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maec-2020

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2017

AET

AET #Thank you, <UNK>, and good morning, everyone Earlier today, we reported first quarter 2017 adjusted earnings of $939 million and adjusted earnings per share of $2.71. These results represent year-over-year growth of 14% and 17%, respectively, and continue to be supported by strong cash flow, balance sheet and adjusted margins I'll begin with some comments on overall performance Our medical membership of 22.4 million is approximately 100,000 higher than the top end of our previously projected range for March 31, driven by better-than-anticipated Commercial ASC growth and lower-than-projected Medicaid membership declines Adjusted revenue was $15.5 billion, a modest year-over-year decrease, driven by lower membership in our ACA-compliant individual and small group products and the 2017 suspension of the health insurer fee These dynamics were partially offset by higher Commercial premium yields and membership growth in our Government business From an adjusted pre-tax margin perspective, our businesses are performing quite well Our adjusted pre-tax margin was 10%, a strong result and above the high end of our target adjusted margin range Our first quarter total health medical benefit ratio was 82.6%, a strong result that benefited from continued moderate medical cost trends and favorable prior years reserve development We achieved this result despite the impact of a $110 million premium deficiency reserve associated with our individual Commercial products Our adjusted expense ratio was 16%, a 200 basis point improvement over the first quarter of 2016, driven primarily by the suspension of the health insurer fee in 2017 and execution of our expense management initiatives Relative to our previous projections, this metric benefited in the quarter from the timing of previously planned spending, which we now expect to occur during the remainder of the year From a balance sheet perspective, we remain confident in the adequacy of our reserves We experienced favorable prior-years reserve development in the quarter across all of our core products primarily attributable to fourth quarter 2016 dates of service And our days claims payable were 53 days at the end of the quarter, a sequential decrease of approximately one day Turning to cash flow and capital, healthcare and group insurance cash flows were approximately $980 million in the quarter During the quarter, we initiated a $3.3 billion accelerated share repurchase program, which retired 20.9 million shares We returned approximately $88 million to shareholders through our quarterly shareholder dividend We also announced the doubling of our quarterly shareholder dividend which took effect last month In short, we are pleased with our first quarter results and the continued successful execution of our strategy to become a more consumer-focused company I will now discuss the key drivers of our first quarter results in greater detail Beginning with our Government business, we delivered another solid quarter, continuing our momentum from 2016. We grew our first quarter 2017 Government premiums by over 9% compared to the prior-year period, achieving a quarterly record of $7.1 billion This quarter marks the first time our Government premiums have exceeded our Commercial premiums From a membership perspective, we grew by 107,000 Medicare members, led by growth of 99,000 in individual Medicare Advantage Medicaid membership declined by 90,000 members in the quarter related to our exit of the Nebraska Medicaid contract at the beginning of the year This was a better result than previously projected due to the delay in changes related to our Pennsylvania Medicaid contract Our Government medical benefit ratio was 85.3%, a continuation of the strong results we achieved in this business in 2016 and a very good start to the year Shifting to our Commercial business, the strong momentum of 2016 continued in the first quarter with our Commercial ASC membership increase of approximately 219,000 members, as large group Commercial membership gains outpaced our previous projection Increased sales drove this improvement, a confirmation that our value proposition is resonating in the marketplace, particularly with public and labor customers In our Commercial Insured business, membership decreased in the quarter, largely the result of declining ACA-compliant individual and small group membership As a result of actions taken to reduce our footprint in 2017, our individual business now represents less than 2% of total adjusted revenue Our Commercial medical benefit ratio was 79.4% for the quarter, a very good result despite continued pressure from our individual Commercial products Our group Commercial products performed very well in the quarter, benefiting from moderate medical cost trends and favorable prior year's reserve development Based on first quarter results, we continue to project that our 2017 non-ACA core Commercial medical cost trends will be in the range of 6% to 7% With respect to our individual Commercial products, we continue to face headwinds related to profitability From a membership perspective, we ended the quarter with 255,000 individual Commercial members, down from 964,000 at year-end 2016. This result is 15,000 members higher than our previous projection Based on our current view of membership in these products, we believe the risk pool that we have retained from last year and attracted during this year's annual enrollment has higher cost levels than we had previously projected As a result of our higher membership, and an updated view of the health status of our current membership, we recognized a $110 million PDR reflecting our expectation for greater losses than previously anticipated for the 2017 policy year It is important to note that despite this headwind, we continue to project that 2017 losses on individual Commercial products will be significantly less than those reported in 2016. We expect that the first quarter will mark the high point for our individual Commercial membership, as we project attrition throughout the remainder of 2017. This is consistent with our experience in recent years Looking beyond 2017, we continue to evaluate our footprint with a view towards significantly reducing our exposure to individual Commercial products in 2018. We have already disclosed our planned 2018 exit from one of our 2017 state-based exchanges and intend to communicate other 2018 footprint decisions when appropriate Moving on to the balance sheet Our financial position, capital structure and liquidity all continue to be very strong At March 31, we had a debt to total capitalization ratio of approximately 39.8% Looking at cash and investments at the parent, we started the quarter with approximately $15.1 billion Net subsidiary dividends to the parent were $785 million We repaid $11.3 billion in debt in the quarter, including $10.2 billion related to the Humana deal financing We paid $1.2 billion in deal-related termination fees We paid a shareholder dividend of $88 million We used $3.3 billion in the quarter for our accelerated share repurchase program And after other sources and uses, we ended the quarter with approximately $100 million of cash at the parent Our basic share count was approximately 332 million at March 31. As a result of our first quarter performance, we are increasing our 2017 adjusted earnings per share guidance to a range of $8.80 to $9 per share The midpoint of this range represents a $0.35 increase relative to our previous projection of at least $8.55 per share, a meaningful increase, especially when viewed in light of an approximate $0.20 headwind from our individual Commercial products Our increased adjusted EPS outlook reflects our favorable first quarter results, including the effect of favorable prior-year's reserve development as well as the impact of our accelerated share repurchase program Partially offsetting these benefits are the updated outlook for our individual Commercial products and the increased targeted investment spending to drive future growth, primarily related to government-sponsored programs However, certain risks remain that temper our outlook at this point in the calendar, including the ever-present concern that medical cost trends could increase more than we have projected, low visibility at this juncture of the year into our ability to achieve our updated outlook for individual Commercial products, and the potential for the health insurer fee to be permanently repealed during 2017. Our updated 2017 guidance is influenced by the following additional drivers Based on our first quarter membership results, we project that our year-end medical membership will be approximately 22.2 million members, as declines in Medicaid and small group Commercial during the balance of the year are partially offset by growth in Commercial ASC and Medicare membership over the remainder of the year As we consider the stronger-than-projected start to the year and our current membership view, we are increasing our adjusted revenue projection for the year and now project that we will deliver approximately $61 billion in 2017 adjusted revenue Based on our strong first quarter results, we now project that our full-year total health care medical benefit ratio will be in the range of 84%, plus or minus 50 basis points We now project that our adjusted expense ratio will be approximately 16.9% for the full year, up approximately 15 basis points compared to the top end of our previous guidance range This increase is driven by the increase in targeted growth initiative investments now contemplated in 2017. We continue to project adjusted pre-tax margin to be approximately 8%, consistent with our high single digit target We now project adjusted earnings will be approximately $3 billion, and we continue to project full-year excess cash available at the parent to be approximately $4 billion Finally, as we consider the impact of the previously announced accelerated share repurchase program and our expected capital deployment for the remainder of the year, we now project our 2017 weighted average share count to be in the range of 334 million to 335 million shares In closing, we are encouraged by the strength of our first quarter results and our improved 2017 outlook, particularly at this early stage in the year Additionally, we remain confident in Aetna's long-term growth prospects and look forward to sharing more details at our upcoming Investor Update Meeting in May I will now turn the call back over to Joe Joe? So a couple things on that, <UNK> One I would say is we have some insights into the group MA pipeline, and we have some known sales already that we think are going to be significant enough that we have to ramp up for in advance As we talked about, we've thought about what are the kinds of things that we need to do to continue to enhance and accelerate our growth in Medicare And so we always have sort of the concept of investment money gated, that when we look at our performance, we make a decision about how to deploy that money And in this case, we've decided to accelerate some spending in the areas of Stars, for example, geographic expansion, advancing some things in Medicaid Again – and so these are all designed to be investments that are either related to known growth or to drive future growth in 2018 and thereafter Well, the – I think certainly, the disability business is one that has had some linkage historically as we thought about the two, right? There are some somewhat arcane benefits in terms of how we position the investment portfolio and things like that But operationally, they do largely run as two free-standing units for the most part today There is cross-sell between – especially on the large accounts We have a number of accounts where we would have the medical and also the group insurance So what I would say is that we're tracking towards having about roughly half the loss that we reported last year this year, and that's on a quarter of the membership that we had, but that's a good sort of proxy And just to be clear for everybody else, that PDR sort of goes all in and out within the 2017 year because it's all related to the 2017 policy year Yeah, as <UNK> mentioned, we'll provide 2018 guidance later this year as is our convention The point of your question, A , obviously, is understanding bid positioning is a pretty big element to try to understand the year, so we'll do that at the appropriate time What I would say, though, is that we're pleased with the 2017 earnings trajectory that we're on at this stage, especially in light of the continued drag that we've had with the individual business And as was discussed on the call and a few of the questions, we're continuing to invest, and some of that investment is pointed at growth for 2018, and some of that is longer term growth <UNK>, the thing I'd say, macro, on small group is that towards the end of last year, it felt like this started to turn a little bit for us in the favorable direction after having had some challenges And for the most part, I would say that continued in the first quarter I continue to be encouraged by the direction that the small group business is headed So that all looks good And as <UNK> mentioned, large group continues to be a stable performer We continue to position ourselves carefully on the large group risk side of the business But, again, those segments were generally at or better than expected in the first quarter Chris, I mean unfortunately, this is a bit of a boring story in that not a lot has changed sort of on the pressure points or the new ones I would say overall, again, we had a very well-behaved, moderate cost trend quarter Certainly looking at prior-period development, that didn't lead to any surprises as those periods have matured So we're probably looking – continue to look at inpatient in the mid singles, physician in the mid singles, outpatient in the high singles, and pharmacy in the low double digits And the pharmacy story really continues to be one that's all about specialty pharma I think that comprises something on the order of 40 % now of the costs and a very low percentage of the scripts And so when you really dig into it, as I've said before, it continues to be issue one, two, and three when you look at the medical cost trend drivers Yes So, <UNK>, this is one of the areas, when we talk about the areas of uncertainty that we have, understanding again the risk adjustment of this very different and changed population from what we had last year is one of those challenges, especially in the first quarter where we really don't have mature data The short version of the story is we still are in a fairly – we estimate that we're going to be in a pay-in position That will probably, in a relative sense, be a little bit less of a pay-in position than we were last year, just given what we've seen happen to our book But again, there's still a lot of uncertainty and blind spots that we have in terms of we know what happened to some degree to our population but we don't know what has happened in the overall market So the takeaway is that we still have a risk-adjuster pay-in position but a little bit – maybe a little bit improved off of last year based on what we've seen so far So I want to just clarify, I don't think we guided for any PYD in our initial guidance We certainly have talked about what the historical levels have been So we had in the first quarter probably on the order of $0.30 to $0.35 of PYD Again, if you look at past years, we've continued to get smaller amounts of PYD in the subsequent quarters going forward So I certainly don't – that certainly wouldn't be a surprise if that happened and we got some more in the second quarter of the year, for example, as that's how most of the prior years have played out On the headwind piece, that originally was going to be about a $0.10 benefit and, as you all recall, it's just really an anomaly of how the accounting works for that recovery Obviously as the year goes on, some of that's built into pricing already It could decline slightly But I think it's best to think about that as about a $0.10 item on that We're probably over, <UNK>, about 100,000 AFA alternate funding small group members I don't have the revenue in front of me, but we can certainly follow up Well, it's huge because we just launched it last year, right, so there's no denominator there So a lot of that growth happened in the back of last year and in the first quarter of this year, especially

