2017, we've got a different mix of refranchising and G&A cuts that collectively is going to provide this 1 to 2 point headwind, but we are certainly on track with the plans we had to get to the 2019 targets and we are going to make meaningful progress on G&A in 2017, similar to the progress that we made in 2016. No, we believe that is the right number. Obviously, there's uncertainty on that as we see potential changes in policy, but that is our current guidance. On Pizza Hut, hopefully, by the end of year, we will be at a single POS system in the US, which will help enormously. Internationally, we are looking at getting out of multiple POS systems down to maybe one or two, so that will help dramatically. Taco Bell is almost at a single POS and back-of-house system, which obviously sets them up for e-commerce, digital, social. And KFC is obviously also making progress to get to a more aligned one system. That will help us do things like loyalty, which obviously are critical and important in the marketplace. It sets us up to obviously drive a social agenda and I think all of that will lead to improved growth for the business going forward. Yes, I think obviously, Pizza Hut has got a very big digital ordering business today, but I think the opportunity for us to do loyalty and things like that will obviously happen once we get to this single POS system. Taco Bell already has mobile apps you can obviously order through. I think that business isn't large yet, but what it does do is actually make the brand a relevant brand, so it's one of those things where we may not be getting a lot of business from e-commerce on Taco Bell. It does actually reinforce that this is a millennial-centric brand. And then on KFC, yes, I think it's not going to happen anytime soon, but we definitely know we need to be in the loyalty business and so whether it is late this year, next year, that's probably more the timing that things will occur. First, on the margin question, good question and, yes, this is all consistent with the plan. Post the October investor and analyst event, we put a slide up that actually showed pro forma for the whole transformation to at least 98%, what our restaurant-level and EBITDA margins and EBIT margins would look like on a baseline of 2015. So if you look at that, you can actually see pretty explicitly where we think those margins can get to within a vacuum. On the other front, yes, as I said in my introductory comments, we are going to get you pro forma results for the new fiscal year and for China and we are shooting for early April, so that will be full quarterly just like I ---+ look, I've been in your shoes and I know what you are looking for and what will be most useful. It is coming. We are shooting for early April. Restated for everything. Yes. It obviously is ahead of our run rate. As I think I said earlier, the organization is much more focused on two things ---+ driving same-store sales and delivering net new units. So I think just the amount of time we are spending on what do we need to do in order to deliver that growth, as we alluded to obviously both KFC and Taco Bell took that Q4 momentum into Q1. We've got the launch of Georgia Gold. You've got the launch of Naked Chicken Chalupa and obviously we still got a lot of work to do on Pizza Hut. So with the plans that we put together for the AOP, I feel really good about the plans across the brands internationally and in the US. It's nice to go into the quarter with some momentum and I think this focus is really starting to pay off and I will be even more excited when we come out of the global management meeting and I've got the top 200 leaders to really help us think about what else can we do from a bold and courageous point of view in order to deliver even more same-store sales growth and even more net new unit growth. I'm really looking for to that meeting because there is nothing better than being asked to co-author your own future. I feel good about that; I feel good about the plans that the divisions presented in 2017 and now we've got to go and execute, which is what we've traditionally been very good at. Look, our performance will differ obviously across the three brands, so averaging 2% to 3%. I have expectations that maybe one brand will do better, one will do a little less and one will do about that number. So I'm not expecting every brand to deliver that. I think the brands that have got momentum, we can build on that and the brand that doesn't have momentum, we've got to do a lot of work. I sat down with the Pizza Hut US team yesterday. We were reviewing calendar changes for this year, which obviously they are working with the franchise community. So no one is sitting still either. If we are having success, we are trying to build on it. If we are not having success, we are acting quickly in order to change the trend. <UNK>, we don't have that number with us right now. Give me a call afterwards and we can discuss. I think the easiest answer is no. I'm not seeing any impact anywhere. There's obviously a lot of discussion and speculation, but I am not seeing any impact on our business in any country so far. On November 3, we filed an 8-K showing a pro forma end of 3Q balance sheet and cash flow statement for Yum!, excluding China. What you'll see is a lot of the cash you just referenced in the $2.99 billion related to China so we show you actually what it was excluding China as of the end of 3Q. Then if you do the walk from that number to what we show at the end of 4Q, largely that is one quarter of dividend and the share repurchases that were accomplished through the quarter as we outlined in our press release. Give me a call afterwards and we can clarify, but that should be all the pieces you need to get through the walk. That's what we have now. Long term in terms of cash needs, it's a little different now given the moving pieces related to refranchising. We still have some company-operated stores. We do not need $700 million as of now and we'd like to knock that down over time. Historically, we've been in the $600 million to $700 million range, including China, so it's less than that now. We will update you as we get closer to run rate at the end of the transformation, but definitely less than the $700 million we have now. As we said, we are monitoring all market and macro conditions constantly, trying to make the best decision and get to the optimal mix of interest rate, duration and flexibility. As we said, we are comfortable with our capital structure right now. If anything changes, we will communicate that in due course. Well, the good news, <UNK>, is that our [delco] model, our small box model, is a really good, economic model. The cash paybacks from building delcos is three years to four years on average. So we have a way to get out of those red roof restaurants that are holding us back. And by the way, not all of them are suboptimized for delivery. Some of them were built more recently. Some of our dine-in stores aren't even red roofs. They were built with the newer model. So there is a mix of assets there. But we do have an economic way to get into a better asset and Artie Starrs, the President of the Pizza Hut US business, is working with the franchisees on a plan to make that happen. And unlike a lot of transformations where you can introduce a new product overnight and it's a quick fix, this one takes a little bit of time. We also have a fast casual model, which we've talked about at previous investor meetings, which really plays into the current trend in the pizza category. We are seeing a lot of growth in fast casual. We've had a lot of success with that, albeit with a small number of units and the franchisees and the Pizza Hut management team are excited about it and using that as another option to get into an asset that's better positioned for delivery but also can add incremental sales through lunch dayparts in this fast casual model. I think, right now, we are obviously having a lot of discussions with the US franchisees, which Artie is leading. And I think until there's an outcome ---+ as I said earlier, I think the great thing is that the US Pizza Hut franchisees as much as we do want to obviously turn the performance around and be more like KFC and Taco Bell in the US. They understand that it's going to require a partnership. They understand it's going to require long-term strategic alignment and I think how that plays out in terms of what both sides do in order to build that relationship and get ourselves strategically aligned, that is sort of a work in progress, but I am very confident both sides want to obviously get to a better place and get this brand back into growth. Thanks, everybody, for being on the call. I guess for me 2016 was a landmark year. We successfully spun off Yum! China, we launched this multiyear transformation plan and we returned $6.2 billion to shareholders. I'm very pleased with the results and a solid end to what I think was an extraordinary year. Core operating profit increased 27% in the quarter and 13% for the year, obviously exceeding our guidance. I remain very confident in our three-year plan. There is no change to our long-term guidance and I'm encouraged by the early progress we are doing to unlock growth through this focus four growth drivers. We are off to a running start. I think we can accelerate growth, reduce volatility and increase capital return to shareholders. So I guess in summary I'm very excited about the future of Yum! and I think we represent an extremely compelling growth story and one that investors I hope will buy into. So thanks for being on the call. Thanks for coming out in the horrible weather and we look forward to speaking to you all very soon. Thanks again.

2017_YUM

2016

GD

GD #Good morning, <UNK>. So, let me talk about revenue. As we noted before we reduced the G50 ---+ G550 rate for the fourth quarter. We had less pre-owned revenue than anticipated and somewhat less than anticipated service revenue. But Gulfstream was up and their backlog was up. Jet was down 5% in revenue, and that was mixed driven as we increased our engineering work in anticipation of the production work that we're starting this year. And we had lower FPO revenue because of fuel prices. We also had reduced business jet completions in St. Louis. So that sort of ties the bow on revenue. In margins, it's the same old stuff we always get, right. We had some of the usual suspects. We had a mix shifts, we had liquidated damages, launch assistant, and by the way you quite rightly point out we had improved margins in the 650. So we anticipate roughly comparable margins. Those aren't what we are leading you to, guiding you to ---+ are not sufficient or significant, material degradations in the margin rate. But what we are focused on and have been laser focused on and have been telling our investors for some time, we are going to keep earnings flat. And that's what we signed up for and we see the path forward to clearly do that. Okay let me talk a little bit about the book-to-bill. With the exception of the fourth quarter, the 2014 and 2015, our IS&T book-to-bill has been approximately 1 to 1 every other quarter in both years. Q4 in those lines of businesses tends to be more of an issue, timing issue, than anything else. And we expect book-to-bill for 2016 about 1 to 1. These are businesses that are performing extremely well and winning more than their fair share based on their ability to increase their operating leverage by decreasing costs. And their performance has been outstanding. So, it's more of the same for them going forward. Ruthless dedication to cost-cutting, operating performance, must perform on that backlog and that then quite nicely leads to the kinds of book-to-bill that we've seen in these businesses. So I see that as more goodness to come. Well, they are different margin businesses. Mission Systems tends to be more heavily product oriented in nature and product tends to carry higher margins. Our IT businesses is services, services have lower margins but like I like to tell everybody they got great cash performance. In fact, by the way, both of those businesses have had great cash performance and with our services business, terrific return on invested capital because there is no invested capital. Think about our information, our IT services businesses. When they go to market, they go to market in their core. And they are very competitive in their core, both through past performance and cost competitiveness. So I like where they're positioned and that hasn't changed for us. They continue to win and they're a big dog in the barnyard. Not to mix too many metaphors. Let me answer that in the inverse order. We have seen and don't anticipate seeing any impact from the planes that are in the used market. It really hasn't impacted us at all because the guidance of the demand for that airplane has been and we believe will continue to be very, very wholesome. Despite taking up our production rates slightly, we are still at first quarter 2018, first available. So that tells you that is a strong, sustainable backlog for a very powerful airplane. So yes, let me talk about all three of those businesses and give you a little bit of color. We have the ---+ achieved a very significant agreement with our partners, our workforce in Maine at Bath that will allow Bath to be increasingly competitive going forward in all of its competitions. We're very proud of our workforce there and we are very optimistic about our ability to compete on a going forward basis. So I like what I see at Bath. And by the way it announced on the DDG-1000 the first one is 98% done so almost out the door, second one is 84% done and again with the kinds of issues that you might expect on first of class ships, but nothing that has been particularly surprising to us. The third ship I think is only about 40% done but it has a deck house that we entirely designed and built, so that reduces the risk going forward. So I see the future for Bath very nice. At NASSCO, we are continuing to work off the backlog of Jones Act ships as you quite rightly point out. There is, we believe, significant demand going forward because of the age of the fleet that has to be replaced for more Jones Act ships. Our experience in the Jones Act market is it's highly lumpy and ---+ but there is demand out there and because of NASSCO's performance. And because of it's good cost structure, they have been very competitive in their Jones Act competition and won a nice backlog and we continue to believe we're going to add to that backlog. Their service business has been performing very, very nicely. The Navy is, what we believe quite rightly, moving to fixed-price service contracts. And we know how to work those and we been working closely with our Navy customers. So we like what we see in service, particularly out west in San Diego. A little bit of lightness in Norfolk area as the Navy re-jiggers some of its home porting of major ships, but we anticipate service to grow reasonably well at ---+ on the surface ship side. Single-digit, low single-digit, with a nice operating performance. We also anticipate additional submarine service at electric boat. Nothing too significant but again right in our sweet spot. Then again at electric boat we still have to worry about Virginia and Ohio, right. I think a once over of that entire portfolio. Sure. Let me have <UNK> answer the first part of your question on pension. Sure. <UNK>, if I understand your question, you're talking about the walk forward on EPS from 2015 to 2016. Really when you think about our pension, our pension plans and our accounting for those plants especially in the defense businesses, that is a muted effect in EPS, so really it's just isolated with the commercial pension side which had a negligible effect so I haven't calculated it, but it's nothing that would be materially---+ There you go. So, let's talk about the businesses. On a going forward basis, we anticipate the IS&T group to be at around a 10% margin business. That may vary from quarter to quarter or year to year depending on how much revenue the service business brings in, but for our foreseeable future that's about a 10% business. Combat we see in the mid-15%, 15.5%, pretty steady Eddie. We may have, and we do I believe, have margin expansion opportunity at the platform businesses but remember that will be somewhat offset by the short cycle business of OTS which we had terrific margins out of that business after we consolidated two units in 2014. With all things defense some of that business needs to go back to our customer, quite appropriately so, so that will cause some margin compression for them. But from right now what we are planning for, for Combat, steady-state, 15%, 15.5% margin we will of course try for higher. And then the Marine group will be a 9.5% to 10% margin business depending on mix. We talked about before, performance at shipyards is all about ---+ well-performing shipyards is all about the mix and we got a number of mix shift issues which we kind of articulated. So I think that gives you a sense of how we see our business going forward. Let me talk a little about the reduction and I'll turn it over to <UNK>. We've been talking for the last year or so about this transition period from moving from the 450, 550 to [500 and 600] ---+ we'll, we're in it now, and quite appropriately you would expect us to size for that. So our headcount reductions were all about sizing appropriately for the ---+ what we see in terms of revenue. And our promise to keep margins ---+ keep earnings flat year-over-year. So we did some pruning. Headcount reductions were just part of our cost cutting effort as we improved our operating performance, took a fair amount of overhead out and touched labor and we'll continue to do so on a going forward basis. So on the R&D question, as you can imagine the pace of that will sort of fall the cadence of the flight test programs, so we expect that to pick up modestly in the next year and a little bit more in 2017 as we continue through that program, but I say modestly and materially still well within the range of our normal collar that we normally expect R&D to flow in. Your question around the launch assistance payments, they'll continue to flow. I don't have the exact schedule of that but it will cause that quarterly amount to be lumpy as it has always been and we will report that to you when it gets sort of out of line, but expect net-net sort of modest immaterial growth in R&D next year and then again the following year. Hi. So I think consistent with the position we've held in the past is levering up really is not something we are interested in particularly as it relates to our current capital deployment approach of share repurchase and dividends. Incurring debt for the proper long-term strategic opportunity is certainly out there, but that's something we'll continue to hold us dry powder until that type of opportunity shows up. And Abigail I think we have time for one more question. So Fed IT, I think what you are saying is what we anticipated seeing the same players just with new t-shirts on in the brand. In the pipeline it is what it has been and I think to <UNK>'s point it has always been our view that if we found something attractive and very accretive we would lever up for it, but we haven't been there and we don't see that as we stand at the moment. I don't think anything is fundamentally changed in the broader portfolio defense and Aerospace portfolio. Service a little bit but that, I gave you my view of that. Thank you for joining us on our call today. If you have any additional questions, <UNK> can be reached at 703-876-3583. Have a great day.

2016_GD

2017

CMI

CMI #Thank you, <UNK> I'll start with a summary of our second-quarter results and finish with a discussion of our outlook for 2017. Pat will then take you through more details of both our second-quarter financial performance and our forecast for the year Revenues for the second quarter of 2017 were $5.1 billion, an increase of 12% compared to the second quarter of 2016, due to stronger demand for trucks and construction equipment in North America and China and improving orders from customers in mining and oil and gas markets EBIT was $620 million or 12.2% compared to $591 million or 13.1% a year ago EBIT decreased as a percentage of sales and was below our own expectations primarily due to higher warranty costs Variable compensation costs also increased both year-over-year and versus the first quarter as a result of our improved outlook for full-year earnings Warranty costs were 3.7% of sales in the second quarter, up from 2.2% a year ago Two unrelated issues caused most of the increase In our Power Systems segment, engine testing at our manufacturing plant identified a component quality issue that may impact engine performance Although no performance issues have yet occurred in the field, we are taking actions to protect our customers and we record a $31 million charge to reflect the estimated costs of the campaign Secondly, we experienced higher warranty claims associated with late light components in on-highway applications in North America that caused us to increase our warranty reserve by $36 million for products delivered in 2012 and 2013. This additional charge primarily impacted the Components segment We've made significant improvements to the quality of our products and especially in our new product launches Cummins' products are performing at record levels of reliability and our market share reflects that strong performance On the other hand, the complexity of our products has increased significantly to meet tough emissions regulations Customer expectations have also increased and the environments where our products are used are more demanding than ever Thus, we are redoubling our efforts on improving product quality and developing new techniques using telematics and Big Data to complement our existing quality tools We expect to resolve the specific quality issues we experienced this quarter quickly and we expect warranty costs to decline as a percent of sales by 50 basis points in the second half of the year Engine business sales increased by 15% in the second quarter compared to a year ago due to higher industry truck production and growth in our market share We also experienced strong growth in demand from construction OEMs in China and North America EBIT for the quarter was 12% compared to 10.3% for the same period in 2016. Benefits from higher volumes and stronger joint venture earnings in China and the absence of a loss contingency charge recorded a year ago more than offset higher variable costs and warranty costs Sales for the Distribution segment increased by 12% year-over-year, resulting from 6% organic growth, net of currency, and an additional 6% increase resulting from the acquisition of a last remaining distributor joint venture in North America in the fourth quarter of last year Stronger parts and service revenues in oil and gas and mining markets in North America and higher parts sales in China drove the improvement in organic revenues Second-quarter EBIT was 5.6%, flat compared to the second quarter of 2016, as the benefit of higher sales were offset by higher variable compensation costs Second-quarter revenues for the Components segment increased by 14% International revenues increased by 25% due to strong growth in truck demand in China and the sale of new products in India to meet the broad Stage IV emissions regulations introduced in April this year EBIT for the second quarter was 13.1% compared to 14.9% in the same quarter a year ago The benefit of the higher volumes and material cost-reduction programs were more than offset by the increase in warranty costs that I discussed earlier Power Systems sales increased by 10% in the second quarter, primarily driven by an increase in engine and parts sales to mining and oil and gas customers EBIT in the second quarter was 6% compared to 9.8% a year ago The primary driver of the lower EBIT margin was the accrual for the estimated cost of the quality campaign The business also experienced an increase in commodity costs and higher variable compensation costs associated with the company's improved outlook for the full year Excluding the campaign and some additional one-time costs, the business is operating at approximately 10% EBIT margin With improving market conditions in some key markets and the benefits of our UK manufacturing restructuring still to come in 2018, we are confident that we will see a significant step-up in profitability in the coming quarters Now, I will comment on the performance in some of our key markets for the second quarter of 2017, starting with North America and then I will comment on some of our largest international markets Our revenues in North America improved 13% in the second quarter, primarily due to higher levels of industry production and increased market share in on-highway markets We also experienced growth in sales of engines and parts to customers in construction, oil and gas and mining markets Industry production of North American heavy-duty trucks increased 4% in the second quarter of 2017, while sales of our heavy-duty engines increased 16% due to higher market share at 32%, up from 29% a year ago Production of medium-duty trucks increased 15% in the second quarter, while our engine shipments increased 27% as our market share improved 600 basis points reaching nearly 80% in the quarter Total shipments to our North American pickup truck customers increased 6% compared to a year ago due to strong demand from FCA Engine sales for construction equipment in North America increased 31% in the second quarter, compared to a weak quarter a year ago with some OEMs optimistic about the prospects for increased infrastructure investment Sales of engine shipments to high-horsepower markets in North America increased 147% compared to a very weak quarter a year ago, driven by higher sales to oil and gas customers Revenues for power generation showed little change from weak levels a year ago with shipments of mobile generators for recreational vehicles helping to offset lower military sales Our international revenues increased by 11% in the second quarter of 2017 compared to a year ago Second-quarter revenues in China, including joint ventures, were $1.2 billion, an increase of 28% due to continued strength in truck and construction markets Industry demand for medium and heavy-duty trucks in China increased by 46% compared to a year ago and our market share for the quarter was 14%, slightly below the level a year ago, reflecting a mix shift in industry sales to dump trucks in which we have a lower share of the market today Penetration of our products with our key OEM customers remains very strong Shipments of our light-duty engines in China increased by 35%, above the overall increase in the market of 10% Our market share rose by 150 basis points from a year ago to more than 8% as we continued to displace local competitors from Foton's vehicle lineup Chinese industry demand for excavators in the second quarter increased 102% from a year ago, reflecting a rebound in construction activity Our shipment of engines to construction customers across all equipment categories increased 125% Revenues for our Power Systems business in China increased 4% due to higher demand from mining and rail customers Second-quarter revenues in India, including joint ventures, were $431 million, a 5% increase from the second quarter a year ago Revenues for power generation equipment increased 6% and sales of construction engines increased 25%, reflecting growing investment in infrastructure Industry production of trucks in India decreased 25% year-over-year, following the introduction of the Bharat Stage IV emissions regs in April In Brazil, our revenues increased by 16%, primarily due to an increase in truck production in the quarter and the appreciation of the Brazilian real Now, let me provide our overall outlook for 2017 and then comment on individual regions and end-markets We are now forecasting total company revenues for 2017 to be up 9% to 11%, higher than our previous projection of up 4% to 7%, due to stronger demand in on-highway and construction markets in both North America and China and improving orders from global mining customers We've raised our forecast for industry production of heavy-duty trucks in North America to 205,000 units, up 2% compared to 2016 and above our prior forecast of 195,000 units We expect our market share to be above the midpoint of our prior projection of 29% to 32% In the medium-duty truck market, we've raised our outlook for the market size to 115,000 units, an increase of 6% compared to 2016 and 2% higher than our previous forecast We now expect our market share to be at the top-end of our prior forecast of 73% to 75% Consumer demand for pickup trucks in North America remains strong with our full-year shipments of engines expected to increase 5%, above our previous projection of 1% growth In China, we expect full-year domestic revenues, including joint ventures, to grow 26% compared to our previous projection of a 3% increase Revenues for the second half of the year are expected to decline by approximately 20% compared to the first half, reflecting an easing in demand for trucks and typical seasonality in construction markets Industry sales of medium and heavy-duty trucks are expected to reach 1.25 million units, a 28% increase from last year and higher than our previous forecast of 1 million units, driven in part by demand resulting from the introduction of regulations last year, aiming at curbing overloading We expect truck market to grow 3% in 2017, unchanged from our previous guidance Our market share in the medium and heavy-duty truck market in China is expected to be 15%, flat with 2016. And in light-duty, we expect our share to exceed 8%, up from 7% in 2016. We currently project revenue from all off-highway markets in China to grow by 15% to 20%, up from our previous guidance of 10% to 15% In India, we expect total revenues, including joint ventures, to be flat to up 3% year-over-year with a 5% increase in off-highway demand and growth from new product sales in our Components business, partially offset by a 12% decline in truck production In Brazil, full-year truck production is projected to increase 10% in 2017 compared to a very weak 2016, when the industry experienced the lowest level of truck production in more than a decade We expect our global high-horsepower engine shipments to increase more than 30%, up from our prior forecast of 10% to 15% growth, as demand from mining customers continues to strengthen Engine demand from oil and gas customers in North America has exceeded our previous expectations for this year, although visibility into 2018 remains limited In summary, we've raised our full-year outlook for sales to increase 9% to 11% We've maintained our forecast for EBIT to be in the range of 11.75% to 12.5% Comparing second half to first half performance, we expect lower warranty costs in the second half of the year balanced with weaker demand in China, targeted investments in critical new technologies and some risk from higher commodity costs With improving demand in a number of important markets, our leading market share and strong operating performance, we remain very confident in the future earnings power of our business During the quarter, we returned $241 million in cash to shareholders in the form of dividends and share repurchases and also announced a 5.4% increase in our quarterly cash dividend, consistent with our plans to return 50% of operating cash flow to shareholders in 2017. Finally, we announced earlier today that we have formally closed our deal with Eaton to form the Eaton Cummins Automated Transmission's joint venture We are excited about working with a capable partner to offer customers leading technology in both automated transmissions and now fully-integrated powertrains Rising demand for automated transmissions around the world should drive growth for the joint venture and opportunities for our customers and partners Now, let me turn it over to Pat Yeah, that's right I mean the variable compensation cost thing does normalize What we have is when we are performing worse than planned because markets negatively surprise us, we have lower variable compensation costs, which bolster our financials And when things bounce up faster than we expected, the reverse occurs But in the end, they work themselves out So, I just agree with Pat's point of view, we feel like the earnings power of the company remains the same and we still think 20% incremental margins is what we're capable of and what we're demonstrating when we pull out these kind of one-time or unusual period costs So, we feel just as strong as we ever did about that That's great I'll take that one, <UNK>, and let me start with the second question first As I mentioned in my remarks, we've made a lot of improvement in quality, especially related to new product launches and that has dramatically improved the liability of products over the last several years and our products are performing well in the market as a result of that But also, as I mentioned, the complexity of the products continues to increase There are many new markets like China and other markets where the use of the products is really demanding and used in various ways And so, what we're trying to do is utilize the benefits of data we're getting from our telematics system to begin to use new methods to improve quality of products, both at launch, but also in longer mileage situations Because, again, expectations of performance of these products over sustained periods of time have gone up by customers I think that's normal for every industry So, we've got to have the ability to maintain quality over a long period of time and, again, over multiple owners and multiple applications So, that's why we're using a lot of this new data with new techniques to mine that data and make – correlate that data with how products perform in the field So, again, this is not new We've been working on that for some time, but we now have some pretty useful tools we think we can apply to our quality efforts and we need to do that That's what I was mentioning in my remarks With regard to supplier recovery, it is an area of focus for us And in the specific quality issues we have in the second quarter, we do think there're some potential for supplier recovery, but right now, what we're focused on is improving the situation for customers, making sure there's no negative impact on customers, getting the products right Again, we just feel like we're in a really strong position with our products in terms of how they're performing And, of course, that's shown up in market share So, we want to make sure we get that right, get the issues behind us and move on and then we'll deal with the supplier recovery issues Mining seems to be demonstrating a more sustainable improvement path We have more visibility to it also based on the number of OEMs we serve and our participation in the market, we have more visibility Again, right now, we don't have long visibility in mining We don't know where it reaches relative to previous peaks or anything, but it looks like it's on a relatively sustained recovery And, of course, we're experiencing some of the reasons for that in our commodity costs We're seeing higher commodity costs coming in as costs which again says that that's more favorable conditions for mining So, we're seeing some benefit on revenue and some hit on costs On the oil and gas side, I'd say we don't see that First of all, we have less visibility, but secondly in fact, we're seeing and hearing more conservatism in that market We saw a lot of rebuilds, a lot of redeployment of products, but we didn't see so much new equipment being built and going out in the markets And what we're hearing is that people wanted to get things redeployed, but there's not a lot of growth in equipment yet It doesn't mean it won't come, but right now, I think the market's kind of leveling off at best is kind of what we're hearing Again, there's other people that may be closer and be able to give you more data, but that's what we're hearing And then, just (34:35) mining is about five to six times the size of our oil and gas business, even on current depressed levels Yeah I've actually heard that question a fair number of times too And we will, by the way, be talking at our Analyst Day a lot more about our electrification efforts, including kind of what parts we intend to participate in But clearly, we don't know yet I mean there's essentially none sold and those that are sold are ones and twos and they're prototypes So, we don't really know what the profitability's going to be like But let me just say two or three words about how we're thinking about it We believe that the segments in the market that we serve, some will find electrified powertrains to be advantageous in the next 5 or 10 years, some will not And so, we don't think that all the markets are going to move We think they're going to move in phases and some will move relatively soon to at least try some And bus is what you mentioned, it's one of the areas that we'll see some activity in buses relatively soon and that we intend to provide a fully electrified powertrain as well as hybrid or range-extended powertrains, we also intend to electrify some of the auxiliaries on our diesel engines and natural gas engines So, we will be active in the market and we will approach the problem in the same way that we've approached other power solutions problems We'll look from the customers' lens, try to figure out what their application is and figure out what the best technology to serve them is In order to ensure profitability in those efforts, we'll make sure that we have a leading position, which means our technology provides customers with monetary advantage So, they get fuel economy benefits, they get cost reductions, they get other things of value to them, because that's how we maintain profitability I don't think one technology is necessarily more or less profitable than the other What creates profitability is advantage for customers and advantage versus competitors and that's what we're going to see Hi, <UNK> It's worth saying that we are not recalibrating our target at all, <UNK> We are adding new tools to get to our target, but we still believe that we can reduce warranty costs significantly from where we are and do it in a way that improves customer performance and customer experience So, that's what we're targeting So, we haven't changed and we still see the same kind of targets in reach that we did before, because we made improvement on our prior efforts So, we kind of took away a lot of challenges and now we're facing new challenges I think that's just part of being in a competitive industry Thanks, <UNK> So, let me start with the last one, because I think that's one we've talked about a couple times The answer is that there has been some conversation with WABCO Of course, we've paid close attention to that We have continued with the same strategy on M&A and – sorry, it may sound a little boring, but same strategy we laid out at the investor conference, which is that we are going to be disciplined about ways to add value through both making sure that it drives profitable growth for the company and does so in a way where we can demonstrate returns over time And that, of course, means that not only do we have to find – have a strategy that makes one plus one equals three It means, if we acquire something, it has to add up to something more than just the combination of the two things And, secondly, we have to be able to do it at a cost to generate returns for our shareholders And so, that's – as you get, that's a challenge Having said that, we've been working on it for some time We have some very good prospects We are actively working on those We feel confident that we will be able to make positive moves in the M&A and joint venture front, which will add value to the company The size of that will depend on which of our projects succeed, so – how big each one is Frankly, we are not trying to make sure that we have a big one We're trying to make sure that the combination of our organic growth, our joint ventures and partnerships and our acquisitions add up to profitable growth and returns for our shareholders And so, whether that's in several acquisitions and joint ventures or in one or two is really not our main focus So, it is a challenging environment As it turns out, it's no easier to grow in a profitable high-return way through acquisition than it is organically They both take a lot of effort and serious-minded work and that's the way we're approaching it, but let me now switch over Pat, I think you wanted to say a couple words about the incrementals And I think, <UNK>, you asked too, have we changed our outlook on investment in critical technologies There's no question that we are speeding up some of our investments in both electrification and digital accelerators, the sort of telematics effort We talked about those earlier We are definitely speeding up efforts And the reason we're doing that is we're noting that in some of the shorter-distance markets, the urban markets, there is significant interest from our customers in electrified powertrains and, again, not for gigantic volumes this year, obviously, but it's going to take us some time to get a product range out and ready and we've heard from them and people are interested So, we are trying to make sure that our efforts are aggressive enough to make sure we meet customer demand there So, that's what's happening It's not a huge amount as Pat said, but it is an increase from what we were anticipating With regard to the large – go ahead, you want to talk about large engine markets, just I'll close that and then you can follow up on that So, on large engines, we are feeling pretty confident about the mining growth, as the earlier question said, oil and gas, we don't see a lot of – we're not expecting a lot of growth in the second half, but we are seeing continued strength in mining, which gives us confidence that we'll continue to see some sales growth in the large engine markets and incremental margins there have been good as we mentioned I mean we had some issues in the second quarter that we think were one-off related, but with regard to engine growth and incremental margins, we're feeling good about that <UNK> - Credit Suisse Securities (USA) LLC Okay But I think it's fair to say that from a power gen point of view, we would not yet say we're at the bottom and stabilizing It could be, but we're really looking for some quarter-to-quarter stabilization infrastructure building rates and things like that around the world before we would say okay, now I think we expect things to consistently get better A couple of times we thought we were at the bottom and stabilizing and then things got a little bit worse So, I guess, we'd like to see a few more quarters in the power gen space to say that Good morning, <UNK> Well, again, we'll spend a fair bit of our time on this in the Analyst Day in Indianapolis I hope you can join us for that So, given the time, I'll make my remarks brief Let me just say that I think both autonomous vehicles if we mean not fully autonomous, but using autonomous technologies are certainly going to be a reality in the trucking market So, just as we've seen in car markets, we'll see safety systems come in very quickly and already we're starting to see those and those will increase and offer more, more opportunities for customers in places like yards and ports and places where they want to control how vehicles move around Those could provide significant value to customers Over what period of time those will become economically viable and how many customers will buy them, that's sort of the charge ahead But you know just by the investments that people are making in the truck market that, that technology is moving and people are definitely going to find ways to implement that technology and to try to figure out how to add value for customers I think the same is true on electrified powertrains What an electrified power train looks like in different applications, as I mentioned earlier, remains to be seen, but it'll be driven by how the customer can best operate their applications So, in places where things go out and back in relatively limited miles, carry loads that are not so heavy, then things like fully electrified or range-extended electrified make sense and especially in urban environments where they're trying to reduce noise, pollution and fueling So, those are all things that they care about Electrified powertrains can provide a solution that meets multiple objectives And I believe that cities will be pushing for solutions like that, which will mean they'll show up in those areas And I think it'll happen In five years or so, we'll start to see some of those buses and pickup and delivery vehicles with electrified powertrains The question is how many and how many cities really can afford to replace that many of the fleet, that will depend a lot – on a lot of different factors But – so, I think it's coming, both of these technologies are coming and it will be while we're still sitting here working on it The question is, in what volume and how many applications and a lot of that is playing out right now As you heard from me, Cummins intends to be in the middle of those technologies, especially electrified powertrains, because we think we understand customer applications It's a great question, <UNK> Anyhow, there's many, but let me just put the one out there, which is that infrastructure takes a long time to build So, the more that your technology depends on common infrastructure or things like it, the less likely it is to occur quickly The more that local infrastructure or a customer base, customer purchases can allow you to use the technology, the more likely it is to succeed at least in the shorter timeframe Good morning, Andy Thanks, Andy Hi, Steve I mean, that's the idea We set a plan out, which is based on what we think we can achieve and guidance we give, we set a plan out and if we end up with that plan and that that pays out at a 1.0 (55:53) and that's what we put in plans so everything is as expected If it's stronger, then we pay out more, and if it's weaker, we pay out less So, to your point, we reset each year and assuming we hit to the plan in 2018, it would be 1.0 (56:06) Again, the surprise here is that sales growth happened faster than we thought, just as it surprised last year when things were lower than we thought No, I always want to be paying out what we planned Yeah, I mean, we don't know that yet, but that's the way it's leaning I mean, again what we're trying to do is make sure that we can deliver to customers on two broad new technology areas One is to deliver much more value in telematics and other services that go along with engines and the vehicles that they operate and secondly, to be able to make sure that we can be in the market in 2019 and across at least several applications in 2020 with electrified powertrains and range-extended powertrains So, we will need to increase investments, especially in the electrified powertrains space over the course of the year How much that is year-over-year, we'll see, but that is a reasonable expectation those costs will ramp up And, again, we're looking at how we structure that business to make sure that it looks like a long-term growth opportunity for Cummins' shareholders Here is my view, it's not clear how big a deal it would be and I think we've talked a little bit about some of the reasons and again we'll talk more in November about that, but it clearly depends on how many of the customers these technologies actually give them a better deal And, right now, it's pretty clear that in some buses, it could There's a whole bunch of other markets where it's not clear yet, especially because diesel continues to improve, electrified trucks with diesel engines continue to improve, light hybrids continue to improve So, there's a lot of technologies competing for the same space And then – and I think you can expect from us that we will be all-in in the sense that we will lead in technology We will not be all-in in the sense that we will not be building infrastructure We will not be betting on one technology We'll be betting to serve customers better than others with the range of technologies where the best one is what they need Same return guidelines we use for everything, though