2017_AET

2018

CWT

CWT #Thank you, Sonia. Welcome everyone to the 2017 Year-end Earnings Results Call for California Water Service Group. With me today is <UNK> <UNK>, our President and CEO; <UNK> <UNK>, our Vice President, Chief Financial Officer and Treasurer; And <UNK> <UNK>, Vice President of Regulatory Matters. Replay dial-in information for this call can be found in our year-end earnings release, which was issued earlier today. The replay will be available until May 1, 2018. As a reminder, before we begin, the company has a slide deck to accompany the earnings call this quarter. The slide deck was furnished with an 8-K this morning and is also available at the company's website at www.calwatergroup.com/docs/2017q4slides. Before looking at this quarter's results and year-end results, we'd like to take a few moments to cover forward-looking statements. During the course of this call, the company may make certain forward-looking statements because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company's current expectations. Because of this, the company strongly advises current shareholders as well as interested parties to carefully read and understand the company's disclosures on risks and uncertainties found in our Form 10-K, Form 10-Q and other reports filed from time to time with the Securities and Exchange Commission. Now let's look at the 2017 results. I'm going to pass it over to Marty to begin. Great. Good morning, everyone. Thanks for joining us. There is a presentation overview slide upfront, which will be the order in which we present today. And you'll see us move around the room a little bit as each of us have a piece to say. Following that page, we added something new to our slide deck this year and we called it our operating priorities. These 5 categories on this page are right out of our strategic plan. And so affordable excellent service, high-quality water, wastewater, employees as our best advocates, strong brand and reputation, and enhancing stockholder value are the 5 major categories that we use to plan on our operations at California Water Service Group. The sub bullet points that you see in each of those categories are things that we call our strategic priorities. Those are the things that we use as we evaluate the projects, new investments and anything that has to do with our strategic plan. So you'll also noticed that if you read our proxy, anything that has to do with incentive compensation or any of the long-term goals of the company also center around these 5 major areas. So we added this slide to give you a sense of what we look at when we plan for and execute to our business plan and this will be something that we'll be referencing going forward as we give updates to Wall Street. With that, I'm going to turn it over to Tom to do the overview for the full year. Tom. Thanks, Marty. So our financial results for the full year. Our revenue was up 9.4% to $666.9 million. Net income rose $18.5 million to $67.2 million, that's a increase of 38%. And our EPS for the year was $1.40 versus $1.01 in 2016. Flipping to the fourth quarter. Fourth quarter, we have revenue which increased 7.3%, and EPS for the quarter, I'll just jump down to that, we had a decrease of EPS for the quarter of $0.28 versus $0.31 in the prior year. In the fourth quarter of 2016 then we had a number of regulatory items related to the adjudication of the 2015 Cal Water rate case that had improved our earnings in the fourth quarter of 2016. So just flipping to the summary that is on Page 8, our financial highlights. Again, the net income increase of $18.5 million, that's largely attributable to our increased revenue from that December 2016 California General Rate Case decision. That is really the bulk of what has changed for the company between 2016 and 2017. In addition to that, we were allowed by the Commission to recognize equity AFUDC, in lieu of just interest during construction on projects that added to our other income. We eliminated our drought expenses in 2017 as compared to 2016 and before. We also had a lower effective tax rate and this was driven by the fact that our capital spending was a record for the year and particularly, capital spending on our network assets, our pipelines. Those are deductible under the repairs and maintenance deduction. And the flow-through of the state tax benefit there is causing a lower tax rate. We did also have higher unbilled revenue accrual at the end of the year. You've heard me talk about this a lot of different forums over the year, but this was a very positive item for us in 2017. It added $2.5 million to our pretax earnings. And so that's something we'll talk about for next year how to look at that item and wrap our heads around that. As I've started to mention, company and developer funded capital investments were $259.2 million. That is a record for us and an increase of 13.2% compared to 2016. Final item of note on our financial highlights. In December, the company received $56 million of net proceeds from a lawsuit settlement over the contaminant 1,2,3-trichloropropane, which is what we call TCP. And that settlement ---+ those settlement dollars will be used to help fund treatment projects that are currently under construction in some of our districts in California Central Valley. The next slide, Slide 9 just shows that graphically, the EPS bridge. Again, the bulk of the change is increased revenue associated with the rate increases. The net other income that we talked about that relates to the equity AFUDC, some gains on our benefit plan investments and unregulated activities. And then, the red boxes, you'll note are interest and depreciation. Remember, as we add capital, those items in our income statement are going to increase. The depreciation will get bigger. The interest to finance, the capital improvements will also get bigger. And so with that, I am going to flip it over to <UNK> <UNK> to talk about the California cost of capital update. Thank you, Tom. So as many of you know, on February 6, an Administrative Law Judge at the California Public Utilities Commission issued what's called a proposed decision on our cost of capital application. California Water Service Company had a consolidated application with 3 other major investor owned water utilities in California and that was filed a year ago, March. And the proposed decision came out on February 6. Regrettably, the proposed decision by the judge rejected the arguments that were put forward by Cal Water and by the other water utilities and adopted in whole, the arguments put forward by the Office of Ratepayer Advocates or OR<UNK> Now, this is a proposed decision it has not been approved yet by the Commission. But if it were to be approved without modification, one of the results of this decision would be that Cal Water's return on equity imputed in revenues would be 8.22%, which is by far the lowest authorized ROE of any state commission for water utilities that we're aware of. You can see at the bottom of that slide, the average ROE for water utilities in U.S. is 9.56%, last year. Then following slide is a comparison chart that really shows how this ROE, which is on the right, in the yellow, compares to some of the other benchmarks. The 9.56%, I just mentioned, just over 10% ROE for California Energy utilities, our current authorized ROE of 9.43%. And the lowest of any water utility ROE authorized last year in the U.S. was in New York, which was 9.0%. The following slide, third slide on cost of capital. Needless to say, we strongly disagree with the findings of the proposed decision. We think that it is a badly flawed. And we have been going through a process ---+ a normal regulatory process to advise the Commission of where we believe that the proposed decision got off the path. We have filed comments along with the other parties. Those comments were filed on Monday with the Commission. And we've also been meeting with each of the Commissioner's offices to discuss with either the Commissioners or their advisers on some of the errors of the proposed decision. As you can see in the subpoints while it would have a significant impact on our EPS between $0.17 and $0.19 per share, it has a quite minimal impact on customer bills, really only just about perhaps 1% to 2% on customer rates. And I think one of the parts of the decision that we felt was fundamentally flawed is that, the proposed decision talked about the supportive regulatory mechanism in California and how some of the mechanisms that are in place today reduced the utilities Cal Water's risk. And they talked, in particular, about the WRAM or the decoupled water revenue adjustment mechanism. And we point out in our comments that, that is not a risk mitigating mechanism, that is in fact a mechanism that was put in place to achieve Commission and State objectives to drive down water consumption and enhance conservation. The PUC is scheduled to hear this proposed decision and vote on it on March 22, at which point, they could either approve it as written, reject it or have it modified. And with that, I will give it back to Dave <UNK>. Thank you, <UNK>. The impact from tax reform summarized on our slides. Before I get started, an important take away from tax reform is that it does not change the company's fundamental investment strategy to continue the much-needed infrastructure investments for our customers and local communities we serve. Tax reform is complex and require numerous judgment interpretations of the tax law changes and how our regulators will handle these changes. We are waiting for additional interpretations or guidance from the U.S. Treasury Department to finalize the impacts to ratepayers. For us, tax reform impacted the following 4 areas. First, the decrease in the federal income tax rate from 35% to 21% lowered the company's operating cost, effective January 1, 2018. And because almost all of our operations are regulated, these cost savings will be passed to ratepayers. The timing of the changes to ratepayers monthly bills will be determined in the regulatory process and all 4 of our regulatory commissions have initiated procedures to ensure ratepayers receive these cost savings, which could be during the next general rate case proceedings or sooner if ordered by regulators. There is no impact to earnings for this change. However, as we return the tax savings to our customers in the form of lower monthly bills, we expect a decrease in cash flow from operations. The second impact, the loss of bonus depreciation and qualifying production activity deductions, along with additional taxes on developer contributions in aid of construction will cause the company to start paying income taxes in 2020. However, when we begin paying income taxes, it will reduce cash flows from operations. The third impact. We remeasured deferred tax balances to reflect the federal tax rate decreased from 35% to 21%, which resulted in a net refund of $108 million. Most ratepayers will get a refund. However, there are ratepayers that owe taxes to the company. We will work with our regulators to determine how best to provide the tax savings or cost to our customers. Our approach will include options to moderate the impact on cash flows from operations and ensure compliance with the federal normalization rules. The fourth impact. We expect reduction in the company's deferred tax liability balances over time, mostly due to the loss of bonus depreciation and refunds of the remeasured deferred tax balances to ratepayers. The reduction in deferred tax liability balances over time will increase rate base in future general rate case filings, which will increase earnings and cash flow from operations. In summary, the enacted changes to the federal tax laws are complex and require additional guidance from the U.S. Treasury Department. Our work with state regulators will determine the best path forward and optimal way to proceed. Regardless of which path the regulators take, it's clear that cash flows from operations will decline as we start paying taxes in 2020, and we expect a reduction in our deferred tax liability balance to increase rate base and earnings over time. Now I'll turn it back over to <UNK>. Great. Thanks, Dave. Before I give the outlook on ---+ for 2018, 2 weeks ago, I was at the NARUC, the National Association of Regulatory Utilities Commissioners'. And I was on the general session panel talking about the new tax laws. And there was a lot of interest in the first layer of the tax law, which is just the overall lowering of the corporate tax rate, the change of 14% from 35% to 21%, which generally is a good thing. Because it makes us more efficient. It helps keep our rates low and allows us to get more capital in the ground. But as I describe it to the regulators, and I was on this panel with Moody's and some Commissioner and a Executive Director of water division within 1 state, I called it the good, the bad, the ugly. The good is the lower overall tax rate, that's actually a very good thing. The bad, and frankly, it's a very bad thing for the utility space is the loss of bonus depreciation, it's the loss of the qualified facilities deduction and it's the fully taxable CIAC, Contributions in Aid of Construction. And then the ugly really is the deferred tax assets and deferred tax liabilities to the extent that state has deferred tax asset, that means the customer owes us the money; to the extent we have a deferred tax liability, we owe the customer money. And as you refund that deferred tax liability, you're essentially increasing rate base because in the ratemaking process, deferred taxes net out and lower overall rate base. So the ugly part is pretty ugly. And the tax bill is somewhat nebulous in a lot of areas. So further guidance from the Treasury Department is really important and from the Commissions to figure out how we're going to deal with this. And as Dave said, the overall concern as expressed by, for example, Moody's, is they put a negative outlook on the whole utility industry as everyone figures out the FFO to debt or the cash flow from operations to debt ratios. So having said that, just remember the good, the bad, and the ugly and as we all work through this process over the next 12 months with the Commission to figure out how we're going to proceed on it. Looking ahead for 2018, a couple of things I'd like to point out. One, for 2018, we anticipate our capital investment range to be $200 million to $220 million. That's a little bit lower than where we were in 2017, that is by design. If you recall, strategically, we changed the way we were planning our capital cycle. So we can maximize our step increases during the second and third year of the rate case. So 2017 was the ---+ really the third year of the capital component of our rate case. And so we really knocked that out of the park. As we put in the slide deck, we received approval for almost a $16 million step increase, that's the largest step increase the company has achieved and that was over 91% of the overall target that we were able to obtain. Along with that, looking in 2018, we anticipate depreciation to be $6 million or $7 million higher, and we expect the interest cost associated with the higher capital investments to be another $2 million. So essentially, there's $8 million or $9 million of cost that will net out against the overall step increase. In addition, through January 1, the CPUC has approved advice letters for the State of California for capital projects totaling an additional $2.8 million in annual revenue out of a total available additional project budget of about $30 million. So for 2018, we're going to be keenly focused on wiping out the rest of those advice letter projects as we go into a rate case year. At this time, we're estimating that our effective tax rate will be about 24%, much closer to the statutory rate of 28%. And that's really due to the reduced budgets for repairs projects that we have within 2018 and the deductions that go along with that. This could change as the new law gets interpreted and guidance comes out from the Treasury Department, the IRS and the Commission. The unbilled revenue that Tom mentioned being high, we've had a very, very dry winter. In fact, as of Tuesday, our snowpack was about 23% normal. So that was a very dry winter for us, which meant consumption stayed high going through December and January. We are facing a very large winter storm right now and expected snowfall on the Sierra is as of this morning for the next 4 days is 60 to 80 inches. The significance of that is it sets us up ---+ the state up for very well for the snowpack reading on April 1 provided that, that the climate stay cool enough not to melt that into runoff. So the unbilled occurrence is really kind of unique to have an unbilled revenue that high. And usually, we see that reverse in the fourth quarter and not actually add to income. And really ---+ that really just ---+ it's our revenue accrual at the end of the quarter. We usually see that reverse out. Beginning in the first quarter of 2018, there is some changes in GAAP that are important in the nonservice component of the pension expense and this gets a little actuarial-ish. But when you look at pension expense, you have the calculation of what's called the normal cost. And within that normal cost, it helps determine what the average cost is per employee. And then you have this other piece called nonservice component. So it could be unamortized losses. If for example, and we don't do this at Cal Water, but if we had a real estate investments that went bankrupt, you would have unamortized loss that you'd be adding into your service component. We don't have anything like that. But to the extent, we have ---+ you might have some passive losses that you have to recognize within a year from some of your investments, that will start flowing through other income and expense due to the implementation of ASU 2017-07. And for any questions on that, call Dave Healy. I haven't been a CFO for a while and I don't miss the old actuarial days. <UNK>, do you want to give an update on the rate case. Yes. Thank you, Marty. So 2018 is the year that Cal Water, again, filed the triennial rate case. Our last rate case was filed in 2015. On July 1 of 2018, we will make our current application. We, frankly, have been working on this process for over 2 years in getting ready for this application. The application itself will cover the subsequent 3-year period. So what that means is that rates ---+ it will cover capital investments from 2019, 2020 and 2021. And rates would go into effect from this rate case effective January 1, 2020 and would cover those years, 2020, 2021 and 2022. Consistent with our last general rate case, we continue to prioritize capital investments in replacing our infrastructure, particularly pipelines, which are in many parts of the country are becoming more aged and need to be replaced. We anticipate requesting more capital in this case than was approved by the Commission in the last case. And as I said before, it will be a capital for years 2019 through 2021. We go through a capital review process. We call it our 9-year process to really look out not just over the next rate case cycle, but over the next 3 rate case cycles in terms of our capital planning. Then out of that 9-year plan, we include the first 3 years in the upcoming rate case cycle. So stay tuned for more information as we have it after we make our filing. Tom. Thanks, <UNK>. So the next slide we're talking about are California drought recovery and regulatory mechanisms associated with water sales. Just to give everyone an update, it wasn't mentioned in the press release. The WRAM balance, that's the Water Revenue Adjustment Mechanism. The net balance grew to $69.1 million in 2017 and that was largely due to the fact that our sales were 82% of what the adopted sales had been expected to be. Fortunately, California has adopted several remedial mechanisms to try to improve that situation coming into 2018. First of all, we have a sales reconciliation mechanism that triggered for all of our districts in California. And what that means is that the projected sales forecast for each of those districts has declined by about 9%. So the target that we have to reach to get to our adopted sales is much lower. If you think about that 82%, if that same exact pattern of usage happens, we would be at about 90%, 91%. And so the WRAM balance would grow much less significantly in 2018 if we had the same quantities of water sold. In addition to that, we do in April, make a filing to recover the last year's balance through a surcharge mechanism and that will be effective in the second quarter as is typical, those are 12- to 18-month surcharges. So we'll start to hopefully see that balance come down in the WRAM mechanism as we get through the year assuming all else is equal. I do want to mention, I think as Marty said, we had a dry January and a dry February until the last couple of days. Reservoir storage is actually above normal for the date. So the State is not as worried as you might think about an immediate drought, although it's obviously a concern to monitor over a year-to-year situation. And happy to talk about that a little bit more as we get forward through the year. The last 3 slides are really graphs of some of the things we've been talking about. The WRAM receivable balance, as you see, grew there in the year due to continuing sales lag. The CapEx on the next page, the $259 million and then the projection there for 2018, $210 million, that's the midpoint of our range of $200 million to $220 million CapEx for the year. And finally, the regulated rate base of the company. The 2017 rate base there, the $1,119,000,000, that represents the average rate base for the year and not the year-end rate base. The year-end rate base was slightly higher than that leading to our projections for 2018 and 2019. So that is ---+ turning it back over to Marty for summary. Great. Thanks, Tom. So just to recap, 2017 really was an outstanding year for the company. We exceeded our business plan on multiple levels. We had 0 primary or secondary water quality violations in all 4 states that we operate in. We had no wastewater spills ---+ major wastewater spills or violations in the 4 states that we operate in. We had no major EPA violations or fines in the 4 states that we operate in. And we had the highest customer service scores on the service metrics that we track ever in the history of the company. So that coupled with the record capital spending that we had within the year, I think, bodes well for our execution of the business plan. And then we entered 2018 with achieving the majority of our step increase, which is one of our goals that we set a couple of years ago, as we retooled our strategic plan. So the company has positioned itself very, very well. Now obviously, we do face some headwinds with the current situation with the Commission and the proposed decision on the cost of capital. I would say, historically, this process has worked. The Commission has a job to do to ensure that they get the best cost for the customers. We respect the position and the work that they have to do. However, as <UNK> said in this case, they accepted a single-point data model. And typically, we all submit multiple models. And you pick an average point within these multiple models on the cost of capital. So we're doing everything that we can to influence a proposed decision that's modified and has a cost of capital that is more in line with the current market conditions. As <UNK> said, we are all hands on the general rate case, which we'll file in July. We continue to see the need for more capital than we can physically get into the ground, or can physically afford to get into rates. So I anticipate a higher CapEx number being submitted than what we had in the last rate case. And I believe that's a really important number as we continue to make progress in upgrading our infrastructure. For 2017, we replaced a record 23 miles of main, which is a new record for us. But that is a small dent in the 6,000 miles of main that we operate in the State of California. So there is a lot to do. In fact, 2 weeks ago, we had a major main blowout in San Mateo. It was all over the news. It was a piece a main we've never had a problem with, but it was a piece of main that was put it in the late '40s and it just blew out and flooded part of downtown San Mateo during the commute. So the good news is no one was hurt. The good news is, the team responded very, very well with a lot of outstanding support from local authorities. And the restoration of any affected customers has been going very well. But having said that, we are not a risk-free business, which is what the proposed decision on the cost of capital applies. So we have a lot of work to do getting the capital on the ground, replacing mains and operating on our infrastructure and doing it in the way that makes sense for the Commission, for customers and for stockholders. So also kind of the last point is that we are continuing to work through kind of the new tax issues, again, the good, the bad and the ugly. Dave was really talking about kind of the ugly part of it and working through with the 4 state commissions that we work with to figure out how to determine what to do with the deferred tax assets and liabilities that we have to deal with over the next 12 months. So with that, we will open it up for Q&<UNK> Operator, please. If we go back, <UNK>, over the long term, we see that number being anywhere from 0 to a $1 million on a long-term average. And so, certainly, 2017 was quite a bit higher. Part of what you had going on there was when you increase rates as we did for the year, you increase the average bill, and so the average unbilled balance at the end of that period will be higher. So that's probably some of what we saw in 2017. As we don't anticipate large rate increases, net-net, when you think about the step increase and the potential for decrease from the cost of capital decision, that's probably fair to be closer to that 0 to $1 million range. Sure, <UNK>. So that is the full effect of both the reduction in the cost of debt and the cost of equity. And just as a further explanation for those who haven't been following closely, Cal Water did propose lowering its cost of debt to reflect the actual cost that we are incurring with respect to our long-term debt and that was not challenged by ORA or adopted any differently in the rate case. So the $17 million to $19 million and the $13 million reflect the total overall decrease associated with the proposed equity and debt rates in the case. So there will be a decrease, even if we were to somehow get the Commission to change the equity piece back to 9.43%. Hypothetically, there still would be a decrease related to the debt side. And yes, we have lower debt costs. We continue to finance and the prevailing even as the rates have gone up, the prevailing debt costs are quite a bit lower than the embedded debt cost the company has in the 6s and 7s for some of the embedded older debt that we're refinancing. And so the company feels comfortable with its estimate of the cost of debt in the case. It is hard to say that, <UNK>. I mean, I'll tell you and I'll let <UNK> comment, too. I mean, this is all we've been working on is meeting with the Commission, meeting with the Commission staff, pointing out what the historical process has been to what we think is an error in the process now, again, relying on a single point. And <UNK>, the cost of capital, I mean, the risk premium model, this kind of cash flow model, I mean, you get different cost of capitals depending on which models you apply and that's why historically the Commission has wanted 3 or 4 different models being employed to get an average cost of capital band that you typically work around within a reasonable range. So this is all we've been working on. And I don't know how many meetings, <UNK>, we have had over the last 2 weeks, but we have been busy. And clearly, we have not been in the office because we've been up talking to them. And so it's really up to the Commission, we're dealing with new ex parte communication rules that make the communications a lot more challenging in terms of actually talking to commissioners. But overall, I would say that the water companies involved in the proceedings and the CEOs of the companies involved as well as the regulatory staff have done a good job of trying to cover all the bases as we go through this process. <UNK>, anything you'd add. Yes. Thank you, Marty. So <UNK>, this proposed decision is really an outlier from our experience with the Commission, this Commission and with other commissions. We hope that the Commission will rethink this and those are the points that we've been making with the commissioners offices when we've been meeting with them, but I don't have any visibility as to what the commissioners maybe thinking about doing between now and March 22. Yes, so we have looked at that, I think, part of the question is really going to relate to how quickly the commissions want to refund that excess deferred tax liability that's right now regulatory liability as we remeasured it. If that goes back quickly, then I think there is a lot more equity need than if they treated as the other normalized items and spread it out over the remaining life of the plan assets. And obviously, there is a lot of regulation yet to be done to figure out what happens there. As you mentioned, we do have some time. We will be doing some financing this year. I think we talked about that before. We have to get off of our company line of credit once every 2 years and that comes up here in October. So we will be doing some most likely debt financing to get off of that line of credit. But the need for equity will be there and the size of it is the question. And really, also, the ---+ one of the things that's highlighted in the cost of capital we don't talk about very much is we did get an increase in our equity ratio as a percent increase from 53.4% to 54.4%, I believe. So that will affect the calculation as well assuming that goes through, right now it's looking like the Commission was going to adopt that proposal from ORA to raise our equity. So all that said, I think we'll have more information as we go through the year on the financing needs and the plans going forward. Well, thanks, everyone. Obviously, it's been a very busy first 2 months of 2018. And we'll remain diligently focused on dealing with the cost of capital as well as preparing the 2018 general rate case. In addition, as we work through any of these issues, if anything material comes up, we will be the first to communicate it either via 8-K or through press release and we look forward to talking to everyone at the end of Q1. So thank you very much for staying with us throughout 2017 and we look forward to talking to everyone at the end of the first quarter. Thank you.

2018_CWT

2016

TDC

TDC #Yes, <UNK>. It's more on-premise first, really looking at how they can optimize their spend to drive more consumption of Teradata to meet their internal users' needs and drive more business values. So the first one is that on-prem. And the second one, I would say, is our managed cloud. And we see continued interest in that managed cloud offerings. So those would be the two ---+ we just came out with MPP on AWS in Q3. And we do have, now, larger customers evaluating that solution as part of their hybrid cloud solution. And so, again, you'll hear more of that in the strategy at the Analyst Day. But that's how I would characterize the activity in Q3 and what I see the funnel in Q4. Thanks, <UNK>. Yes, <UNK>. We've always had ---+ to answer directly first, is that we have not made any wholesale changes to the comp structure during the year. But our objective in 2016 was to really keep it comp neutral to the salesperson to drive the right solution for the customer. So again, out there our sales people know that they'll be treated fairly with the compensation strategy driving the right solution for the customer. And we are working on our comp programs to really align them entirely to our strategy effective 1/1/17. And it will continuing to be an evolving process. But again, we have had these offerings in the past. They were more unique to a particular sets of customers. So we understood the economic dynamics of those transactions for our customer and for our sales teams. And we kept it to be very comp neutral to them to drive the right solution for the customer. So, again, you'll be ---+ we'll be continuing to refine those and rolling those out in a more specific way start of 2017. Thanks, <UNK>. Hey, <UNK>. Yes, we did the ---+ the alignment was actually done in December of 2015 where we, particularly in the US, the Americas markets, where we realigned from an industry focus to a more geographical focus. That was a very significant realignment. And that was completed and put into place at the beginning of this year. We're not anticipating any other significant realignments going forward. We're working within that geographical structure. But what you'll see is, we continue to evolve in our go-to-market. We will align existing resources, and we're looking at hiring additional resources in the cloud area. And again, we're aligning our resources ---+ continuing to align and refine our resources back to that geographical model that we put in place at the start of 2016. So no significant realignments in 2016. And I'm not factoring in any, again, because there's no significant realignments, there's no unusual activity that I'm forecasting or outlooking in Q4 of 2016. Again, on our Analyst Day, you'll hear more information on our go-to-market strategy. Yes. Again, we're very early stages. It is our larger customers that are evaluating those alternatives. But there's no ---+ I can't come up and say there's a particular trend. It is predominantly with our larger US-based customers. But again, we're not restricting these types of solutions just to the US customers. It's on a global basis. So again, very early stages. You'll hear more on our assumptions behind those conversions at the Analyst Day and how that would impact our long-term financial model. So thank you. Although the last few years ---+ I just want to share a couple of words here in closing. Although the last few years have been challenging for Teradata from a revenue growth perspective, our technology, again, remains unchallenged in the market and highly regarded by our customers. The key element of our future success is to drive more consumption of Teradata, no matter where or how deployed, in the public cloud, in our managed cloud, or as a subscription, or on premise. We're also emphasizing our ability to generate quantifiable business value for business users at our customers. This is something that has become less of a focus in the last few years. Going forward, we plan to become more business outcome led and technology enabled. We have great foundation in our technology, our customers, and most importantly our people to support our strategy. And everyone is passionate on our renewed focus of winning. At the center of this focus is alignment and execution. Our long-term strategy, which you'll hear on our Analyst Day, aligns with our clear vision. Our current year operational imperatives are aligned with our long-term strategy, all of which will be measured by actionable metrics to drive consistent execution and accountability across the organization, and drive business value for our customers. Again, we'll provide more information on all of these actions at our Analyst Day on November 17. And I look forward to seeing you there. Thank you.