2017_CMI

2016

DY

DY #I'm not sure there's a disconnect with all investors and the way we see the length of the cycle. We see it the way our customers articulate it. So, when we have a customer, a major customer, who says it's a 10-year initiative, we believe them. When we have another customer and all the Connect America Fund work that says it's through 2020, we believe them. When we see backlog that's almost doubled year over year, and that's all the result of customer awards, and those awards go into the next decade, we think this is a long cycle. And I think it was encouraging this quarter, for example, to see Verizon announce the expansion of Fios in Boston when you consider that they announced a six-year program, which at the end of it we will have been doing Fios for them for literally 18 years. So, that's about as long a cycle as I think you can see in a technology-based network business. <UNK>, there's a mix of customers, and when you have this kind of growth, and you have a quarter that's back-end loaded, it's going to be difficult to build April's production in April. So, once again, as we've discussed this before, we're very confident that our procedures are consistent, consistently applied. And as you can see, the DSO, even though the seasonal impact was a challenge, actually came down. <UNK>, I'll just talk generally about the difference between, say, fiber to the node and vectoring technologies or improvements to the copper versus fiber. We play a major role in both. There are upgrades not only to the electronic DSLAMs but also improvements to the existing copper facilities. So, not only have we done it in the past but we're doing it currently and we look at that as a nice opportunity. With respect to CAF and fixed wireless, we are engaged with one customer who's a major wireless carrier. All of the other opportunities that we're seeing with respect to CAF are traditional fiber deployments and new DSLAM installations. If you don't have the spectrum and you don't have a wireless network, it seems unlikely that somebody would develop one simply to just do CAF work. And we've not seen any evidence that's the case, but could change. And then I think on free cash flow, we're growing the business and having very high returns on capital. Our leverage is coming down on a gross basis. And as long as our customers want us to grow and we're earning high returns on equity, we're happy to support them. Now, that doesn't mean that we can't do a better job of collecting and invoicing, but at the same hand, we're not going to, in a business where we are actually deleveraging and are earning high returns on equity, we're not going to let that influence our investment plans. <UNK>, the first thing I would tell you is, from the Company's perspective, we don't think about backlog quarterly. These are long-term agreements. They have renewal options, in some instances we have a long history of successfully renewing these contracts. So, remember, the way we value backlog, where we're looking to trailing revenues to value the remaining term under the contract, I'd probably argue that backlog, given our growth rate right now, in some hypothetical sense is probably understated. So, as we continue to grow, the backlog will come up as it gets revalued. But when we have master contracts that have a fixed term, when you get to the end of the term, there's no backlog left, that doesn't mean there's no growth or no revenue, it just means you have to renew the contract. So, I think there's still plenty of opportunities for us to book new business, but there is going to be this renewal cycle that we go through where there may be a period of time where backlog is flat. The best example ---+ and I'm looking at the schedule ---+ is last year, from the second quarter of 2015 to the third quarter, so from February to April, backlog went down $70 million. How good of an indicator was that as to our growth rate over the next four quarters. Zero. So, that's how we think about backlog. Master is another long-term contract, <UNK>, is 80%, pretty much like it's always been ---+ 80%, 81%, 82%. No change. Yes, thanks, <UNK>. For the customer split, telco was at 64.7%, cable was 25.9%, facility locating was 5.8%, and electrical and other was 3.6%. <UNK>, as long as we see solid investment opportunity with high returns on equity, we're going to continue to invest. This was a big year but there are also some pretty substantial opportunities in front of us. Just under $40 million, <UNK>. We don't have a large business in that industry. It's significant, it's a good business. So, I don't know how much you can read from our results to the broader industry. I would just tell you that our folks have had some good opportunities that we've executed well against. So, that business is growing and we expect it to grow, based on what we know today, through the balance of the calendar year. <UNK>, I'd just say, generally, when you have an industry environment that's as robust as it is today, and we've got big customers with big programs, they're not all going to be marching in cadence quarter to quarter. There's going to be times where there's surges and consolidations. That's just the way these industry expansions have worked, in my experience. So, I don't know that there's anything broad to read into an individual customer's activity quarter to quarter in a short-term period. We won't break out individual legal matters. I think what I'd have to say, and our comments on this call are limited, but I think it's important that we make clear why we filed the lawsuit. This August, I'll have been President of the Company for 20 years, and in that period of time, those 20 years, we bought 38 businesses. In every one of those transactions, sellers made promises to us about how they'd behave after the deals were closed. 37 out of 38 times the sellers kept their promise. Here they haven't. So, the lawsuit is just simply to insure that the Dycom and the shareholders get what Quanta promised when we entered the 2012 deal. That's really all we have to say. <UNK>, the way I've always thought about growth in the industry, and I think it's played out this way a number of times, we're deleveraging the business as we grow EBITDA. The operating cash flow will have uses and then seasonal flows back out. And I think as long as you're going to grow at the rate that we are, I think the right way to think about it is not necessarily cash flow from operating activities. Once again, we're always working on getting better at collections and managing our expenses. But think about what the investment was in the business to produce organically $600 million worth of growth. And this is very low EBITDA multiple growth. So, that's the way we think about the investment cycle. And we are very confident that we'll manage operating cash flow. As I just alluded to, I've been doing this for a long time. If you can take out almost 40% of your equity, keep your leverage at two times, you must know how to manage the operating cash flow or you couldn't accomplish those things. I think as opportunity presents itself, <UNK>, there are always opportunities to grow our customer relationships on small regional basis, so we're always going to look at those kinds of transactions. There are some good smaller businesses out there that we can look at, and we'll look at larger businesses as they become available. As your EBITDA margins are going up, and the incremental is generally non-cash expense, other than the investments you make, as that stream of cash keeps coming in and those investments at least at some level will level off, you'll generate a lot of cash and you'll have a lot of earnings. Let's start with, in the last year we've signed a six-year contract with Verizon for essentially the entire East Coast. We've signed three-year extensions with CenturyLink that cover 24 states. And I guess it ought to be self-evident that the customers see value in us in a long-term relationship or backlog probably wouldn't have doubled and the duration doubled in the last 12 months. I don't know how to deal with the perception that doesn't look to the actual performance of the business. With respect to wireless, <UNK>, we are doing DAS, we are doing some small cell, but the bulk of the growth that we saw has really been around macro cells, carrier adds and other improvements to that network. Once again, it's a substantial business but it's not so large that it may not be an outlier, although our folks are pretty confident in their outlook for the next 12, 18 months in that business. And that is a business where there is some fair visibility, particularly around site acquisition activity. So, at least in our business, we feel good about it. We are executing well. Can always do better but we feel good about that business. I think with respect to cable, we're clearly growing with cable, particularly with Comcast. I think there's been plenty of industry commentary, even at the most recent cable show, and certainly by the major equipment manufactures, about what will be required to increase capacity in the network, and that requires pushing fiber deeper. So, we see great forward opportunities in that initiative. I think just this week Cox came out and had some comments in the press where they're talking about taking fiber deeper to increase capacity and also to deal with particularly on the return path. So, I would just defer people to take a look at what [ARRIS] and some of the other equipment folks are saying. I don't think they could be any clearer. And since they make the equipment, I don't know how they could be mistaken. Okay. We thank everybody for your time and attention. We understand this quarter there was a little bit of extra interest on our calendar. So, just to remind everybody for next year, we always publish the Tuesday before Memorial Day. And next quarter, we will be publishing the end of August. So, with that, thanks, and have a good day.

2016_DY

2018

WRLD

WRLD #Great. Good morning, and welcome to our third quarter earnings call. As in recent quarters, we've issued our earnings release and an additional document to provide what we call further details and observations about our results. Again, my name is Jim <UNK>. I'm fulfilling the role of Interim President and Chief Executive Officer until the search for a permanent replacement is completed. A little background on me might be useful. I specialize in public and private corporate executive-level transitions with well-known names to mid-market firms. I also do some specific project work into what I would call targeted client risk areas. My career thus far includes some 40 years of experience in C-suite operational regulatory finance positions with large corporations and firms such as MCI, Telecom USA, Sprint, Arthur Andersen Business Consulting as well as others. For this group, I am not a candidate for the permanent role of President and CEO. From my vantage point, the board is focused on the search for that candidate and who likely will include tenure, skills, strategic industry and pedigree that fit their targeted preference. In the meantime, the board has charged me with assuring the company and management team operate on a business-as-usual approach throughout this transition. And a primary focus for me is assuring our business is conducted in a manner advantageous to our customers, to our employees and shareholders. So as for the business for this call, overall, our third quarter results were strong. We see positive momentum building and continued in our business as a result of a number of initiatives by the company. Our Chief Financial Officer, <UNK>ny <UNK>, is with me. And we're certainly welcome to take questions about our quarterly results. No, that's a Q4 event. No. There's ---+ obviously, there's been a press release on the activity by the board about the mutual separation. So yes, we see no reason to comment further on personal matters. Right. So the tax rate will also shift due to the change in the tax law. So obviously, our corporate rate was 35%, and it's moving to 21%. For the current fiscal year, that's going to be a blended rate. But going forward, our effective tax rate will be more in the neighborhood of 24% to 25%. No, it's effective January 1, I believe, or maybe even a few days before that. Well, you're providing for the annual tax, right. So our fiscal year tax rate will be a blended rate of the 35% and the 21%. Sure. Yes, there is some seasonality in Mexico, as you pointed out. As in Mexico, there's a kind of required Christmas bonus and ---+ that generally leads to pay downs and runoff in both portfolios. We have seen runoff in our Viva payroll deduct portfolio. As of the end of the quarter, our net receivables on the payroll deduct product after allowance is $16.9 million. The gross figure is $56.2 million. I believe we stated on the last call, we have stopped originating in our Viva product. And so the [amount of] delinquencies have remained relatively steady. So yes, a lot of delinquencies in the Viva portfolio. Sure. We feel like in the states we operate in today, there's still a lot of opportunity to open new branches. While there are states that look possible for us to move into, there's no immediate plans to move into those states. The plan right now is to continue to open branches in the space we operate in today. And it'll likely be similar to the current year where we open 30 ---+ 25 to 30 branches here in the U.S. So for the current year, the effective tax rate, again, this would be a blended rate of the 35% and the 21% that went into effect around the new year. Going forward, so starting in fiscal '19, we expect our effective tax rate to be in the 24% to 25% range. There was some shifting in expenses between Mexico and in the U.S. which would have some impact, but it's relatively minor. Yes. Again, from my perspective and my conversations with the board, it's a very active future-looking group. I've grown to be impressed by their willingness to stay actively involved. In terms of the management team, again it's nice to walk into an organization that's got some stable management at the operational level. There's lots of things going on, and I feel good about that. In terms of the recent turnover, the function of the board is to always be taking a look at what does the leadership look like for now and going forward. And they've made some decisions along the way, and hence, the joint decision to part ways with the previous CEO. So I feel comfortable. Again, my charge is business as usual. But I've got a talented and knowledgeable group of board members to work with. I'm not sure I understand the question, <UNK>. No, there's nothing we can elaborate on at this time. So as I mentioned to <UNK>, we have stopped originating in the Viva business. There's nothing more to add to that. Sure. I think you can maybe assume that it is us taking market share, but it's hard to get a very clear view on that, just given that most of the companies in the industry are private companies. So it's hard to know what their growth rates are and what they're seeing to know that for sure. But we are encouraged by the strong growth in new customers and former customers. And they'll continue to be a focus as we move forward. And really some of our initiatives are concerned with retaining our base. We've got a good brand name where we are. And so the better service we can provide, hopefully, that might influence our ability to grow a little bit as well. Sure. As you know, around a year ago, we started to ramp up our internal collections efforts. And we've seen strong benefits from that. And since we started holding our 90-day accounts or longer, we have seen an increase in the rehabilitations of those customers. So it was something we felt good about, and the results seem to be playing out. Sure. I won't elaborate too much, but I will say it was relatively small acquisition. It was only $350,000. Generally, the third quarter is pretty quiet for acquisitions, given most of these companies were in the middle of their growth season, and it's a profitable quarter for them. And you don't typically see people looking to sell in the third ---+ our third quarter, calendar fourth quarter. It's relatively small. So as you may recall, or may have seen, our live check program is focused on our former borrowers. We've rolled that out in the summer of last year. And obviously, since we're focusing on a former customer base, the response rates on those will go down over time as there's a limited number of people in that base. So while it's still a very helpful piece to our overall marketing program, it's not a significant piece of that program. I don't have it in front of me. But again, it's going to be a relatively small percentage of the overall base. Sure. So our ---+ we typically renegotiate our facility in the springtime, so coming up in the next few months. I'm not going to elaborate on what we ---+ what the negotiating points may or may not be at this time. So the fourth quarter, I think it'll be in that 31% range. So just to clarify on why the quarterly effective tax rate was lower, a lot of that has to do with the first 2 quarters be that ---+ the 30 ---+ closer the 37% rate, and you have a true-up in the fourth quarter to adjust down to that 31% rate. So that's why the fourth quarter effective tax rate was a little lower. But for the full year, we expect to be closer to that 30%, 31%, 34% rate once you take into effect the state taxes. Correct. Well, great. Thanks for everybody's time and interest. We appreciate the opportunity to get in front of the group. And everybody, have a great day, and let's enjoy the warming weather, at least down here in the south.

2018_WRLD

2017

APA

APA #Good afternoon and thank you for joining us On today's call, I will discuss third quarter results and accomplishments, comment on our Midland basin oil production and development program, recap some of the key Alpine High points from last month's webcast and provide an update on our 2018 planning process and current thinking around commodity price assumptions Beginning with the third quarter, as anticipated, our average daily net production in the U<UNK> returned to a growth trajectory We also grew net production in the North <UNK>ea and gross production in Egypt Production was in line with our guidance with notably strong performance in Permian oil volumes We stated in our webcast update last month that we expect this performance to carry through into the fourth quarter with Midland and Delaware oil production tracking at the high end of the guidance range, established back in February As we also noted, the delayed start-up of two central processing facilities at Alpine High caused by Hurricane Harvey will defer some natural gas volumes into 2018. <UNK>o, our updated fourth quarter production guidance is unchanged In the Midland and Delaware basins, we are benefiting today from the strategic testing, optimization and development planning initiatives that we implemented in 2015 and 2016, while running a very lean capital program Going forward, we anticipate continued capital efficiency gains in both the Midland and Delaware basins This is particularly true at Alpine High, as we move further into multi-well pad development, continue to extend average lateral length, utilize more smart completions and further optimize our landing zone targeting and well spacing The majority of optimization benefits, which have been proven in other unconventional plays are still ahead of us at Alpine High On the international side, cash flow generation during the third quarter was strong once again, as both Egypt and the North <UNK>ea benefited from improving Brent crude prices and production from our Callater startup in the North <UNK>ea Overall, capital investment was in line with expectations and remains on track with our guidance for the full year We have shifted some capital in the back half of 2017 from our international regions into the U<UNK> to take advantage of attractive portfolio opportunities in the Permian Basin Finally, we continue to benefit from our cost structure focus with both LOE per BOE and G&A costs remaining low as a result of the significant rationalization efforts over the last two years Apache also made some excellent progress this quarter with regard to its portfolio transition <UNK>pecifically, the discovery of Alpine High enabled our strategic exit from Canada In only one short year, we will have completely replaced our Canadian production and we will have done so with an asset that offers significant returns and is only just beginning to show its enormous long term potential Value creation and returns accretion were challenged in Canada, given this low ratio of cash margins to F&D cost Alpine High on the other hand will have significantly lower F&D costs, much more attractive cash margins and will transform Apache's long term return on capital employed profile Organic portfolio transformations like this take time, but are much more accretive to returns than acquiring high priced proved acreage positions I will now turn to the Midland Basin where activity is primarily focused on multi-well pad drilling to the Wolfcamp and <UNK>praberry formations Our third quarter oil production was up approximately 5,500 barrels per day over the second quarter, as we are delivering excellent results from recent multi-well pads in our core areas We will continue to progress our development efforts with two more pads coming online before year end Our focus in the Midland basin is on multi-well pads and full field development We believe the proper approach to an unconventional resource has developed each section in a way that optimizes long term value and returns This requires a full understanding of intra-well dynamics and proper spacing in order to design development patterns that optimize costs and recovery Additionally, Apache utilizes a fully burdened returns approach, which should give you confidence that the anticipated returns will result in a competitive return on capital employed at the corporate level Tim will share more details on the impressive progress we have made in our Midland basin development efforts Next I would like to move to Alpine High and reiterate a few of the key points made in last month's webcast First, Alpine High consists of three primary plays, a highly economic wet gas play that contains the majority of our currently identified locations, a dry gas play that is smaller, but very economic and an emerging oil play with tremendous future potential <UNK>econd, we increased our location count from 3000 to more than 5000, which consists of at least 3500 locations in the wet gas play, at least 1000 locations in the dry gas play and more than 500 locations in the oil play As we have previously discussed, we believe there is significant upside potential to all of these location counts Third, 90% of our currently disclosed locations are in the highly predictable and repeatable transgressive source interval, which consists of the Woodford, Barnett and Penn formations Being a true source interval, there is minimal in situ water that will be produced with the hydrocarbons Water handling and disposal costs are becoming a significant challenge across the Delaware Basin and this will only get more difficult in the future We are fortunate to not have this problem in the transgressive source interval Fourth, returns of Alpine High are driven by the combination of extremely low development costs with attractive cash margins Recent wells have validated our assumptions on future drilling and completion costs Cash margins will be attractive due to the high quality liquid content and the low operating costs Lastly, we are very pleased with the performance of the wells of Alpine High, many of which have been producing now for several months Cumulative production data is confirming our expectations for this high quality rock, which was predicated on extensive geologic, geophysical and reservoir engineering work Our investment economics are robust for all three plays at current or lower commodity prices and are consistent with those presented more than a year ago Next, I'd like to discuss the process we are undertaking as we finalize our 2018 plans <UNK>ince the beginning of 2015, we have operated Apache with a fundamental belief that over a typical run of years, it is both possible and appropriate for an E&P company to live within operating cash flows Within cash flow, a company should be capable of growing production volumes and delivering competitive rates of return above its cost of capital, while also increasing return of capital to shareholders through dividends and/or share buybacks We have taken a number of transformative steps over the last three years, designed to enable this vision, irrespective of the oil and gas price environment We streamlined our portfolio and strategically shifted our asset base, reset our overhead and operating cost structure, dramatically reduced our capital investment program from mid-2015 through 2016 to live within cash flow, implemented a rigorous capital allocation process based on fully burdened returns as opposed to fundamentally flawed half cycle economics and reduced debt and preserved our dividend without issuing equity and diluting our shareholders' future ownership Recently, we have been on the road meeting with shareholders and other long term oriented potential investors Encouragingly, the market sentiment is becoming more aligned with Apache's philosophy For most of the last three years, the E&P industry has been engaged in excess spending to drive short term oil growth Today, we are seeing a return to the fundamentals of capital discipline and focus on long term returns We welcome this change and believe it is very constructive for the long term health of our industry <UNK>o as Apache enters the 2018 planning season, we are experiencing some natural, but very positive short term budget tension That is, do we continue investing in our attractive Permian upstream opportunities at what we consider to be the optimal pace for delivering the long term returns or do we pare back and manage the program for cash flow neutrality That is a nice problem to have and as an expected outcome of discovering and bringing into development a large low cost new play We believe Alpine High is a compelling world-class resource Once ramped to its production potential, Apache will benefit for decades from high returns and free cash flow from a significant portion of our future capital employed Given the dynamic nature of our opportunity set and the volatile commodity price environment, our 2018 capital budget is still being rigorously worked Consistent with previous years, we will issue our 2018 budget and associated guidance in conjunction with our fourth quarter earnings results in February As we have in each of the past three years, we will base our 2018 plan on benchmark pricing that is slightly on the conservative side of the prevailing strip Given the recent volatility in oil prices, this means we are preparing for a number of possible scenarios Fortunately, we have considerable portfolio flexibility Our focus now is prioritizing next year's activity and identifying areas where the capital program could be pared back While spending could be lower in 2019, the allocation of capital across the portfolio would likely be very similar to 2017 with Permian Basin investment representing the majority of Apache's capital program Internationally, we will continue to invest to maintain current levels of free cash flow At recent oil and gas prices, this spend is in the $700 million to $900 million range In 2018, we will also continue to fund the Alpine High midstream buildout as this is strategically important to enable an optimized upstream development program As we have stated previously, we believe this represents a very attractive investment opportunity and are continuing to review its monetization potential Finally, like in 2017, we have begun a program of hedging for 2018 and '19. This activity is focused on protecting cash flows to support our near term capital program <UNK>teve will talk more about the details in his prepared remarks To sum up, the third quarter was important for Apache as it marked our strategic exit from Canada, the very early stage acceleration of production at Alpine High and a significant turn in our Permian Basin oil production We're making excellent progress across the company As the Permian region grows in relative scale with our portfolio, the quality of its returns and cash flows will improve those of Apache as a whole Our teams have created a deep inventory of investment opportunities, both domestically and internationally As we have over the past three years, we will fund these opportunities in a disciplined manner that in no way stresses our balance sheet We look forward to discussing our plan further in February when we will provide a review of our operating cash flow, capital spending and production outlook for 2018, a higher level preliminary outlook for 2019 and potentially beyond, a longer term view into how the investments we're making today will improve long term corporate level returns and free cash flow and a more detailed view into Alpine High for both the upstream and the midstream Now, I would like to turn the call over to Tim who will provide some operational highlights <UNK>o on the pads, <UNK>, as you know we've been pretty vocal that you need to be developing all your areas on a section basis <UNK>o these have been designed and we've got a couple more pads coming on between now and the end of year They've been doing our adequate spacing and pattern tests <UNK>o that's why there are no half sections, we're kind of doing a half section test pad <UNK>o that's what you've had going on in the Midland and it's really defined tune exactly the pattern and the spacing between the various landing zones that we say Hedging, I'll let <UNK>teve And one thing I want to add to <UNK> is, we've done some things to protect the upside to because we like the exposure even on the oil where we've done some collars, we've also bought the coal as well <UNK>o it's more geared towards protecting some downside and protecting the balance sheet over the short term than it is trying to make a price collar because we like actually the constructive nature, especially on the oil side The good news is, is with the price movements has gotten very constructive lately And we find ourselves and can see a price now where we could actually have some free cash flow next year pretty soon <UNK>o I mean that puts you in a position to, you know, we've been a company that's maintained our dividend and actually continued to return something to the shareholders over the last three years <UNK>o obviously dividend is an option if you look at in terms of - you could be in a position of accretion Obviously share buybacks or some acceleration, but clearly we would look to find ways to return that to shareholders Number one, the write-off is really legacy Anadarko Basin; it's not what we call a <UNK>COOP stack area <UNK>o it's going to be more in the Texas panhandle, there's some hangover from the Cordillera transaction many, many years ago <UNK>o it's really more just legacy Anadarko Basin acreage have some attractive things in the future, but it's not anything we're funding or planning to fund in the near term <UNK>o that's where that is And in the <UNK>COOP stack, actually it's in the <UNK>COOP area We've got a section there that we needed to drill a well to hold, but rather than going in and drilling one well, we got in there and did seven wells because that's a proper way to do that <UNK>o we're drilling those seven wells in the in the <UNK>COOP there to meet some lease obligations on a section that we really like And it gives us the ability to test some spacing and things in the <UNK>COOP as well <UNK>o kind of two birds with one stone I mean I would say at this point we're looking at '18 hard We're watching the commodity price view We said we will come out with a plan that's kind of predicated on something slightly conservative to strip <UNK>o we're watching that very carefully I think the good news is there's flexibility I mean we don't have to outspend to keep Alpine High up and running so to say is the way you phrased it But we're also looking at what we think is the right thing to do in the right pace to develop Alpine High That we're just going to really maximize long-term returns and that's really what we're trying to accomplish Well, it's a little bit of flexibility on the international side, but we kind of laid out that range where we'd like to stay the $700,000 to $900,000. I think there's flexibility in both places And I'd also remind you that Alpine High is part of Permian But there's flexibility in both I mean you wouldn't see us flex one or the other and we're not talking a massive change from what we've laid out in February of this year anyways That plan was going to be neutral on the upstream spend at a $55 deck and we're not far from that right now <UNK>o we're not talking about a lot that we'd have to pare back and it can be flexed into place And so we'd look at what we thought made the most sense And that's some of the exercises and scenarios we're running through right now Well, I mean I think it's just different geology I mean that's something we've gone to great lengths to explain in terms of a source interval versus a parasequence, which is what the Wolfcamp and the Bone <UNK>prings are in the Delaware Basin <UNK>o actually if you look at the five wells we've drilled, we're very pleased with the results <UNK>ince the disclosure on October 9, we've actually had another one well in there that's cleaned up very, very nicely <UNK>o it's actually fairly predictable We're just talking in terms of the geology You have to get in and do your rigorous mapping We have to do the inversion work with the seismic I mean it's more going to be based on where the organics inside and what's really water wet rock and you have to do the detail work But once you've done the detail work, it's going to be pretty predictable It's just not a blanket you're going to lay across a large area Most of the locations you know we'd came out with 500 was based on a couple of landing zones, we've in truthfulness we've added another one, so those location counts are going to go up even since the October 9 disclosure <UNK>o we see it as a very prominent program I can tell you most of those are in the northern trough And the good news is, with every well we drill in Alpine High, we're looking at all those sections <UNK>o we see it as a very viable and a very material play that we're going to continue to move forward And you're going to see the number of landing zones and the location counts grow There's two things I would say, Bob Number one, we do have some very sophisticated land owners and we've been making great progress on our discussions with them as well But it's not a matter of just trying to drill the shallow zones and not drill the deeper zones later What you really want to do like anything is, you wanted to develop the sections properly and very systematically where we would develop the deeper zones and the shallow zones together where we need to do that What you don't want to do is come back later and drill deeper after you have develop shallower or you're going to find yourself with some of the challenges that you're seeing in the other parts of the Permian Where now they happen to run extra casing strings and things to deal with water flows because you've they're going to run extrication strange things to deal with water flows because you've because you've dealt in depletion and that sort of thing <UNK>o contrary to that one of the advantages we have at Alpine High, we've done a lot of data analytics and been recently able to eliminate even a string of seven of 58s on our 14,000 foot TVD wells <UNK>o you want to do this properly and I think the conversations we're having with the landowners are constructive and that you want to go about this in the right way where we can develop the wet gas and the oil zones and you want to do them where you don't have to go back in later <UNK>o it's more or less of you know developing everything and then margin directionally than it is trying to develop bottom up or come in and develop all your shallow and then have to drill through your shallow to get your deep If you look at '18 and I look at Alpine High and if I just if - even if we were to keep a six rig program, less than half of that would be necessary in terms of near term acreage <UNK>o I mean, we're in a really good spot I mean if you look today, I mean we've been making that shift And as of the October 9 disclosure we had 34 wells online And we said we're going to be virtually halfway there year end with I think another eight wells, we're going to bring on 42 by year end <UNK>o as we move forward and start to shift into our pattern and spacing tests, you're going to continue to see us start to climb that curve I'll give you a little bit of a feel for well camps that are necessary to do that I think we're continuing looking at the portfolio and clearly we've got projects in Egypt and the North <UNK>ea that have, you know, that are Brent-weighted We've got some brand new acreage that in Egypt that we just received through the award process We're anxious to get our seismic shot and we'll actually be drilling wells there <UNK>o I think it's more a function of the opportunities as we high grading things, there will be things that we will move up in the portfolio for sure I think the thing you got to think about is, number one, we're not far off of that optimal from where we sit today anyway <UNK>o and kind of what we laid out at the start of this year would have been what we thought was optimal <UNK>o we're not, you know, we're pretty darn close to being that zip code as we sit today The point is, you always want to balance and what's going to maximize our long-term returns and the pace And I think the beauty of it is, as it has been alluded to we've got some flexibility, we've got some cash on the balance sheet You're just trying to balance the right approach And the good news is, we've got the ability to defer <UNK>o those are just some of the trade-offs that you have to balance and that's some of that what I'll call good positive tension As you find things and discover things, your goal is to always bring more things into the portfolio that give you opportunities to high grade and pull things forward And so it's just a good healthy situation and tells you the quality of our portfolio And the other piece I'll say to that is you see we're in multi-well pads, we're not out one well here, one well there And so I think the testing we've been doing in the Midland Basic, we've been building a lot of momentum there The patterns and spacing tests and things were also moving toward Alpine High Those are all building towards understanding and to finding that optimal pace because that's how you're going to maximize your long-term returns versus short-term things you can do to manage short term Well these are half section type tests And so, depending on the capital level that we decide to disband, you're going to see us moving more into full section development type mode And you'll see more similar type things, but that will be hinged on the pace that we want to go And the beauty of having a lot of inventory that's drill ready and the infrastructure that we put in place puts you in a great position to be able to move forward But you'll see continued building on pad level type economics because fundamentally we think that's how you're going to create the most value I mean, I'd let Tim go into details on Callater, but first two wells that gone on are performing quite well Any color you want to add Tim to Callater And I would say on the capital shift, <UNK>, it's pretty minor But it's more geared towards some of the pad testing and things we're doing in the Midland basin We're looking at all options I mean our gas today is flowing into Mexico, but we're certainly not counting on the Mexican market to be the purchaser of all of our gas We recognize that we've got to be able to move a substantial volume of gas to the Gulf Coast We're certainly looking at all options associated with that And for that matter the liquids as well No, I mean, I think as I've answered, we're in a good place in both I think we'll be able to move both programs forward if you look at current rig count today as I mentioned less than half of the capital we'll be spending this year as we kind of roll forward into next year would be required in terms of how we need to meet lease obligations in the Alpine High <UNK>o I think we're in a pretty good zone that we can materially move both programs forward, like we need to move them forward I mean if we look at Alpine High today, I mean, you could see something similar very easily Well, I mean I think the key there is, number one, I mean if you look at the portfolio today, we like the balance that we have across the entire portfolio We like what we have internationally or like what Egypt and the North <UNK>ea bringing to the table with exposure to Brent, we think we've got world class operations there and we differentiate ourselves And so we like having free cash flow that we can invest We also like the running room and the exposure we have in those two areas I think it's a very good compliment When we look at North America, we're always looking at the portfolio and that's something we will continue to do and continue to do on a daily basis I like right now we moved up and we've got a nice position in the <UNK>COOP We could run a couple of rig program up there for several years And we think it competes fairly nicely <UNK>o that's where your rigs are now But I'll tell you we continue to look at the portfolio, we continue to have those conversations with the board And I think the nice thing is, with the, you know, those areas there's a lot of upside and there's very little to hold those positions And so I think they really create options for us in the future because we can see to a point where we're going to be generating a lot of free cash flow coming out of Alpine High First of all, if we just take a single rig at Alpine High, it's less than two years before its self-funding <UNK>o, it really comes down to pace and how we want to scale that up I mean that's the way you want to think about that And that's fully burdened with infrastructure and midstream spend And then secondly, when we do talk about our numbers, we've got our dividends dialed in <UNK>o our dividend payment has been dialed into our capital programs

2017_APA

2016

BAC

BAC #Thank you.

2016_BAC

2015

VAR

VAR #And I should say, that none of the stuff is a pipe dream. A lot of it is already being worked in the developer mode by our research customers worldwide. Sure. Yes, I'd say ---+ on the first part of the question, the answer is zero and zero. So we have (multiple speakers) nothing in our backlog. And we have nothing in our guidance, because we're not going to put anything into guidance, that is not in our backlog. We've learned that lesson, as we've discussed already. Let me tell you about, we do have $350 million of proton backlog. Yes, I'm sorry, thank you (multiple speakers). Yes, sorry. There is no single rooms in our backlog (laughter). Having said that, we have a very active funnel of single room systems. And I would be surprised if we didn't see one or a few of those land in 2016. And as that happens, we'll have some rev rec upside maybe to report. So we have not put any of those in the backlog. As to the ---+ what percent of cancer patients are indicated for proton therapy. I think, since the minute we've been in this business, it was part of the first thing that we did as due diligence. We thought the number would be somewhere between 10% and 20% of all cancer patients would be indicated for proton therapy. So that number is consistent, with what our assessment was, in our due diligence getting in a few years ago. And <UNK>, let me just these, let me just clarify one thing, under this percentage of completion method in protons, it's a little different in that we get to essentially recognize the revenue kind of linearly over the project. So if we were to get a compact order in the year, as soon as we specify equipment for a particular customer, we buy parts. We start putting it together and producing it, we start revenue at that point. So we don't have to wait until it is built and shipped, before we get any revenue. We did two acquisitions last year, we like them both a lot. One is pure software play, MeVIs, a computer-aided diagnosis for both breast and lung cancer. We think there is an opportunity, given our distribution channel to leverage that product globally. And we're seeing some very good kind of development opportunities in the oncology business there, with some of the imaging processing things that they do there. So that is encouraging. Clairmount is a little more hardware, it is largely a cable and connector business, that's very synergistic with our tube business, has the same customer list that we have. And again, an opportunity there to take that product line globally with our distribution, and drive some growth. Also very good teams, the MeVis team is a very, very good software development team in Germany. The Clairmount team, very low manufacturing costs in the Philippines, and I think these are capabilities that we can leverage across the company. In terms of our broader M&A strategy, I think it is the same. We're always interested in things that we can do to strengthen our oncology business. On the hardware side, I don't see a lot there, just because there isn't much that's too close to us. But on the software side, the infomatic side, maybe there is some things. And then, we are going to continue to hunt as well, the component space. We think scale matters there, as the industry consolidates. It's has been a rough year, but we've had terrific growth in this business. We've now ---+ we believe that we're the largest manufacturer in the world of tubes and panels, even given some of the insourcing that the big radiology companies do. So we've got a strong strategic hand to play in that ---+ in that business. And we like ---+ even despite some of the 2015 rocky road that we've been through, we like the cards that we have, and think we've got a good strategic hand to play, given our scale. It is going to build, <UNK>. So we've built in one to two handfuls of Brazil shipments in this second half of the year primarily. So this is going to be something ---+ it is going to take a number of years for this to all to work through the P&L and the margin. Yes. And then relative to our first question, we are looking very hard at our supply chain in oncology. It's ---+ I mean, the cost in this business, our actual labor content is very, very small. We do final assembly and test, which testing is very, very important. We've got to get that right. We are pointing radiation at patients, and we want to make sure that is done at the highest quality fashion. So we always want to make sure that, that part of the process is very robust today. I would say, with the vast majority it's done here in Palo Alto. We have some capability in China, and we're building some capability in Brazil. So the China and Brazil, will bring the cost per unit of that down, but we're still very significant here in Palo Alto. But the real cost opportunity is on the supply chain side, we've made very good progress on that in 2015, and that continues to be a focus area for us. I am pretty pleased with the variable cost productivity we're getting in oncology. We're seeing at least mid-single-digit kind of variable cost productivity in oncology. Sure. So the earnings contribution would be negative, and it will be pretty similar to what we saw in FY15 and FY16. We are ---+ I'm assuming that we are going to have roughly $20 million more proton revenue this year versus last year, just given what we are delivering on in the backlog. But remember, the Maryland deal was pretty profitable, because of the way it was a bolus of revenue, and because it was a very large center. So it should be about even with the year ago period, in terms of the impact on the P&L. And, of course, the big wild card being, do we get Emory. And do we get any compact that we can book, that are currently not in the backlog. Yes, sure. So, <UNK>, to my knowledge, these are all separate legal entities, with separate investors, and lenders and equity players. And so, one is insulated from the other. So I do not believe that it's going to have a big impact on Emory. I can tell you that, we're still engaged with banks, helping answer questions, so that APT can, in fact get their financing put together. And longer-term, for UT Southwest, boy, I do know that UT Southwest has indicated they are very interested in still having a proton center. And so, hopefully this litigation will get worked out, and we can go to work for them, and get it installed. But that's a ways off. Yes, both were very strong in the quarter. So we ---+ services was hit from a currency point of view, but constant currency basis, it was right where we expected it would be, 9%,10%. Software equally strong, largely on the backs of RapidPlan. Thank you. Thank you all for participating. A replay of this call can be heard on the Varian investor website at www.Varian.com//investor. It will be archived there for a year. To hear a telephone replay, please dial 1-877-660-6853 from inside the US, or 1-201-612-7415 from outside of the US, and enter confirmation code,13619357. The telephone replay will be available through 5:00 PM this Friday, October 30.

2015_VAR

2016

ACC

ACC #Sure. <UNK>, this is <UNK>. As we have talked about historically, certainly our asset management platform and the cost containment efforts that we have through that have been a big driver of the progress we have made to date. We continue to expect to make progress in certain areas there. We have talked about recently our efforts with regards to multi-asset market efficiencies, which we see in both payroll, marketing, and repairs and maintenance. We see efficiencies there. Obviously also as we bring online, and the development pipeline, which tends to have a higher margin, that will be an additional benefit to help us get there. From a timing perspective, I think it's been a year or so ago that we said we thought it would be within two to four years. Right now, as you can see for the total portfolio, as of the end of this quarter we're at 54.7%. We're getting pretty close, and we think it's something certainly we're on track to get to that 55%, potentially eclipse it in the near future. Yes, and if you go back to what we have been talking about the last several quarters from a capital allocation perspective is that nothing at this point in time is more accretive than the development pipeline that we're bringing in on place. And so in that regard, that is our focus in terms of the highest and best use of the capacity that we have. However, as we talked about when we see the acquisition opportunities that have outsized performance, especially in existing markets where we're already operating in and have that additional comfort in terms of knowledge and due diligence and the ability to execute on creating that value, we're going to undertake that. And as we talked about in this case, we're able to completely match fund that via the ATM, preserving that capacity for development. And so we continue to be focused, priority number one on development. We will continue to look at acquisitions on a one-off basis, and when the opportunities exist to produce upside and match fund and preserving that capacity, we'll undertake it. And if such time there's a larger acquisition or M&A opportunities that arise, we'll do what we have always done if it makes sense for us and come tell the market the story and talk about that together. So at this point in time it's still very focused on the course that we have set over the last 18 months in developments first and foremost and acquisitions when they make sense. Yes, absolutely. And that in addition to finishing the disposition of the non-core assets, we do expect to continue to be a capital recycler, always looking at the bottom 1% to 3% of your future performance and attempting to predict when that's going to occur and harvest value. I would say that it will come in two fronts, one will be situations where based on agers, again, further proximity to campus, between ---+ they may be bicycle properties, things of that nature, but we'll look at refining and honing in. The other thing that you have seen us do in markets like ASU and Tallahassee is in markets where we have a presence as we do a good job in harvesting and maximizing value, is trading assets and reinvesting in the same markets. And so on an ongoing basis, those are things that we will continue to do as part of that long-term capital recycling activity. Again, benchmarking those funds first and the highest priority to go back in the development pipeline that are typically either on campus or right across the street. Sure. <UNK>, this is <UNK>. Remember at the beginning of the year we talked about that we wanted to dispose of a significant portion of our non-core assets, and we said that in terms of our target for the year we were looking at about $600 million. Obviously we were looking at a selection of potential assets in the non-core group that we could sell. And so it wasn't that we were setting out with a specific group that was making up that $600 million. We wanted to put together a portfolio that we thought would transact well, and so we worked through that throughout the year. Remember we sold $74 million in two assets early in 2016. So the $526 million was really just the difference between the $600 million and that $74 million that we had already sold. Not that we were tying a specific valuation to a specific group of assets. So we feel good about the 19 we have been able to put together for the current disposition, and the $508 million valuation we got on those. As you see on the sources and uses page, we lay out $508 million to $530 million of potential dispositions, which at the $530 million would include the two additional assets that we are currently marketing and expect to potentially transact on in early 2017. In terms of the cap rate, the economic cap rate of 6.1% that we achieved is very much in line with our expectations. We're very happy with that, and on a nominal basis that was in the mid-6%s which again was in line with our expectations going into the process. Yes, so we're going to be transitioning management with the buyer to a new third-party manager. They're going to take on ---+ their new third-party manager is going to take on all but 11 of the assets, and then we will phase those to the new manager over the coming months into early 2017. Based on the timing, it's about $140,000 a month in management fees that we would make on the 11. I would say you should expect about $350,000 in management fees in 2017, first part of 2017 before we completely roll those over to the new manager. Good morning, Alex. Yes, so like any sale they're going out and financing the assets with new debt. We will be prepaying the loans, the $197 million of debt that's currently outstanding on the portfolio and they're putting new loans in place. They're halfway through the process of getting all their loan approvals and expect the rest of it to come within the coming weeks, and very much still expect to be online with our targeted date that we laid out and guidance in November. No, they're using the GSEs and very much in line with what they do in the 70%, 75% range. Yes, and Alex, this is something that you will see, and it's not a situation where you see more 10-month leases at 12-month properties. That is pretty consistent from year to year with what we have seen. What we're referring to here is really directly related to ACE. And if you look at the ACE awards about 50% to 70% of those on an emerging trend are first-year residence hall products. And so by design and by pro forma those properties operate on an academic year fall and spring versus the apartments off campus which operate on a 12-month basis. And so we're seeing a higher percentage of our revenue come from those residence hall properties where by design you're getting the full-year investment in that 10-month period. And that's where <UNK>'s comment is that is what you will see a little variation, seasonality in growth rates as those May-ending leases, which again are not short-term leases on a 12-month property, but rather by design that product type how they lease. And so my guess would be over time as we see more ACE transactions coming into the pipeline, and remember a large majority of ACE is replacing the 1940 and 1950 residence halls products on these campuses, you'll see that become a larger portion of the portfolio. No, in 2017 it will probably be 30 to 40 basis points post May when you see those residence halls move off, just in terms of same-store comparison numbers. And remember, Alex, that you always noted that those summer months are mixed between Q2 and Q3. And so it gets mixed with the normal part of the academic year, the spring semester and then the fall semester in Q3. So you don't see the full impact in any one quarter, but to the extent it is a little bit noticeable, we wanted to make sure that people understand with a little bit more of those residence-hall style beds coming in through the ACE program that if we are seeing some of that seasonality you understood what was going on. And so the biggest impact, again, it's not an economic in that you're achieving the full yield in that academic year on those assets by design, but you will see the annualized occupancy over time as that portion, and also by the way eliminating the 19 sale properties, which were all 12-month off campus, just by virtue of the dispo is also you have a higher percentage of those assets that are in the portfolio. So just something that we want to point out and make folks aware of, and we certainly will continue to talk about that over time as it becomes a larger segment of our portfolio. I think maybe in the lower end of that, 3% to 3.3%. It's very much, even with the dispos in it would be very much within the midpoint of our original guidance range for the year, which was 2% to 3.8%. So of course as you would expect we have a slight improvement in the same-store NOI expectations when you're looking at just the core assets given the improved rental rate increase at those assets. Probably low 3% because we have had a little bit of outperformance to date. So a little above the midpoint. Yes, they're certainly one of the systems that are looking at privatizations as one of the main methods of delivery. And at the system level they are drawing out some guidelines in terms of how they want to go about it as a system, what type of deals they want to do. Obviously we have an excellent rapport with the University of California system in that UC Irvine has been our largest third-party client for more than a decade, where we've done about $0.5 billion of development on that campus. Also we have the ACE transaction at Cal Berkeley that is under way. And so certainly as that system looks at the success that has been taking place with P3s by individual colleges, they've recognized that it's probably a method that could be utilized throughout the system and are looking at broader initiatives of how to approach it. And so certainly something that we're well aware of in that we already do business within that system, and would earmark it as a place that there's great future opportunity. Yes, we talk about there's a vibrant pipeline of about 20 to 30 potential transactions in total over the ---+ in terms of active procurements, recently completed procurements where decisions haven't been made, and direct negotiations. So we're in direct negotiations with clients on about just under a half dozen schools that could bring something to fruition in the next six to 18 months. There's 18 active procurements that are out there that we are in the process of responding to. There's another seven that are a little further along in broader initiatives like the UC system question that you brought up. And so a very sold pipeline. As we've always talked about the procurement process of universities, think of it more like the entitlement process on off-campus deals. It does take time. Some move at the speed of light, others move at the pace of a snail and a little harder to predict, but we will keep you up to speed quarter by quarter. And as you saw in 2015 when all of a sudden a bunch of them popped at once, that you can have a little bit of a lull, but then all of the sudden the flood gates can open, bake on windows, university decision making comes into play. No, we'll continue to always prune the bottom 2% to 3% of what we think is the slower growth in the portfolio or again, trading out in markets where we may be investing in different assets. So we would continue to think of ourselves always as a capital recycler in the bottom 2% to 3% of the portfolio, including 2017. Thank you. Yes, it would have been, sorry <UNK>, this is <UNK>. It would have been 4.4%. Honestly we're not going to comment on the performance of any of the 19 that are currently under contract out of courtesy to the seller there. We'll wait until those close. Buyer, I'm sorry. Not a courtesy to ourselves. But I will comment on our new asset in Missouri. As <UNK> mentioned in his script, and that's a market again, to talk about the asset or recycling strategy there we're disposing of the drive asset that we have in Missouri that were part of previously larger M&A transactions. And we are developing right across the street from the campus with the new community we're bringing online next fall. That particular asset is already 46% pre-leased, it's number two in our portfolio right now. We feel very good about our future investment at the University of Missouri. Thanks, <UNK>. <UNK>, this is <UNK>. Yes, it will be included as an early extinguishment of debt in 4Q. Don't really want to quote what we think it will be yet, because obviously it's going to move around significantly with movements in treasury rates and where the final quote on that comment, there's some assets that are defeasances, some that are prepayment, yield maintenance. And also you will have an offset against that for the debt premium that will be written off. So we will have a charge for it, it will show up as an early extinguishment of debt, but don't think it's appropriate for us to comment on it yet just because of how much that moves around. Yes, <UNK>, and I have answered that question the same since we went public in 2004. And I think you can never become complacent and take for granted that at the end of the day you win and perform with people. And American Campus has always been based on having the best team in the business, and our future success is predicated on maintaining that. We started a program called Inside Track in 2003. And Inside Track is where we identify the best talent in our Company, starting at the student worker level and then migrating that into your first managerial positions, leasing managers, and AGMs and putting them in a mentoring program. We attended our National Managers Conference last week, and of the 200 folks that are managers and first-time corporate employees in managerial positions, 91 of them were Inside Track graduates. And so the program has really been the heart and soul of the Company's scalability. Also last year we really hit a pinnacle in that five people were promoted to the ranks of Senior Vice President and joined the 23 other folks in Senior Management that were part of that Inside Track class of 2003 and 2004. And so that is something that has been the backbone of our scalability, that our culture and employee development department continue to focus on, and again, something we'll never take for granted and will always be the thing that keeps me up at night for the years to come. Thanks, <UNK>. I want to thank you for joining us. Again, I want to echo the sentiments that <UNK> and I expressed earlier in thanking the team for just excellent operational, financial, and leasing results. And we look forward to seeing you all out in NAREIT. We have an investor tour that <UNK> has worked on out at ASU, for those of you that want to see first hand what that ACE partnership has done in helping President Crow realize his vision of making Arizona State University the new American university. I'd also point out in that regard that ASU was just recently named by US News and World Report as America's Most Innovative University. And so we're proud to have been part of his strategic vision, and look forward to showing you that in Phoenix.

2016_ACC

2017

KLXI

KLXI #Good morning, <UNK>. It's not possible to give you an exact answer, but we estimate that our aftermarket growth rate organically in the fourth quarter was between 3.5% and 4%. It was about the same in the third and fourth quarters. I don't know what the answer is to the question as to how it's tracking in the first six weeks of this year. We report that after the first quarter. It looks like there is a nice increase in aircraft maintenance activity, which is positively impacting our aftermarket business, and we've had two quarters in a row now of decent growth ---+ organic growth in the aftermarket. We've not seen any change in trends, <UNK>. It's <UNK>. It's <UNK> again. It's not a drag per se. It's just there's very modestly lower revenue, so there's an absorption factor there that's pretty minor, and then we had some end-of-year cleanup things that we did. It was very one-off. There's nothing unique in the numbers, to your point. The fourth quarter, seasonally, is always a little worse in the third quarter. We had plant shut down to deal with and all that stuff. But we did guide to approximately flat Q4 versus Q3. That's about we've got. I think the most important thing for next year is the completion of the integration of Herndon. It not only eliminates costs that we're occurring ---+ we've got another $4 million or $5 million or whatever it is to complete that integration, and also to get rid of the drag and to get the synergies, which is ---+ excuse me, about $10 million overall, a portion of which we've achieved. In terms of getting to a substantially higher EBIT margin, we need the aftermarket to continue to kick in and to represent a higher portion of overall revenues as a percentage of the total. So some improvement in the operating margin, particularly in the second half of the year. Good morning, <UNK>. We did say that we expected Q4 to be about the same as Q3. And I think the operating earnings number is $1 million different, so I don't think there is much talk about. It was essentially flat with Q3, and in fact, our cash burn rate went down. So it's not about pricing. It's just about a little bit less activity because of extreme weather in certain parts of the country. Well, we did say that we expect to get to EBITDA neutrality by the third or fourth quarter of the coming year, so we expect the combination of volume and price to improve profitability as we go through the year, and hopefully, we'll get to EBITDA breakeven by the back half of the year. It's three weeks now, and I'm having a tough time getting rid of it, <UNK>, but I got a little help from <UNK> this morning. We did win an important new contract in the fourth quarter that was in the Corpus Christi Army Depot. That was very happy occasion for us, so we see some growth there. We did get renewals from two other major military aftermarket contracts, the biggest ones that we've had, so that was important. Our expectation is that the business will grow in 2017 because of basically new business ---+ military aftermarket new business. With respect to the Trump Administration, there, I think it might take a little longer than 2017, but our expectation is that manufacturing of F-18s and F-16s and other programs that have been dramatically declining in the past and have contributed to a reduction in our military manufacturing support business, I think in 2018, I think the outlook there, assuming the Trump Administration carries through, is for higher revenues to support military manufacturing, higher revenues in the military aftermarket, and higher BizJet revenues with a number of new aircraft being introduced. So as we think about the next couple of years, we have pretty high level of confidence that our quarterly comparisons for the next couple of years are going to be pretty darn good. Sure. A really important consideration is $500 million of new business that we booked last year. It basically is all market share gain. So we are expecting a really hefty growth rate in the second half of the year ---+ organic growth rate in the second half of the year from these new programs. So it is true that we don't have whole lot of visibility in the aftermarket portion of our business, that is the non-military or commercial aftermarket portion of our business. We don't have a lot of visibility ---+ excuse me. But we've had a couple of nice quarters now of organic growth driven by increased aftermarket activity at the airlines and MROs. We don't see any reason to believe that should not continue given that so many of the new 11,000 airplanes delivered over the last seven or eight years are now getting to the point where they require heavy maintenance. We think that's what's driving aftermarket demand. That was true in the third and fourth quarters of this year. We don't see a reason not to expect that to continue in 2017. Good morning, <UNK>. Yes. Primarily in the second half of the year. The reason that we are confident about 2018 as well, which you just mentioned, is that the growth rate in the second half ---+ organic growth rate from all the new programs is very healthy, and that continues right into 2018. I would be happy to, <UNK>. Thank you for asking. I think we are actually quite encouraged by the M&A landscape in the sense that there are a number of transactions that we understand we may get a chance to look at in the coming months, and we'll be as discrete about them as we were in sorting through all the opportunities that led us to Herndon. I think you can tell from how we've integrated Herndon, we're exceptionally pleased with how that acquisition has worked out so far. It's still early days. But to Rich's earlier question, we see the ramp-up opportunity there continuing to be quite compelling, and we would hope that we find another acquisition that would provide the same incremental growth platform, but we will be extremely disciplined about putting money to work at multiples and with returns that meet the thresholds that become accretive for us on a pro forma basis. We're very focused on that. And in the meantime, again, as you noted, we did increase or accelerate our share repurchase program in the fourth quarter. We had a $100 million original authorization that we've called out. We've used roughly half of that at this point. We have significant cash flow capacity, and I think it will just be a question of sorting through what we think are a number of great opportunities. We believe very much in our stock price and the value that the stock currently represents, and we want to make these acquisitions if they pan out, so we'll definitely be going down a parallel path on that. One of the great things I think we did to support the ESG business was aggressively buy those assets that we called out in 2015 at very low prices relative to replacement value. We believe at this point in time that with very few exceptions, we've got an inventory of equipment that is the envy of much of our competitors. And we keep it in exceptionally good shape right now. We don't have to put a lot of capital in it because we know how to store it and maintain it. And we think it's ready to go out in the field as the business opportunities present themselves. So we are not budgeting a material ramp-up in CapEx to meet what we see as being a substantial incremental business opportunity as 2017 plays out. As to 2018 and beyond, again, that would be a high-quality problem. If we reach the point where we have to spend more money on ESG because the growth is that good by the end of 2017, we'll be happy to update you on that, and it will be a very good conversation. Good morning, <UNK>. It\ I'd rather not do that yet. We want to see just how the new programs do come online. But we have enough confidence to say that we will have a very strong organic growth rate, particularly in the back half of 2017. Yes, they are still retiring those older aircraft at a very high rate, and we expect a couple of the big airlines, like American and Delta, to continue that program. That contributes to a lower growth rate in our aftermarket business. Fortunately, so many of the 11,000 aircraft that have been delivered over the last seven years or so have begun to require mandated heavy maintenance. That has given us a positive boost overall in spite of the retirements in the third and fourth quarters, and we expect that to continue in 2017. Good morning, <UNK>. It's changed quarter by quarter, so I will break it out for the fourth quarter for you, but that will give you a good indication of what we expect in 2017. In the fourth quarter, the aftermarket was 40% of our revenue. Approximately 40%. Yes, I think <UNK> ---+ <UNK>, this is <UNK> <UNK>. I think <UNK> noted earlier that we saw that at roughly at a 3.5% to 4% level on an organic aftermarket basis. Correct. That's correct. If you remember, last year, we had negative organic growth in the first half of the year compared to the record first and second quarters that we had in the prior year. Then in the second half of the year, we basically made up for that. So we had some contribution from our OEM customers, nice contribution on the OE side. Even BizJet was not down compared to the second half of the prior year. So we had little bit of contribution form all parts of our business in the second half of the year, which made up for the negative growth in the first half of the year. Thank you. Yes. Let's take the question in two parts. Take the ASG piece first. We haven't had a year like this in a very long time (Technical Difficulty) program, all of which represent market share gain. I think it is becoming evident to the industry overall that our superior service is truly differentiated from the competition. We are seeing a lot of opportunity. We expect more orders and share gains during 2017, knocking on wood here as I'm saying that. We do have a lot of confidence that we are going books more gains (Technical Difficulty). The ---+ respect to the second part of the question, I'm going to ask <UNK> to jump in because I'm starting to cough. <UNK>. Rich, on the ESG side, I think that we believe that coming out of this downturn, because of the opportunity we had to really piece by piece integrate the seven businesses, we have been very assiduous about capital control, trying to reduce losses, what have you. But we come from a strong base from a capitalization perspective, so we been able to invest in the business from an operational perspective while a lot of competitors were scrambling, frankly, just to keep their lips above the water. So we do believe we have created a differential organization that is fully integrated, that moves equipment where the demand is best served, that allows each of our geo managers to serve their customers at an absolutely optimal level with best equipment and best people. And that's really important because if you consider the implications for health, safety, and environmental on this industry, executing at this level is crucial to get new business. In addition, we have, as I think we've called out in the past ---+ and we're very proud of the amount of R&D that we have currently developed in terms of new tools. We have really focused on bringing in best-in-class engineers that can work directly with our field personnel to develop innovative new tools that separate our service from other competitors. Again, other people didn't have the capital to do this. They didn't have the initiative to do this because they were scrambling. I think it allowed us a real opportunity to differentially position the ESG business, and I think you'll see that starting to pay off as industry activity ramps up. Thanks, <UNK>.

2017_KLXI

2016

ESL

ESL #Again, <UNK>, similar to the response that <UNK> gave to <UNK>, we are expecting similar effect in Q4 that we had in Q3 relative to compliance. We are moving into our second directed audit and moving into what hopefully is the final innings of the ball game on that one. But that is going to continue into the first half ---+ the first fiscal half of next year. And we do report in ---+ and I don't have a copy of the release here in front of me. We do report in the dollars we expended in compliance in the third quarter ---+ in the earnings release and also in the Q. Just to add to that, <UNK>, I think what you are trying to get to is of the stuff that we don't carve out, there still is activity going on in the businesses, especially as we are gearing up for the second audit. And, again, we don't carve that out or try to. So there is probably some incremental costs that are impacting our business units, especially as we get ready for the second audit, which kicks off ---+ we have an audit schedule that's been agreed to with the State Department. It kicks off at the end of August. It will go through probably December time frame as we work through the different pipes. So we feel good about that. We've also had some, I would say, things that we don't carve out in our accelerated integration targets as we close down the two facilities. We are down to the expected headcounts. We did most of those changes in the third quarter; now we are down to the levels that we anticipate. And, again, as we had two factories going up and a lot of activity to get the first article inspections through a couple of our key customers, those activities were hitting gross margins in the specific businesses. So those ---+ some of that flows through inventory. We'll have to see some of that read off in the fourth quarter, but we feel good about the progress that we are making there. There is a lower level of headcount. We have built up the right levels in the new sites. So, some of that should start to flow off in the fourth quarter into definitely some improvement in 2017. Well, we are ---+ obviously income is a big part. One of the reasons why cash flow is a little softer year to date is because of the significant capital expenditures that we've incurred relative to our norm. We are anticipating that we're not going to see that level of CapEx in Q4. So we've got higher income and we've got lower CapEx. When looking at our working capital, because obviously that's another significant factor there, we are expecting obviously receivables are probably going to move up because of the higher sales that we are looking at. But fundamentally, the sales that we are looking at in Q4 are not going to be that dramatically different than we've had in Q3. So in our model, we are looking at some level of inventory reduction in Q4. The combination of those factors is what leads us to believe that we are pretty comfortable with that cash flow forecast. Well, I mean ---+ and frankly, <UNK>, you've nailed it. Our expectations are that capital expenditures are going to come back to our more historic norms next year. We certainly don't ---+ we certainly are not buying another building, and we are not renovating a building associated there. And then we are looking for improvements as we move forward in operating performance. One other I'll mention is, <UNK>, it's just with some of the product moves that we've had ---+ so, we moved the products from Duluth up to Everett. We had some product moves ---+ obviously, we've talked a lot about NMC and the sensors move. We did have to build up some buffer stock there to make sure that we did those moves. NMC was another one where we built up some buffer stock, again, to kind of work through with our customers. So we are not in ---+ we are anticipating bleeding those down, which I think were kind of a little bit one-offs. Another small one that I did have some build-up was we've talked about this connector issue, that we had an opportunity to grow into new connector business because of a competitor that had some export issues. And we built ahead on that. And lastly, Racal, which is typically has that business model to position for some sales in the fourth quarter, working with our customer we anticipated an order. We didn't have it yet, so we did do some build-ahead there. I'm not saying we won't have those things next year, but those should probably be a little bit less next year. We brought Scott Celli on board. That was a normal retirement. Jim Brandt is working overlapping with Scott. But really excited about Scott coming on board. In a very difficult environment in defense technologies, we have won a lot of business. California has done better than expected this year. Arkansas has had some challenges because they've won more new programs this year than they have won, I think, in five or six years. So it's ramping up, having to set up mixed model sales, doing small-batch sizing. So all of that has gone very well. We had the incident in Arkansas, which was ---+ wasn't ---+ it was an engineering change that probably wasn't understood as well. But that's being improved, and we are working through that. So, feel good about that situation. I think ---+ again, I think we're a little hung up on the compare with that one year. We think it's going to be equal to or slightly up. There's a number of things we are still chasing but overall, sequentially. So it's ---+ we still think it's pretty solid ---+ it should be a solid quarter. There are some things that we are still out pursuing, but feel good about the backlog that we have right now. So, broadly, it looks pretty good. I think maybe two or three things. The ---+ some nice wins. The Antonov program that we've gone out with, that was a nice win, a long-term contract. And the thing I will highlight there is that was a relationship that our DAT folks had with Antonov, and they were able to pull along the CMC side. As you know, we've talked about the sales lead at CMC is from DAT. So, very excited about that opportunity, and saw some more of that type of activity at the airshow. So that was really nice. DAT had some nice sales increases. So, again, their breadth of products ---+ we saw some nice increases there. And lastly, EIT, the interface technologies group, again, had some good growth there. So kind of broadly ---+ some nice broad-based improvements. Mike, let me start with the defense platform. You know, given the state we're at, we are still in flux. And so I'll give you what I know, which is similar to what I said. We've done a detailed evaluation of the site. We've done a thorough investigation of the events leading up to the incident. We've taken some corrective actions. We have worked with the employee work force and, last week, reviewed all of our training and safety policies. And this week, as we speak right now, we are in the process of restarting the facility. So, there's a couple of things that have yet to be determined as we are working through this. One is, when are we going to be back up to ramp speed, which is going to take us a little bit of time. And then the second is, as I mentioned in my comments, we had just passed a number of first-article inspections on some new products. And depending on how quickly we come back up, we may have to go through those first-article tests again. So that's a long way of saying that we are being conservative. We are factoring that in, and we are factoring a slow and steady start-up. And, relative to our expectations, sales in that platform could be impacted by $15 million to $20 million. Yes. It's still in flux. We obviously are on certain of those programs what we hear about a little bit earlier than maybe is out in the press, and are our working with current orders and work in process and working with the customer. Those are ---+ you are right. Those are big programs for us. That is very important. They are important customers. We've made good investments. You know, we think A400M ---+ it's timing ---+ a matter of time. But they are relatively ---+ there are large programs, but our exposure to any one specific program is fairly small. And so we think we are building that into our forecast as we look forward. I think we've talked about this. We do go through some upside/downside planning and are trying to be, again, a little more conservative in the way that we look and try to take into account fluctuations like this. And I think we are trying to show that we are being a little bit more steady-state there. Well, we are still working with the businesses to take a look at that, so it's a little premature. But I feel ---+ I'm cautious because of those things. But, again, our breadth is pretty diverse. I feel very encouraged about the bookings that we are having in some of the diverse markets. You know, it's ---+ I'm cautious about it. We're not ready to show something, but I would ---+ I'm not going to see big giant double-digit gains next year. I will say that. But it's a little bit early for us to give a specific number. Yes, <UNK>, we are right now ---+ as you would expect, we are right now working with our platforms and our segments and looking at our detailed planning for next year. And there is ---+ as both you and Mike have clearly pointed out, there's a lot of uncertainty on some programs that we are deep into. And we are developing and working on, with our engineering staff, developing programs that will begin kicking in a little bit later. So, we are ---+ right now, it's early. I am very pleased with how the unit is doing. I think our senior team here, Michel Potvin and his sales team there, along with Al, we ---+ I have much more visibly onto what they are working on. It is a long list of singles and doubles that they are working on. So, again, we are not trying to go bank on any big one-time wins. But the combination with DAT has been really good. I will say that when we brief the Board on this, we do talk about, hey, this is working like we planned. There are ---+ two or three or four pretty significant opportunities where CMC is getting their foot in the door and more wins. And we are also seeing the same thing going the other way where we are able to pull through some DAT volumes. So it's going well. They've got a long list of things that they are working out. We've just got to go make sure we execute on them. But so far, some nice wins. They had a long list of things for this year. They've been successful on some. They've lost out on some others. So it's still early days. Thank you. And thanks to everyone for being on our call today. I will note that <UNK> will be attending a couple of conferences on the East Coast next week. So, if possible, it would be great to see you there. In the meantime, if you have any questions about our third-quarter results, feel free to get in touch with me. So thanks again, and have a great evening.