2016_TDC

2016

CHK

CHK #Sure, <UNK>, I'll take that. It's Nick. We remain in constant dialogue with Williams on a number of fronts, as well as some of our other downstream partners. And you've seen us have a variety of success across a number of fronts this year to align our current operating activity to current market environment with the contracts that we have in place. And we've had very good receptivity from all of our partners to do that. With respect to Williams, you did see that we lowered our gas gathering outlook by $0.05. And that just really comes down to, as we set the cost of service for the year, an alignment around what our activity plans are, where to spend money, how much to spend, and how that rolls through the calculations. So that's minor evidence ---+ although it does generate a pretty reasonable amount of capital, of course ---+ minor evidence of how we can continue to work together to optimize around existing structures. Negotiations on new structures, like I said, do continue, and we are making good progress there. And we will just have to ask you to hang with us. Obviously we have had good success over the last year there, and are confident that we will continue to have more in the coming months. This is <UNK> <UNK> again, <UNK>. We have gas that we can manage our production rates to a very manageable ---+ no decline, basically, which is a great opportunity for us in the Marcellus. As far as the delays that we've seen, we were not on constitution, so that's really not something that we were counting on. We did have a small amount of gas that we wanted to put through net. Of course that's apparently gone now. So, we have an opportunity here to really manage this field to a really nice, no-decline position, with very little capital. If you go to page 13 on the slides, you'll see that we're really not putting a lot of capital into the Marcellus because it doesn't need capital. As far as monies being spent in the field, it is going to the Utica. The Utica has access through ---+ open to the Gulf. And we are going to be putting on additional Utica dry wells this year and next year, and drilling some additional Utica dry wells going forward. As far as sales or divestitures of assets, Marcellus is a core asset. There are parts of the Marcellus that might not be core, and we would consider that with the right price. Utica, we're pretty happy with our position. I might just add on to <UNK> that the Marcellus is an incredibly powerful asset: stability in production, significant upside in terms of future opportunity there in the Marcellus, the Upper Marcellus; an ultra-low cost operating team up there. It just presents a significant high-return opportunity for us. Obviously the gas position and getting the gas out is the key issue. And we will continue to monitor that, and ready to invest there when the opportunity presents itself of getting more gas out of the basin. Well, I guess I'd have to go back to ---+ we've got a lot of exciting things still left in the mid-con. We have 1.5 million acres there, so we've got really strong economics there. And then our Eagle Ford has experienced a renaissance, as well, with the longer laterals. So those are still preferentially, if we're spending more dollars, those plays always look a really strong. In the Haynesville, again, we are continuing to improve. We are getting close to 20% returns at the strip here, so it's hard to explain how impactful these long laterals have been to that play out there. Because we see no degradation in performance with these 10,000 foot wells, so we're getting double the production for effectively half the cost out there. We also have a new play there I didn't mention on my first set of comments. We've got our first 7,500 foot Bossier well that's flowing today, and it's 17 million cubic feet a day at 7,300 pounds. There's a lot of exciting things going on in the Haynesville. But our Eagle Ford team, they are drilling ---+ plan to drill for this year 9,800 foot wells, on average, which is nearly double what they were couple of years ago. So their returns have gone through the roof, and we're actually ---+ our returns today in Eagle Ford, with the current cost, are about the same as when oil was $80. It's just significant how much of a change the Eagle Ford team has made there. We had wells coming on a year ago at 500 barrels a day. Our latest wells are coming on close to 1,000 barrels a day. So we've had just a huge transformation in the Eagle Ford team over this first quarter here. But for me, again, if I'm fighting for capital, that's the area I want to send it first. So, just to reiterate that we really like our mid-con position; continue to believe it's a significantly undervalued asset in our portfolio. Specific to your point, <UNK>, we see upside in the Meramec in the remaining acreage that we have. It's not necessarily all gas, or more gassy-related. And we see other significant opportunities with the Oswego that we've noted before. When you look at our position, we've got what we believe to be still good upside opportunity. And we will be balancing the investments across oil and gas in mid-con, where we can get the best return. Do you want to add anything to that, <UNK>. Now. Again, when we would talk about the acreage we retain, we're focused on the yellow in the Northeast part of Kingfisher County up there. That's where the Oswego acreage is that we looked at. But we had it on one of our releases a while back, just map of all the stacked plays in mid-con. They are much larger than just this small stacked area. We've struggled to come up with a name of what we would call the stack, as we've got Miss Lime wells that, again, continues to get downplayed but have fantastic results out of the Miss Lime continually. But there's just all kinds of stacked plays that are ---+ there's new tests going out on the mid-con all the time, and because of our large acreage position, we are set to take advantage of those. And we've got some new prospects that I'm really looking forward to talking to you about as this year progresses, and into next year. Because our G&G teams are just really fired up about all the potential they see in mid-con. It's more than just the Meramec. Yes, there's two sales there. So we had the FourPoint sale, which is the southwesterly sale; but yes, that's ---+ the target in the middle, though, is what we sold this time. No, this is all just a repeat of our last disclosure. We had done the debt for equity exchanges, some open market purchases, and then we had completed our exchange obviously back in December. So, no, there's been no increment activity since then. I think the last time we updated the market on this was around the ---+ sometime in March. And then pretty quickly thereafter that, we got into an earnings quiet period and all of those things. So we've been quiet on this front recently, as we completed our bank amendment and got through earnings, and look forward to being more active in the weeks to come. Sure, <UNK>. A good question. We still see good opportunity with the other remaining STACK opportunities and the remaining acreage that we have ---+ as <UNK> noted, 1.5 million acres that we still have good leverage in that particular asset to help us with our midstream negotiations. And, likewise, in the other assets, we continue to work closely with Williams, looking at additional stratigraphic dedications, lateral dedications, potential other business lines. There are a number of things that we are working. We still remain excited and encouraged that we will continue to find improvement there, and win-win solutions with Williams. And what I would just encourage you to focus on, as we have done several times, and highlighted what we intended to do, we have accomplished just that. And I'm confident that that will be the case again. Yes, so the volumetric production payments, we presently have six remaining. Each have a different timeline. With the asset sales that we've highlighted, we will see the number of VPPs, and the complexity associated with them, continue to reduce. With these transactions, we should see three or four of those go away. As we noted in the press release, and I put in my comments, that's principally the reduction that you see from the gross proceeds down to the net proceeds of about $950 million, <UNK>. So, what remains, we will ---+ are at different time intervals. But when I started the Company, we had nine. We have six today. And we will continue to see more roll off this year. And so that volume really is insignificant, at this point in time. <UNK>, just to provide a little bit more color there. We will ---+ after the transactions that <UNK> just spoke about, we will have remaining our VPP in the Devonian and our VPP in a field in northern Oklahoma called the Sahara field. Other than that, everything else will have been retired, like the Barnett last year, or repurchased. It's possible, <UNK>. I think it just depends on structures of transactions and where assets sit, and what else is around them. So, it is certainly possible. Well, first, I will never underestimate the Chesapeake employees. They are doing a phenomenal job on our costs and those continued improvements. And I expect there to be nothing more than continued improvement. Capability with (multiple speakers). Well, I think I just would highlight again the capability and capacity of this Company is phenomenal. And the technology improvements, the efficiency of the organization, G&A reductions that we've had to undergo, like a lot of the industry, have not compromised the strength and ability of this Company. And so, I feel very good about our competitive position ---+ competitive position to reduce costs in the current pricing environment; and competitive position that, should we see a more stable, higher-price environment, that we could ramp up and handle that additional capital activity level very easily. Okay, well, I appreciate everyone's time on the call today. We are very encouraged about the progress that we continue to make at Chesapeake. As I noted in one of the questions there, we have highlighted a number of times our strategy and our intent to further improve the Company. And I just want to reiterate that today. Our commitment is as strong as ever ---+ our commitment to drive greater value for our shareholders and all the stakeholders, the excellent work by the employees of Chesapeake in making sure that we drive for the greatest return and the greatest value for this Company. We will continue to be focusing on that, and I look forward to the rest of the year and sharing with the investment community our continued progress. Thank you all for your time.