2016_ESL

2017

AAPL

AAPL #Thank you, <UNK>, and good afternoon, and thanks, everyone, for joining us. Today, we're proud to announce very strong results for our fiscal third quarter, with unit and revenue growth in all of our product categories. We'll review our financial performance in detail, and I'd also like to talk about some of the major announcements we made in June at our Worldwide Developers Conference. It was our biggest and best WWDC ever, and the advances we introduced across hardware, software and services will help us delight our customers and extend our competitive lead this fall and well into the future. For the quarter, total revenue was at the high end of our guidance range at $45.4 billion. That's an increase of 7% over last year, so our growth rate has accelerated in 3 successive quarters this fiscal year. Gross margin was also at the high end of our guidance, and we generated a 17% increase in earnings per share. iPhone results were impressive with especially strong demand at the high end of our lineup. iPhone 7 was our most popular iPhone and sales of iPhone 7 Plus were up dramatically compared to 6s Plus in the June quarter last year. The combined iPhone 7 and 7 Plus family was up strong double digits year-over-year. One decade after the initial iPhone launch, we have now surpassed 1.2 billion cumulative iPhones sold. Services revenue hit an all-time quarterly record of $7.3 billion, representing 22% growth over last year. We continue to see great performance all around the world with double-digit growth in each of our geographic segments. Over the last 12 months, our Services business has become the size of a Fortune 100 company, a milestone we've reached even sooner than we had expected. We had very positive results for iPad, with broad-based growth in units, revenue and market share. iPad sales were up 15% year-over-year and grew across all of our geographic segments. We achieved our highest global market share in over 4 years based on IDC's latest estimate of tablet market results for the June quarter. And in markets like China and Japan, over half of iPads sold were to people buying their very first iPad. Our iPad product lineup is stronger than ever. The new iPad we launched in March offers great value and performance, and the all-new 10.5-inch iPad Pro launched in June features the world's most advanced display with ProMotion technology and is more powerful than most PC desktops. iPad is the perfect tool for teaching in new and compelling ways, and our iPad results were especially strong in the U.<UNK> education market where sales were up 32% year-over-year to over 1 million units. We believe that coding is an essential skill that all students should learn. We're thrilled that over 1.2 million students of all ages are now using iPad and Swift Playgrounds to learn the fundamentals of coding, and over 1,000 K-12 schools across the United States plan to use Apple's Everyone Can Code in their curricula this fall. And for high school and community college students who want to pursue careers in the fast-growing app economy, we announced App Development with Swift, an innovative full year curriculum designed by Apple engineers and educators and provided free to schools to teach students to code and design fully functional apps, gaining critical job skills in software development and information technology. I'd like to turn now to Mac, which gained global unit market share and reached new June quarter unit sales records in Mainland China and Japan. Mac revenue grew 7% year-over-year, driven by the strength of the MacBook Pro and iMac despite IDC's latest estimate of a 4% unit contraction in the global PC market. And with the refresh of almost our entire Mac lineup in June, we're off to a great start for the back-to-school season. Sales of Apple Watch were up over 50% in the June quarter, and it's the #1 selling smartwatch in the world by a very wide margin. Apple Watch is having a positive impact on people's health and daily lives and motivating them to sit less and move more. With features like built-in GPS and waterproofing, Apple Watch Series 2 is the perfect companion for hiking, running and swimming. We're also seeing incredible enthusiasm for AirPods, with 98% customer satisfaction based on Creative Strategies' survey. We have increased production capacity for AirPods and are working very hard to get them to customers as quickly as we can, but we are still not able to meet the strong level of demand. We made some big announcements during the June quarter that I'd like to quickly review. We launched a new investment in the future through our advanced manufacturing fund. We've earmarked at least $1 billion for this program aimed at helping our manufacturing partners develop innovative production capabilities and create high skill jobs in the United States. We believe this can lay the foundation for a new era of technology-driven manufacturing in the U.<UNK> The first $200 million from the fund has been committed to Corning to support R&D, capital equipment needs and state-of-the-art glass processing. And as we announced at WWDC, we have a very exciting fall ahead with stunning advances in iOS 11, macOS High Sierra and watchOS 4. iOS 11 will make iPhone better than ever with Apple Pay peer-to-peer payments, an even more intelligent and natural Siri, new expressive Messages with full-screen effects, richer and more powerful Maps, enhanced live photos, Memories and portrait mode effects and much, much more. iOS 11 will also take the iPad experience to a whole new level, with features such as a customizable dock, Multi-Touch drag-and-drop, powerful new multitasking, more efficient QuickType and great new markup and scanning capabilities. One of the most exciting and most promising announcements from WWDC was the introduction of ARKit, a new set of tools for developers to create augmented reality apps. It's still early in the beta period, but it's clear that ARKit has captured the imagination of our developer community. We think ARKit will help the most creative minds in the industry tap into the latest computer vision technologies to build engaging content. We believe AR has broad mainstream applicability across education, entertainment, interactive gaming, enterprise and categories we probably haven't even thought of. With hundreds of millions of people actively using iPhone and iPad today, iOS will become the world's biggest augmented reality platform as soon as iOS 11 ships. With iOS 11, we're also bringing the power of machine learning to all Apple developers with Core ML, enabling capabilities like space detection, object tracking and natural language interpretation. Core ML lets developers incorporate machine learning technologies into their apps with all the processing done right on device so it respects our customers' data and privacy. For Mac, we've provided a peek at the immersive gaming 3D and virtual reality experiences made possible with the upcoming release of macOS High Sierra and the amazingly powerful new iMac Pro. We're proud to make the best personal computers in the industry and are very excited to deliver even more innovation in the months to come. Apple Watch will become more intelligent than ever this fall with watchOS 4, featuring a proactive Siri watch face, personalized activity coaching and an entirely new music experience. watchOS 4 also introduces GymKit, a groundbreaking technology platform to connect workouts with cardio equipment. We also previewed HomePod, a breakthrough wireless speaker for the home that delivers amazing audio quality and uses spatial awareness to sense its location in the room and adjust the audio automatically. Visitors to our listening room at WWDC were blown away by the HomePod's incredible sound, which is unlike any other wireless home speaker on the market. With deep knowledge of music, HomePod is designed to work with your Apple Music subscription to help you enjoy the music you already love as well as to discover great new music based on your personal preferences. As an intelligent home assistant, HomePod is a great way to send messages, set a timer, get updates on new sports and weather or control smart HomeKit devices by simply asking Siri to turn on the lights, close the shades or activate a theme. We can't wait to deliver all of these powerful innovations in the months to come, and we might even have some others to share with you later in the year. Now for more details on the June quarter results, I'd like to turn the call over to <UNK>. Thank you, Tim. Good afternoon, everyone. Revenue for the June quarter was $45.4 billion, up 7% over last year, an acceleration to the growth rate we recorded during the first half of our fiscal year. We achieved these results despite a 200 basis point negative impact from foreign exchange on a year-over-year basis as currency movements, especially in Europe and China, affected our reported results. Our performance was very strong across the board, with growth in all our product categories and almost every market around the world. We achieved double-digit revenue growth in many developed markets, including the U.<UNK>, Canada, Germany, Spain, Australia and Korea, and emerging markets outside of Greater China grew 19% over a year ago. Gross margin was 38.5%, at the high end of our guidance range. Operating margin was 23.7% of revenue and net income was $8.7 billion. Diluted earnings per share were $1.67, up 17% over last year, and cash flow from operations was $8.4 billion. During the quarter, we sold 41 million iPhones and reduced iPhone channel inventory by 3.3 million units, leaving us with our lowest level of channel inventory in 2.5 years and well within our 5- to 7-week target inventory range. iPhone sales were up year-over-year in most markets we track, with many markets in Asia, Latin America and the Middle East growing unit sales by more than 25%. We are very pleased with these iPhone results, especially considering the tough comparison to the June quarter last year when we launched iPhone SE. iPhone ASP was $606, up from $595 a year ago, thanks to strong demand for iPhone 7 Plus, which represented a higher percentage of the iPhone mix compared to the Plus model a year ago. The impact of the stronger mix on ASP was partially offset by negative foreign exchange year-over-year and the reduction in channel inventory, which took place entirely at the high end of the portfolio. Customer interest and satisfaction with iPhone are very strong with both consumers and business users. In the U.<UNK>, the latest data from 451 Research on consumers indicates a 95% customer satisfaction rating for iPhone 7 and 99% for iPhone 7 Plus. Among consumers planning to buy a smartphone, purchase intention for iPhone was nearly 3x the rate of our closest competitor. Among corporate smartphone buyers, iOS customer satisfaction was 94%. And of those planning to purchase smartphones in the September quarter, 78% plan to purchase an iPhone. Turning to Services. We set an all-time quarterly record of $7.3 billion, up 22% year-over-year. The App Store was a major driver of this performance. And according to App Annie's latest report, it continues to be, by a wide margin, the preferred destination for customer purchases, generating nearly twice the revenue of Google Play. Revenue from our Apple Music streaming service and from iCloud storage also grew very strongly. And across all our Services offerings, the number of paid subscriptions reached over 185 million, an increase of almost 20 million in the last 90 days alone. The reach, usage and functionality of Apple Pay continue to grow. We launched Apple Pay in Italy in May, and the UAE, Denmark, Finland and Sweden are scheduled to go live before the end of this calendar year. Apple Pay is, by far, the #1 NFC payment service on mobile devices, with nearly 90% of all transactions globally. Momentum is strongest in international markets where the infrastructure for mobile payments has developed faster than in the U.<UNK> In fact, 3 out of 4 Apple Pay transactions happen outside the U.<UNK> And with the launch of iOS 11 this fall, our users in the U.<UNK> will be able to make and receive person-to-person payments quickly, easily and securely. Next, I'd like to talk about the Mac. Thanks to great performance from the new MacBook Pro, we generated 7% revenue growth over last year and gained share in the global PC market based on the latest data from IDC. Customer satisfaction for Mac is very strong at 97% in the most recent survey from 451 Research, and our active installed base of Macs has grown double digits over a year ago. We ended the quarter within our 4- to 5-week target range for Mac channel inventory, and we have a great lineup of Macs for our customers heading into the busy back-to-school season. Turning to iPad. We sold 11.4 million units, up 15% over last year. We were happy to see iPad growth in each of our geographic segments, with strong double-digit increases in key markets such as the U.<UNK>, Japan, Germany, France and Greater China. We exited the quarter within our 5- to 7-week target range for iPad channel inventory. NPD indicates that iPad had 55% share of the U.<UNK> tablet market in the month of June, including 8 of the 10 best-selling tablets. That's up from 46% share a year ago. And among tablets priced over $200, iPad's share was 89%. In addition, the most recent survey from 451 Research measured business and consumer satisfaction rates ranging from 95% to 99% across iPad models. And among those planning to buy tablets, purchase intent for iPad was over 70%. Our enterprise business continues to expand and our customers are transforming the way work gets done with iOS and iPad. Walmart will be deploying more than 19,000 iPads for employee training across 50 states, with projections of over 225,000 associates trained on iPad by the end of the year. The initial response from businesses to iOS 11 and the new iPad Pro has been amazing. And companies, including Bank of America, Medtronic and Panera tell us that they will be rolling out the 10.5-inch iPad Pro throughout key areas of their organizations. We're also seeing real traction with our enterprise partners. Just last month, we unveiled the next set of technology enhancements in our partnership with Cisco. This new wave adds a whole new category of security features designed to help enterprises and employees defend against growing cyber threats. We believe this investment in our joint security solutions for iOS will make cyber insurance even more attainable for businesses. SAP is making great strides since launching the SAP Cloud Platform SDK for iOS in March, with a pipeline of hundreds of global opportunities. SAP has also released SuccessFactors Mobile, its first native iOS app for human resources, which will support 47 million iPhone and iPad users worldwide across multiple industries. And our partnership with Deloitte has recently expanded to several more European countries. We're helping clients transform their businesses with iOS, with jointly developed programs such as the Connected Store, a pop-up version of a retail environment demonstrating iOS tools for sales and demand generation as well as tailored apps for safe associates, store management and customers. We also had a tremendous quarter for iPad in education, up 32% year-over-year. Following the launch of our new iPad in March, an update to our popular Classroom app and continued enhancements to iOS that make managing iPads in the classroom even easier. The Saint Paul Public School district in Minnesota is renewing its 1:1 program by deploying over 40,000 iPads across every student and teacher in the district. iPad was chosen because of its power and durability, ease of use, multimedia and accessibility features and the extensive Catalog of iOS apps designed specifically for education. The Shawnee Mission School District outside Kansas City recently purchased 19,000 iPads, extending its 1:1 program started in 2014, thanks to iPad's intuitive interface, superior reliability and expansive ecosystem of iOS tools for education. It was a very busy quarter for our retail and online stores, which collectively welcomed over 300 million visitors. In addition to our spectacular new store at the Dubai Mall, we opened our first stores in Singapore and in Taiwan during the quarter, expanding our total store footprint to 497 stores. In May, we kicked off Today at Apple, with new in-store programming from music to photography to art and coding and our stores collectively hosted 87,000 sessions during the quarter. As Tim mentioned last quarter, we have entered a new chapter in retail with unique and rewarding experience for our customers and some stunning new stores coming in the near future. Let me now turn to our cash position. We ended the quarter with $261.5 billion in cash plus marketable securities, a sequential increase of $4.7 billion. $246 billion of this cash, 94% of the total, was outside the United States. We retired $3.5 billion of debt and issued the equivalent of $10.8 billion in new euro- and U.<UNK> dollar-denominated debt during the quarter, including our second green bond, bringing us to $96.4 billion in term debt and $12 billion in commercial paper outstanding. We also returned $11.7 billion to investors during the quarter. We paid $3.4 billion in dividends and equivalents and spent $4.5 billion on repurchases of 30.4 million Apple shares through open market transactions. We launched a new $3 billion ASR program, resulting in initial delivery and retirement of 15.6 million shares. And we retired 3.4 million shares upon the completion of our 10th ASR during the quarter. We have now completed $222.9 billion of our $300 billion capital return program, including $158.5 billion in share repurchases. As we move ahead into the September quarter, I'd like to review our outlook, which includes the types of forward-looking information that <UNK> referred to at the beginning of the call. We expect revenue to be between $49 billion and $52 billion. We expect gross margin to be between 37.5% and 38%. We expect OpEx to be between $6.7 billion and $6.8 billion. We expect OI&E to be about $500 million, and we expect the tax rate to be about 25.5%. Also today, our Board of Directors has declared a cash dividend of $0.63 per share of common stock payable on August 17, 2017, to shareholders of record as of August 14, 2017. With that, I'd like to open the call to questions. Katy, sequentially from 38.5% that we just reported, typically, we have product transition costs during the September quarter. That's the primary driver. This happens fairly regularly for us. We also have a more difficult memory pricing environment this year than a year ago. And we think that we're going to be able to partially offset this with a positive leverage. As you've seen, we've guided up sequentially in revenue. So those are the major puts and takes. In terms of the range that we use for gross margins, we have a fairly good understanding on where we are with our hedging program, and that allows us to mitigate some of the volatility there. So we felt we could guide to a slightly narrowed range, which we've done occasionally in the past. Katy, as <UNK> mentioned, we did assume some transitional costs in our guidance for the quarter as is typically the case. And we're looking very much forward to the product rollouts. Yes. Thanks, <UNK>. We were very encouraged by the results this quarter. We improved, as we thought we would, from the previous quarters a little more than I thought we would. If you look underneath the numbers, Mainland China was actually flat year-over-year during Q3. And in constant-currency terms, we were actually up 6% in Mainland China. And so we're very encouraged by that. iPad grew dramatically more than the market. The Mac grew much more than the market. iPhone was relatively flat year-on-year as the same sort of ---+ similar as the market was. And so we see all of those as very encouraging signs. On top of that, Services grew extremely strongly during the quarter. The ---+ Hong Kong continued to drag down the total Greater China segment. And ---+ but on a sequential basis, we're probably sort of at the trough of that, which is nice. With the peg to the dollar there, from a currency point of view and tourism being what it is, I don't really know when that market will come back. But what I ---+ what we see in the mainland is definitely much more encouraging. It's interesting to note that upgraders through ---+ both for the quarter and actually for the full fiscal year to date was our highest ever. And so that we felt very good about. In terms of WeChat, the way that I look at this is because our share ---+ because iOS share is not nearly a majority of the market in China, the fact that a lot of people use that, it makes the switching opportunity even greater. And I think that's more the case than the risk that a lot of folks have pointed out. And so I see Tencent as one of our biggest and best developers. They've done a great job of implementing a lot of iOS features in their apps. And we're looking forward to working with them even more to build even greater experiences for our mutual users in China. The ---+ from an absolute quantity point of view, the upgrades for this fiscal year are the highest that we've seen and so we feel good about that. However, if you look at it from an upgrade rate point of view instead of the absolute number, the rate is similar to what we saw with the previous iPhones, except for iPhone 6, which as we've called out in the past, had an abnormally high upgrade rate. We do think that based on the amount of rumors and the volume of them, that there's some pause in our current numbers. And so where that affects us in the short term, even though we had great results, it probably bodes well later on. Sure. Switching outside of China was up year-on-year and so we're happy with that. We continue to see people moving over to iOS, and it helped with us making the results that <UNK> announced earlier, including the channel inventory reduction. Sure. Starting with the U.<UNK> ---+ and let me just take this question from what are we doing to increase jobs, which I think is probably where it's rooted. There's ---+ we've created 2 million jobs in the U.<UNK> and we're incredibly proud of that. We do view that we have a responsibility in the U.<UNK> to increase economic activity, including increasing jobs because Apple could have only been created here. And so as we look at that 2 million, there are 3 main categories of that, and we have actions going on in each of them to further build on that momentum. The first category is app development, about 3/4 of the 2 million are app developers. And we're doing an enormous amount of things to deliver curriculum to both K-12 with Swift Playgrounds and the K-6 area; other curriculum, as you proceed beyond Grade 6, under the Everyone Can Code area. And just a couple of months ago, we announced a new curriculum that's focused on community schools and community colleges, junior colleges, technical colleges for kids that did not have coding in their elementary and high school years. And so we're excited about that because we think it could increase the diversity of the developer community and the quantity. And I think this area, in general and all the things we do for the developer community, will be the largest contribution that Apple can make because this is the fastest-growing job segment in the country, and I think will be for quite some time. If you look at the second area, it's ---+ we have purchased or we purchased last year about $50 billion worth of goods and services from U.<UNK>-based suppliers. Some significant portion of those are manufacturing-related, and so we've asked ourselves, what can we do to increase this. And you may have seen that at the beginning of the quarter, sometime in April, I believe, we announced a fund, an advanced manufacturing fund that we're initially placing $1 billion in. And we've already deployed $200 million of that. And the first recipient is Corning in Kentucky and they'll be using that money to expand the plant to make very innovative glass. And we purchase that glass and essentially export it to the world with iPhones and iPads. We think there's more of these that we can do. I think there's probably several plants that can benefit from having some investment to grow or expand or even maybe set up shop in the U.<UNK> for the first time. So we're very excited about that. And then the third area is we have about 2/3 or so of our total employee base is in the U.<UNK> despite only 1/3 of our revenues being here. And we'll have some things that we'll say about that later in the year. And so that's what we're doing from a job growth point of view and we're very, very proud of that. If you ---+ now turning to China. Let me sort of comment on what I assumed is at the root of your question about this VPN kind of issue. Let me just address that head on. The central government in China, back in 2015, started tightening the regulations associated with VPN apps. And we have a number of those on our store. The ---+ essentially, as a requirement to ---+ for someone to operate a VPN, they have to have a license from the government there. Earlier this year, they began a renewed effort to enforce that policy, and we were required by the government to remove some of the VPN apps from the App Store that don't meet these new regulations. We understand that those same requirements are on other app stores, and as we checked through that, that is the case. Today, there's actually still hundreds of VPN apps on the App Store, including hundreds by developers that are outside China. And so there continues to be VPN apps available. We would obviously rather not remove the apps, but we ---+ like we do in other countries, we follow the law wherever we do business. And we strongly believe that participating in markets and bringing benefits to customers is in the best interest of the folks there and in other countries as well. And so we believe in engaging with governments even when we disagree. And in this particular case, now back to commenting on this one, we're hopeful that over time, the restrictions that we're seeing are loosened because innovation really requires freedom to collaborate and communicate. And I know that, that is a major focus there. And so that's sort of what we're seeing from that point of view. Some folks have tried to link it to the U.<UNK> situation last year and they're very different. In the case of the U.<UNK>, the law in the U.<UNK> supported us. It was very clear. In the case of China, the law is also very clear there. And like we would if the U.<UNK> changed the law here, we'd have to abide by them in both cases. That doesn't mean that we don't state our point of view in the appropriate way; we always do that. And so hopefully, that's a little bit probably more than you wanted to know but I wanted to tell you. I think the upgrade rate is a function of many, many different things, from the size of the installed base, the age of the installed base, the product that is new at the time, the regional distribution, the upgrade plans that are in various markets around the world. And so I think there's many, many factors in that it's not a simple thing that you can apply a set formula to ---+ or one variable or a couple of variable formula, in my opinion. And ---+ but I think in general, because our installed base is ---+ was up strong double digit once again, there's a lot of factors that are very positive for us. And between the upgraders and the switchers that we see and still ---+ the first-time buyer category is still out here, too, in several countries, including some that you may not think there is, there is still sizable base in some. Between those 3 areas, I think we have a lot of opportunity. As you know, Toni, we do not guide on channel inventory. We've never done that. We are providing a fairly wide range from a revenue standpoint, so obviously, that also has an impact on potential channel inventory levels. One thing that I would tell you is that we feel very good about the performance of the business right now. We think that our Services business will continue to grow well. We've got a lot of momentum on iPad and Mac because we refreshed the lineups of those products. Watch and AirPods are doing incredibly well. We're getting a lot of positive customer feedback. And I think in general, even the performance in China, Tim has mentioned it, we think that the performance will continue to improve. So those are the drivers of our guidance range for the quarter. On the first part of your question about original content, we have done some original content. It's focused on Apple Music. Currently, we have some more that's launching in a week or so that will be made available on Apple Music. The objective of this is really twofold. The one is for our own learning, given that we're new in the video space in terms of creation; and two is to give the Apple Music subscribers some exclusive content and hopefully grow our subscriber base. And we've recently hired 2 great folks with lots of experience in creating content like Breaking Bad and The Crown and some really top-notch content. And so we'll see how this area goes, but it's still an area of great interest. In terms of autonomous systems, what we've said is that we are very focused on autonomous systems from a core technology point of view. We do have a large project going and are making a big investment in this. From our point of view, autonomy is sort of the mother of all AI projects. And the autonomous systems can be used in a variety of ways, and a vehicle is only one, but there are many different areas of it. And I don't want to go any further with that. But thank you for the question. Mike, that is a great question. Since we ---+ and I could not be more excited about AR and what we're seeing with ARKit and the early going. And to answer a question about what category it starts in, just take a look at what's already on the web in terms of what people are doing and it is all over the place. From entertainment to gaming, I've seen what I would call more small business solutions. I've seen consumer solutions. I've seen enterprise solutions. I think AR is big and profound. And this is one of those huge things that we'll look back at and marvel on the start of it. So I think that customers are going to see it in a variety of ways. Enterprise, it takes a little longer sometimes to get going, but I can already tell you, there's lots of excitement in there, and I think we'll start to see some applications there as well. And it feels great to get this thing going at a level that can sort of get all of the developers behind it. So I couldn't be more excited about it. <UNK>, <UNK>. Our Services business is very broad. We got multiple categories in the Services business, so it's difficult to talk about ARPU in general. It doesn't make a lot of sense. The reason for the acceleration also here is multiple factors. One that is very, very important for us is the fact that the App Store, which is the largest of our Services categories, is seeing an increasingly larger amount of paying accounts. On a year-over-year basis, the number of accounts that are actually transacting and paying on the App Store is growing very, very well. It is happening for a variety of reasons. One of them, for example, is the fact that we are making it easier for customers to pay on the App Store. Outside the United States, in many markets, not every form of payment is accepted. We're making it easier all the time. We launched on Alipay, for example, in China during the December quarter. That has obviously helped a lot with the growth in the number of paid accounts. And we continue to bring more and more forms of payment in the App Store around the world. That's a big reason for that. The other reason why the number of paying accounts is growing is the fact that the quality and the quantity of content continues to improve, and so there's many more ways of experiencing games and entertainment and other apps on the store. We have other businesses like the Apple Music streaming service, which is growing very fast because we just started it a couple of years ago, so we are getting a lot of new subscribers there. Our iCloud storage business continues to grow very, very fast. So it's multiple services. The number of people transacting on our stores continues to grow. In terms of ARPU, and maybe I can make a comment on ARPU specifically related to the App Store. What we're seeing and we've seen over a long period of time as we keep track of these cohorts of customers, we see that as customers get on the App Store and start spending on it, we see this profile, spending profile is very similar across generations of customers. People tend to spend more over time. Obviously, you have different spending profiles in different geographies around the world, but in general, you see that trend across the board. We have no comment on anything that's unannounced. The answer to your first question is yes, I do think that we can grow both in units and market share. We don't predict those things. But yes, if you ask me what I think, that's what I think. And so what are the drivers. The installed base is growing. It's still growing very strongly. That will generate more upgrades over time. I feel good about our ability to convince people to switch. And where the developed markets, the first-time buyer rates are down other than places like Japan perhaps. The emerging markets, we haven't even got started yet really. And from a revenue point of view, we had very strong growth there on emerging markets ex China, we're up like 18% year-on-year. It was a record for us. So we see a lot of opportunity in these markets. We are investing in India. As you mentioned in your second point, we've already launched an app accelerator center, that's on top of working with the channel and looking at expanding our go-to-market in general. And we've began to produce the iPhone SE there during the quarter, and we're really happy with how that's going, and so we're bringing all of our energies to bear there. I see a lot of similarities where China was several years ago. And so I'm very, very bullish and very, very optimistic about India.