2016_CHK

2017

C

C #Hey, thanks Mike and good morning everyone Starting on slide 3, we showed total Citigroup results Net income of $4.1 billion in the third quarter grew 8% from last year including a $580 million pretax gain on the sale of yield book, a fixed income analytics business which benefited EPS by $0.13 per share Excluding the gain, EPS of $1.29 grew by 4% driven by a decline in our average diluted shares outstanding Revenues of $18.2 billion grew 2% from the prior year reflecting the gain on sale as well as 3% total growth in our consumer and institutional businesses Offset by lower revenues in Corporate/Other as we continue to wind down legacy assets Expenses declined 2% year-over-year as higher volume related expenses and investments were more than offset by efficiency savings and the wind down of legacy assets And cost of credit increased mostly reflecting volume growth, seasoning, hurricane and earthquake related loan loss reserve builds and additional reserve builds in North America cards which I'll cover in more detail shortly In total we've built $100 million of hurricane and earthquake related loan loss reserves across North America and Latin America GCB as well as the legacy portfolio in Corporate/Other Year-to-date total revenues grew 3% year-over-year including 7% total growth in our consumer and institutional businesses Total expenses remained flat and net income grew 7% driving a 13% increase in earnings per share including the impact of share buybacks In constant dollars Citigroup end of period loans grew 2% year-over-year to 653 billion as 4% growth in our core businesses was partially offset by the continued wind down of legacy assets in Corporate/Other GCB and ICG loans grew by $26 billion in total with contribution from every region and consumer as well as TTS, the private bank, and traditional corporate lending Turning now to each business, slide 4 shows the results for North America consumer banking Total revenues grew 1% year-over-year and 5% sequentially in the third quarter Retail banking revenues of 1.4 billion grew 1% year-over-year Mortgage revenues declined significantly, mostly reflecting lower origination activity However we more than offset this pressure with growth in the rest of our franchise Excluding mortgage, retail banking revenues grew 12% driven by continued growth in loans and assets under management as well as the benefit from higher interest rates We're continuing to see positive results from the launch of our enhanced Citigold Wealth Management offering driving growth in both household and balances with improving penetration of investment products Turning to branded cards, revenues of $2.2 billion were down slightly from last year Client engagement continues to be strong with average loans growing by 8% and purchase sales up 10% year-over-year We generated year-over-year growth in full rate revolving balances in our core portfolios However non-core balances continued to run off as expected And we face continued headwinds from growth in transactor and promotional balances which we are funding at a higher cost versus last year given the higher interest rate environment Full rate revolving balances which had been flat since the beginning of the year began to grow this quarter as new loan vintages matured and started to accrue interest This drove 5% sequential growth in revenues this quarter However, it was not sufficient to deliver year-over-year growth Relative to our expectations going into 2017, we're seeing solid revenue growth in several products including Costco and Double Cash However in aggregate we are seeing slower than anticipated revenue growth in our proprietary business mostly driven by a higher mix of promotional balances in our portfolio Finally retail services revenues of 1.7 billion grew 2% driven by higher average loans Total expenses for North America in consumer were $2.5 billion down 5% from last year as higher volume related expenses and investments were more than offset by efficiency savings Digital engagement remained strong with a 13% increase in total active digital users including 22% growth among mobile users versus last year We continue to drive transaction volumes to lower cost digital channels For example, increasing e-statement penetration and lowering call center volumes while improving customer satisfaction Turning to credit, net credit losses grew by over $300 million year-over-year reflecting the acquisition of the Costco portfolio which did not incur losses in the third quarter of last year, episodic charge offs in the commercial portfolio which were offset by related loan loss reserve releases this quarter, and overall portfolio growth and seasoning We also built $460 million of loan loss reserves with a roughly $500 million reserve build in cards being partially offset by the reserve release in commercial banking The reserve build in cards was comprised of roughly $150 million for volume growth and normal seasoning in the portfolios, $50 million related to the estimated impact of the hurricanes, and about $300 million to cover our forward-looking NCL expectations About two thirds or $200 million of this amount related to retail services where we could see the NCL rate increase from 470 basis points in 2017 to roughly 500 basis points next year And the remainder is attributable to branded cards where we expect the NCL rate of 285 basis points this year to rise by about 10 basis points in 2018. On slide 5 we show results for international consumer banking in constant dollars In total, revenues grew 5% and expenses were up 4% versus last year driving a 6% increase in operating margin In Latin America total consumer revenues grew 4% year-over-year This is somewhat slower than recent periods driven in part by lower industry wide deposit growth this quarter which we expect to recover as we go into year-end Card revenues grew slightly year-over-year on continued improvement in full rate revolving loan trends And expenses also grew 4% in Latin America reflecting ongoing investment spending and business growth partially offset by efficiency savings Turning to Asia, consumer revenues grew 5% year-over-year driven by improvement in wealth management and cards, partially offset by lower retail lending revenues Higher card revenues reflected 6% growth in average loans and 7% growth in purchase sales versus last year And while retail lending revenues declined versus last year we saw a sequential revenue growth again this quarter Expenses in Asia grew 4% as volume growth and ongoing investment spending were partially offset by efficiency savings Total international credit costs grew 4% year-over-year mostly reflecting volume growth and seasoning in Latin America Slide 6 shows our global consumer credit trends in more detail by region Credit remained broadly favorable again this quarter In North America the sequential increase in the NCL rate reflects the commercial charge offs I noted earlier while the NCL rate declined in both card portfolios Turning now to the institutional clients group on slide 7, revenues of $9.2 billion grew 9% from last year reflecting the previously mentioned gain on sale as well as continued solid progress across the franchise Total banking revenues of 4.7 billion grew 11%, treasury and trade solutions revenues of 2.1 billion were up 8% reflecting higher volumes and improved deposit spreads Growth in TTS was balanced across net interest and fee income with fees up 9% on higher payment, clearing, and commercial card volumes as well as higher trade fees Investment banking revenues of 1.2 billion were up 14% from last year with a wallet share gains across debt and equity underwriting and M&A Private Bank revenues of 785 million grew 15% year-over-year driven by growth in clients, loans, investment activity and deposits, as well as improved spreads And corporate lending revenues of 502 million were up 14% reflecting lower hedging costs and improved loan sale activity We continued to see strong engagement with our global subsidiary clients this quarter as they borrowed to support core business activities Total markets and security services revenues of 4.6 billion grew 3% including the gain on sale Fixed income revenues of 2.9 billion declined 16% on lower G10 rates and currencies revenues given low volatility in the current quarter and the comparison to higher Brexit related activity a year ago as well as lower activity in spread products Our local markets rates and currencies business grew modestly as we remained engaged with our corporate clients across our global network Equities revenues were up 16% reflecting client led growth across cash equities, derivatives, and prime finance And finally in security services revenues were up 12% driven by growth in client volumes across our custody business along with higher interest revenue Total operating expenses of 4.9 billion increased 5% year-over-year as investments and volume related expenses were partially offset by efficiency savings On a trailing 12 month basis, excluding the impact of severance and the gain on sale, our comp ratio remained at 26% On a year-to-date basis ICG revenues of $28 billion grew by 10%, even while trading revenues remained flat to last year We generated half of our revenues in banking which grew 13% on continued momentum in TTS, investment banking, the private bank, and corporate lending And we're seeing strong growth in security services as well which we view is similar to TTS in many ways as a foundation for developing broader relationships with our investor clients Slide 8 shows the results for Corporate/Other Revenues of 509 million declined significantly from last year driven by legacy asset runoff, divestitures, and the impact of hedging activities Expenses were down 36% reflecting the wind down of legacy assets and lower legal expenses And the pretax loss in Corporate/Other was roughly $260 million this quarter We believe this level of $250 million to $300 million of pretax loss per quarter is a fair run rate to expect for Corporate/Other through 2018. Slide 9 shows our net interest revenue and margin trends split by core accrual revenue, trading related revenue, and the contribution from our legacy assets in Corporate/Other As you can see total net interest revenue declined slightly from last year to 11.4 billion as growth in core accrual revenue was outpaced by the wind down of legacy assets as well as lower trading related net interest revenue Core accrual net interest revenue of 10.4 billion was up 5% or $450 million from last year driven by the impact of higher rates and volume growth, partially offset by a higher level of long-term debt On a sequential basis core accrual revenue grew by nearly $350 million this quarter reflecting day count, the impact of the June rate increase, loan growth, and mix Year-to-date core accrual revenue grew by $1.5 billion year-over-year and we expect to see roughly $500 million of additional growth in the fourth quarter However, on a full year basis we expect this increase to be offset by a roughly $900 million decline in the net interest revenue generated in the legacy wind down portfolio in Corporate/Other On slide 10, we show our key capital metrics In the third quarter our CET1 capital ratio declined sequentially to 13% as net income was more than offset by $6.4 billion of common share buybacks and dividends Our supplementary leverage ratio was 7.1% and our tangible book value per share grew by 6% year-over-year to $68.55 driven by a 7% reduction in our shares outstanding As we look to the fourth quarter, in consumer we expect continued modest year-over-year revenue growth and positive operating leverage in both North America and international consumer In total we have achieved sequential growth in pretax earnings in global consumer banking for the last two quarters and we expect this to continue in the fourth quarter On the institutional side we expect continued year-over-year revenue growth in our accrual businesses including TTS, the private bank, corporate lending, and security services Market revenues will likely reflect a normal seasonal decline from the third quarter And investment banking revenues should be similar to this quarter assuming a continued favorable environment We remain on track to achieve an efficiency ratio of 58% for the full year and cost of credit in the fourth quarter should be broadly in line with the third quarter driven by the normalization of credit cost in ICG offset by lower reserve builds in consumer Finally we expect our tax rate to remain at around 31% in the fourth quarter and with that Mike and I are happy to take any questions Question-and-Answer Session Yeah <UNK>, we are definitely rolling on new promotional balances Well Costco is part of branded but I think maybe the best way to think about this is if you take a look at what's going on with branded cards revenues in general I think there is three factors that you need to discuss in order to explain where we are with the cards revenue growth And the first is that as we saw the competitive dynamics and the rewards offerings in the U.S heat up late in 2016. At that time we made a conscious decision to shift our acquisition program away from rewards oriented products and more towards value products Now value products as we've been discussing, those typically feature a promotional period and so this change in tactics combined with the fact that the initial response to our value acquisition offerings was even stronger than we anticipated has resulted in a higher amount of these non-yielding promotional balances in our portfolio And based upon the performance of the earlier vintages we expect these promotional balances will generate growth and full rate balances but, in the near-term we're seeing a dampening effect on revenues caused by this shift in focus So that's one factor Then secondly there's also a dampening effect on the revenues against where we anticipated just caused by the higher rates If you remember when we went into the year, our planning was based upon one 125 basis point hike in rates in the U.S during 2017 and in fact so far we've seen two And while the higher rates are overall accretive to the U.S consumer business we've also talked about the fact that higher funding rates increase the near-term revenue drag caused by promotional balances So that's the second factor Now as late as June we believe that despite the drag of the higher promo balances and the higher funding rates we'd still be in position to deliver at least some level of year-over-year revenue growth in the U.S brand cards beginning in the third quarter However this is where the third factor comes into play Beginning in July we saw a slight uptick in the overall payment rate across the proprietary portfolio but while small it was just enough to take us from a small increase in revenue year-over-year to a small decrease So three factors; change in acquisition focus, slightly higher interest rates, and a slight increase in payment rates that have combined to result in the third quarter 2017 branded card revenues to be just below the level that we had in third quarter 2016. Absolutely, Costco remains a real winner We've continued to be able to grow account balances, we've seen continued growth in the purchases So it's still looking like an absolute winner for us Just the normal level that we would do every quarter There was always a small amount but there's nothing unusual this quarter Not a problem <UNK> Yeah, that's it exactly, <UNK> It's exactly what we've been talking about for the last nine months or the last three quarters And while we've seen some improvement in those later stage delinquency bucket roll rates, it's still higher than what we thought it was going to be So that's what is feeding into that It has fed into the increased guidance that we've given you during the course of the year driving another 2017 expected NCL rate from 435 basis points coming in to the year to 470 basis points now And so you know, reflecting about a 30 basis points, 30-35 basis point increase where we otherwise would have expected retail services to be in 2018. Yeah, maybe if you want I'll go through both branded cards and retail services because it's the same three factors that impact both of them So when you think about the branded cards, LLR build up, you know, we built about $200 million of the LLR of that 500 in branded cards And there's about on a normal basis given growth and seasoning in branded cards we probably have about $50 million to $100 million in the quarter So figuring the midpoint to be about 75, we added $25 million of reserves to cover our estimated impact of the hurricanes And then finally in branded cards we're looking at an NCL rate of about 10 basis point growth next year and that will go from about 285 this year to 295 next year That's a little bit higher than what we had previously considered It's still in line with our long-term 300 to 325 basis points but we'll probably get to 295 next year You take a 10 basis point increment in your NCL rate, multiply it by an $85 billion loan portfolio, adjust that for 14 to 15 months of coverage and that adds about $100 million accrual on to branded cards So overall, 75 that I would consider to be normal, 25 for hurricanes, and 100 just to adjust to that forward look So when you think about that forward look maybe perhaps we could have taken more of a wait and see approach over the next several quarters but our assessment was that it was appropriate to take that reserve build now So all things being equal I'd expect that the fourth quarter reserve build would be back in that range of $50 million to $100 million in branded cards that we would consider to be more normal And then if you move over to retail services, it is similar to what we just went through with branded cards We had that $300 million reserve build in retail services and again if you look at retail services, the normal reserve build there is again kind of in that $50 million to $100 million range And with retail services we'd likely be in the upper end of that range right now, just given the volume build that we've seen So call that 90, 85, 100 somewhere in that range Then there's another $25 million for hurricanes that we've put away in retail services to cover the estimated losses that we think could occur And then again as we look forward and we think about the NCL rate next year being 30 to 35 basis points higher than what we had previously thought about, again you take 30 to 35 basis points, multiply it by a current $46 billion portfolio, adjust that for a 14 to 15 month coverage period and that gets you the extra $200 million reserve build there So $75 million to $80 million to $100 million for normal; 25 for hurricanes, 200 for the forward look that gets you to that 300 to 320 that gets in the supplements And again just like in branded cards perhaps we could have taken more of a wait and see approach but we thought it was appropriate to take the reserve build now And again all things again being equal with retail services I'd expect that we'd be back in that upper end of that $50 million to $100 million normal range in the fourth quarter Let me just finish it because if we’re adjusting that range up to 500 basically basis points of losses in retail services in 2018, we're also going to take the medium term view of retail services up from where we have talked about on Investor Day of being about 500 basis points to be more in the range of 510 to 525 basis points So again, not a big change but we're going to make that change in the forward guidance I think it's an area <UNK> if opportunities present themselves as we've seen in Best Buy and other and if portfolios make sense we clearly got the capital balance sheet, liquidity capacity, and if the returns makes sense we’d be happy to take them on Well we think it's a growth business and again if you measure it in revenue <UNK> it's a little hard and I think we touched on this a little bit in Investor Day It's a difficult business to measure just based upon revenue growth only because with so many of the partner relationships that we have we end up with performance sharing agreements and those performance sharing agreements, now the accounting for that all runs through revenue So your revenue as your NCLs go up or down that impacts the performance of the business, that ends up in your revenue number So that's why over time you might only look at that as being a 1% revenue growth business But we like the growth aspects on pretax earnings So we think it's a really good business and unfortunately with those performance sharing arrangements that tend to obscure the true revenue trends and even in the near-term economics we end up having to build the loan loss reserves for all the NCL's that we're going to incur in that business even though some of those NCLs ultimately as they’re realized will go into the performance sharing arrangement and so it's actually our partners that will actually bear a significant percentage of those NCLs That ---+ I would say the best measure is probably pretax earnings less the LLR I did, year-over-year We expect year-over-year growth to be $500 million in the quarter If you remember Jim when we, as we've been talking about growth in net interest revenue year-over-year we've been focused on that core accrual line and we said that in the second half of the year we would expect that to grow about a billion dollars year-over-year and we saw a $450 million in the third quarter and we're looking at $500 million in the fourth quarter So we’re roughly in line with that billion dollars that we talked about back in July Well we opened a number that we settle on, is going to be really determined based upon the overall portfolio mix between the branded proprietary portfolio, the co-brand cards, and everything else So I don't want to give you a long-term target on the average yield We have given you the target that we believe that branded cards in the medium term should produce about 215 basis points of ROA and that includes yield assumption, that includes our forward look of NCL rate of 300 to 325 basis points I don't want to start giving guidance Jim on every little line item that comprise the cards performance When banks file their capital plans, the capital return is approved not just based upon the full year but it actually is quarter by quarter So we have to lay out what our estimated capital returns will be for each quarter and then we need to live within that whole budget for each quarter So we've got some flexibility but it has to be within the quarterly numbers that we have told the Fed that we're planning for No problem, thanks It has to do with the instruments that you're using in any given quarter to help position your clients appropriately, how you hedge, what instruments you used to hedge the position And so some of the instruments that you use are mark-to-market instruments and therefore any change up or down in those instruments end up going into principle transactions and then mark-to-market revenues If you're doing that by actually holding a security then to the extent that you've got a mark on that security, the mark would go into principle but interest that you actually accrue on that security goes to net interest revenue So, trying to predict as you said trading related net interest revenue, good luck I'm sorry but you were breaking coming in and out, so in security services how much of it is market gains compared to actual client growth? Yeah, certainly in both businesses we're seeing the growth that we've been hoping for Security services we've had good underlying growth for six to eight ---+ six quarters now But in the beginning part of this year and for most of last year then underlying growth has been masked by the impact of some businesses, some product portfolio that we had sold early in 2016. And so we lapped that impact in the first quarter of this year and that's why now the last two quarters, the real underlying growth rate that we’re getting out of security services is coming through And again we consider that to be similar to TTS, a foundational type of business in order to grow good in this case investor client relationships So we think that's a terrific business and you're now able to see I think more clearly the momentum that we have there And you know when it comes to equities, Mike? And I think the nice thing also you need to take a look at are we making progress with equities, I really think ---+ we are talking about, we try to gauge the progress that we're making in building the client franchise And so in order to really gauge I think the progress that we’re making there, take a look at our secondary business combined with the primary equity business, the ECM business And if you look at that ---+ the equities franchise revenues, the equity markets plus the ECM they totaled over a billion dollars this quarter and that's up 30% year-over-year The ECM revenues are certainly up significantly versus the prior year, they virtually doubled and that's really because we will be able to generate about 170 basis points of wallet share gain this year And that's all with corporate clients So combining both elements of our equities franchise, we've got a growing and balanced business with good momentum going with both our corporate as well as our investor clients No problem Well, when we go back to the Investor Day charts we tried to give you a sense as to over the timeframe that we were talking about that clearly the wind down of legacy assets and think all of that is now in Corporate/Other It is certainly going to be one of the factors that gets us to the expense profile that we put in there It's one of the wind down of legacy assets depresses revenues, and it also serves to depress expenses So we tried to give you a sense as to the revenue and expense growth that we're going to be getting out of the core businesses and then where we saw Corp/Other, those legacy assets also play a role Alright So I would say it is not just in the U.S but as we look around the world we would rate the health of the consumer right now is pretty good And again so you touched on a number of the most important things, so when you look at a consumer what are the things you look at, does the consumer have a job If they have a job are they going to keep it, if they don't have a job how difficult is it to get one And I think as you look across the world unemployment, slow employment is high Probably the bigger challenge to the consumer or to the worker has been the lack of wage growth and again not just in the U.S but in many places And we're beginning to see some of that and again that's helping to the consumer The other pieces when we look at the consumer and again when we go back to the crisis and know what we know from there, very hard to have an engaged consumer the consumer accounts for about two thirds of the U.S economy, very difficult to engage a consumer when housing prices are going down And again what we've seen not just here in the U.S but in many places there's a fairly steady consistent rise or at a minimum good stability to housing prices and I think the combination of jobs, a little bit of wage growth, stable housing, and rising asset prices has left the consumer in a pretty good place Obviously we are a long way or we're a long way from the last credit cycle and so we're always challenging ourselves in terms of where we are But a lot of the signs we looked for in terms of the deterioration of the consumer I got to say right now, we just don't see and if you go and look at our NCL rates and look at our delinquency rates around the globe from the document we've given you, again the numbers don't point to it You know in general the promotional balances while the range of offers vary, they did you go up to 21 months No, I don't want ---+ don’t freak out, that does not mean that it’s going to be 21 months before we see growth in anything But it’s just that going into this year we shifted our mix of acquisitions away from rewards towards promotional balances It doesn't mean that we won’t shift back again Now the one thing that we know about cards is in trying to build this balanced portfolio with the balance business we're going to need to make adjustments as we go along every quarter And so I just don't want to give specific guidance <UNK> as far as what month or how long, we do think again we are going to get sequential growth again this quarter And we'll keep you apprised as to how we think we are doing overall with our targets on branded cards And so you're right, we do use the services of Equifax but we've got to say that while this one is of a significant magnitude, data breaches aren’t new and us having to work with and work around out data breaches I think for us and others are said to become fairly embedded in our business When you think about the risk that we bear we're really bearing two types of risks when incidents like this occur, one is the authentication risk So is somebody presenting the credentials, are they actually that person or that entity And I think we feel that we've got ways of working with different technologies to authenticate and obviously we flagged those accounts and we know and we go on heightened alert to watch this The second form of risk is the acquisition risk and that is that if somebody comes in through the application process, are they actually who they say they are And that in itself is challenging and probably causes or does cause us to go through more steps of making sure that that's them So one is we would go back, we would flag the file, and we would go back and be required to do extra levels of work against that And from that the natural question is what's the ramifications on near-term, longer-term formation of credit and I would say in the first instance I think we've got the ability to authenticate pretty quickly I think in the second instance it does slow the process down And again some people have been locking their accounts within Equifax, that makes it a bit more challenging So I wouldn't say it's necessarily material in terms of the slowdown but it does slow the process down just a bit Hey <UNK> Again going back we focused a number of years ago around what we said growth is going to look and feel like for us is not a whole lot of new client acquisition In fact we're doing more with less clients, more focused on our target clients, and growth is going to come in the form of taking market share both on the capital market side of things as well as on the banking side of things, and that's what we've done And it's our expectation that we will continue to focus on taking share And again I think the opportunities, we know having lived it when you go through restructuring and you go through changes to your business model how disruptive they can be And I think actually with us taking the early actions and actually having of a lot of stability in our ICG franchise has served us well and we continue to want to be focused on that You know, I would say <UNK> that it is ---+ it varies by product Private banking where loans have been strong, private banking lending in both the U.S and in Asia, but primarily in the U.S when it comes to trade loans we have seen some good growth pretty much in Asia again in trade loans as well as some things here in the States And it's been a nice mix across the place You know we normally don't give too much guidance on the backlog but I think that you've seen that in the forward guidance that we've given towards the fourth quarter where we sort of said the investment banking revenues in the fourth quarter we expect to be pretty much on where we were in the third quarter No, I mean Jeff when we got to the Investor Day we talked about the fact that the ROA was going to come down from 2.25 down to like 2.15. Again it's not a ---+ it's a tweak more than anything else and it was more reflective of a rebalancing of just the fact that we had a lot of the co-brand just growing faster than what we had thought was going to happen, so some of that is just a product of our own success But we still think of cards as being a healthy part of our business but it's not the only engine for growth that we have It's the first area that we talked about only because the investments that we made in branded cards were so visible, when you think about the early investment that we made in the proprietary portfolios we got into that whole rewards and rebates area and so you know that you're just taking a big drop down in your profitability It's very, very visible, it's not quite the same as hiring a few more people in equities markets These things were big and so we needed to really make sure that we talked about them and that you understood where we were going But I think the nice thing is that we've developed many engines of growth right now If you take a look at what's going on in the rest of North America, the launch of the Citigold platform, we now have retail banking revenues excluding mortgages which again we change our strategy on that But the retail banking revenues up 12% year-over-year, yes, that is getting a little bit a lift from interest rates but it still is good growth We've had our Citigold Wealth Management clients increase by 28% year-to-date You can see the assets under management growing by 10% So we've got a nice a nice growth coming out of retail banking in the U.S We've got on the international five consecutive quarters now of positive revenue growth and positive operating leverage in both consumer Asia and consumer Mexico You see the engines for growth that we built in the ICG and these are all client-led businesses TTS, security services, private bank 15%, that's two ---+ that's a couple of quarters now we've had double digit growth in the private bank So while branded cards was the first engine for growth that we talked about publicly we've built a whole series of engines for growth that we're really excited about and that we try to lay out for everybody on Investor Day I mean we're still focused on growing that branded cards business but it's not the only engine for growth that we have either in consumer or for Citi Yes Jeff, I think you may be getting caught up just a bit in the inorganic growth that we had in North America from the Costco portfolio because we actually like the organic growth that we've been getting now in Asia and in Mexico In both ---+ like in Mexico a little bit ---+ revenues grew a little bit lighter this year this quarter than we would have liked but that seems to be something that's cutting across the industry We have deposits we’re growing but now in Mexico what we've got now is we have actually finished the repositioning of the cards book, we worked our way out of that J curve type of thing And now we've got cards revenues in Mexico that are actually have growth year-over-year So we think that the growth prospects for Mexico are pretty good Investor Day we said our anticipation is compound annual growth rate in revenues of 10%, we had been running at about 7% to 8%, we will probably be back to that 7% to 8% in the fourth quarter and then we should continue to grow into 2018 and 2019. Asia again we've got the cards business there now generating nice growth We're starting to get growth in some of the retail lending We like the wealth management business that we've got in Asia and again in both of those businesses five consecutive quarters of revenue growth and positive operating leverage We think that's the way that you build a nice sustainable growth pattern by being able to grow revenues as you're generating positive operating leverage And then in North America, again we will take a look, branded cards is coming along a little bit slower than we had thought but still coming along nicely And I talked about the retail banks so I think we've got really three good engines for growth in the future there in the consumer business No problem

2017_C

2016

PNW

PNW #Thanks, <UNK>, and thank you all for joining us today. Pinnacle West delivered a solid 2015, with earnings near the high end of our guidance range, with Palo Verde Nuclear Generating Station having a record year, and with a balance sheet that remains one of the strongest in the industry. <UNK> will discuss the financial results and outlook. My comments will focus mostly on the year ahead. Our fleet performed very well in 2015, highlighted by Palo Verde Nuclear Generating Station's highest output ever, equating to a capacity factor of 94.3%. One of Palo Verde's key strengths is the ability of the team to perform at an excellent level, but to also drive continuous improvement each year. 2016 marks the beginning of a new period for our fleet. In total, we are planning to invest over $3.6 billion in capital over the next three years. We're investing in two large projects in our fossil fleet as well as a few innovative investments and some IT systems to prepare our operations for the long-term. The two large fossil projects are the Ocotillo modernization project and the selective catalytic reduction pollution controls, or SCRs as they're called, at the Four Corners Generating Plant. Four Corners unit 5 entered a major outage in January to make several upgrades and begin laying the groundwork for the SCR installations. The innovative investments I will outline are designed to increase customer and system reliability and meet future resource needs. In November, we announced a partnership with the Department of the Navy to develop a 25-megawatt micro-grid project at Marine Corps Air Station Yuma. This is APS's first micro-grid project and the first military base to secure 100% backup power. We also plan to install a 40-megawatt solar facility this year on behalf of some of our larger customers. This amount has been reflected in our 2016 CapEx budget. The Solar Partner program, which is planned for 1,500 APS-owned rooftop solar installations, is on track to be fully installed and operational by mid-2016. And just this month we officially launched our Solar Innovation Study, a 75-home demand rate laboratory here in the Metro Phoenix area which will determine how customers can use various combinations of distributed energy resources such as solar panels, battery storage, smart thermostats, and high-efficiency HVAC systems to better manage their energy environments. These customers will also be placed on our existing residential demand rate, and the study will provide valuable information on a customer's ability to use technology to manage peak demand and lower their bills. In addition to generation investments, we are upgrading several IT systems to improve our customer interface, facilitate active operation of our transmission and distribution systems, and enable participation in the California ISO Energy Imbalance Market. These investments, along with our advanced meter program, which is fully deployed, are enabling integration of advanced technologies while also allowing us to maintain grid stability. 2016 also represents an important year on the regulatory calendar, with the APS rate case set to be filed on June 1. APS submitted the Notice of Intent to File on January 29, which gives notice to the ACC and stakeholders and outlines the primary topics we will propose in the June rate filing. APS will propose the new rates go into effect July 1, 2017, based on the test year ended December 31, 2015, with certain adjustments. To help achieve this outcome we have held a series of stakeholder meetings to provide clarity and transparency with the stakeholders. We're also planning to submit an extensive list of standard discovery questions and responses with the June 1 filing. Let me outline a few of the central topics from the Notice of Intent to Filing. Residential rate design is an area where we will propose changes to better align costs with prices and incentivize cost-reducing technologies. We will be proposing universal demand rates as well as shifting our time-of-use periods to later in the day. We will also propose a revenue per customer decoupling mechanism that will be adjusted annually to replace the existing lost fixed cost recovery mechanism. The decoupling mechanism will be proposed on a trial basis until the next rate case, to act as a rate-stabilizing mechanism during the transition period to the new rate structure. The last item I'll mention is we will request the deferral of costs related to two large CapEx projects we're investing in: the SCRs at Four Corners, and the fast-ramping natural gas modernization project at Ocotillo. These investments total of over $900 million over the next few years with in-service dates of 2018 and 2019, respectively. In the case of the SCRs, since the timing of installations will be close to the end of this rate case, we'll also propose a step mechanism to reflect the deferred SCR costs, similar to the treatment of the Four Corners acquisition. The docket on value and cost of distributed generation has testimony due on February 25. There are also four other electric rate cases in process. UNS Electric is the first in line, with hearings set to begin on March 1 in Tucson. We are an active intervener in the UNS case, since it is an important forum to discuss rate design. The testimony we filed supports the concept of three-part rate design which incorporates a fixed service charge, an energy charge, and a demand charge. This concept was also proposed and supported by UNS Electric and the ACC staff. Related topics, including methodologies for determining the cost to serve customers with solar and the value of solar, will be a central focus in the value and cost of distributed generation docket. In closing, we delivered on our commitments in 2015, and we are well positioned for 2016 and the long term, with a clear plan and a strong leadership team in place to deliver on the plan. I'll now turn the call over to <UNK>. Thank you, <UNK>, and thank you, everyone, for joining us on the call. This morning, we reported our financial results for the fourth-quarter and full-year 2015. As you can see on slide 3 of the materials we had a solid year and ended on a strong note. Before I review the details of our 2015 results, let me touch on a few highlights from the quarter. For the fourth quarter of 2015, we earned $0.37 per share, compared to $0.05 in the fourth quarter of 2014. Slide 4 outlines the variances which drove the increase in our quarterly earnings per share. Looking at gross margin, higher retail sales, favorable weather, and the adjustment mechanisms were all positive contributors. Also, as we anticipated, lower operations and maintenance expenses in the fourth quarter of 2015 compared to 2014 improved earnings, largely due to lower planned fossil outages. Now turning to slide 5, let\ <UNK> is sitting right here, <UNK>. I'll let him try on that one. Sure. <UNK>, there was an extensive discussion in Arizona a few years ago around decoupling mechanisms in general. In our last rate case we had proposed that LFCR mechanism essentially from the settlement process. But the way a revenue per customer mechanism would work is it takes into account all of the different adjustments: so weather, sales, as well as just other changes to ---+ essentially changes to the normal revenue requirement process. But what it does is it looks at it to accommodate customer growth, right. So as customers grow and we're making additional investments into the system, we need to be able to pick up the additional costs that come from that growth. Does that make sense. Have we arrived at those yet, <UNK>. Still working through, obviously, the stakeholder process, but pushing it more towards later in the day, because that's where you see the need to essentially focus on the peak. Yes, early evening. We've got at current rates the primary time use rate is a 12 to 7 peak period, and so it both shorten that up and then move it out later in the day. That's partly responding to the duck curve, what you see in the wholesale market out here from the overgeneration that happens in the middle of the day. As our summer peak, this last year was 5:00 to 6:00 in the afternoon, early evening, and that's been typically the time of hitting our peak. Well, I think there will be some additional element in this than is typical. But the last few cases have been very well organized and executed by all 22, 23 parties. That's certainly, I think, the direction we, the staff, [BRUCO], and the vast majority of the parties would intend to proceed. UniSource is going to be an important discussion. That's the first case in a state that's really focused on the changes to residential rate design. That's why we've got four witnesses in that case. So obviously that's probably a case to watch. No, <UNK>; this is <UNK>. The EIM helps balance really inter-hour. It's not affecting the underlying wholesale markets. So what you see in that shift ---+ and it's not the shift of demand rates, but that shift of the time-of-use period, the peak period, out to later in the day is reflecting that ramp that comes later in the day from the duck curve. No, nothing in the process. Well, we will be going out next month, I believe, with a [tolls] resource RFP for ---+ with a beginning date later this decade. It's really designed not only the heat rate options, which are not flexible that have been ---+ or will expire; and then we have a toll in 2016 and a toll in 2019. So this process ---+ and we'll get, being all-resource, I expect to see various resources in there; and we'll evaluate that, and evaluate where we are and what we need, and we'll move from there. Yes, I think we have great optionality here. We can extend the tolls short-term, long-term. We could newbuild if it was the right thing to do. But right now we'll just see what comes into the RFP. This is <UNK>. What you're trying to do ---+ we have a fuel adjuster, right, which is going to pick up essentially the cost of the fuel burn. But what you're trying to do in shift that out later is to align the customer response with when we see the need for, essentially, conservation on the system. So what it's trying ---+ go ahead. It's a customer issue. If you have the time-of-use rates fixed, you don't have essentially ---+ for example, on the solar side you're not providing credit at noon at a peak rate when the wholesale market is negative. Yes, <UNK>, there is no money lost for APS. It's really a shifting and sending the right price signals to ---+ what was done they were put in before to what we're seeing in today's marketplace. It's an alignment issue. It's really a rate design issue, so it's part of the rate design process. We're trying to align the retail rates with the wholesale market. Yes, I was just going to say the issue is its rate design, so it's revenue neutral. We've made a fair number of changes really over the last probably two or three rate cases that have picked that up. A lot of it comes in the time to process the case and trying to get that processing time down to the year or so. Things we've done with that are, for example, prefiling the discovery. So we don't wait, file the case, wait for three or four months, and then begin the discovery process. So a lot of that's been worked out. Obviously, adjuster mechanisms and how you can work on adjustment mechanisms can help smooth that even further. So that's probably going to be some of the discussion you'll see, and that's part of what we've been talking about with stakeholders. I think the general issue that's coming up in UNS is how it's going to apply broadly across the customer base. The Commission staff have proposed that the three-part rate design be applied to all residential customers, and that's one of the key issues to look at, I think. I don't see any equity needs, <UNK>, through the planning horizon. I think as we've said in the past, EPS CAGR is somewhere between rate base growth and dividend growth, as we think about those as your two boundaries. 5% was the last dividend increase. Well, you're right, there's a lot going on out there. But we don't really comment on M&A. I will say we're focused on our excellent operations and continuing that. We believe growing earnings will provide shareholder value without combining operations with another entity. I think each one of them is unique to the specific transaction. No, that's based on the $3.92. And that's at the Pinnacle level. Yes. I think that's pretty close, yes. Thanks, <UNK>. We like it that way, too.

2016_PNW

2016

SYY

SYY #Thank you.

2016_SYY

2016

TSN

TSN #Good morning, <UNK>. Thank you. <UNK>, we are very optimistic about this year, and the foundations that we've built for next. If you look at it next year, we've got more synergies coming. I think we're going to prove solidly in the next few weeks and the quarter or so, that we're ---+ we've got great brands that are well-positioned. I think protein demand is going to remain pretty strong. I know we have great consumer relevance. I'm not ---+ it's really hard to predict what input prices will be a year from now or whatever. But if you just look at the macro view, it feels pretty good that they'll be reasonable, and certainly, within our ability to manage. Should have plentiful supply of livestock. We've got a great innovation pipeline. Great cash flow, as <UNK> talked about. If I look at ---+ anyway ---+ so yes, we're really optimistic. Yes, we can. That is the take-away. Thank you. So listen, we appreciate your interest. We certainly appreciate your involvement in our Company. We plan to carry this momentum generated in Q1 through the rest of this year, and on into 2017. So we're off to the shareholders meeting now. Hope you have a great weekend. See you.