2017_AAPL

2018

CASH

CASH #Thanks, <UNK>. I'd like to welcome everyone to our first ever quarterly investor call and webcast. Over the last few months we'd informally asked investors and analysts about initiating a call and received very positive feedback. As Meta continues to grow, we believe introducing a quarterly call is another enhancement to our corporate communications, consistent with our desire to be highly accessible and transparent with the company's owners. With this call, we aim to provide shareholders with an opportunity to hear from us on key items from our results which warrant particular attention. Even more importantly, we want to provide the investment community with a chance to ask questions in this public forum and for us to give you timely information and insights on our performance and prospects. Before we open up the call to Q&A, I do want to share a few thoughts with you on the business, and I'll ask <UNK> and <UNK> to do the same. I know many of you saw our January 9 announcement of our all-stock transaction to acquire the national commercial lender, Crestmark Bank. This acquisition will further diversify Meta's national lending platform, immediately adding new pipeline for AFS/IBEX, Meta's commercial insurance premium finance division and provide opportunities for other synergies. Crestmark has been a very profitable operator, posting impressive loan growth rates of nearly 19% on a compound basis over the last five years, despite the reliance on wholesale funding and capital limitations that constrain growth. By combining Meta's low-cost deposits, higher capital and legal lending limits with Crestmark's loan platform, we believe there exists significant financial upside in addition to the deal's high strategic value. The transaction also delivers on Meta's goal of growth and innovation through diversification. In addition, the deal supports our strategy to pursue higher-margin, risk-appropriate opportunities while deemphasizing certain lower-margin deposit relationships. We also expect this acquisition to moderate Meta's inherent earnings seasonality, which we believe shareholders will value. We believe this will be a transformational transaction with relatively low execution risk. It's expected to be immediately accretive to 2018 earnings, excluding merger-related expenses, and we expect it to be approximately 10% earnings per share accretive in the fiscal 2019 year. Even with only 6% cost savings and a 15% loan growth rate for Crestmark assumed. We believe the deal was priced reasonably at 7.2 times projected 2019 earnings, with an earnback of tangible book value dilution of about 2.2 years. We've had the opportunity to spend extensive time with Crestmark's management team and we continue to be very impressed with founder and CEO, Dave Tull; President, Mick Goik; and their entire team of talented executives who have an average tenure of 13 years with the company. We'll continue to benefit from their leadership after the transaction closes. When the transaction is complete, Dave will be joining our board, along with a second mutually agreed upon director. In addition, Mick will add leadership strength to our company as President of the Crestmark division and an EVP of MetaBank. More broadly, Meta and Crestmark's joint integration teams have been working well together and we continue to expect to close the transaction during the second calendar quarter of 2018. We look forward to progressing towards a successful close and seamless integration in the coming months. Even as we work to bring our latest acquisition together, we maintained our focus on operational excellence and other profitable growth opportunities at Meta. As you can see in the quarterly results reported this afternoon, our highly differentiated business model continued to see very strong performance across all of our divisions. Meta's fee-generation business, prepaid and tax services are typically characterized by 1 or more of 4 key elements. First, Meta provides unique solutions designed to address unmet market needs. Second, these businesses have high barriers to entry due to start-up costs, including compliance and technology infrastructure buildouts among other things, and Meta has multiyear agreements and very long relationships with many big partners in these businesses. Third, these businesses contribute to Meta's success in pushing non-interest income to levels among industry leaders, representing 65% of revenue in fiscal 2017. And fourth, these businesses are the driver behind Meta's overall low cost of deposits, which in the first quarter averaged 24 basis points or just 7 basis points excluding wholesale deposits. We believe that is a key competitive advantage and will become an even bigger advantage as rates continue to rise. Prepaid solutions and tax services exemplify our proven ability to integrate, pilot, scale and then to continue profitably grow these outsized fee-generation businesses. As most of you know, one of the pioneers of the prepaid and tax payments industry is MetaBank's President, <UNK> <UNK>. He joined our company in 2004 and has over 25 years of experience in financial services, including numerous positions in banking, card industry and technology. He has played a significant role in the development of the prepaid card industry and has led Meta to an industry-leading position. <UNK> not only has a firm grasp of Meta's entire operation and opportunities, but he also has an exceptional perspective on payments and tax service industries and is among the industry's most recognized leaders and innovators. With that in mind, I'd asked him to share some of his thoughts with you today. And it's my pleasure to introduce you now to <UNK> <UNK>. Thank you, <UNK>. We could spend a lot of time reviewing MetaBank's prepaid solutions and tax service businesses in detail, but I'd like to focus my remarks on some timely topics. Let's start with a brief update of our 2018 tax filing season. We believe that we have the right infrastructure in place and are well-positioned. Things are going well in the early days of the filing season, as expected. We also believe we're well prepared to deliver best-in-class execution thanks to the hard work of our multiple tax partners in collaboration with the MetaBank team. Accordingly, we remain comfortable with the tax season guidance we shared in October. During the 2018 tax season compared to 2017, we continue to expect modest growth in contribution from refund transfer income, as well as nearly the same contribution from refund advance loans. While we also expect to originate over $1 billion in refund advance loans during the 2018 tax season, we expect to hold all of these loans on our balance sheet. We're also very excited about some innovative programs created through collaboration with our tax partners. For example, earlier this month our partner, Credit Karma Tax, launched an early-bird advance program, the first entirely online refund advance program of its kind. I want to note that Credit Karma's program was included in our assumptions when we provided our tax season guidance last fall. We also wanted to take this opportunity to share our thinking on how December's Tax Cuts and Jobs Act might impact our tax service business. In short, we believe the changes in federal tax law will be neutral to slightly positive for Meta's refund advance loan and refund transfer programs. Demand for these products is largely driven by individual tax payers who qualify for the earned income tax credit. Under the new tax law, the earned income tax credit remains largely unchanged. In fact, it's expected that some of these tax payers should see an increase in their expected tax refund during the 2019 tax season. Again, this should be neutral to slightly positive related to our previously anticipated volumes this year and going forward. We believe that our collaboration with multiple tax partners, the buildout of our infrastructure, and our plans for execution in 2018 are setting the table for an accelerated tax service growth in 2019. As consumers become increasingly aware of the availability and benefits of these programs, we continue to believe that this space has significant upside for MetaBank. Turning to our consumer credit, Meta expects to announce exciting new products with strategic partners in 2018. While our resources have been prioritized to focus on execution and delivery of our interest-free tax advance product for the current tax season, we have been laying the groundwork through our SCS acquisition to deliver several new consumer loan programs during fiscal 2018 and expect them to be significant contributors to earnings in 2019 and beyond. As in our prepaid business, we are developing strategic partnerships to accelerate delivery and adoption of these new products with national companies such as Liberty Lending. These partners will provide marketing and servicing support, while Meta will provide underwriting and maintain loan balances. We are pleased with the development of these programs and continue to strive to deliver product offerings to consumers that provide financial inclusion for everyone. Let me stop there, and I'd like to turn the call over to <UNK> <UNK>, our CFO, to provide a brief review of our consolidated financials for the most recently completed quarter. Thank you, <UNK>, and good afternoon, everyone. For those of you who have followed Meta for some time, you know that many of our businesses are seasonal. But as <UNK> mentioned, the Crestmark transaction is expected to significantly reduce our earnings seasonality. Turning to fiscal 2018, we believe that all of our businesses are enjoying an outstanding start and that should be evident in our consolidated financial results. We reported record first quarter GAAP net income of $4.7 million, a nearly fourfold increase from the same period last year. On a per share basis, we grew earnings to $0.48 in the first quarter of 2018, a $0.34 year-over-year increase. This earnings growth is even more impressive when considering that reported earnings included the impact of $3.6 million in additional income tax expense related to passage of the Tax Cuts and Jobs Act, as previously disclosed; $1.3 million of acquisition expenses in the quarter; and a $1 million loss on sale of investments, which were replaced with the $73 million of seasoned floating rate private student loans early in the first quarter of fiscal 2018 which carried an earnback at just 4 months. The previously disclosed student loan portfolio purchase and our organic loan growth, supported by our investment portfolio, contributed to net interest income growth. Net interest income was $26.2 million in the first quarter of 2018, a 32% increase over the same period last year. Total loans of $1.5 billion at the end of the first quarter reflected growth of 36% from 1 year prior. Excluding purchase portfolios, loan growth of 30% was driven particularly by the commercial insurance premium finance portfolio at 31% year-over-year and community bank portfolio at 29% year-over year. Average cost of funds increased to 51 basis points in Meta's first quarter. The increase was largely due to the addition of wholesale deposits and increased overnight borrowing rates and higher average overall funding balances to support the 2018 tax season, as we prepare to hold more tax loans this year. With that said, as expected, we have been able to more efficiently acquire the wholesale funding needed to fund our tax loans compared to last year. Despite this year-over-year increase in cost of funds, we continue to believe our growing low cost deposit base is a differentiator in the banking space, particularly in a rising rate environment. Our overall cost of deposits was just 24 basis points in the first quarter and just 7 basis points when excluding wholesale deposits. We reported a tax equivalent net interest margin or NIM of 3.06% in the recent quarter, up 16 basis points from the year-ago quarter. However, the growth in NIM was tempered by 20 basis points' impact due to December's Tax Act on our municipal securities portfolio and also by wholesale funding. As the 2018 tax season progresses and has a material effect on NIM in subsequent quarters, we plan to disclose margin with and without the impact of tax loans and wholesale funding, similar to what we provided last year. Turning to non-interest income which grew by 51% to $29.3 million, our largest drivers continue to be card and tax product fees. Card fee income increased 37% to more than $25 million in the first quarter, compared to the same period last year. Similar to the previous quarter, a good portion of the $6.8 million increase was due to residual fees related to the wind-down of two non-strategic programs. In 2018 we expect total card fee income to be the range of $95 million to $101 million, and total card processing expense to be in the range of $23 million to $27 million. In tax services the 2018 filing season is off to a good start with $2.1 million in fees in the first quarter. The 242% increase over the first quarter of 2017 was primarily due to the volume of preseason tax advance loans originated during the first quarter of fiscal 2018. All of these loans are also being held as opposed to the previous year when many of these loans were sold, contributing to fee growth. Combined with substantial growth in earning assets and interest income, the company grew total revenue to $55.5 million in the first quarter, up 42% compared to the same period the year prior. A quick note on first quarter 2018 non-interest expense, we'd emphasize that most of the $7.3 million increase from the year-ago period is attributed to higher compensation expense. This reflects the cost of new team members with the EPS Financial and Specialty Consumer Services businesses we acquired partway through the first quarter of fiscal 2017, as well as costs to support continued growth. The integration of EPS and SCS permitted the company to gain scale in the tax services divisions, and we expect to gain further efficiencies during fiscal 2018. Turning to credit, you saw that our asset quality metrics remain very strong and further improved in the first quarter of 2018 compared to the fourth quarter of 2017. Non-performing assets represented just 61 basis points of Meta's $5.4 billion in total assets at the end of first quarter fiscal 2018, declining 11 basis points from the end of fiscal 2017. This relates primarily to the payoff of a $7 million non-performing ag loan relationship during the quarter, in which we received all principal, interest, legal, and other expenses. NPAs at the end of the first quarter represented a 56 basis point increase from 1 year prior, as a percentage of total assets. This was primarily due to a large well-collateralized ag loan relationship moving to non-performing status in the third quarter of fiscal 2017. On January 2, 2018, a deed in lieu of foreclosure was executed and we assumed ownership of the properties, moving these particular ag loans into foreclosed real estate and repossessed assets. Today we believe we have minimal loss exposure with respect to this relationship, given the underlying value of the land collateralized in the relationship which will now be marketed for sale. We expect to work with the borrower to sell these properties and to receive principal, note-rate interest, and related fees and expenses. We would note that ag loans represent only 1.59% of total assets. Overall we are comfortable with our asset quality metrics which remain well within our risk tolerance levels. We are very pleased with the start we are getting off to in fiscal 2018. Meta's annuity-like fee-generation businesses combined with our national lending platform and community banking operations, continue to deliver very strong organic growth and profitability. Add to that the financial and strategic benefits to be presented by our accretive acquisition of Crestmark, and we are very excited about the growth potential of our highly differentiated financial services model in 2018 and beyond. With that, I'll turn the conversation back to <UNK> now for any closing comments before we open it up for questions. I'd like to thank <UNK> and <UNK> for their comments and participation today. These are just two of the outstanding leaders we have on our deep bench at Meta, and I look forward to giving our shareholders a better appreciation for the quality of our talented team through these calls in the quarters ahead. That completes our prepared remarks. So I'll ask <UNK> and <UNK> to join me for Q&A. Operator, could you please open up the line for any questions. Yes, so I guess what I would say is each of the individual deals will have different sizes and scope to them. But we have talked about material agreements with strategic partners. So we do think there's opportunities for significant growth in the credit area. Yes, I guess I don't want to get into too much specifics on any individual agreement that we haven't announced yet. But again, I think it will be consumer related in the customer demographic that frankly we've spent a lot of time and have a lot of knowledge with respect to that group. I would say that the majority of that is already included. I would add I guess a little bit. When you look at the wind-downs, we wind down programs all along. To some degree it's similar to what happens with loan portfolios. You have payoffs. You roll out of some deals, maybe get some prepayment penalties on deals. And that creates some lumpy income, a little bit. With that said, we've continued to grow deposits and fee income even as we've rolled off or wound down some partners. And again, I would expect us to continue to grow. But there's always going to be a little bit of lumpiness for that reason, just like I said, just like you look at a normal bank's loan portfolio. You have some prepayment penalties that might kind of pop up. Again, we'll have some income that comes in in a little lumpier manner as we're winding down some programs. We did call it out, because the dollar amounts involved were a little larger than normal when we wind some programs down. Yes, I think we continue to have upside to our margin opportunities, again between the student loans, frankly even more so when we get the Crestmark acquisition done. The majority of their loans are either variable rate or very short-term in nature. You add the growth with AFS, which again are roughly 5-month average life loans, some variable rate securities we've added as well. So to me as long rates keep moving up, that's a good thing for us and gives us upside to margin. Again, excluding, as you said, the wholesale funding and the fee-based instead of interest-based income that we earn on the tax loans. So again, the way I would answer the question is based on the existing businesses as we're doing it, we talked about with tax. Now that we've got EPS and Refund Advantage and SCS kind of all integrated, we do expect to see some improved efficiencies from our ongoing banking and payment systems as well. Looking at the credit opportunities, there are start-up expenses associated with that. In addition, when you start booking loans, there's some cost of acquisition. And then you've got to take the provision expense all up front. So again, there will be some start-up costs related to some new things we're doing. We've talked about Liberty Lending as one. But again, there's other initiatives, both in the credit space and other places. Again, as is clear with our other businesses as well, we do have some start-up expenses and some ramp-up before we really start to scale and see the efficiencies. So I would rather break it out and say, the businesses that we have that are ongoing, yes, I expect to see increasing improvement in the efficiencies. With respect to the other things, we will have some other new businesses that are starting and have some associated start-up costs. So with that said, I'm really not prepared to give you a core starting point for the efficiency numbers. As we get further into some of these new initiatives, we'll try to provide some additional guidance on how quickly things will ramp. But again, especially with the credit initiatives, we're really looking at that as being a significant opportunity for increased earnings in '19 more so than in '18 between the start-up costs and the up-front provisioning. And Mike, this is <UNK>. I would just add, we are focused very heavily on creating positive operating leverage at each of our businesses. I would say all of them though have different operating efficiencies inherent in their business. Payments is different from tax, different from consumer lending, which would be different from our community bank or Crestmark's commercial lending business. So at those business levels, we're certainly looking to generate positive operating leverage and improve efficiencies. Also all the businesses are at different maturity points in their cycles from ---+ we kind of have a layering in of more mature businesses like our community bank, even though it's grown very quickly, still growing well; to those that are starting up, as in our consumer lending initiative. Yes, that's a great question. The municipal portfolio still provides us significantly better yields than what we could get in other investments, not as good as what it was before the tax act. On top of that, that's part of why we're doing the things we're doing on the lending side. By replacing securities, especially securities growth with what we think will be a great loan generator with Crestmark in addition to what's been strong loan growth, both in the retail community bank and at AFS. And now you add in the consumer credit products that we're having, over time I would look for a de-emphasis of the securities portfolio (inaudible). I can take that. Yes, there was another bank that has ---+ so there is some experience out there. We are not in a position to divulge the numbers right now of what that was. But we do have some insight into the performance and expectations within our modeling. Yes, I'm going to start with Crestmark. Because I think your assumption is not necessarily true. The yields are higher on the Crestmark loans. They do a lot of small business related lending with the average ticket size of about $180-some thousand. So if you look at the types of lending they do with receivables, leasing, asset-based lending; there's a lot more administrative cost associated with those loans. So part of the rate is not because they're dramatically higher in credit risk. But there is significantly higher administrative costs. And that's why if you look at their overall performance, their average loss rate has been barely over 50 basis points over the last 5 years. So again, I think one of the things that we were most impressed with, with Crestmark is their ---+ I mean these are credit people. They know credit. They know underwriting. They know administration. They know how to properly securitize their collateral to make sure that they don't have those kind of losses. So if you look at their earnings over the last few years, I mean basically you're talking about a 2% ROA and a 20% ROE bank. So again, they understand credit and we're very comfortable. Frankly, we've looked at a lot of whether it be bank or finance company opportunities. And this one, the team, we were definitely impressed with. And that's why, again, the team was a big part of the deal. It's not just buying that portfolio or the set-up that they have. But we want the people, because of the expertise they bring. With respect to the consumer credit, again, there is history associated with that. We will be implementing our own underwriting as well. But there is history and background, as <UNK> said. And this is also a demographic that we've spent a lot of time and have a lot of background. And as a reminder, when we bought SCS, we talked about they had the best-in-class underwriting model for tax. But we also talked a lot about their underwriting model and their platform for consumer credit, relationships they had throughout the country and our ability to really grow that business. So while with a number of the tax partnerships and the acquisitions we've done over the last couple of years, frankly it took us a little longer to roll out those credit relationships and products than what we would have planned a year or two ago when we started talking about it. We think we're well-positioned with very seasoned teams leading those initiatives with very solid underwriting models, and we're comfortable with the credit. I'm not sure I'm clear on your question. Could you repeat it or rephrase it. Yes, it's taken in. So yes, I mean when we talked about making the same ---+ at least the same on the refund advances and a little more on the refund transfers that was all inclusive. Yes, again, we had a couple of those lumpy things in last year, which affects then the year-over-year growth. So that would be one comment. Another comment, again, we've made a couple of different times is we're trying to take advantage of the best opportunities with higher margin business. So there could be some opportunities out there for lower-margin business in the prepaid space that we would rather pass on, so we can do more things in the credit which will add more income overall. Again, that doesn't mean we won't be growing deposits or we won't be growing fee income. But again, we're trying to make sure that we prioritize the opportunities that come to us. So with the Crestmark acquisition, even though again we're assuming low cost saves and still have an accretive deal; we want to make sure that we have the right discipline and proper approach to make sure that integration goes well and Crestmark's ready to hit the ground running. Again, we've talked about other potential strategic credit announcement that would be coming. So again, we don't want to bite off more than we can chew. So if there are better opportunities, again for the same reason last year, frankly we were working on some credit opportunities last year. And we looked at EPS and SCS acquisitions and some other partnerships as things we just had to do at that time. So again, it really becomes a prioritization thing. So again, I don't view it as a negative. I just view it as us taking advantage of what we think the best opportunities are. Yes, I would say the deposit growth was not materially affected by those called-out programs. So it was the fee income that got the bump, not the deposits. Yes, so I'll start off with one thing. It's not sponsorship. So I need to repeat that. It is not credit sponsorship. We will be underwriting. We will be holding the loans. We are originating the loans. This is a Meta credit program. It is not a sponsorship or rent-a-BIN thing. So with that said, yes, we don't expect any material impact to earnings in 2018 off the credit programs, give or take a little income or a little loss, but nothing that I would frankly change your numbers in '18. But we do expect to see some significant impact going into '19 once kind of that start-up phase is done. Well, there will certainly be some sort of curve to it. But yes, and again, those are origination volumes. It's obviously not going to equal 1-for-1 in outstandings by the end of the 3-year period for the Liberty Lending relationship. No, we haven't. Like I said, we'll continue to provide more guidance as we roll things out. Yes, so actually we have even more flexibility after the Crestmark transaction. Again, basically 100% of their funding is wholesale deposits. So to the extent we wanted to, we could replace those wholesale deposits and either sell or let securities roll off. Securities roll-off can replace loans. On top of that, virtually all of the loans that Crestmark would originate, if we wanted to, we could securitize them and sell them, frankly in addition to some of the other loans that we have on the books. So we have a lot of flexibility on the balance sheet side or on the asset side. And again, with the wholesale funding that we do incrementally, again, there's a lot of flexibility. Again, we could shrink the balance sheet well over $1 billion overnight if we wanted to. So we are managing at this point to stay under the $10 billion. And we think we have a lot of flexibility to do that. So I think that answers the question. Yes, we're continuing to add additional information into our earnings announcement. We'll continue to provide more guidance each time we do an earnings call. Back to the discussion on the lumpiness of some of the card fee income. When we are doing big agreements and big partnerships, how quickly something ramps as we work with our partners and their budgeting and expectations. We're going to continue to provide as much guidance or direction, ranges, things like that as we can. But at this point, we don't have a plan to provide specific earnings guidance on a go-forward basis. Thank you, everyone. I'd like to close by thanking all of you for participating in Meta Financial's inaugural quarterly investor call. We recognize this is a very busy time for all of you and hope you found this session to be of value. If you have any feedback or suggestions on today's call, don't hesitate to let <UNK>, <UNK> or me know. Thanks again and have a great evening. Thanks, everyone.

2018_CASH

2016

MNRO

MNRO #I think you summarized what we're considering. First of all, the trend significantly changed almost immediately in April. If you want to say that we underestimated what that would look like, I think that's a fair statement. I just don't ---+ we're a needs-based business. What I really see here is a pullback by the consumer off of a very light winter. I think what gives me confidence about that is the fact that our southern markets are better and the fact that, later in the year, we really have easier comps. And that's really what ---+ there's something going on with the consumer that wasn't present at the time we were having those discussions at conferences. And I think that, for those reasons, it's going to improve as we work through the year. I think what you're ---+ first of all, I think if you look back at that period you will see over the last several years that our comps have been down 50 basis points I think from 2014. If you go back a few years earlier than that, just to give some perspective, we ran three years of plus seven prior to this tougher period. What I referred to in the comments are that I know that there are more vehicles that are entering the six-plus age range over the next five years, and we really haven't had that. It's been more flat. Overall vehicles in operation have been flat and now that's coming back and growing. The other important trend, older cars, is a trend that's going to continue for the next several years. I think that helps. And you're seeing that there are more vehicles per base. The service stations and garages are exiting the marketplace. So, when you look at overall vehicles in operation increasing 8% over the next five years, you look at the number of vehicles coming into the six plus going to be increasing for the next five years, and you look at the number of vehicles per day continuing to go up because small guys are exiting the market, I think that underpins what we've described as our comp opportunity on the traffic side. And then, we've proven that we've been able to get something in price. If you look at something like flat to plus two in traffic and flat to plus two in price, you get that 3% comp that we talk about. Even in a softer year, we're generating $80 million to $90 million of free cash flow. It won't all be debt. Fair point, absolutely. Thank you. Good morning. That is not all ASP. There are some other related services like TPMS that we're doing a good job in there. But, we did collect more on tires during the quarter. We said that we will start to achieve operating leverage on any positive comp. So, if you want to call it an inflation hurdle, inflation hurdle zero. I assume you're talking about Pep Boys. No. I don't think they're driving the market. I think it's a difficult ---+ it is a difficult environment, has been a difficult environment for some time. I think some wage inflation would certainly help that, but the consumer overall is dealing with the higher cost that I talked about, and I do think that healthcare, rent, those kind of things are outstripping the benefit of gas. We look at our own employees and we look at our customers, and we see a lot of similarities there. And I think that's ---+ we've seen it over this couple of years in trade down and in increasing intervals in deferral. That's the environment that we're describing and that we've been operating through. And, again, the tougher the environment the more we'll grow the top line. And that to me is the big hedge being the business model that we have that we continue to act on. Sure. Thank you. Thank you all for your time this morning. We remain focused on managing the business through this difficult environment and taking advantage of the significant growth opportunities it presents. I look forward to reporting our progress in July. And, as always, we appreciate your continued support and the efforts of our employees that work hard to take care of our customers every day. Thanks again and have a great day.

2016_MNRO

2018

SM

SM #Thank you, <UNK>, and thanks to you all for joining us this morning by phone and online. Before we start, I'd like to advise you that we will be making forward-looking statements during this call about our plans, expectations and assumptions regarding our future performance. These statements involve risks that may cause our actual results to differ materially from the results expressed or implied in our forward-looking statements. For a discussion of these risks, you should refer to the cautionary information about forward-looking statements in our press release from yesterday, the presentation posted to our website for this call and the Risk Factors section of our Form 10-K that was just filed. We will also discuss certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliation of those measures to the most directly comparable GAAP measures and other information about these non-GAAP metrics are described in our press release for this call. Other company officials on the call are Jay <UNK>, President and Chief Executive Officer; Wade Pursell, Executive Vice President and Chief Financial Officer; Herb <UNK>, Executive Vice President, Operations; and <UNK> <UNK>, Vice President of Investor Relations. I now turn the call over to Jay. Thank you, <UNK>. Well, thank you, everyone, for joining us. I recognize that we released a lot of material last night and there's a lot there to digest. So I very much appreciate you taking the time to call in today. I do have one introductory comment before I open the floor for questions. Over the past year or so I've spent a lot of time talking to people who've been disillusioned with investing in the oil and gas space because they believe industry management teams don't really care much about making high returns on capital. My response to that concern is always that we agree with that. And that SM Energy's singular focus on achieving top-tier returns as a measure of success in our business currently has us on a path of demonstrating a very high rate of change in the improvement of our business relative to our peers. I listened to our recorded call notes again and I'm sure we must have said 50 times that we focus on achieving high returns as measured by growth and cash flow per debt adjusted share. And that is how we have built our business plan, a plan that achieves about a 35% cash flow per debt adjusted share growth rate over the next several years. To be clear, production is an output from that planning process, not an input. We have never had a production growth rate metric in our long-term incentive plans here at SM. And even though we've averaged over a 98.5% approval rate on our say-on-pay votes over the last 5 years, we are going to modify our long-term incentive plan metrics this year to explicitly include cash flow growth per debt adjusted share as a key performance measurement. We'll be disclosing more about that in our upcoming proxy. So with that, I'll open the floor for questions. <UNK>, this is Herb. I'll take that one. So you're probably aware we've been getting quite a bit more efficient on our rig rate drilling, how fast we're drilling. And for example, what we would drill with 11 rigs in 2016, we can do with 8.5 rigs this year. And we also are going to large pads with co-development. And by doing that, we wind up with a large number of DUCs at a certain time and then we complete them and we bring them all online pretty quickly. So what you'll see is a large increase in the DUC count at the end of '18. And shortly thereafter, in '19, we bring those all online. So we'll be spending completion dollars in '18 for a bunch of wells that come on in '19. I think ---+ does that answer the question for you. Okay. So it's still relatively early compared to the Viper experience. But the IP was quite good on that Wolfcamp B. It reaffirmed our views from that Eastland well that Apache had drilled just to southwest of there. So it's on that same trend, which we see ---+ which is relatively low decline. We'll see where it goes, but it's a strong well. Well, we look at the opportunity to core up all the time. We are exploring the idea of selling Halff East. Don't know if we'll get a number that we like yet, and we'll let you know where that goes. We're kind of in that exploration phase at this point. Brad, yes, you're right. We went with tighter stage spacing there. I think it's probably around 84 ---+ 82 to 84 stages in that well compared to ---+ so effectively 125-foot stage spacing versus our standard 167. We've been trying that in a number of places. So we're trying to do direct offset comparisons in some cases to see is the incremental investment in the additional stages worth it. So we're still in the testing stage on that. And those Sundown wells, we applied it there. We also had that in the Viper well. No, I don't think we're really prepared to do that. Obviously, we're in the core areas where we're building out that infrastructure and then there's other areas where we'll still be using third party. But yes, I wouldn't put a number on that yet. We're just in the building phase right now. So first of all, let me address the capacity question first. So we have not had any issues with capacity. We've got vendors lined out and we've been using the same ones over and over again. They know our program, they know what to expect so that it can work quite effectively for them ---+ very efficient for them. That goes to our rigs and our completion crews and then some of the ancillary services like cementing and logging. So we've baked in a certain amount of escalation. Some of it is where we have no escalation, we've got firm contracts. And then some, there's some linkage to prices where there's escalation based on certain price parameters. And we know those will be coming in and we baked those in. So bottom line is availability looks good for us. And the escalation, we've baked in ---+ a lot of it is relatively firm for the first half of the year, and then we'll see where the second half goes. <UNK>, will you repeat the first part of that. Okay. So the Griswold, there's a few wells over there in that area, and those are on the periphery and there's a number that we've drilled over there for our acreage holding. The real pilot areas for where we're downspacing that's like the Iceman pad would be an example, where we've gone down to 500 ---+ sorry, 420-foot spacing there and stacked Wolfcamp A over ---+ Lower Spraberry over Wolfcamp A's. So we do have a spacing model that we're using, so typically, 500, 660 feet in Wolfcamp A. That's really the ---+ what we've determined is optimal based on all the work we've done in both Sweetie Peck and Rock [Ridge]. Is there something specific about the Griswold you wanted to know. Yes. And the Griswold ---+ let me just pull up the results there. Actually, what I'll do is I'll have <UNK> get back to you on that one. You gave us a 2018 rig cadence over the course of the year. You're going to enter 2019 with 7 rigs in the Permian, 1 in the Eagle Ford. How does that activity trend through '19. Do you kind of keep that rig count flat there. And I guess, how much CapEx ---+ or directionally, how does that look when you're assuming that you'll be free cash flow neutral by mid-2019. Yes. Our assumption for 2019 is we keep the activity relatively flattish, but you just have to watch the DUC count versus the rig count. As we get more efficient, that can influence things considerably. But we have not provided capital guidance on that one. Directionally, it will be lower than '18. Okay. And so I guess, how many DUCs are you going to enter 2019 with. And how many of those will you be working down. I mean, are you going to complete more wells in 2019 than in 2018. I think the DUC count we provided at end of December is around 110 to 115. That's at Slide 34 that we give it by month. You can see the build at the end of the year. Okay. And so are you going to work that down pretty significantly in 2019. Yes. This is where it gets real lumpy. As we go to these 25 well type of co-developments, you see 25 wells come on in a very short period of time. So then your DUC count drops within a month by 25 wells. And then you build it up again and [cut down]. So that's just what we've determined is very much the optimal way of developing. Okay, got it. And just lastly for me, did you incorporate the in-basin sand cost savings into the 2018 CapEx budget. Or is there maybe some downside if that comes in at some point in time. Yes, there's some of it. I guess, the way to look at it is ---+ I just checked, last month, we ran about 20% local sand in our completions. And by the end of the year, we hope to get to around 80%. So for the year, what the actual savings will be will depend on how quickly those local sand mines come on. And we indicated that U.<UNK> Silica has told us first quarter and third quarter, and they're on track for that. So that's really ---+ yes, there is an opportunity to get more local sand to reduce further, but we've got something that's very reasonable baked into that plan. Okay, that's a tough one. I usually think of it in terms of frac spreads per rig. And that's usually the way ---+ and basically, you can see we run about 2:1. So 2 rigs per frac spread. And then how it actually moves through time is really pad dependent. If we do 2 well pads, they come on pretty quickly. If we do 6 well and we do a number of 6 wells together to co-develop, then it's a different story. I think you just run an average line through what we've got there, and that would be a pretty good indicator. Yes, there's 2 things on the Austin Chalk. First, we know a lot of other operators in the Eagle Ford have gone and test the Austin Chalk and had some great results. Second piece of information is that we had 1 Eagle Ford well that was initially in the Eagle Ford for a good portion of the lateral but then went up into the Austin Chalk. And we find that the condensate yield and NGL yields are higher in the Austin Chalk. So that's an attractive economic proposition. Deliverability looked good, too. So we'll be testing that. It would be a potential big inventory add for us if we could add another layer of Austin Chalk across our full acreage position. Too early to say. This is <UNK>. No, I think our plan would be to exit that acreage over time. Most of that acreage that's remaining is small dribs and drabs of things in mineral interest, small interest in other wells. It's not a big, cohesive thing that we can really develop. So I think it would probably ---+ most of it would probably get sold in auction processes or in small processes. And it will take quite a bit of time. None of it is operated to any significant extent, so it wouldn't impact our ability to exit operationally. Well, as was mentioned earlier in the call, we're exploring the sale of Halff East, which is a nonoperated property we have in the Permian. We'll look over time. We're not shy about selling things. And I think we're getting to the point where a lot of what we own has great inventory in it, and that makes all those decisions more difficult. But certainly, we're going to continue looking at our portfolio every year and deciding whether it fits. Our objective is to own top-tier assets. And if we can find ways to get better assets, we're always going to look for opportunities to trade up or do whatever we need to do. I guess, how much additional facility in water infrastructure CapEx should we expect in 2019. And I guess, is that something you plan to keep in-house. Or could that be potentially monetized at some point. <UNK>, yes, this is Herb. So for 2019, well, first let's get our backbone going in 2018. 2019, we'll have most of the backbone in there, and it will just be a matter of whether we extend it from there. So no, we haven't really looked beyond that. And there's always the opportunity to sell a water system if it makes sense. Okay. So it's not necessarily something that you've built it with the intention of selling, it's just something that maybe opportunistically you would evaluate. Yes. <UNK>, it's <UNK>. We've done this before. We've built water systems in the Bakken and it's sold and then kind of had a leaseback arrangement. And I think that makes sense to us. At this point in the development, having control of these assets has a lot to do with maintaining schedule. We have great relationships with the landowners and everything we need to build these out. It just makes sense to us. When you run the economics, it's just really a compelling story to go ahead and build these ourselves. And we can make the decision here in a year or 2 about, okay, do we need to continue to own those or can we make a turn here by passing that on to someone else. So we'll make that decision. We can go either way. It's certainly an opportunity. I think it's going to create a lot of economic value for us. And that's why we're willing to spend the capital over the next 12 months. Okay, got it. And I guess, in terms of the spacing, the wellbore spacing, how do you guys plan to go and develop Howard County in 2018. Is it going to be all 660-foot spacing or are you going to do some 500-foot spacing on a portion of the acreage. And I guess, also if you can just kind of talk about that in regards to your inventory at year-end '17. Does that include anything on ---+ tighter than 660-foot spacing. Yes. <UNK>, I will say we've got the ---+ Slide 33 shows kind of some of the assumptions. But I'll just go over a little bit more color on that. So yes, typically in the Wolfcamp A, we're going to be between 513 and 660-foot spacing. There's ---+ some of the Wolfcamp B further to the east will be going to wider spacing because it makes sense there. And then in Sweetie Peck, we'll still be doing some 420s. And typically, the Lower Spraberry in Sweetie Peck will be 420 to 513-foot spacing. And that's just because of how thick Lower Spraberry is over there. Lower Spraberry will vary between 660 and 1,320 feet in the RockStar area. Okay, got it. And just lastly for me, you guys are obviously seeing a lot of efficiency gains out there. What should we assume now for how many wells a rig can now drill in a year. Okay. Here, I'll do it kind of the reverse. You can figure out the math here. We have a record well of ---+ I believe we did 1 10,000 foot lateral spud rig release in 12.5 days. That's the record. But the average would be a little bit longer than that. So call it about ---+ yes, last 12 pads averaged 18.5 days from spud of the first well in the pad to rig release on the last well. So ---+ and that's with 10,000-foot wells. So you can figure that's about 20 wells per rig. Oh, yes, and you see the ---+ if we can get 18.5 down to 12.5, that's a lot of efficiency gains. Well, again, I just want to thank everybody for taking the time today. We know it's a very busy day for you. And we're happy ---+ <UNK> is always happy to answer questions, and we'll be happy to follow up on those. So thank you very much, and have a great week.

2018_SM

2016

QEP

QEP #Thank you. Thank you, Audrey. Thanks, everyone, for dialing in today. We appreciate your interest in QEP Resources. We look forward to seeing you all over the next few weeks as we hit the road to attend some conferences and to do some non-deal road shows.

2016_QEP

2016

CVS

CVS #Thanks, <UNK>. <UNK>, the year ended up at 97.2% for last year's selling season. As we mentioned, we have about 75% of the renewals done, so we're in the home stretch there. I do not know what the retention rate was at this time last year. It probably wouldn't be that far off with where we are. Right. And it's pretty similar to the selling season, right. The large players have made their decisions and now it's down to the mid-market and the small players. So I would say it's pretty comparable to where we were last year. No, <UNK>, I don't see those aspects pressuring front-end comps. It's important to emphasize that some of what we're experiencing is planned as we think about our front-store business and the segmentation or personalization strategies as we had talked earlier. I would say, too, <UNK>, we've said all along, we're focused on driving profitable growth, and so when you look at where we're very pleased, in our core health and beauty businesses, that's where we want to win, that's where our most valuable customers expect us to be unique, and that's going very well. Then we're pulling back in general merchandise and edibles businesses, which tend to be very promotional, and reinvesting those dollars in our best customers, so you'll continue to see us do that. <UNK>, we have had an extremely high retention rate of those Maintenance Choice clients, so there's really not a good proxy there to answer that question. In the few cases where that's happened, CVS continues to be in the provider network, and we've retained a large percent of that business. <UNK>, it's <UNK>. We haven't broken that out. Quite honestly, the integration of those businesses are pretty complete now, so actually we haven't even broken out, so a little more difficult than you might imagine. But they're part of our forecast for this year, and our forecast is very much in line from a quarter perspective. <UNK>, it's around 75%. If you look at the mix of business within the PBM excluding Med D, the make-up of that business is now 60% health plan, 40% employer. Thanks. We look at it a lot of different ways, but I would say at the most simple level, the top 30% of our customers drive about 75% of our sales and profit. We are meaningful to them, but we still have significant upside in terms of share of wallet opportunities with them. So what we've really been focused on is the personalization strategy that <UNK> talked about. Essentially, investing in those customers because we can see from the data where we have upside with them. We segment them either from a value perspective sometimes, or we look at them in terms of their shopping behaviors. So we might look at beauty enthusiasts who, for example, tend to be less promotionally oriented and are very focused on new items and what's hot and relevant for them. That might be very different than food and family loyalists, who are looking for different kinds of offers and strategies. So for us, it's all about getting at the very micro level and giving them targeted offers that matter for them. We can track those customers over time, and we're very focused and pleased with the fact that we continue to grow sales and profitability among those best customers. <UNK>, it's <UNK>. If I could emphasize one point, you're hearing a theme emerge and it's not a new theme. But whether we're talking about your point on the front store or some of the things that have come up earlier with some of the questions about, the pharmacy, there is a tremendous amount of data out there. It's one thing to collect the data, it's another thing in terms of how do you use the data to create an outcome or a behavioral change. That's where we've made significant investments in our business, whether it's ExtraCare or whether it's the capabilities back in the pharmacy, that is allowing us to do things in a very differentiated way, that we think that is giving us an advantage in the marketplace. That's the delicate balance that does not just make this a math exercise. We certainly know, if you look at our bottom two deciles of customers, where there's potential, and that's what you saw us doing the last couple of quarters, is pulling back our promotional spend ---+ weaning those customers off of it. We certainly want to continue to keep their business and reinvesting that in other segments where we could see more profit upside. But that's exactly the balance we're looking at. And we said before, the role of the front store is different in our Company than other companies. It represents 11% of our total Enterprise sales, but it also is the front door to how people start to use us as a pharmacy. So as we look at those customers, we're looking not just at their front-store sales and profitability, but we also note which of those customers are our pharmacy customers and that's an important part of the decision making process, as well. <UNK>, as we've said many times price has been important. It will continue to be important. We've talked about the fact that, price is ticket to the gate. Listen, when you look across the PBM business, we're talking a lot about retention rates. We never want to lose a client. At the same time, we don't forecast or expect to have 100% retention. You can look across the landscape, and you can see clients who, every contract renewal, they migrate to another PBM. There are going to be clients out there that have different priorities, and we think that, with our differentiated offering, we can appeal to the broadest set of those clients. Just to add to that, <UNK>, while we have to continue to be competitive on price, it's really our differentiated model and our ability to interact with a consumer and impact their behavior and lower overall healthcare costs, that's what's resonating in the market and that's why we're continuing to win. Thanks, <UNK>. <UNK>, it's <UNK>. I'll start and then flip it over to <UNK>. But as you've heard us talk in the past, while biosimilars are just beginning to enter the market and their impact will be nominal or minimal in the near term, we believe that they will grow in importance and they will behave more like brands than generics, which create opportunities within the formulary management area, so that's how we thought about it at a very high level. I'll flip it over to <UNK> to talk more specifically. <UNK>, maybe I'll step back and talk about the three dimensions to our formulary strategy for this year, because it's a little bit different than what we've done in years past, and it does include these biosimilars, or in the case of the Basaglar, it's as a follow-on biologic but I would think of it as a biosimilar. First, we've got our normal therapeutic review that we started back in 2012. That's all about making sure we have cost-effective medications for our clients and their members. We've been able to deliver the $9 billion in savings that <UNK> talked about, and over the last several years, we've been able to negotiate price protection into those contracts, so if a manufacturer raises a price over a predetermined threshold, that comes back to our client in the form of a rebate and lowers their price. What we introduced this year is indication-based formulary. Think about Hepatitis C that has six different genotypes ---+ the genotypes are different ---+ so we will have different formulary options based on the genotype. Or in the case of autoimmune, you have the same drugs that treat psoriasis and RA. We may have a different preferred product for psoriasis than we do for rheumatoid arthritis. The third dynamic is really hyper-inflation. We looked at drugs that had a three-year cumulative WAC increase of greater than 200% and we've taken on 10 of those drugs this year. Our goal is, either we're not going to cover them, or we're going get the economics back to prior to these WAC increases that they took. For biosimilars, it's just part of that theme: how can we get the lower, most cost- effective drugs for our clients to provide as a benefit to their members, and we think biosimilars will be an opportunity. When you look at biosimilars, most of the pipeline is filled with the biosimilars under the medical benefit with the exception of Humira, but we'll continue to look to make decisions that are in the best interest of our clients and their members. <UNK>, it's <UNK>. I'll start and then <UNK> or <UNK> or both will jump in here. But <UNK>, I would say it's really the surround sound that is contributing to that. It's not just about the procurement side of things or the network side of, of things. I do think that Med D is a great example of competition prevailing in the marketplace to drive down overall costs, and as you look today at the cost of the Med D program against what it was projected a decade ago, it's a fraction of that. The only thing I would add is, I think that's right. It's pretty balanced. We're getting ---+ continue to get value to have a very competitive product in the market really across all those dimensions. The only thing I would add is that, our expertise and how we've been able to help SilverScript and our clients is really how you design your plan, how the formulary that supports that plan, what's your network strategy, all of those need to work together to provide a synergy that gives you a competitive product in the marketplace. That's really the expertise that we've built over the years that allows us to continue to be successful. <UNK>, it does. In our prepared remarks, I mentioned that less than 7% of the gross wins are made up of the Coventry business. Yes, <UNK>, it's <UNK>. As <UNK> mentioned earlier, we have seen the ramp begin in terms of the clients that came online in January 2016. At our analyst day, we'll provide and quantify exactly where that sits as we're able to ramp-up through the year. No, <UNK>, we're pleased with where we're at, and recognizing that, as you've heard us talking about, this is a marathon, it's not a sprint. We're pleased with the progress that we're making. And again, for the reasons we mentioned earlier, we think about the assets, the capabilities that we bring will grow in importance, recognizing the direction that healthcare is headed. I do think that obviously the business has performed well in for both segments, both Q1 and Q2. Obviously, we are driving benefit from ---+ I'll say below the line ---+as we think about refinancing our debt. But again, you saw us raising operating performance expectations within the PBM for the balance of this year and I continue to think that we're well-positioned, as we think about delivery for Q3 and Q4. We look at our price ---+ the net price to customers, as you think about all of the promotions, ExtraCare rewards, and targeted offers we give them and we think that's how the consumer views it, and we think we're within striking range, essentially, of those competitors when you look at all those offers for our best customers. Thanks, <UNK>. Next question. <UNK>, I'll start and then flip it over to <UNK>. I'm sure you know this, so just as a reminder, any acquisition, especially on the retail side, you have to do the things you must do before you can do the things you like to do. We're all really pleased with the work of the team to be able to convert almost 1,700 pharmacies in what amounted to a six-month period. It was a terrific job by all. We got tremendous support from our partners at Target. We've completed those activities within the last 30 days, so now we get to move to the things that we really like to do. I'll flip it over to <UNK> to talk about that. Right. As you can imagine with all that conversion, there is always ---+ we've done a lot of acquisitions, you do have a fair level of disruption. As <UNK> said, the Target folks have been great in working with us through all that. But we're very pleased. The service scores coming out of those stores are tremendous, the leadership alignment is fantastic, we're on track to achieve our targeted EBIT for those pharmacies. Now we're focused on ramping up our patient care programs. As we looked at this opportunity, there were really three big areas where we saw opportunity and those are beginning now. First, is the core clinical programs that we've always used at CVS, we call them our patient care programs, things like adherence, outreach, and other ways that we can drive clinical outcomes, which drive scripts. The second is around the all the member engagement efforts that we've got going on. These are essentially targeted at our members through the PBM who now have opportunities to fill the prescriptions at Target, So we're letting them know about that, inviting them into those Target pharmacies to experience the new offering, as well as some targeted marketing that we've been doing in conjunction with Target. Most of that's been digital. It's also been radio. That is really just kicking off now, as well. So all those things together give us a high level of confidence that, with all of these unique programs, as well as our brand recognition, our clinical capabilities in these digital tools that we've introduced, that we'll be able to increase script volumes in these locations. I would say the only thing we would really say is probably noteworthy in terms of performance is those markets where CVS had very little presence, like a Denver or a Portland, Oregon, those Target pharmacies are probably performing the best. Because as you think about it, that's where our model of allowing Maintenance Choice members to now fill at a CVS pharmacy inside a Target really is unique. They don't have a CVS nearby. So that's probably the one difference we've seen so far in terms of performance. It's <UNK>. What's important, too, as you think about that combination, is the overlap between the Target pharmacies and the CVS pharmacies was pretty minimal. So there's not a lot of those situations where we're head to head, number one. That's why it was a good match from that perspective. And number two is that we share customers. Many of our customers shop the Target channel and many of the target customers shop the CVS channel. Now what we've got is giving those customers options. So at the end of the day, it's going to be enhancing to our overall market share, not just switching from one box to another. And <UNK>, I'll just wrap it up by saying it's a hard question to answer at this point for the reasons that <UNK> mentioned. We're just beginning the broad-based marketing programs. There is a tremendous opportunity to increase the level of awareness of CVS at Target, and all that work has just begun. Before we take the next question, we just want to back and add a little color to the question that came up earlier on the Coventry business. This is <UNK>. <UNK> <UNK>, you asked a question about Coventry. Again, for the 1/1/17 selling season, about 7% of our gross wins is related to the migration of the Coventry business onto the Caremark platform. There is an additional piece of Coventry commercial business that does migrate onto CVS on 1/1 of 2018. Okay. So next question. Steve, this is <UNK>. I would say, if you go back and look at our long-term targets, probably the best way to think about this, and you look at those targets, you've seen us give expectations that the top line is going to grow faster than the bottom line as we capture share, as specialty continues to grow, as we continue to invest in our business and do [ballpoint] acquisitions. I would say that, that long-term forecast remains intact today from, as you think about the top line growing more rapidly than the bottom line, and so I would expect that to occur. Generally speaking, that's essentially how this business typically operates. As we've always said, is the health plan business, they're a little slower to adopt our programs and to sell those programs in, and to ---+ depending on the complexion of the health plan business, some might be more Med D weighted versus commercial, so the cadence of that ramp does vary but it's typically a bit slower than the employer book of business. Steve, they had an option to extend the contract and the economics were already built into that deal, and they chose to extend, so it was not a new financial arrangement. It was an extension of the existing deal we had offered them. Okay. We'll take two more questions please. It's a great question and we're certainly open to that. As you look at how pharmacy is evolving, and the importance of investments in technology to not just satisfy the regulatory priorities that are associated with pharmacy, but how pharmacy becomes an important of the solution of driving down healthcare costs, and serves as something more than just a dispenser of prescriptions, that is ---+ as that increases in importance, there may more be more opportunities that present themselves, and we're certainly interested in those. <UNK>, <UNK> <UNK> here. Obviously, we're very pleased with the progression of Red Oak. We continue to ---+ both us and Cardinal ---+ continue to see value from that joint venture. I would say that as we've talked about this in the past, both inflation and deflation across our business has not really been that impactful, so I don't think that the change in those levels of pricing within generics have been a major impact on us. They certainly have not been material, both this year and in prior years. So it is progressing very much as planned this year. We'll probably have more update as far as generic introductions when we get to analyst day in December. We always update our performance, both from a current period perspective and an ongoing perspective, so we certainly hit on key topics, and the outlook for those key topics over the course of the next several years, in December. Okay, everyone. Thanks for your ongoing interest in CVS, and if there are any follow-up questions, you can contact <UNK> <UNK>. Thanks.

2016_CVS

2017

NSA

NSA #Thanks, <UNK>, and thank you, everyone, for joining our third quarter 2017 earnings conference call. Our results, which we reported yesterday, demonstrate the continued success of our differentiated strategy to combine the power of our national self-storage platform with the local knowledge of our seasoned participating regional operators to drive outsized growth. For the third quarter, our same-store NOI grew by 6.7% year-over-year, and our core FFO per share increased by 13.8%. I'm pleased to note that this was our 10th consecutive quarter of double-digit year-over-year quarterly core FFO per share growth since our IPO in 2015. Our platform also provides meaningful competitive advantages for driving external growth as we benefit from both a captive pipeline of high-quality potential acquisitions that our PROs already manage, plus decades of established relationships with local third parties who are looking to sell their stores. As we anticipated, our acquisition pace has accelerated meaningfully in the second half of the year as sellers have come back to the market. Fortunately, the bid-ask spread has narrowed sufficiently, and we've been able to close our latest acquisitions, with pricing slightly better than we were seeing last year. During the third quarter, we acquired 19 properties for a total of about $125 million. And subsequent to quarter end, we have invested in 29 more stores, totaling just over $180 million, which includes one JV acquisition for about $9 million. This brings our total consolidated acquisitions this year to 62 stores valued at over $400 million or 19% growth on a square-footage basis since the start of the year. These stores are geographically diverse, but the largest additions have been in Georgia, Florida and California. We've also invested in 5 stores valued at about $60 million through our joint venture this year. One thing I'd like to mention is that 13 of the stores we've acquired this year will be managed by the NSA management company and carry the iStorage flag, which we will refer to as our corporate stores. These are stores located in markets where NSA doesn't have a PRO presence but where we have been able to find good acquisition opportunities outside of our designated PRO and JV territories. The most significant of these today are the St. Louis and Kansas City MSAs, where we recently acquired 10 corporate stores. This increased acquisition activity was supported by the continued expansion of our strong balance sheet. Notably, we were recently able to tap into the perpetual preferred equity market at a record low yield for a noninvestment-grade rated company. Tammy will provide more details in a moment, but we are very pleased with our continued access to well-priced capital and remain comfortable with our liquidity and capital position at this time. Now let's turn to the fundamentals that we're seeing in the self-storage sector and specifically address a couple of factors impacting us today. I'll first review the impact of the recent severe hurricane activity and then discuss what we're seeing from new supply. Regarding the hurricanes that hit Houston and Florida this year, we were very fortunate that the impact on NSA's portfolio was limited. In Houston, we only have 5 stores, 3 wholly owned and 2 in our joint venture. However, we have 50 stores in Florida, 29 wholly owned and 21 in our joint venture portfolio. For all these stores combined to date, we have incurred hurricane-related repair and maintenance expense of approximately $75,000 in the third quarter, and we anticipate another $75,000 of storm-related repair and maintenance expense in the fourth quarter. We also expect to make approximately $300,000 of incremental CapEx investments to replace damaged infrastructure caused by the hurricanes. The capital projects are in various stages of completion, and about $50,000 of their expenditures will be covered by flood insurance for one of our Houston stores. The remainder of our stores did not incur enough damage to exceed our deductibles. On a net basis, the primary impact of the stores for us will be slightly positive through the absorption of new supply in both Houston and Florida. Moving on, I'd like to talk briefly about new supply. At this point in the cycle, given several years of limited new construction and outsized revenue and NOI growth, it's only natural to expect construction activity to increase. I'm happy to say that we are seeing increasing total demand in pretty much all of our markets. But in several markets, supply is growing faster than demand. So in our view, the absolute amount of new supply is not necessarily the issue. The issue is more directly related to where the new supply is being developed and how the increase in new supply lines up with the increase in new demand. Until recently, we've seen substantial new supply in the top 20 MSAs. But even in those markets, the impact of new supply is very submarket-specific. About 35% of NSA stores are located in the top 20 MSAs, and we've been most impacted by new supply in those markets. In total, looking at both our top 20 MSAs and our secondary markets, we estimate approximately 20% of our properties are being affected by new supply within 3 miles of our stores in 2016, 2017 and into 2018. We believe our stores in the Portland, Dallas, Atlanta and Western Florida markets will be most significantly affected by new supply in the next 1.5 years. These markets, despite relatively healthy economies and steady demand growth, just have too much supply coming online too quickly and may take some time to get to equilibrium. Given this new supply picture, we have a few takeaways. First, we'll continue to benefit from the diversification of our portfolio and our concentration in markets with strong demand drivers, such as population growth and job growth. And many of our markets have very limited new supply coming. So demand growth should be more than adequate to fully absorb that new supply quickly. Second, we're committed to maintaining rate integrity. The way we think about it is that market occupancy is caped somewhere in the low- to mid-90% range anyway, and we would rather give up 1% to 2% in occupancy in an oversupplied market and continue to hold our overall market rates and pass through increases to existing customers instead of fighting to keep higher occupancy by lowering our overall market rates. Historically, our overall net revenue growth has been better by recognizing the reality of the supply-demand picture and adjusting our revenue management approach accordingly. Third, we continue to benefit from the on-boarding of our new acquisitions to our national platform, bringing added scale advantages to our call center, corporate G&A and marketing spend. This larger scale is further enhanced by our JV platform, and given our smaller size relative to peers, this growth is material on an overall percentage basis. The important point here is that these scale benefits can truly move the needle for NSA. Finally, our emphasis on external growth and our unique structure remain a strong competitive advantage for NSA. The 4 pillars of our external growth strategy remain very positive as we look toward 2018. First, our captive pipeline, which consists of properties that our PROs manage but which NSA does not yet own, currently stands at about 120 properties valued at nearly $1 billion. Second, the personal networks and relationships of our PROs provide us a big strategic advantage in sourcing third-party acquisitions. In addition, we continue to evaluate potential new PROs through ongoing discussions with several high-quality private operators. And finally, our joint venture strategy allows us to compete for transactions that may be too large for us to acquire on our own, while at the same time, driving fee income and scale to our platform and balance sheet. And as joint ventures wind down to an exit strategy, this provides another source of potential growth for us in future years. Year-to-date, about $60 million of our acquisitions have been completed through our joint venture. With that, I'll now turn the call over to Tammy. Thanks, <UNK>. Last night, we reported core FFO of $23.8 million and core FFO per share of $0.33, a 13.8% increase over last year. Our FFO growth continues to be driven by our significant acquisition activity as well as solid organic growth in our same-store portfolio. We also benefited from our unconsolidated joint venture with $2 million of management fees and $1.3 million of FFO this quarter. This growth was partially offset by increases in both interest expense and G&A. Turning now to operations. Our third quarter same-store NOI growth led the industry at 6.7% and was driven by a 5.4% increase in total revenue and a 2.4% increase in property operating expenses. These strong increases were delivered in spite of very tough comps in 2016 when we led the industry in both same-store revenue and NOI growth. We continue to prioritize rate growth over occupancy as we seek to drive long-term total revenue growth. As <UNK> mentioned, keeping our pricing integrity is especially important at this point in the cycle where we are seeing the localized impact of new supply. We believe the short-term negative implications of quarterly fluctuations in occupancy can be mitigated by focusing on maintaining and increasing overall average rental rates to our customer base. Other than the $75,000 of incremental R&M expense we incurred during the quarter as a result of hurricanes Harvey and Irma, our controllable operating expenses were in line with expectations this quarter. Across the portfolio, we received property tax notices and trued up our accruals, resulting in expense fluctuations in several states, including a significant increase in Colorado, which you might have noticed in our Supplemental Schedule 6. We also increased our marketing spend in Oregon, which resulted in higher year-over-year expense growth in the quarter, although year-to-date, OpEx is in line with our expectations for Oregon and certainly for the total same-store portfolio, with year-to-date expense growth of just 1.5%. Within the same-store portfolio, our strongest-performing markets were in California, Washington, Arizona and North Carolina, where we saw a relatively good balance between new supply and increasing demand in most submarkets. Our weakest markets were in Colorado, Oklahoma, Georgia and Texas. In those states, we saw the impact of excess new competition in certain markets limit our ability to push rates and in certain markets, causing us to give up some occupancy. In Oregon, our Portland stores are challenged by excess new supply, but our other stores are doing well. So in that state, the issue is more isolated to one market. In summary, our geographic diversity continues to serve us well. The overall economy remains healthy, with steady job and population growth in most of our top markets. Further, while we continue to monitor new supply carefully, as <UNK> mentioned, the impact of new supply continues to be localized. Given that our PROs have a deep understanding of the markets and submarkets in which they operate, we believe that our strategy will continue to be advantageous in this environment. With respect to our balance sheet, we continue to focus on maintaining a strong, flexible balance sheet with low leverage. We believe that multiple sources of capital set the foundation for long-term growth for NSA. In early August, we closed an $85 million mortgage financing, secured by 22 of our properties. This 10-year interest-only loan has a fixed rate of 4.14%. The proceeds were used to repay borrowings under our revolving line of credit. At quarter end, our net debt-to-EBITDA ratio was 6.3x, which we further reduced through a preferred stock offering in October. As a reminder, we have very little debt maturing before 2020 when our revolver matures. Post quarter end, we took advantage of favorable market conditions to access the perpetual preferred equity market. In early October, we completed a preferred equity offering of our 6% Series A preferred shares, which yielded total proceeds of about $173 million. We were very pleased with the pricing and market reception of our inaugural preferred offering and view this as an endorsement of our successful execution of our differentiated growth strategy as well as the strength of our balance sheet. We used the proceeds of this offering to repay borrowings on our revolver, which created capacity to close over $180 million of acquisitions we had under contract at the time of the preferred issuance. Finally, we remain very comfortable with our full year 2017 guidance range for core FFO. With regard to some of our supporting assumptions, we expect our same-store results to come in near the midpoint of the range we provided. We will obviously exceed the top end of our guidance with respect to 2017 acquisitions given that we've already closed approximately $460 million year-to-date. I would also note that our fourth quarter FFO results will be impacted by the higher cost of the debt termed out in the third quarter as well as the preferred equity issued in October. However, these moves are consistent with our long-term balance sheet strategy and set us up for sustained growth going forward. As we look forward to the end of 2017 and into 2018, we will continue to strive to position NSA for long-term growth and value creation for our shareholders. We'll now turn the call back to the operator to take your questions. Operator. Yes, hi, <UNK>. This is <UNK>. Yes, in general, as I mentioned, our cap rates have improved a little bit over last year. Our blended average cap rate on those acquisitions this year is running about 6.3%, where last year, we blended average at about 6.1%. So we're seeing about a 20 basis point improvement in cap rates, and that's reflective, obviously, of the fact that interest rates are up a little bit and also, we do expect slower growth coming ---+ going forward. So we are pleased to see that. I would say it is a combination of 2 things. One is we do ---+ we have a broader target of markets. As you know, our focus is on the top 100 MSAs. We're not so focused on just the really large MSAs. And then the second is that our multiple sources of capital ---+ I mean, of deals, deal flow through our PROs particularly, create a lot of opportunities for us to look at that may not be available for others because they're kind of off-market situations. But it is a combination of both. Yes. So we did issue some SP and OP equity this year. It's going to be in the $30 million-type range for the year, but that is less than normal. And frankly, part of it is we don't control at all. It depends on the sellers' objectives if they want cash, certainly as it relates to OP type of equity. But the other part of it is we were not particularly aggressive at wanting to issue OP equity when our prices were down in the $23 range, which we've been at for much of the year. We've recently moved up into the $26 range which we feel is more appropriate, and we will be issuing new equity, OP and SP equity next year. I'm sure we always do. The amount though varies both on really personal desires of the sellers and our PROs' requirements for commitments on SP as well as how aggressive we feel the stock is, which was part of the reason we did the preferred stock offering as well. We see it's a pretty good pipeline. The difficult part is we have a good view to stuff that might be looking at closing in the first, let's say, quarter to 4 months or so of the year. And between what the PROs have lined up, both from captive pipeline stuff and deals that they sort of are working on, on the side, we think the first quarter will be a good quarter. Beyond that, we don't know yet, but we're very encouraged by the fact that the bid-ask spread has come together, that our people aren't waiting around for tax changes, that kind of thing. So our overall goal, as I think we've mentioned to you before, <UNK>, is that we'd like to grow our portfolio by 10% a year or more if good deals are out there. So with our size of our portfolio right now being our total enterprise is about 300 and ---+ $3.5 billion, we'd like to grow by 10% of that at least next year. Just quickly on ---+ I appreciate your update on supply, <UNK>, but can you just comment specifically on when you think deliveries will peak in your markets on sort of kind of a weighted average basis. Yes. Based on what we're looking at, it's probably going to peak within the next 3 to 6 months. We're actually really encouraged by that. Now we've done tons of analysis on what's coming in our markets, and it does vary. There's no doubt that markets vary a lot. But we've looked especially at our top 40 markets that we participate in. And overall, when you look at the entirety of those 40 markets, we see supply growth and demand growth being almost perfectly matched overall from a 5-year period from 2016 through 2020. But the problem is, every market's not perfectly matched. And in those 40 markets, we've identified 5 of those markets that we think will be oversupplied during that time period for the demand growth and 9 of those markets that will be undersupplied for the demand growth. But overall, it's fundamentally a balance. So we're really encouraged by both the fact that we're seeing strong demand growth across the board in every one of our markets. We're seeing continued new demand for self-storage, new move-ins, higher move-ins than last year, those kinds of things and also, the fact that supply is peaking and coming down. So I think we're really generally in for a pretty soft landing, but there will be some bumps along the way depending on the specific market. Okay. But I think you have mentioned previously and some of your peers have mentioned, correct me if I'm wrong though, that in some of the smaller markets, maybe the 25 to 75 MSAs, that there's been a pickup in starts recently. I mean, did your comments, what you kind of just said, kind of disagree with that. No. But remember, I'm talking about the new construction that we've seen both in the last 2 years and in the next 2 to 3 years. We try to look forward in a 5-year period. And it is definitely true that in the last 2 years, the huge percentage of the new supply was in the big top 20 MSAs, where we have 35% of our property. In the next 3 years, there will be more in the smaller MSAs. But overall, we don't see it as a problem, especially in our markets because we have very strong demand growth since we're in so many markets with strong population and job growth. Fair enough. Okay. And then can you tell us how Street rates kind of trended through the quarter and where they stand in October. Hey, <UNK>, it's Steve. Yes, Street rates are certainly in line with expectations and in line with what we would expect with the seasonal dynamics of Q4. But overall, they're flat year-to-year. We saw that through much of Q3, and we're seeing a similar dynamic in Q4. So I'd say Street rates are flat. The upside is that we are still very successful in raising rates on in-place customers, and that's really allowed us to drive our revenue growth for the last couple of quarters. So this is <UNK>. I'd just comment ---+ add to that, that even despite relatively flat Street rate growth, that our overall contractual rates are up 5.5% or so. So generally, very strong continued movement on rates overall to our customer portfolio. It varies, obviously, a little bit by market. And we don't give a lot of exact details on that because that's not information that we share. But I can say that the most difficult of those will probably be Portland area, where we see that the demand is growing well but supply is growing faster. Of the others, we think that there might be ---+ in a 5-year time period, we might see effectively 6 or 7 years of supply coming in at the same time that you have 5 years of demand growth. So those might have a couple of year headwind against those. Overall, and certainly with our overall portfolio, we're in very good shape, but we know that some markets will have it harder than others. And fortunately, some of our biggest markets ---+ in fact, in our top 10 markets, we only have one market that's actually a negative, and we have 3 markets that are strong ---+ not enough supply for the demand growth. So generally, we will be affected positively by that, which is favorable. But it's no ---+ we've said all along that we do see the trends in our industry coming back to more industry norms, the 25-year-type averages in terms of revenue and NOI growth and a pretty soft landing. And I'm very encouraged that, that seems to definitely be coming. Yes. So most of it ---+ only about 10% of that is related to stabilization-type assets or partnership maturity-type situations. Mostly, it's relating to debt maturities. So 90% or so is debt maturities, which basically means that it spreads out really over the next 8 years or so. But we do have more of it coming in the next 3 to 4 years than in the last 4 to 5 years of that 8-year period. Now our hit rate has historically been really high. I think it's around 85%. But that is not a realistic ---+ I mean, to think that we'll always hit 85%, I just don't ---+ I don't feel like that's a realistic number. We kind of use somewhere in the 50% to 60% hit rate. And if we end up better than that, which we have so far, that's great. But we don't count on that. Hey, <UNK>, it's Steve. Yes, revenue management is actually available for the entire portfolio at this point, and all of our PROs are engaged in some level of revenue management. It becomes more meaningful for some properties than others. We found certain markets where it's extremely effective and other markets where it's a little less impactful. But I'd say it is broadly deployed throughout the portfolio. With respect to new acquisitions, it's a really simple process to bring it onto the platform. What is not so simple is to optimize our approach to revenue management for a new store. That can take upwards of 6 months before it would really get into the groove in terms of increasing rates on in-place customers and essentially finding the sweet spot of what we think is the sweet spot on market rates. So easy to do technologically, hard to do functionally and in an impactful way. So that takes a little longer. The ones where we actually see dynamic price movement tends to be better for us. So we've seen a lot of success on the West Coast. Certainly, Oregon, Washington and all of California benefited greatly from having those types of tools available to us to set our rates and be very thoughtful in terms of increasing rates on in-place customers. For your slower markets or smaller markets, where mom-and-pop really aren't moving rates around, it becomes a little less impactful, but still useful when you think about raising rates on in-place customers. Hey, <UNK>. Yes, I think in general, where we are seeing improvement, it is where we've seen the absorption of the new supply that was theirs kind of pretty much be relatively fully absorbed. So Oklahoma, as you mentioned, we did have quite a bit of new supply come into Oklahoma, and obviously, Oklahoma is not a strong economy. So that new supply, it took time to absorb, and it's still not fully absorbed. But enough of it has been absorbed now that at least it's improving and stabilizing. Now will it be a gangbuster market in the future. I don't see that in the short term unless something happened where the economy really turned around. But at least it's not in the decline mode like it was because we had a slow economy and excess supply. So that's helped there. Some other markets where we have seen increasing absorption and taking up of the existing supply, in some cases, actually, we might see some new supply coming online further. So North Carolina is an example where we had a good quarter in North Carolina, but we do see a number of new supply coming in the future in the Raleigh-Durham area, which will put pressure on that market. But that's part of the analysis I commented on earlier, and that's one of the more difficult markets. We think that Portland certainly has continued impact of new supply, both what's already been built and some more that are coming. But overall, we're certainly pleased with the relatively soft landing we're going to see in the big picture. Hi, this is Tammy <UNK>. I think what you're seeing in our guidance is exactly where we think we're going to end up for the year, and what's implied by the fourth quarter is likely some higher expenses and seasonality, of course. In particular, the property tax adjustment that Tammy mentioned in her comments affected both the third quarter and will affect the fourth quarter as those ---+ we got hit with some unbelievable price increases unexpected in some markets on property taxes. And of course, we challenged those, but we cannot assume we're going to win the challenges, and we have to book those as though they're going to be fully expensed from now through the end of the year. And then I think the other thing that ---+ other point that we wanted to make is to be sure that everybody's taking into account some of the moves that we've made on the balance sheet, for instance, the term debt that we did early August and then, of course, the perpetual preferred that we just did about a month ago. So we're not, obviously, not prepared to give guidance on 2018, but I will say that our operating expenses overall will be, call it, around inflation and with the exception of property taxes. And we think property tax expense will continue to increase in what we've used historically as 5% to 6% range. So the performance of our new PROs, subsequent to the IPO, has been very, very strong. And in general, as properties come in from those captive pipelines from the PROs, we have an agreement with the PROs that they will come in based on their one-off appraised value of that individual property. So that gives them a fair value to come in and contribute the property, but it does not give them the portfolio premium that they might normally get if they sold the portfolio, but we believe that they realize the effective portfolio premium over time by their participation in NSA's equity. So that's really the way that, that works. We are very pleased with all of our PROs' performance. We ---+ frankly, it's been a real win-win-win. We believe a win for our investors as our performance has been extremely strong, a win for our PROs as they've done really well, both financially and from a personal operational standpoint, and certainly, a win for us here at corporate management in terms of the results that we've been able to deliver and continue to plan on that for the years ahead. Yes. I would say ---+ <UNK> <UNK>, this is <UNK>. I would say, overall, the geographic footprint is probably a little more geared towards the markets between, I'd say, MSAs 20 and 50. So a little bit on the ---+ pretty much in our sweet spot in terms of where we like to operate. So ---+ and the relative quality is about the same, although I will say that we had a lot more investment planned in a number of properties to upgrade the properties from the time we buy them from the sellers than we did last year. So ---+ but that's factored into the cap rate numbers I was mentioning to you. So I guess a way to say that is once we have them under our operation fully with the improvements we've added, they will be relatively comparable quality to our other portfolio and then roughly more the 20 to 50 MSAs. <UNK> <UNK>, the only thing I was going to add to what <UNK> said is that one of the things we look for and feel pretty good about is that these assets have been under managed. So we see good upside opportunity in the acquisitions that we've made in the last 4 or 5 months. And the ages are really close to our average age of our portfolio, maybe even a little bit newer, but very, very close to average. So overall, it's really, really comparable. And almost all of the acquisitions, not quite all, but almost all, are quite synergistic in markets. So we didn't add many new markets. It's mostly markets where we already were, and we're just strengthening our market share within those markets, for the most part. Yes, this is Steve. Our promotions and discounts had been pretty stable for the last few quarters. As a percentage of revenue, they're actually down from Q1 and Q2 when you look at Q3. When you look at dollar terms, they're mildly up year-over-year. I would expect to nearly about flat year-over-year for Q4 as well. We feel like we've really reached a plateau with respect to discounting and expect to see consistent performance here for the next several quarters. It's a tool that we like. It makes sense to bring in occupancy and try to hold rate, and it's been working for us. And we do it on a selective basis, on a market-by-market basis and a store-by-store basis. Yes, it's only up a few basis points. The absolute number is not something that we actually disclose, but year-over-year, quarter-to-quarter, it's really only up a few basis points. Yes. So let me start with the high level. In terms of in-place rate changes, we've been really successful over a number of quarters now of sort of increasing rates at, call it, the high single digits, sometimes low double-digit rates on an appreciable number of our customers, such that we're hitting 75% to 80% of our customers over the course of the year. And what that means is that we can achieve contractual rates that are in the high single digits in terms of growth year-over-year. We're looking at 5% to 6%, has been the recent trend, and so that's really been a growth driver for revenue for us. As you noted, I think occupancy has been rather flattish to mildly down this year, and we expect to see something similar in Q4 with respect to occupancy. With respect to new stores and finding opportunities there, that's absolutely something we look for. We're always keen to find a store that's over-occupied and has not been raising rates and has not been issuing those rate increase letters. And we do find quite a bit of that, particularly with the smaller operators and with those under managed stores that Tammy mentioned. So that's definitely an opportunity for us. With respect to increasing rates on customers, we ---+ our average is probably around 9 months in terms of the first time we send a letter out to a customer. And then after that, the subsequent increases tend to run between 9 and 12 months for a second increase to a customer. I will say though one thing about that is it does depend on how competitive the market is. So if we're in a market, let's say, that rates have gone down, which some markets have that or there's higher promos, that might be much more likely that the customer might get a rate increase in 3 to 5 months instead of 9 months. Whereas if it's a market that the rates have been going up and they're continuing up somewhat, then it's probably 9 months before they will get a rate increase. So you blend all of that together, and it ends up with very effective revenue movement. Well, that doesn't really affect our same-store pool, though. I mean, that affects our FFO because of the fact that these new stores, when we buy them, if the prior owner didn't raise rates, we move those rates through. And ---+ but by the time they get into our same-store pool, we've already done that quite a bit. So the real difference in terms of the same-store performance, I think, is mostly related to the markets we're in and the fact that we have less new supply in the markets that we're in, in average, not in total, as I mentioned, we have 35% of our properties in the top 20 MSAs and there's lots of new competitors in those, but in average, we have more diversified portfolio across more broader markets, which I think have less new supply, which has helped us in our relative performance. Thank you, and thanks again, everyone, for joining us today for our 2017 third quarter earnings call. As always, we appreciate your continued interest in and support of National Storage Affiliates, and we look forward to visiting with you again at the end of next quarter as we wrap up 2017. Thanks a lot.