2016_TSN

2017

CMO

CMO #Well, I mean, if you look at the cohorts out there, what you're seeing is kind of an interesting phenomenon now. For the longest time, longer resets were prepaying faster than short resets. That's flip-flopped now. And so you've got season-short resets that are of kind of printing in mid-20s now. Longer resets, you look at our long reset book, the coupon is 2.70% with a gross mortgage rate of 3 1/4% or so, those are now in the upper teens. So it's kind of flip-flopped. So I don't ---+ using that, I don't disagree with your thesis. Yes, the first quarter was very interesting. Everything ---+ spreads tightened dramatically early in the year. The banks weren't buying. There was very little new production. The Street didn't have much inventory and there was very little selling. And it's not uncommon for banks to come in early in the quarter. Well, as spreads tightened in, then you started to see a pickup in secondary selling, guys taking advantage of tighter spreads, and so shorter resets, for example, tightened early in the year and then started widening out. If you noticed our marks, our shorter resets were actually down in the quarter. And then on top of that, you're starting to see a lot of out-month production mainly as the result of rates going up. There's more ARM production now and so, for instance, in the out months the bigger Tier 1 originators, for instance, in 5/1s that were selling $10 million to $20 million blocks are now selling $20 million to $35 million blocks. So ARM production as a percentage of production is up right now. The last number I saw it's about 17% of new production. Now, that's not all going into agency MBS, that includes jumbos and everything else. But net to net, the absolute increase in rates has caused ARM production to go up. Now, the curve flattening has been a more recent phenomenon and so you could see it dip back down again. But bonds that are coming out now in new production are reflective of when we had about 125 basis points between 2s and 10s and that's come in a little bit now. So a long answer to your question but there's plenty of supply right now between new issue and secondary selling. <UNK>, this is Phil. We don't really break down the average age of the portfolio. We do give some months to roll, months to reset. Average months to reset is about 6 months as it has been for quite some time on our current reset classified loans. All those loans will reset inside of 18 months. And about 20, 22 months for ---+ or about 40, 41 months for the longer resets and 22 overall for the portfolio. Yes, and as far as speeds goes, I know you guys look at the different cohorts. And right now, for instance, ARMs that are resetting for the first time that are 5 or 6 years old, seasoned 5/1s, some of those are ramping up to north of 40 CP<UNK> Very seasoned non-IO product that's 15 years old is still trending around 20 CP<UNK> So there's a huge variance in speeds depending upon the age, whether it's IO, different attributes like that. So I would just kind of say, generically, short resets are trending in the mid-to upper 20s and depending upon how much of the book is concentrated in newer versus seasoned production it's going to be either lower or higher. I'm sorry, <UNK>, what does ---+ what was your question again. The curve's calling for a couple of more bumps this year. (inaudible) Yes, I think the curve is ---+ next year, I think the Fed funds futures are calling it, for terminal funds, around 2 1/4%. I think the Feds [dots] implies a terminal funds rate of 3%. It's been pretty transparent, it seems like they're signaling 2 moves this year. Who knows what they are going to do next year. But we really don't try to make a prediction when we're executing our strategy. We think our strategy works very well in an environment where the Fed's moving gradually and if you some steepness in the curve, if 10s go back out in the high 2s and you get a couple of fed moves, that's not a bad environment for us. Well, the cost of that capital to us is about 7.75%. Well, at the margin, we're investing close to 10% right now.

2017_CMO

2016

NUVA

NUVA #Let me have <UNK> answer that one, and then if there's any numbers follow-up, we'll give that to <UNK>. So talk deformity. Not to give you a diatribe but I would tell you that we went head long into adult deformity, which is really an extremely complex surgery, where in essence you have a fixed spine. And so the whole iGA element is really trying to bring about the culmination of less-invasive approaches to correcting alignment. And so clearly, we made a significant bet on that, and we've seen significant momentum as it relates to the delivery of iGA, and in that through align and through a number of interbody elements and in our IOS contribution. It's clearly an opportunity and a place that we want to participate, and we believe there's significant innovation opportunity with regard to what Ellipse has done with early onset scoliosis, and where we're heading into the idiopathic space, as well. It's clearly ripe for a fresh look, and an aggressive approach, and I think that the Ellipse thing gives us nothing but momentum on our way into exploiting that opportunity. The only thing I would add to it is I think you've got a total deformity market all inclusive of adult down through early onset of close to $2 billion of opportunity. With the acquisition of Ellipse Technologies we can now play really in that entire space, and the whole $2 billion becomes available to us. That's how we think about the opportunity around deformity. You bet. So we would agree with that last comment, that the NuVasive representative in the OR is one of the key factors that drive the surgeon to want to be a partner, a member with NuVasive. That said, early in 2015, we experimented with creating the clinical associate role, a person with a good operational room experiential set, deep training in NuVasive technology, and an understanding of how to be a service partner. And we prototyped that in a couple of geographies, to see if that could be a way, as we have said in other venues, to then remove the more expensive, if you will, sales representative, and let them hunt a bit more. So we tried it out in certain geographies. The results came back extremely positive. Having said that, we still are very cautious about the rollout of that idea across the nation, across the world. And so what happened in the balance of 2015 was we sat down with each of our major sales representatives, we caucused with them to see if they wanted to try this out, and we probably deployed ---+ actually I'm not going to disclose how many we deployed, but a fair amount of them across the United States, and measured then their impact. What we found when we deployed them was we didn't lose customers, and we actually accelerated our growth rate in those geographies. So it's a good idea. It's an idea that doesn't fit everywhere. Depends on the surgeon. We're ramping up the idea in 2016 in the right geographies to get additional growth. That's how we think about it. Well, let me answer the question by always coming back to first principles. So for us, it's about a return on invested capital, and it's about delivering a strategic advantage. We want to be very disciplined on the deployment of capital, and if it's going to be more of a tuck-in, a smaller acquisition, we want to get the return on capital above our weighted average cost of capital meaningfully, within three years. Something bigger, transformational, certainly by five years. As a point, Ellipse Technologies and all of our work and all of our modeling certainly meets those goals. Because of the very fast revenue growth we're seeing, and we have planned for the business. We built out a very competent, very strong corporate development team to allow us to not only understand our own innovation, but what others are doing, and seeing when and if it makes sense to make acquisitions. So we are always looking at things. I do anticipate that we'll probably make other acquisitions in 2016, but I'm not going to comment on how big or small they are or if we need to take on debt or not. I come back to my first principle. We're going to be extremely, extremely principled in the deployment of capital. China is still a focus. Beyond the headlines, beyond the volatility, healthcare spending in China remains very strong. The growth rates in the healthcare market in China are substantially above other markets around the world. We have zero presence there right now. And if anything, now is probably a better time than before to buy assets if you're going to move into China, just given the rest of the uncertainty in the world. I'm not ready to announce anything because again, I come back to first principles, any deal we do is going to be a good deployment of capital. Yes, <UNK>, it's <UNK> here. The one thing that we're up against in that biologics segment which falls into the surgical support, is going to be tough comps. We were growing biologics 13% or so in Q1 and still roughly double digits in Q2, and then in the back half the comps get a little bit easier. So we've got to work ourselves through that. But over time, you would expect biologics would pull through, comparable to your hardware growth, which is really your procedural volume. So once you get through the tough comps you would expect to see that category start to come back in line. And then the other thing that falls down into surgical support and other is just the services business, which has generally been growing in the low single digits. We would expect that would continue at along that same trajectory, and that's what we've modeled in. But that's going to continue to grow at a slower rate than the overall procedural growth, at least for the time being. But I think over time, you should see that category get closer to the procedural growth that you're going to see in the spinal hardware column or category. This is <UNK>. We're extremely enthusiastic about the unique utility of that mechanism. There's a fair amount of experience already, obviously in the limb lengthening side, and the translation of a limb lengthening strategy to a complex trauma strategy is somewhat straightforward, and it has great momentum. So we have great enthusiasm as it relates to the elements of R&D that's been done up in Ellipse prior to the acquisition. So I see every reason to perpetuate that. I think the same way that we're thinking about the R&D strategy. We believe this to be a nice little assembly of really specialized orthopaedic products. And so we see it as an opportunity for us. And so really no change in terms of the way that we're thinking about the go-to-market strategy other than really bullish on what we believe the opportunity will look like. The big issue <UNK> was around Brazil, frankly and not being able to get any money out of the country to get paid and recognize that revenue. That's what we saw in the quarter itself. Our guidance had anticipated that we would continue to sustain the historic trends within that business, and their ability to pay. We didn't anticipate some of the benefits we had from the prior year. If you remember, we talked about that quite a bit back through the middle of the year, that there were some one-time benefits in 2014, and we said they wouldn't repeat in 2015, or at least we wouldn't guide to them, but we thought the core business would continue. What we saw in the fourth quarter was the inability to get any dollars out of the country at all. So we didn't recognize much of any revenue in Brazil. The underlying procedural volumes were still there, though, and they're still being performed in the country. It's more a timing issue. That cash will come. The revenue will come. But in the quarter itself, we weren't able to recognize it. Now that the incremental challenge that we hadn't fully anticipated and that was really isolated to Brazil. There was some headwinds in the Middle East that we talked about, but between the Middle East and Brazil, those were really the challenges. The transitions we made throughout Europe, as we noted with Germany specifically, we're seeing growth come back in a pretty dramatic way, 30% growth in the quarter. It's more a timing issue, just working through the ability to get paid from some of these distributors. We get asked that question quite a lot. And we reply very simply that we haven't seen any change on the competitive set, or the competitive dynamics in the field. And I would just make a personal comment that usually management change at those big companies just creates a ripple effect of uncertainty, and then a lack of further focus on execution. So that's what we think. It's relatively nominal in terms of its growth expectations next year. We're not looking at it to contribute to growth. We're also not looking at it to go backwards in a meaningful way. But at the same time, there's not a whole lot of room to go backwards. It's not a significant part of the business, and with the soft year that Brazil had, there's not a huge base that we're working off of. The plans in guidance is more or less flat year-over-year in those markets and the growth that you see in international is really coming from our direct markets, which are primarily Japan, Italy, Australia, now Germany that's coming back online with some nice growth. That's what's going to be fueling the overall growth. You got it. I think I spoke directly to that. Yes, it's 20%. We haven't disclosed that for a while. I'll tell you the last time we did talk about it, it was about a third across each region. Obviously with the growth in Asia-Pac accelerating well beyond the overall international growth, it's more weighted in that area, and Latin America's become much less. It gives you a sense of where it might be. Sure. So clearly, the tax rate continues to be well too high for a Company of our size, and we know a big part of that comes back to our international presence, and the ability to drive profitability there, and we're focused on doing that. At the same time, we're making good progress in bringing it down. We came into the year guiding to an expectation of around 47% on a non-GAAP tax rate. We saw it come in around 42%. We made good progress over the course of the year, and we would hope to repeat that progress as we head into the future. There were a couple one time discrete items that helped us get there in the current year, that at least at this point, wouldn't repeat. So I think if you normalize it, you saw us generate 300 basis points of improvement. Our guidance is roughly 100 basis points of improvement next year. We feel very good about that, but to the extent we can accelerate international and the profitability efforts there, we should be able to move more quickly. AttraX is coming along well. We plan to roll that out in a broader launch in the US in the mid part of the year. So you'll start to see some contribution from that in the back half of the year. I would say things are going fine there. That's right. If you were just to look at core NuVasive business with no acquisition on a constant currency basis, yes, 20%. Perfect. Thank you very much, <UNK>. It wouldn't be any fun if we told you what's coming. What I want to give you assurance on is that the current agenda of fundamentally improving execution, delivering great improvement in profitability, and continuing to invest in innovation, whether it's our own or acquiring key technologies, is going to continue. And I would further add that while I don't control it, I at least anticipate it, that the competitive playing field really won't change very much in the next 12 months, and we think we'll continue to gain market share as a result. We're feeling, as I said in my prepared remarks, while the world is volatile around us, we're going to be steady, and we think we're going to have a great year. I think we're all good. Thank you very much.