2017_NSA

2015

B

B #We remain consistent in terms of our communication around capital allocation. First we are going to invest in the existing businesses to drive our organic growth. We still see opportunities within Maenner, within Synventive, in terms of their continued ---+ the opportunities that are presented to those businesses globally. So as I've communicated in the past, Phase II of Maenner is very much underway. We continue to look at the investments required to expand in North America. And secondarily, as we think about the M&A side of the equation, we are very much, holding to the high discipline that I continued to reference around the criteria. So, even as we see some of these markets slowing, if we believe that there is an industrial technology that provides great value to the customer base, and that the customer places a premium on that technology, then it still is going to be something we are willing to pursue in terms of M&A. And then our last and third capital allocation criteria is share repurchase and dividends. So we're going to be continued to be in tune with our shareholders and continue to buy back as we see the opportunity presenting itself opportunistically. Thank you. Thank you, <UNK>.

2015_B

2016

NTGR

NTGR #(inaudible). So first and foremost, we welcome new entrants into the market, especially at an even higher ESP. So that's good. So that, again, as you say, it validates our strategy. Nothing is better from a flattery standpoint on somebody copying your model. We do believe that providing whole home Wi-Fi coverage eliminating dead spots is the way to go. And this mesh network concept, we introduced it last year with our Dead Spot Terminator SKU under the joint branding of Best Buy Geek Squad and NETGEAR. And it has been very successful. I guess that prompted our competition to copycat it. And we will welcome any copycat because that validates our strategy. So we will continue to do on a single router expanded coverage with the Nighthawk series. And then, of course, we will continue to develop our mesh network along the line of the Dead Spot Terminator where you have multiple units to cover the house. So as far as competition is concerned, we actually saw our market share ticked up in Q1 both in North America as well as in Europe. So I think the new entrants hurt our comp---+ the old competitors more than us. I'll let <UNK>tine talk about foreign exchange first, because I don't know much about it. And for Asia-Pacific, as you can see, the percentage of revenue derived from Asia-Pacific market is perking up year after year. And we're very pleased that in Q1 in Q---+ [comments] to 17%. I remember many years ago I talked about that eventually Asia will represent 20% or 25% of our total sales. And we clearly are marching towards that goal. Clearly, if you look at the pure economy, Asia is the biggest. If you combine Japan and China and India, it's definitely bigger than Europe, bigger than the US. And population is not even comparable. So naturally that should be a very lucrative market. And also, unlike Europe and the US, while the economy is kind of growing at a very snail pace, Asia-Pacific economy, if you look at China and India, they're still growing at 6%, 7%. We talk about recession but for 6% and 7%, we'll take it any day. So and also, I ---+ the most important thing both in these market of China, India is that the middle class is growing rapidly. And more and more affluent people are servicing. As a matter of fact, the last report I read is that there are more billionaires in China than in the US now. So that all bodes well for us because we're not selling cheap stuff. We're selling the most expensive high-end aspirational products. So all those elements benefit us and we believe that our Nighthawk routers, our Dead Spot Terminators, our Arlo security cameras will play really well into the Asian market. And we expect that we'll continue to take share away from our competitors both from the US as well as from the local Asian vendors. Yes. For the service provider, definitely if you have a fixed cost structure and on your existing product line especially on the leading-edge product line, all of a sudden, you get a bluebird order. That's very, very highly leveraged because you have no additional costs. But it's at the front end of the margin and you get extra revenue. I mean, we'll take it any day. Now, but those opportunities are far and few in between. The reason that we could take care of it is because our competitors just do not have that kind of logistic excellence that we could do. Absolutely, if there's such a bluebird coming in every quarter, we'll be more than happy to take it. But on the other hand, I'm not going to lower our margin to try to catch this type of business. But the good thing is, the products that we're shipping are at the leading edge. So the margin is good. But you're right, definitely our objective is now after we pare down the product line for service provider and really leave it just to the high value-add, differentiated high margin products, we absolutely will look for opportunities everywhere. And if we could grow that business, of course we will do that. All right. And then in terms of Arlo, yes, clearly Arlo fits right into our channel. The strength of our channel. We're very strong in retail, we have a fantastic brand around the world. We have a very strong VAR base. So that's why when we create Arlo Wire-Free and then Arlo Q, we just inject them into the channel and the channel would take it from there. As long as our products are differentiated, are leading edge, and provide real value to our customers, our channel will be able to take it as far as we can. We'll use that same experience to develop our next category or products in the smart home or in the smart office. As I said in the prior two earnings call, we're really focused on a product category that we see already growing. But we would be able to provide a highly differentiated product that would add significant value and fulfill a significant unmet need from our customers in that category that we could command a premium and is a high ASP. So we're scanning many, many of the categories and there are a few that we're putting our eyes on. And we would come out with new products but we cannot disclose what it is until it's out. <UNK>, I can answer DSO quickly. Two things on that. The lower the service provider, usually the better the DSO. And secondly, when we look at our retail quarter, we do give holiday payment terms to some of the large retailers. And most of that money then comes in in Q1. So they get extended terms once a year. So our range is still 65 to 75 and you can see that if you look over history, we happen to be at the low end of the range this quarter. Yes. As far as LTE, clearly, our expertise is actually in wireless, be it in the licensed band for LTE Advanced or the unlicensed band for Wi-Fi. And 5G is being talked about and the standards is not really finalized and the format is not finalized. But no matter what, we believe that we'll be at the leading edge because frankly, there is not a single competitor in our space who knows more about both the licensed and the unlicensed band wireless as much as we do. And we have very close relationship with all the chip vendors that provide wireless technology in these areas. And namely Broadcom and Qualcomm. And we believe that we'll be at the forefront of the technology. And you bet, and we will be very focused on making sure we are a leader in the 5G technology. And you're right, the LTE gateway in the developed market did not pan out as what we would have liked. And in the emerging market, it's still pretty much mirrored in the old 3G technology which is very low margin, which we're not be open for us to go in. But you're here running ahead with the new LTE technology not only in 5G but even in 4G. I mean, the LTE Advanced continue to progress. I mean, the next milestone is the gigabit Cat-15. And then also, there is this Cat M, M1 and M2 coming along pretty soon which will open up tremendous opportunity in what we call the mobile IOT area. Again, nobody could compete with us. If you look at some of the low power wireless technology, we had it all. We've been doing years in the mobile hotspot. And now with Arlo Wire-Free all these are very tricky. <UNK>w power wireless technology, I don't think any of our competitors have any parallel to our expertise over there. So we look at LTE as a tremendous opportunity in all three areas. The existing LTE Advanced, the incoming LTE 4G and Cat-M, and then the upcoming 5G. So it's a tremendous opportunity for us to branch out and capitalize on all these new-found opportunities in the future. Sure. Yes, thank you everyone today. And I think we're all very excited about our Q1 performance. As well as more importantly the strength of our channel and the strength of our new products which validate our strategy in really focusing on what we do the best. Which is wireless and switching in the leading edge category. And use that opportunity to branch out into new product category but utilizing our existing strength in both brand and channel. Which we're happy to see that is not only resonating in our traditional market in North America and Europe, but is clearly now resonating in Asia as well and in the emerging markets. So we're very pleased and we'll continue to follow this path. And in the next earnings call, we'll talk more about in more new exciting, new products and expansion of channels. Thank you very much and look forward to talking to you again in July.

2016_NTGR

2016

CSL

CSL #No, August 15 is when the notes come due. Coming into the year, our plan was to sort of remain revenues level to 2015. The certainly some of the news that has been reported so far this year, is going to create some challenges for us. I think the business has done a nice job taking cost out and we continue to focus on cost reductions, again, as these end markets continue to remain soft. So we're - - I think it's more of the same that you'll see in 2016 and our focus on cost reduction continues. We saw raw materials throughout 2015 continue to ---+ raw material costs continue to decline and there will be some continued decline, I think, going into Q1. There may be a little bit of a lag in terms of how those raw material cost changes on oil or captured in the business and in the end products we use but we see Q1 as a continued decline in raw material process. <UNK>, I'd say low to mid. I think we don't think really much change coming out of the Q4. Q1 is really a very low volume quarter for us, obviously. So picking that up in Q1 is up, I think, is an indication for the year but we see things in that low to mid-single-digit range. <UNK>, our first priority remains to grow the business, both organically and acquisitions. And we are excited about acquisition opportunities and that's where we hope to do, to deploy cash in 2016. In addition to that, share repurchase continues to be our focus but I think you're seeing in 2016 a similar program that we employed in 2015. We will buy back systematically to minimize the dilutive effect of equity awards and we will also look to be opportunistic to buy on top of that. So I think what you saw in 2015 is what I'd expect to see in 2016 and beyond. Yes, I think you're going to see, for 2016, that operating margin in the range that you saw for 2015. I think we ---+ that 18% to 19% is probably a pretty good range. Sure. We ---+ Dave and I've worked together a long time and we worked together on the construction with the other team members of the current strategies and so there's going to be a lot of consistency moving forward in the whole framework of Carlisle. But with that being said I think Dave and I have alluded in the last year to as we have, or alluded to, some higher growth expectations as we have reached some milestones. Certainly, getting close to our 15% EBIT margin for Carlisle means we're probably going to take a look at that again. And of course, we have pretty high expectations so there will probably be some changes there. As we continue to build out the CFT platform, the margin profile changes as well in CIT, with new products like the connector plates that are innovative and bring good margin, I think that just reinforces that. I think you'll see continued growth, like I said in CIT. I think CFT, both of them platforms for acquisition. We are also ---+ we'll probably be opportunistic with CCM; that's been a great business. And we talked earlier about hopefully having moved up that margin profile in the industry. So I think it's not just more of the same; it's probably additive to the same and continuing to reinforce the strong financial management, the conservative balance sheet, the opportunistic acquisitions and moving the business forward. So we think good things ahead. Yes, <UNK>, obviously, the pricing is the other part of that equation. But the pricing continues to hold and we continue see the discipline within the industry that we've enjoyed, really, throughout 2015. Yes, we expect raw materials to be a tailwind and we do expect to have some top-line growth. <UNK>, that's ---+ and you're right, with the Project business being a part of the CFT and that will continue every year. The Systems business is hard to really work forecast in, I'd say, month-to-month granularity because obviously, the automotive companies and other large OEMs operate on their timeframe. But I think you'll see growth in CFT. You'll see growth in systems; growth in standard product. And we'll just ---+ I can't really give you a lot of clarity on that Systems business, other than to tell you it will be there and it will be part of the revenue mix going forward and just to expect it. Okay, Thank you. I would say both. We did inherit a strong product pipeline. One of the examples I would give you that we're having a lot of success with right now is our smart pump technology. It's an electronic ---+ or electric, excuse me, pump for applications like automotive paint systems. It's being very well received worldwide. It was already launched when we took over. It had been recently launched. And we are continuing to see just solid penetration globally and especially in major automotive OEs. And then we've come in and we have organizationally added some assets. We have changed the structure to be more responsive and as we look to 2016, you'll see an accelerated investment in new products. I mean, that is an absolute essential part of this business and its continuing to deliver customer solutions that are innovative and have that high margin profile. Well, I think with what's going on in the overall market, there's been a 20% decline in equities in general. And I think we are seeing some of that in the marketplace. I think it's becoming a better time to be a buyer than maybe it was a few quarters ago. You're welcome. I don't think I can break it down for you by individual segment within the markets. I would just say that as the year went on, there was some moderation in the growth rates. I think we had some significant discussion around the third quarter and what the surprise that was. I think Dave did a great job of characterizing it. We didn't see that coming and that had an impact on 2015 growth rates. And then as we moved into Q4 with the warmer weather, we saw some nice growth and I think we're seeing a Q1 that is pretty consistent with the growth rates in Q4. So I think as you look at 2015, you've got to take third quarter in account and think about what that did for overall growth rates for the year and as we look at 2016, we think the outlook is for moderate growth. And we think that's consistent with what we saw in the fourth quarter. Thanks Patrick. This concludes our fourth quarter 2015 earnings call. Thanks to everyone for your participation and we look forward to speaking with you at our next earnings call

2016_CSL

2016

AMG

AMG #Thank you for joining AMG to discuss our results for the second quarter of 2016. In this conference call, certain matters discussed will constitute forward-looking statements. Actual results could differ materially from those projected due to a number of factors including, but not limited to those referenced in the Company's Form 10-K and other filings we make with the SEC from time to time. We assume no obligation to update any forward-looking statements made during the call. AMG will provide on the Investor Relations section of its website at www.AMG.com, a replay of the call and a copy of our announcement of our results for the quarter, as well as the reconciliation of any non-GAAP financial measures to the most directly-comparable GAAP financial measures, including a reconciliation of any estimates of the Company's economic earnings per share for future periods that are announced on this call. With us on the line to discuss the Company's results for the quarter are <UNK> <UNK>, Chairman and Chief Executive Officer; <UNK> <UNK>, President and Chief Operating Officer; and <UNK> <UNK>, Chief Financial Officer. With that, I'll turn the call over to <UNK> <UNK>. Thanks, <UNK>, and good morning everyone. Against the back drop of volatile markets and muted investor risk appetite, AMG generated solid results in the second quarter, including stable economic earnings per share and year-over-year growth of 8% in our pro forma assets, bringing our total assets under management to approximately $700 billion. Our Affiliates produced excellent relative investment performance and positive net client cash flows, and we added outstanding new Affiliates, including Winton Capital Management and Capula Investment Management. As <UNK> will describe, given the increased earnings power of our business, even in a relatively difficult environment for the asset management industry, we see continued earnings growth for the balance of the year, and through 2017. Notwithstanding elevated market volatility, which resulted in industry-wide risk aversion, we generated positive net client cash flows during the quarter. As <UNK> will discuss, our strong net inflows in the retail and high net worth channels were partially offset by lower institutional sales, especially at the end of the quarter, as a number of global institutional clients decided to pause implementation of investment decisions, in response to the unexpected outcome of the UK's Brexit referendum. We believe that this was essentially a short-term response, and looking ahead as markets have stabilized and investor expectations adjusted, we are seeing a resumption in sales momentum, and expect to benefit from these delayed fundings through the balance of the year. We also believe that rising dispersion in the markets will increasingly favor differentiated performance-oriented strategies, including focused active equities and a range of value-added alternative investment products. Our Affiliates' equity strategies performed well in the quarter, including Tweedy, Browne, Harding Loevner, and Genesis, which all posted strong absolute and relative performance in global and emerging market equities, and Yacktman and TimesSquare, which in particular, generated excellent results in US equities. Our alternative managers also generally performed well with the volatility, as several of our Affiliates, including AQR, First Quadrant and BlueMountain generated meaningful alpha during the quarter. Looking forward, contrary to conventional wisdom around challenges in the hedge fund industry, there is significant and growing client demand for alternative strategies across distribution channels, particularly those which are additive at a total portfolio level, given their lack of correlation to traditional equity and fixed income markets. We believe this is an enduring trend. The diversification and balance of risk and return offered by well-designed alternative strategies are compelling to both sophisticated global institutions, as well as individual retail investors as they strive to meet their investment goals. We believe that clients are increasingly focusing on the highest quality managers with long-term track records of alpha generation, and those managers which have demonstrated that they can effectively manage at scale and with institutional quality. This trend benefits the highest quality alternative firms, including our Affiliates, which are recognized as leaders in their respective disciplines, and as evidence of this, our alternative Affiliates have consistently generated positive net client cash flows over the past five years, including in the second quarter. Across our group of Affiliates, we have strategically and deliberately assembled a very large and diverse set of alternative strategies, which taken as a whole, not only generate strong organic growth, but also have low correlation with equity markets, and low correlation with each other. There's no other firm in the industry with the range and quality of our alternative product set. We think that this point is under-valued by the market, and that the benefit of our strategic position across a very broad range of alternative strategies will become increasingly evident. Our substantial exposure to this array of strategies, which is, in aggregate, approximately 40% of our AUM, and the highly diversified return streams they provide, is not only attractive in its own right, but it is also a strong complement to our strategic focus on differentiated active equities, through our outstanding traditional Affiliates. As clients increasingly seek the highest quality active Managers for the alpha portions of their portfolios, our industry-leading boutique Affiliates are well-positioned for continued strong organic growth going forward. Finally, turning to new investments. We continue to have an outstanding opportunity to further enhance the diversity of our performance-oriented product set, by partnering with leading traditional and alternative firms around the world. The transaction environment remains highly favorable for us, and we have a diverse global pipeline of prospective new Affiliates, that are drawn to AMG's excellent reputation as a partner for over 23 years. Given our unmatched competitive position and our strong and flexible capital structure, we are confident in our ability to execute additional accretive investments in new Affiliates, and together with the organic growth of our existing Affiliates, are well-positioned for continued earnings growth ahead. With that, I'll turn it to <UNK> to discuss our Affiliates' results in more detail. Thanks, good morning, everyone. As <UNK> said, in the quarter heavily influenced by macro uncertainty, we had positive net flows and our business performed well, as the market volatility created opportunity for high-quality active managers. Let me begin with performance in the second quarter, and start with our alternative products. Across our Affiliates, we are one of the largest managers of alternative products in the world, with a very diverse portfolio of strategies across categories and investment styles. As <UNK> mentioned, the addition of a diverse series of high-quality alternative return streams to our outstanding equity boutiques significantly improves the stability of our business, while also providing an enhanced long-term return profile. Now before I describe our performance in more detail, let me further break down our alternatives exposure into categories, and we now have these categories broken out in our IR presentation on our website. We have four primary groupings: First, private equity and real assets, which includes a variety of long-locked capital products, such as Pantheon's global private equity fund-to-funds and infrastructure funds, Baring Asia's emerging markets private equity strategies, and EIG's energy and related infrastructure investment, none of which are impacted by short-term fluctuations in equity markets. The next category is Systematic Diversified Strategies. These include our managed futures or CTA products at AQR, Systematica, and Winton, which seek to deliver returns which are uncorrelated with equity markets, and also substantially out-perform in declining markets. The third category is Fixed Income, and Equity Relative Value strategies, including those at BlueMountain and Capula, which look to provide returns uncorrelated to traditional equity and fixed income markets, as well as strategies with varying degrees of equity market exposure, from full exposure to market-neutral. Our fourth category is multi asset and multi strategy, which includes products that utilize a variety of asset classes and exposures to deliver diversifying return streams for both institutional and retail clients. Turning now to performance, and starting with our private equity and real asset strategies, we have a very diverse array of offerings with firms such as Baring Asia, EIG, and Pantheon. These firms have a number of current strategies where they are actively putting capital to work, and they have excellent long-term track records. Next, turning to our Systematic Diversified Strategies, our Affiliates include three of the leading CTA Managers in the world. So we are benefiting not just from the diversity these strategies provide during periods of expanding volatility in trending markets, but also from the excess return these firms have been able to provide pretty consistently over time. With that as backdrop, our Systematic Diversified Strategies were able to navigate the volatile markets in the quarter well. AQR Managed Futures was one strongest performing strategies in the space, with a positive return on the quarter, and a strong long-term track record. While Systematica's flagship BlueTrend fund posted losses in the quarter, it has positive returns for 2016, and a very strong long term track record. Our investment in Winton is not closed yet, and so is not reflected in the financial results for the quarter, but they also have one of the highest quality offerings in this product category, and performed well in the quarter. Among our fixed income and equity relative value strategies, BlueMountain and Capula generated positive returns in the quarter across most of their products, while ValueAct on the other hand had a more challenging quarter, as they underperformed their benchmark, although they have started the third quarter very strong and continued an excellent long-term track record. Finally, with regards to our multi-asset and multi-strategy offering, many our Affiliates' products performed well in the quarter, including risk parity products at both AQR and First Quadrant, as evidenced by the returns of their publicly available funds, AQR's Risk Parity Fund, and AMG FQ Global Risk Balance, which are up 6% and 7% respectively. In addition, we saw solid gains across other significant products in the category, such as AQR Style Premia and First Quadrant Tactical Currency. Now turning to our equity products, and starting with the global developed markets category, where a number of our largest products and strategies posted strong absolute and relative returns. Tweedy, Browne's flagship global value fund out-performed its benchmark and peers in the quarter, further improving its long term track record. Through the quarter, this fund holds the top 5 and 10 year track records in Morningstar's foreign large value category. In addition, Harding Loevner once again out-performed benchmarks and peers in both international and global equity strategies. Both strategies also feature near or above top-decile long term track records in their respective Morningstar categories. On the other hand, AQR Artemis underperformed the benchmarks, although they still maintained good long term performance records in the major non-US equity strategy. Turning to our emerging markets category, we had very broad-based strong relative performance. Almost all of our major products at Affiliates including AQR, Genesis, Harding Loevner and Trilogy posted good absolute and relative returns. Stand-outs included Genesis Global Emerging Markets and Harding Loevner Emerging Markets, each of which outpaced the benchmark by over 250 basis points. Finally, with respect to our US equities, many of our US growth strategies are biased towards quality growth and away from high beta stocks, and we benefited from that in the quarter, as they generally out-perform the benchmarks and peers. This includes the largest products at Frontier and TimesSquare. On the US value side, our largest US equity contributor, Yacktman, saw their Focused Fund and Diversified Fund each outperform peers for the quarter, allowing them to maintain their top decile returns year-to-date and for the trailing year, and both funds still rank in the first percentile of the Morningstar category across the last 10 to 15 year period. Now, turning to flows for the quarter, and I'll reiterate that flows to both the institutional and sub-advisory channels are inherently lumpy. First, we were pleased to generate another quarter of positive net client cash flows of $630 million, bringing us to positive flows in 22 over the last 24 quarters. Within our flows this quarter, there are a couple themes to identify. First, as we've discussed on previous calls, we remain very well-positioned to participate in the trend of rising allocations to alternatives across distribution channels, and we benefited from this trend again this quarter. As <UNK> said, investors are increasingly using alternatives to achieve their investment objectives, either to generate uncorrelated returns or for risk mitigation, and our Affiliates feature some of the best offerings in liquid and illiquid alternatives, whether for institutional, retail, or high net worth investors. While there have been a lot of headlines about the challenges so-called hedge funds are facing, we should all be very careful to separate those from the strong underlying trend of flows to alternatives more broadly, a trend we believe will continue, and which we are very well positioned to participate in. Second, the quarter was really a tale of two parts, with a relatively good first two months giving way to June, which was impacted significantly by the Brexit vote, and the volatility around it. Now moving to specifics for the quarter, and starting with the institutional channel, we had net outflows of $2.9 billion in the quarter. There were three broad reasons for the negative net flows in the channel. First, we saw the funding process for several significant mandates slow in the back half of the quarter. A couple of cases were explicitly linked to Brexit-related uncertainty. Second, we did experience some outflows from petro dollar-related clients. And third, unusually, we did not have any meaningful closes in our long lock capital products, at firms such as Pantheon, EIG, and Baring Asia. That was really just an idiosyncratic dynamic related to the quarter. There is significant demand for these illiquid products, so it's a matter of incidental timing and how the fund raising cycles across Affiliates stacked up. Turning to the high net worth channel, we had record inflows of $1.7 billion for the quarter. Key contributors to this quarter's strong flows were SMAs sold through our broker dealer channel, especially in municipal bonds, as well as our AMG Wealth Partners platform, where we continue to see good traction developing. In the mutual fund channel, we had net inflows of $1.8 billion in the quarter. From an asset class perspective, flows this quarter were driven by strong inflows to our alternatives and emerging market equities offerings, and we continue to benefit from much better US equity redemption rates. From an affiliate perspective, key contributors to net positive flows were AQR and Harding Loevner. We did have some elevated retail outflows at our UK affiliate, Artemis, in the second half of the quarter, particularly in their UK-oriented strategies following the Brexit vote, but as markets recover, we expect this to continue to abate. More broadly, while there's still a lot to be determined regarding the outcome, we do not see the Brexit vote having a significant direct impact on our distribution efforts or our Affiliates' operations more broadly. In fact, in the area most likely to be impacted, the retail channel across the UK and Europe, our affiliate product offerings, even from our UK-based Affiliates, are mostly domiciled outside of the UK, and should be relatively unaffected, or domiciled in the UK, but also sold to UK clients. Looking ahead, with our outstanding and growing array of high quality equity and alternative products, along with our unique distribution strategy, which includes both the Affiliates' own distribution teams as well as AMG's focused, complementary resources, we believe we are very well-positioned for meaningful organic growth ahead. With that, let me turn to <UNK> to discuss financials. Thank you, <UNK>. As <UNK> discussed, we generated solid results in a quarter marked by industry-wide risk aversion. AMG has a differentiated ability to produce stable earnings across a range of market environments, and with the addition of Winton and Capula, we will further diversify and increase the earnings power of our business. As you saw in the release, we reported economic earnings per share of $3.06 for the second quarter, which included net performance fees of $0.10. On a GAAP basis, we reported earnings per share of $1.97. Turning to more specific modeling items for the second quarter, our EBITDA was $220.3 million, and the ratio of our EBITDA to end-of-period assets under management was approximately 13.6 basis points, or approximately 13.1 basis points excluding performance fees. In the third quarter, we expect this ratio to decline to approximately 13.1 basis points, reflecting lower performance fees, which is typical in the third quarter. As a reminder, we will report our recent new investments on a one-quarter lag. As a result, this will have the effect of lowering our earnings for the second half of 2016, but not thereafter, as we closed Capula in July, and we expect to close Winton in the fourth quarter, without reporting their respective income in the quarter in which we close. I will further describe the timing and cost of funding of these new investments in a moment. With regard to our taxes, our effective GAAP tax rate for the quarter was 32.3%, and our cash tax rate was 18.8%. In the third quarter and for the full year 2016, we expect our GAAP tax rate to be 33%, and our cash tax rate to be 20%. Intangible related deferred taxes for the second quarter were $21.3 million. We expect this number to remain at approximately $21 million in the third quarter, and for the full year 2016, we expect our intangible related deferred taxes to be approximately $87 million. Our share of reported amortization for the second quarter was $37 million, which includes $14.8 million of amortization from Affiliates accounted for under the equity method. For the third quarter, we expect our share of amortization to decline to approximately $35 million, and for the full year 2016, we expect amortization to be approximately $145 million. Our share of interest expense for the second quarter was $21.9 million, and in the third quarter, we expect our share of interest expense to be approximately $24 million, reflecting the higher revolver balance from the closing of Capula. For the full year 2016 we expect our interest expense to be approximately $90 million. Other economic items for the second quarter were $0.8 million. For modeling purposes, we expect other economic items to be approximately $1 million per quarter. Turning to our balance sheet, in June we announced new investments for the total purchase price of $800 million and simultaneously entered into a forward equity contract for up to 2.9 million shares, a structure which we have used several times in the past. Of the available 2.9 million shares, we expect to issue 2.5 million shares for $400 million in proceeds in the fourth quarter upon closing Winton, with the remainder of the purchase price funded under our revolver. Given the funding profile as well as the ongoing strength of our balance sheet, and the quality and diversity of our business, we were placed on positive outlook by S&P. With our flexible capital structure, we are well-positioned for growth in a range of market environments, and looking ahead, the strength and scale of our business, which generates run rate EBITDA of approximately $1 billion, along with approximately $1 billion of undrawn capacity available by year-end under our revolver, positions us to create meaningful earnings growth as we execute on our new investment strategy and return capital to shareholders over time. Now turning to guidance. We are updating our 2016 guidance, as we now expect economic earnings per share to be in the range of $12.30 to $13.30. This guidance range assumes our normal model convention of actual market performance through Friday for the current quarter, and 2% quarterly market growth for the fourth quarter. As per our convention, given the pacing of our 2016 new investments, our guidance does not assume incremental share repurchases for the balance of 2016. We expect our weighted average share count for 2016 to be approximately 55 million, which includes the expected equity issuance in the fourth quarter. Given the meaningful run rate impact of our recent new investments, which is not reflected in 2016, as well as the full-year impact of the fourth quarter share issuance, we are providing preliminary guidance for 2017, as we expect economic earnings per share to be in the range of $14 to $16. This range assumes the full-year effect of our 2016 new investments, our normal model convention of 2% quarterly market growth beginning in the fourth quarter of 2016 and each quarter thereafter, and includes our normal model convention for share repurchase in 2017, equal to 50% of our annual economic net income. As a result, we expect our weighted average share count to be approximately 56 million for the full year 2017. The lower end of our guidance ranges includes a modest contribution from performance fees and organic growth, while the upper end assumes a more robust contribution from both performance fees and net client cash flows. As always, these assumptions do not include earnings from future new investments, and are based on our current expectation of affiliate growth rates, performance, and the mix of affiliate contribution to our earnings. Of course, substantial changes in markets and the earnings contribution of our Affiliates could impact these expectations. Now, we'll be happy to answer your questions. This is <UNK>. So I think you understand that mostly right. So I think first, I would say that the Brexit vote, the slowed fundings really were the uncertainty around it, so we actually saw that show up more broadly through the month of June than just right after the vote, so it was actually that uncertainty running into it. We saw a few things push out, so that was the first. And then the second is as you say, we didn't have any closes in long-lock capital products, which is the other underlying trend I'd give you. And yes, of course, as you say, it is always lumpy, and so the timing of the close on one or two fundings ends up ---+ can end up impacting that gross sales number, can impact the gross sales number. And the other thing I'd say, just to follow on to your question is, look, July was a good month, and the institutional pipeline looks really strong, and partly that is probably because of some things that slipped from Q2 into the back half of the year. But the RFP levels and the finals activity levels are really fantastic. And maybe even a nuance there, which is that description I gave of June was really on funding, not really on activity level, because again activity level through the quarter was actually quite good. I'll start, and maybe <UNK>, if you want to add in some color, and <UNK> can answer the last bit. Winton and Capula of course are ---+ in the case of Capula, we just closed our investment, and Winton will be later this year. Their performance is actually good, and was ironically even better post-Brexit. So across our book of alternative strategies, and you heard a broader more comprehensive discussion this quarter, and you'll hear more as we broaden and expand our disclosure around the range and quality of our alternative products, but the main answer is that looking ahead, we feel very good about the position and performance level of especially our largest affiliate products. But including the range and diversity of the products, because inevitably not every product or strategy will outperform in every period, and it's the correlation among the alternative products, as well as correlation or lack of correlation to equity markets that's important to bear in mind. <UNK>. Or <UNK>. Just going to answer on the 2017 piece. So on 2017, the first thing obviously <UNK>, is that we've incorporated Capula, which has closed, and Winton that will close in the fourth quarter. Again, we will have a full year reporting of those in 2017. The 2016 numbers will be affected by the lag that I mentioned, but that is included in the $14 to $16 of the 2017 estimate. But specifically, when you look at the deal itself, we had announced a range of accretion of $0.50 to $0.80, given that we will be issuing the 2.5 million shares in the fourth quarter, it's going to be closer to $0.60, but it will still be in that range. And it is included in the 2017 numbers already. Right yes I think that's a fair comment, and so far in 2016, we've closed or will close on approximately $1.3 billion in new investments, so I think you're right on that. We have positioned the balance sheet for both flexibility and capacity. As you know, we expanded or we increased the revolver to $1.45 billion and we did the equity forward, really in anticipation of continuing our new investment strategy, continuing to execute on our pipeline. We are well positioned for that, and as it relates to overall leverage levels, we're just a hair above 2 times. I think 2 times would be a level that over a longer period of time, we would think we would be at. So we aren't really over levered at this point. In fact, we're probably right where we would want to be. You could see a modest delevering, but nothing that would change the course of our balance sheet. And as it relates to capacity to do deals, we'll by the end of the year have over $1 billion under our revolver that we can continue to execute. So I'll try to hit all those, and I think they are ---+ it's not unfair to think about them as relatively equal magnitudes, is the way to think about it. So the funding is a couple billion, the petro dollar outflows, again, that's not impacting that gross sales number, but that was also significant. And the closes on long-lock capital, as you say, they are very lumpy, and they can ---+ some of these when you come through with flagship products, those are multi-billion products, sometimes spread across multiple closings. But as you say, it will be lumpy, but those are all very significant things. I need to declare we did have some additional pieces in, but there was nothing that was a meaningful close on long lock, which again, if you look across the breadth and diversity of that product set across the Affiliates we talked about, it's quite unusual to not have anything. But again, it was just the accident of how things stacked up. And then I think our petro dollar exposures, still one of the lowest I think in the industry, frankly, but it's still a couple percent is how we would characterize it. And again all of that is separate and apart from the very elevated, in fact, I think I heard <UNK> use the word fantastic, which is not a typical <UNK> word, RFP and finals activity. So we feel very good about current trends, especially given our product set and performance. Yes, so the short answer is, it is primarily related to the timing of the financing and the quarter lag of reporting, and then there's a bit of it that's performance fee. Maybe just to give you the backdrop of the last time we gave guidance, at the time we gave that guidance in the quarter, which was May 2, we were already up about 1%. And as you can see from our AUM table, we experienced about 1.3% market change for the full quarter, and I also note that FX impacted it by about 0.5% negative. So we really, from the last time we gave guidance, markets really haven't changed materially, so it really was not market related. And then when you look at what happened quarter to date July, we've effectively experienced about 2% up in our blend, which would be exactly consistent with what a quarter would expect. So there's really no change to our forward forecast, with respect to beta because we've got the 2% that I've just described. So really the three items are the quarter lag closed in July, Capula, but we won't report until the fourth quarter expect to close Winton in October, but won't report until the first quarter of 2017. But we will have the revolver balance and the 2.5 million share issuance in this calendar year, and so that's the first bit. The second bit then would be our model convention, given the pacing of new investments, the $1.3 billion I mentioned earlier, we would from a guidance and a model perspective, not assume any more share repurchases. So that has an impact. And then lastly, we've taken down our performance fee expectation just modestly, but that's the third piece here. This is <UNK>. I'll take that one. So I think the short answer right, is that we don't think the DoL rules will have a significant impact on our business. And maybe just at a first answer, bit of a high level but our Affiliates that are interacting with retirement investors are already fiduciaries so the retirement piece of our business is modest. It's actually frankly an area where we should be able to grow our business and there should be real opportunities for us there over time. That said, there are definitely ways that the rules are impacting the way products are sold by intermediates we work with, and that is where most of our retirement business is. So we're probably thinking about this the same way, many others are, from that perspective, which is what are the things we can be doing to be a supportive partner or working through, as they're working through primarily through this. So again not a particularly large piece of our business, the places that we're interacting directly already with retirement investors, we're already fiduciaries 100% of our business. So it really for us is a question of how do we really support our channel partners. Sure. As you heard us say in the prepared remarks, generally speaking, the new investment pipeline continues to be strong. I guess I would say, looking back over what we've done over the last year, and trying to imagine looking forward, there's probably a little more balance in the mix, a little more traditional and perhaps a bit more US-based, but that's just the...really just the incidental element of the pipeline and our relationship set, and not anything that I would call an enduring trend. I think, because the overall opportunity is very much global and includes, of course, excellent alternative firms, as well as traditional long only. So to your question about whether the recent volatility has done anything to impact the pipeline, I would say not really. I could maybe argue that to the extent that markets have recovered, that there might be a greater inclination to move forward, but it's not anything we've seen from the discussions that we're in the midst of. And in terms of the forward part of the pipeline, that continues to be positive with, I would say, transactions that we've been working on, as well as ones that we're just at the earlier stages of. And finally with respect to your question about pricing, I would say for the best firms, you always have to pay fair prices. We, as you know, don't participate in auctions, don't try to quote, win auctions, and firms which choose to partner with AMG are making a much broader decision beyond just the valuation of the portion of the firm's revenues that we're acquiring in the initial transaction. There are pockets of the industry, I would call out probably private equity firms, where there's a lot of activity, and I would say a supply demand balance among buyers and sellers, which is less favorable. But even there, we still find opportunities to invest in a sensible basis. And overall, it continues to be very much an execution of our new investment strategy, in the same way that we've been doing it for two decades. Building on relationships that we've established and over years, and then making investments as a product of all of the relationships, and the description of our investment structure and how that fits with the prospective affiliates' long-term succession plans. Sure so as you've said, we've been ---+ our Affiliates have done a really nice job in the channel. The biggest driver in the quarter and over this period has been the strong flows estimated to the broker dealer channel, including through AMG funds, which has also got a distribution platform and an operational platform for those products, as well. But as you say, AMG Wealth Partners is developing some real nice traction, was a very significant contributor this quarter, and has been over the last four or five quarters. And most of that, as always, most of that is due to the really good work that those Affiliates ---+ those very high quality leading independent RIAs are doing themselves, but we are also exploring and have now launched a few initiatives to help augment their new business development, and I think some of those are starting to take hold as well, so that's contributing. Let me start with the question about July. I don't think we're going to be able to do month by month. I think July was a good month, and I think we characterized the sort of sizing of stuff that slipped into the back half of the year. So those are both ---+ it was a good month and that is a positive tail wind for the next two quarters. So I'm going to, I think you're asking about 2017, <UNK>, in terms of performance fees. So I'll address it. I would just say as we look at the estimate for 2016, we've already booked $6.01, and so really we're just looking at the second half of the year, we're making a judgment on where we are. But the year is still early and that's why we have a range, primarily for performance fees on that $12.30 to $13.30. But when you look out into 2017 and I should have said this earlier, a lot of these items that really just affect 2016, they go away. They normalize, because we will have the full-year effect of Winton and Capula, we'll obviously have the full year effect of the share count, and we will have a new year with respect to performance fee opportunity. When you look at the performance fee opportunity, we continue to add incremental breadth and diversity to this product set with the addition of our 2016 Affiliates, and when you take them all together, we expect a low teens contribution for performance fees at the midpoint of the 2017 guidance range. And obviously there's a range around that, that makes up a good part of that $2 range. The other thing you mentioned is organic growth, and yes we do assume positive organic growth, and a range as well, a more modest amount at the low end, and a more robust amount at the top end. So I'll go first. Yes, so Bill, going back to ---+ the back drop here was we did $1.3 billion in the first six months of announced deals. The forward equity structure, which we've used several times in past, really gives us the option to issue equity. I think the third consideration is our leverage ratio of debt to EBITDA is just above 2 times now, call it 2.1. So those things taken together, we want to make sure that we have the ability to execute on our new investment strategy, as we obviously want to pick up the very best, highest-quality boutique Affiliates when they come to us, so we have no interruption there. We obviously also want to keep our leverage at a reasonable level so that's really the two main drivers as to why we chose or why we are choosing to issue 2.5 million shares later this year. It does preserve in both respects our ability to execute, and as we look forward we expect to continue to execute. So really it is in preparation and getting ready for the next wave of new investments. Then on the private capital, there's not a lot we can say about it, other than I'll say, look there's good demand for a set of the products that do have plans for capital raised plans for the back half of the year. And the thing that's driving the timing, or a thing that's driving the timing is the pace of putting capital to work from prior things, and what not. So we really just have good underlying demand trends and the question of when they bring product to market. Well to just correct and maybe it's semantics, but it's not a philosophy it's a model convention, to allow or illustrate the magnitude of the impact on our earnings from the use of the cash that the business generates. So how do we spend $1 billion in EBITDA that the business generates is of course a much more important and relevant question than it was three years ago, five years ago. We have a long track record of returning capital to shareholders, when we see periods of relatively lower new investment opportunities. And over time, inevitably, as the business grows, there will be fewer and fewer periods, where all of the cash or the largest part of the cash is used up by new investment opportunities. And so what we see going forward, in terms of the quality and pacing and magnitude of new investments is hard to gauge. As you've heard us say, we continue to be very optimistic about our prospects for adding outstanding new Affiliates which will generate earnings accretion and broaden and diversify our product set, and enhance our business in other ways. So to the extent we have those opportunities, that will continue to be the primary focus of our capital activity. That said, inevitably the pacing of new investment opportunities, and again over time as the business grows, the repurchase of shares will continue to be, and over time, maybe I would say even be a more important element of our capital management. That part's philosophy, and the commitment to return capital and not just to build cash on the balance sheet is also a part of our philosophy. But the amount and timing of repurchase relative to new investments is difficult to forecast, and I think if you look at our track record, we expect that we will continue to do both, and do both in a meaningful way. Thank you again for joining us this morning. As you've heard, we're pleased with our results for the quarter, and we're confident in our ability to continue to create shareholder value through both organic growth and accretive investments in few Affiliates. We look forward to speaking with you again in October, thanks.

2016_AMG

2015

JNPR

JNPR #Okay, thanks, <UNK>. Let me start on the record product question, and I'll pass it over to <UNK> to comment on the Asia question. Yes, we did say, and it is a fact, that three of our product lines ---+ our flagship products ---+ the MX, the PTX, the QFX, all had record revenue quarters in the Q2 time frame. As did services, thanks for the reminder. And each for different reasons. The MX has always been a very successful product. And we continue to invest in that platform to keep ahead of the demand for capacity, but also the demand for services. The thesis behind the MX was all around convergences, around simplifying your edge architecture by deploying a single platform that can deliver all services. I think we were pioneers in articulating that thesis and executing to that strategy. And we've benefited from that. And we've introduced new line cards and new capabilities to actually make this more of a reality, and we certainly saw the results in Q2. PTX, this is a product line that we knew when we initially shipped it would require a bit of a different mindset around how to develop and build out a next-generation core architecture. We called it the Supercore. And it did require a bit of a different approach to how one might in fact architect a wide area core or a wide area of metro network. And quite frankly, it took us a bit of time. It took us some time to make sure our customers were educated on the transformation that's required, but also on the benefit that they could reap from this architecture. And I'm very happy that we're seeing that transition happen. And we're starting to see, in fact, the growth from the PTX that proves that the thesis that we had made initially was the right one. QFX, first, again, we continue to add new capabilities to our QFX copper [brack] switches and our access switches. But we've also, just from a go-to-market standpoint, been focusing quite heavily on our data center opportunities, our cloud opportunities. And that's where the growth in the market is. And that's where the differentiation that we have in the QFX, in terms of things like the layer 3 capabilities, really start to become very effective. And the results are that we saw a great quarter for the QFX. So let me talk about A-PAC, and <UNK> can chime in as well. So A-PAC, we did have a disappointing quarter there. The revenues were down 10% year over year and 3% quarter over quarter. We were anticipating softness in China. And in my outlook, I mentioned that I expect that to continue. Some of it is, obviously, geopolitical and also competitive factors in China. If we excluded China, actually the revenues would've been up for the rest of A-PAC as a percent sequentially. We've talked previously about obviously the different regions within Asia-Pacific. We're seeing good design wins and growth in the ASEAN countries, Malaysia and Singapore, obviously Indonesia. We have seen some good wins in India, although that market we're continuing to increase our capabilities in. In terms of the Australia/New Zealand operations, in Q2 had a good quarter. Japan was slightly soft, but actually not bad overall. And Korea was slightly negative as well. But those tend to go more in line with service providers. Deployment just given the concentration that we have in those markets around a service provider. So our view is in terms of the region, we're making progress in a lot of different areas. China was weak in the quarter, and we expect it to be weak as we move forward. Next question. Let me talk about deferred revenue. Long-term deferred revenue is primarily services. So we do service contract renewals on a one-year and a three-year basis. And depending on the customer, depending on whether they renew it on a one-year or three-year basis. And so the declines that you've seen in the long-term are specifically to do with the proportion of three-year versus one-year, at any point in time. So obviously, three-year customers it will come down before they renew again for three years. And so that's what you've been seeing bleed off on the long term. There isn't anything more than that in the long-term deferred revenue. And so when those renew, you will see that long term actually increase again. In terms of hiring, I put the headcount numbers in my actual commentary. So we ended the quarter at 8,815 heads, modestly up from the prior quarter. The team's been very focused on how we actually continue to invest in the things that matter around the product portfolio and that type of thing. I'm not expecting a catch-up in terms of headcount or a significant increase in headcount. We're managing things very well; and quite honestly, the teams are very productive the way we are. The only thing I'll add is we have what we need in the plan that we're working towards this year to invest in all the areas of innovation that we know we need to invest in for our long-term competitiveness in the spaces that we're in. That was something very conscious that we did at the time of taking out the structural costs. Thanks for the question, <UNK>. I think this strategy that we're on and the focus across the key vertical segments ---+ cloud, cable, telcos, financial services, government ---+ is one that I think has a lot of legs. The opportunity for us in cable, for example, or in cloud, appears to be very good and sustainable. I know, for example, let me just pick on one vertical in the cloud space, where we are very, very close to them in terms of the architectural evolution of their network today but also in the future. And also in terms of the capabilities, the features, the performance, the scalability, that we are implementing into our new products that will be released over the coming year and beyond. It's just a function of our strategy, and I think that it's something that can actually play out for a long period of time. Very difficult to put a time period on it. But it is not something that I see an immediate or short-term end to. We'll go to the next question. Sure, <UNK>. First, let me just say this. We use both merchant and also our own silicon across the variety of products in switching and routing and in security. We're absolutely not going to be religious about using our own or somebody else's. We're going to choose the best silicon to solve the problem in the most effective and differentiated way possible. And before we embark on a new silicon project ourselves at Juniper, we go through very extensive analysis to make sure that it is in fact something that's going to differentiate us and therefore pay off because these chip projects, as you know, are not inexpensive projects. And we've done exactly that. If you look at the cloud space, for example, the accessed layer, where it really comes down to pricing, not that much differentiation in certain market segments. You can easily go to commodity. As you get into the core the need for power efficiency, programmability, the need for logical scale, IP routing capabilities, becomes greater. And so the opportunity to differentiate with your own silicon becomes evident or becomes there, and so that's essentially what we have done. In the competitive environment, we understand. This is a competitive space. And both from the standpoint of systems vendors that are using merchant or their own silicon, and also from the point of merchant silicon technology that's out there. And as long as we are innovating and focusing on the parts of the market where we know that we can achieve differentiation, then that's what we will do. We will choose the best tools and technologies for the right areas of the network. Okay, thanks, <UNK>. Next question, please. <UNK>, let me just make sure I correct something that I help people understand about the guidance for Q3. And then I'll hand it over to <UNK> on the visibility question. So you mentioned the word flat Q3 to Q2. Actually, it's up. So the way I want you to think about it is if you take out Q2 results, the deferred revenue impact, it's on all of the $48 million, but a large portion of that, and then you actually look at that versus guidance. What you'll see is that we're actually projecting an increase quarter over quarter in the underlying business. More consistent actually with what we've seen historically when we've had growth years in terms of Q3 over Q2. With that, I'll hand it to <UNK> to talk about the visibility. Sure. First I just want to emphasize the fact that while the telco space remains a very important vertical for us, we're by no means tied completely to that space in terms of what drives our business. The diversification across the verticals and across products is certainly helping us in dampening, if you will, some of the effects of the lumpiness in that space. As far as the second half, it really is consistent with what we have been saying over the last several quarters. We expect to see some improvement, but that's going to be complemented with continued diversity. That's going to help us achieve the results that we're expecting for the second half. I think we have time for maybe one or two more questions. Next question, operator. Okay. <UNK>, I'll handle the first couple of questions, and then <UNK> can chime in. So in terms of 10% customers, there were no 10% customers in the quarter. What was the second question. Pricing. So in terms of the pricing environment, obviously it's a consistently competitive environment globally. But as you saw from the gross margins, we had pretty healthy product gross margins. Which reflect not only the ongoing competitiveness of the portfolio but also the cost reductions that we continue to focus on in the supply chain. So from our perspective, no discernible difference in the competitive dynamics in the quarter. On the question around market versus projects, and I'm assuming you're really asking about whether something specific to Juniper in the projects we're engaging in versus something that's more broader. It really depends; and in some cases, it's very difficult for us to tell really. But in the cloud space, for example in our switching, what you're seeing there is more of the market opportunity shifting towards the data center. So we ourselves as a Company are diverting more of our intentions, especially on the go-to-market side, on the support side, to that opportunity and benefiting from the growth in that market segment. I think in other verticals, like maybe in the cloud space, it actually could be more project-driven. It could be more of a market share phenomenon that's happening because we have traditionally been really strong and very close to that vertical and something that's paying off for us. So it's a mix and difficult to really break out in any precise detail. And, <UNK>, I just want to make sure. The telco customers are important customers to us as well. We're not saying that we're diversifying away from the telco customers. They are important. They will continue to be important. Having said that, the innovation that we're delivering is as relevant to other parts of the market and through the changes that <UNK> mentioned in terms of not just the portfolio but also the go-to-market motion. We're actually driving revenue growth through those other verticals as well. So I think that's a very important point. And I think earlier in the questions, there was the comment around cyclicality. There's no question one of the reasons why we decided to work on the go-to-market muscle in terms of some of these other verticals was exactly for that reason, to offset some of that cyclicality as we move forward. Thanks, <UNK>. Operator, we have time for month one more question. Yes, thanks for the question, <UNK>. I guess the blurring, what it means for us is that when we go and develop our products, we develop them in such a way that we become somewhat agnostic as to where in fact they will be placed to deal with the massive amounts of IP transport traffic. In some areas, in might be in more of a nationwide or even a global network. In some areas, it might be more of a Metro network. What's happening today architecturally is data centers in some cases are being built in more distributed locations, which puts more pressure in the metro areas; and in some caser are in more central areas that will put more pressure in the core areas. If we build the products that will deal with either architectural case, then we win either way; and that's exactly the goal. So take, for example, our PTX product line. It comes in a large, a medium; and now with the PTX 1000, a small form factor. And that's a perfect example of how we're building these products and the capabilities of these products to address the issue of scale or the challenge of scale, irrespective of architecture that the customer ultimately wants. It makes it more difficult to break out our numbers into core and edge. We can sort of estimate it. But I tend to measure ourselves now as more routing all up in the wide area network, as opposed to specific to core edge. I would agree with that. Yes. Thank you, everyone. This will conclude our call for today. Thank you, as always, for your great questions. Thank you very much.

2015_JNPR

2015

AMZN

AMZN #Sure, <UNK>. What I can tell you is the 3P percent of revenue continues to grow for now up to 46% of paid units, which is up 400 basis points year-over-year and 100 basis points sequentially off Q2. We feel that Prime and FBA are reinforce each other, they are inextricably linked. FBA adds Prime selection and Prime growth attracts more FBA sellers. So we have seen growth in FBA. It increases our Prime fast-track eligible selection, which we like and customers like, so we like what we see in the third-party side. Yes, thanks, Doug. I will point out that this quarter showed a lot of innovation, a lot of new products and features and a lot of investment. We've already talked about India, but domestically, we're ---+ excuse me, globally we are investing very heavily in our Prime platform both in North America and International. And that includes video content and original content, Prime Music, as <UNK> just said, the Prime Now has been expanded to 14 Metro areas, we have had same day delivery in now in 16 metro areas, we've built 14 new fulfillment centers, we've launched multiple devices including e-readers, tablets that are priced under $50, Echo, Dash Button. So there's a lot of investment going on and there will be continue especially related to Prime. And on the AWS side, as I said, we have 530 new features so far this year. So innovation and investment will continue and can be lumpy. I hate to use that word again, but could be lumpy over time. The other dynamic in our Company though is definitely working on cost reductions and efficiency. I think you see a lot of that in this quarter's P&L and in our capital efficiency, both in the warehouse world and also in infrastructure. So we will continue to work on costs. The good thing about 30% revenue growth is it gives you a lot more cost to work on as well. So we will ---+ I would say it is not as much as a pendulum as maybe it's been portrayed, it is more of a constant. The investment will, it sometimes ebbs and flows but the cost reductions will be a constant presence and the increase in customer experience and shortening the time to delivery in making the customer experience better. This is <UNK>. We are not going to update our Prime subscription growth beyond what we said last year or the end of last year, which last year in the year when we raised prices early in 2014, the global growth rate was 53% and North America growth rate was 50%. So by default, the International growth rate was higher. We like the adoption of Prime internationally, it is helped by additional selection that's available for fast-track shipment including FBA. So that fly wheel is working. We've also launched video benefits, most recently in Japan, but we have them in UK and Germany. We continue to launch other Prime benefits, Amazon Pantry in Japan and Germany this quarter. We launched Prime Now in the UK. So it is very similar to the US story potentially time lagged a bit but we are seeing the same customer adoption and impact on growth rates. Sure, thank you, <UNK>. First, what I will classify as Prime demographics. So yes, we still think there's a lot of people in the country who are not Prime members and we are anxious to have them try it and sign up and join. The other thing that we see is that with our vast offering of selection and faster and faster shipping programs, we have a more competitive offering for many things that they buy. So there's a share of wallet element to it as well over time that we are looking to be more useful to customers all the time. On your comment about the economic drivers of Prime Now. You know what I will say is, customers really value it. It is not our entire selection, it is tens of thousands of items that they may need on a daily basis. We think it is an interesting part of the selection offer for Prime and it's in many ways something that we can do that others cannot because it is a natural evolution of our 20-year effort to grow our fulfillment center network and our scale, quite frankly, makes it possible to even offer this to customers. I will take the India question. So again, India is a different market and does not have a lot of the same ready fulfillment options that some other countries did. We see that as an opportunity, an opportunity that we can build and we can bring to sellers. And as I believe I already mentioned, we like what we see, we are very encouraged, customer accounts, active customer counts are up 230% year-over-year and sellers, number of sellers is up 250% year-over-year. 90% of those sellers use our logistics and warehouse services, as you mentioned, which has caused us to triple our fulfilment capacity. We are happy to do so. We like what we see in India. We think we have, we're attractive both to customers and to sellers and we like our position. No comment on the pricing. I would say that we have 23 sort centers which allows us to control a lot more of our shipments for longer but we certainly value our relationships with USPS, FedEx, UPS and other global carriers. And we are looking forward to a great holiday season. Yes, I will take that one, this is <UNK>. No specific call outs in Japan. I would say that we are still very bullish on our Prime Instant Video, especially our new original content we've created. We think it is been critically acclaimed and also a big hit with customers. Man in the High Castle is coming out shortly as is the second season of Transparent which won Emmys this year. So we are really excited about the creative team we've assembled and the products that they have been able to bring to Prime customers. And we still like the customer reaction. Free trial conversion rates are higher when Prime members stream and they also renew at a higher rate their annual subscription. So again, that's very important to us as well and are very happy with the results. I would say it is difficult equation. Yes, order size can go up but we ship a lot of toys and bigger items so it is hard to predict what that looks like. But having the density, having the sort centers has certainly helped our cost structure in that area and having inventory closer to our customers. Yes, sure. On Prime Now, it is our intent to rollout benefits and functionality globally as quickly as possible. I think we were able to do that with Prime Now and get to the UK faster. We are happy with that, it is not necessarily a comment on Amazon Fresh, it's just they are different businesses. So we're happy with the launch in the UK and the team did a great job to get that launch in a timely manner. On Kiva, we are up to 30,000 bots at the end of Q3, which is ---+ and then they're in 13 for fulfillment centers. At the end of 2014, we had 15,000 bots. So we've doubled that amount and they were in 10 warehouses. Our intent is to use that more widely. And stay tuned. I'm going to be vague on the scale of it but their capital intensity is offset by their density and throughput. So it is a bit of an investment that has implications for a lot of elements to your cost structure but we are very happy with Kiva. We think it is a great pairing our associates with Kiva robots to do some of the hauling of products within the warehouse has been a great innovation for us. And we think it makes the warehouse jobs better and I think it makes our warehouses more productive. Yes, I cannot get into too much detail on the components of EGM profitability. I would say that we are seeing strong growth across all of our EGM categories. We have great teams that are chasing a lot of different product lines and working with vendors to get more selection on the site, both retail and also third-party. So still a lot of room there. On the Prime sub growth, we are not updating the statistics. We are very happy with the growth not only in participation but also purchases and retention and we had a very successful Prime Day in <UNK>ly that we are really happy. It was a great event for customers and sellers. That's about all I have on that.

2015_AMZN