2016_NUVA

2017

PES

PES #Thank you, <UNK>, and good morning, everyone. Joining me here in San Antonio is <UNK> <UNK>, President of our Production Services Segment; and Brian Tucker, President of our Drilling Segment; and of course, <UNK> <UNK>, Chief Financial Officer. By all accounts, our first quarter of 2017 was a robust quarter for the company. Our Production Services segment grew at an exceptional 39% rate, and we were able to expand our gross margin as a percent of revenues to the high end of our expected range of 20%. That's up from 14% in the fourth quarter. The drilling segment, aided by improvement in Colombia, operated at 72% utilization with average margins of $7,700 a day, which are some of the highest drilling margins in the industry today. Both segments performed very well in the first quarter. As noted in the press release, we had investments in working capital during the quarter and had a little heavier discretionary capital spending in Q1 that'll bleed over into early Q2. But after that period, we'll resort back to pretty much routine and maintenance spending in the second half of 2017 and looking into '18, as we began to whittle away at our short-term bank debt. Also in the first quarter, we collected another $7 million on the sale of drilling assets, and we continue to have dialogue around selling our 6 held-for-sale rigs that could generate an additional $10 million to $12 million in cash. Looking at our Production Services Segment, all the businesses were up during the quarter. But as we mentioned in the press release, wireline led the way. We had a very big increase in revenue and in margin in wireline in the quarter. Well servicing and coiled tubing continue to see a very steady upward trend in both activity and pricing, and we're very optimistic about that gradual continued improvement in those businesses. Labor is a limiting factor in all 3 of these businesses, and we could put more equipment to work today if we had the people. Looking at our drilling segment. In the U.S., we worked 14 of 15 rigs and put our 15th rig that's capable of working ---+ to work in April. So we had, starting in April, 100% utilization except for the 1 rig that is being upgraded where we're putting our latest generation [mast] and substructure on it that's performed so well. Once that rig is completed next month, it'll move into the Permian, and at that time, we'll have 16 of 16 rigs contracted and working. Dayrate renewals. On average, there's been a range of improvements in dayrates. But on average, they're up 12%, 15%. And in Colombia, we had mostly 4 rigs working during the quarter. We ended the quarter with 2 working. We're repositioning with some new clients, and we're very optimistic that by the end of the second quarter, we should be back up to 3 to 4 rigs working, and generally, the outlook in Colombia is very favorable just like it is in the United States. That'll end my remarks. I'm going to turn over to <UNK> to do a financial recap, and then we'll talk a little bit about guidance. Thanks, <UNK>, and good morning, everyone. This morning, we reported revenues of $95.8 million and adjusted EBITDA of $6 million. Reported net loss was $25.1 million or $0.33 per share. As <UNK> mentioned, wire production service revenues were up 39% to $56.7 million driven by all businesses led by wireline. Drilling services revenues were $39 million, up from $30.6 million in the prior quarter, and the drilling margin per day was up ---+ was $7,659 up from $7,088 in the prior quarter, again due to a higher percentage of drilling activity that was attributable to our operations in Colombia, where they tend to have higher ---+ they tend to exceed the average margins in the U.S. We have 24 rigs in our fleet today. Currently, 15 of our 16 AC rigs in the U.S. are earning revenues, and 3 of our rigs in Colombia are earning revenues, which includes 1 rig that began mobilizing after quarter end. Of the 18 rigs earning revenues, 11 of those are under term contracts in the U.S. for which the roll-off is as follows: One is up for renewal late in the third quarter of 2017; 4 are up for renewal in the fourth quarter of 2017; 1 in the first quarter of 2018; 2 in the second quarter of 2018; 2 in the third quarter of 2018; and 1 in the fourth quarter of 2018. Turning to company-wide expense items. G&A expense was $17.7 million, up 17% from the prior quarter. That was driven by higher activity levels in production services, increased deployer-paid payroll taxes and incentive compensation resets. For the second quarter, we expect G&A expense to be approximately $17.5 million. Depreciation and amortization was $25 million, down from $26.9 million in the prior quarter. We expect D&A to be approximately $25.5 million in the second quarter. Interest expense was $6.1 million, and is expected to be approximately $6.5 million in the second quarter. Our effective tax rate was close to 0% in the first quarter due to a valuation allowance taken against the deferred tax assets primarily related to domestic and foreign net operating losses. We currently have $79.7 million outstanding and $11.8 million in committed letters of credit under our $150 million revolving credit facility. Cash capital expenditures in the first quarter were $24.7 million. We estimate 2017 capital expenditures to be approximately $50 million, which includes an estimated $20 million for fleet upgrades and additions, specifically including the upgrade of the U.S. drilling rigs <UNK> mentioned, the exchange of the 20 well servicing rigs for newer models that occurred in the first quarter and the addition of 4 new wireline units. As <UNK> mentioned, our 2017 CapEx is front-end loaded, and we estimate approximately $35 million of the $50 million will be spent in the first half of the year. We spent just under $25 million in the first quarter. To meet bank covenants, the company must meet a minimum bank EBITDA threshold of $12 million for the 12-month period ending June 30, 2017. As of March 31, we exceeded that requirement. With that, I'll turn it back over to <UNK> for final comments. Thank you, <UNK>. The market we see today continues to be fairly strong. Capital spending remains high, and at this point, the sub-$50 oil has not had an impact on business, possibly just minimally around maybe recompletions and workovers in well servicing but modest at best. And so we're still guiding for improvement into the second quarter. It's a little hard to gauge, the revenue growth and production services or the margin improvement. But as we talked at length in the last quarterly call, when you're running at 39% growth, there's a quite a bit of associated cost and startup that is a little inefficient, so we are forecasting a further improvement in margin as a percent of revenues up to 22% to 25% range, above the 20% we experienced in the first quarter and continued revenue improvement of 10% to 15%. Those numbers are hard to estimate but that's a good guesstimate. On the drilling side, the only really uncertainty there is in Colombia, when the timing of the rigs is going back to work and exactly how many do go back to work. But we know the U.S. will be 100% utilized at improving dayrates, so we're forecasting 72% to 75% utilization for the entire fleet. And margin per day, as a result of Colombia being a little softer in the second quarter as we reposition to some new clients, that'll have an impact on margin per day. So we're forecasting that to be a little lower at $6,800 to $7,200 per day. But once we get those rigs situated with these new clients, we think that margin will work itself back up. That'll conclude our prepared remarks, and we'd be happy to answer any questions. Well, it continues to be primarily remedial. I think that we've seen a little bit of uptick with this better oil price, particularly when it was above $50 where we're doing more longer lateral-type completions where we are doing some drill outs with the well servicing rig. But it's historically run, what, 70% or so maintenance and workover. So that hasn't changed too much. I think that will change more as we ---+ oil prices improve and lateral lengths continue to get longer. Well, I think that preferred method continues to be drillouts utilizing coiled tubing. As you know, there's been a gradual shift over time to the larger diameter. As an example, for us, we added several years ago, the 2 and 3/8s, and now we have a 2 and 5/8s coil diameters. So with a bigger diameter coil, you can go further in the laterals. But as we continue to push out to kind of 10,000-foot, 12,000-foot laterals, I think that there's going to be an increasing shift to start utilizing well-servicing rigs. But we haven't seen too much of that so far. But we've certainly used the well servicing rigs to fish coil out, attempting to do those long laterals in the past. And so some operators would just prefer to just go straight in with the stick pipe from the get go. So, <UNK>, you have anything you want to add on that. I think that's fair. It's hard for us to have a view of the entire market but we certainly do both. We will drill out using coil. We'll do it with well service. Some operators will use a combination. So it varies. And I would say also on coiled tubing, and really up to about the fourth quarter of last year, we virtually had no large diameter coil work. And with the improvement in oil prices, granted we're primarily in the Eagle Ford with a large diameter or exclusively in the Eagle Ford with the large diameter coil, but we're now doing large diameter work regularly via 2 and 3/8s, 2 and 5/8s, which for the bulk of last year, we had no work during drillouts. So that activity is definitely increasing consistent with improving oil prices. Well, I would say having the stability through the downturn and we remained pretty active in all of our services during the downturn, so we had trucks move in lots of different directions. That stability certainly helps, but our competitors were very competitive during the downturn. And they're continuing to try to gain market share and raise rates, which is good. So I don't think they've been severely damaged in any way. They're still out there competing, and everyone is a little tight on capital still today even though some of them have reduced debt. They still have high interest expense. And we're not making a lot of cash flow because pricing hadn't improved sufficiently, so we're all still struggling in that regard, but it's getting better. And as oil prices improve in the future, then cash flows will improve, and I think we'll ---+ the group will continue to be very competitive, I believe. I think that, <UNK>, has to do with Colombia. We have 3 currently, as it stands today, we have 3 rigs earning revenues. There's a chance we go to 2 briefly, and then, as <UNK> said, we think we could be back at 3 to 4 working by the end of the quarter, so a little bit of fluctuation there. In the U.S., it's pretty set. In the U.S. ---+ Don Lacombe is in here, but in the U.S., I think we pretty much already renewed in principal at least, if not on paper, all the contracts that are near-term or medium-term coming up. So, as far as we know there should be no change in the U.S. to the end of the year. We should remain 100% utilized. Well, we agree with your observation. That's a slowly improving sector. It's been historically one of the most stable businesses we have. As we talked about in the past, it remained cash flow positive throughout the downturn every quarter and ---+ but it has been slower than we would've thought in the recovery. And like you pointed out, there's great upside there. As you recall, in 2014, there were points when we were above 100% utilization because we had 10 or 12 rigs working 24 hours. And so we ---+ like today, I think we have 5 rigs doing 24-hour work, so we have a lot of room to pick up more 24-hour work. I just think that that's been a little slow to recover relative to these other businesses. And the other factor that I think is plaguing everybody in that business is the tightness of labor. We could put more equipment to work today if we could find, train ---+ or crews that we could hire and train or the qualified crews. It's just an extremely tight labor market. And so we are hiring people every month, but we do lose some every month as well and ---+ to competitors. And early on, we were losing some from some of these businesses into the pressure pumping space. So it's been a very tight labor market. I think that I would say is the biggest constraint facing all the production services businesses. I think drilling, we've done a great job of being able to crew those rigs up without too much difficulty. But on the production service side, labor is tight, and it's a competitive market, and I think all of us are struggling with that. Well, we had 20 rigs that were close to or beyond the kind of 10-year anniversary, that for us, we take them in and we sandblast them, and we do a critical inspection on them and recertify the mast and sub and totally go through them, repaint them. And we were faced with that capital outlay at some point in the near term. And a company that had leased rigs from one of our primary rig manufacturers had gone belly-up, and so the manufacturer got all those rigs back. And these had a average life of 0.6 years, I believe. So there are a bunch that have never been used, and some that were very lightly used. They were all right in our kind of market. They were 550, 104-foot, up to 116, even 121-foot mast, so right in our sweet spot. And so we just started negotiating with the manufacturer about what kind of trade we could make. To your point, I mean, some people would look at it and say, "My gosh, you got the youngest fleet in the industry. Why would you trade 10-year-old rigs. " But essentially brand-new rigs helps, and we think in the recovery, having these newer rigs, freshly painted up, will be easier to crew and position during ---+ because it is a very competitive market so having new iron helps. And so that was our logic. It was a very reasonable trade financially. We thought it was a good trade, and it really helps keep our rig fleet the youngest in the industry. A million ---+ all things, a working rig, we package it with tanks and pumps and closing units, but somewhere in the 1 million, $1.8 million range. Right. About $1.8 million. Yes, these are ---+ yes, these are all the highest capacity type well servicing rigs. So they can pretty much work in any shale play anywhere in the country. And then, of course, the 116- up to 121-foot mast allow you to go into the higher pressure areas where post (inaudible) some of those BOP stacks get fairly tall, so you can operate your floor above those stacks comfortably and have plenty of mast height. Yes, really it was a good. We feel like it was a good trade. We were opportunistic there. Honestly, we didn't want to spend money at that point, but it was just an opportunity we felt like we couldn't let go by and someone else would have grabbed it if we didn't, so we just went and did it. Well, we ---+ through '15 and '16, we stayed very busy on the maintenance side with our wireline fleet. So I think we were one of the most active wireline fleets across the board in the industry and doing also some slip line work, and that business has increased. But the real delta in terms of revenue has been as the rig count has moved up and as the [ducts] have started to be completed, we moved into a heightened phase of plug-and-perf work. So that's really the ---+ everything ramped up higher, but the plug-and-perf work is where the big revenue gains, big ticket started coming in, and that's gotten very, very active for us. And the pricing is, I would say in this quarter, it was kind of in process of improvement, and we think we'll see some continued improvement into the second quarter. We see a little bit of the full effect in the second quarter. So now it's not euphoric or off the charts or hockey stick or anything like that. It's ---+ I think, we need better oil pricing to really drive much greater pricing improvement, but they're ---+ with the rig count as high as it is, the duct work that's is being done, there is demand on all these services, and it's helping improve the pricing a little bit. Labor, as I've mentioned before, very, very tight. So we can't do everything we like to be doing, but hopefully we'll be able to hire more people and train more people over time. Okay. Well, thank you very much for joining the first quarter call, and we look forward to visiting at the end of the second quarter. Thank you very much.

2017_PES

2016

WDC

WDC #On a growth rate basis, the capacity growth rate for flash exceeds that of disk, and so that trend continues. That's been ongoing for some time. And that's really specifically related to hyperscale deployment. Rich, it still begins with the work load and then the cost per bit that optimally supports that workload. So going forward, we don't see a convergence to an all-flash world anytime soon, frankly anytime in our planning horizon. So what we do see is continued growth of capacity enterprise that we articulated. That's going to be long into the future. Although flash revenue and flash bits on a proportionate basis is growing faster. So from that standpoint, that's the trend we would point you to and they have very different purposes in the hierarchy. So we continue to obviously work closely with those that are innovating around data center architectures and we intend to deploy our technology and our products in an optimal way to those trends. It varies depending on performance requirements etc. , but it would run between 5x and 10x. Let me talk about sort of the supply demand environment. We said publicly and will reiterate here that we see constraint supply in the NAND side of our business through calendar year 2017 and that's primarily driven by two things, end market demand for that class of technology and the rate and pace of the industry's conversion to 3D NAND. Relative to the hard drive market, I think at this point we would see that as a normal or balanced environment. And then, <UNK>, with respect to the decision to exclude stock-based compensation expense from our non-GAAP results, we really had two primary drivers. One was just the way we run the business. And our stock-based compensation expense actually has some elements of it that are either short-term in nature or are variable. And as a result, it injects some variability that undermines our ability to demonstrate or track the improvements we are making from a synergy realization standpoint. So that's the first driver. The second driver is that we are more and more focused on our cash flow generation and looking at our results from a cash standpoint, particularly given our balance sheet. And by excluding the stock-based compensation, we are better able to highlight and track the cash flow impacts of our operating decision. One thing, <UNK>, that I will add to that ---+ this is <UNK> ---+ is that we fully recognize the fact that there is an impact in the form of dilution from stock-based compensation, and we remain not only aware of that, but sensitive to that. And if you look at our proxy statement in terms of compensation philosophies and that sort of thing, there is no change in that regard, in terms of what we are doing. It's more a matter of excluding those figures to provide more meaningful analytical information, if you want to call it that, to the financial community, but I don't want people to think that we don't recognize the fact that there is a dilution component as it relates to our existing shareholders. And <UNK>, I think as you know, part of the calculus was looking at the comparable peers and what they do to try to provide easier basis for comparison. Okay. So we've talked about sort of the cost reduction domain of three generations or three periods in the NAND industry. Very early on, it was running at around 50% annualized rate. The next period was running at about a 30% rate. Frankly that's now ending as we come to the conclusion of plain or NAND. As we move fully as an industry into 3-D, once we're through the transition, we expect around a 20% per year cost reduction capability. So that's the way we would guide you to think about that. Obviously there is some perturbations as we transition from 2D to 3D, but that's the way to think about it from a long-term modeling perspective. It will be 64-layer. And I think we have ---+ what's the right number for exit rate on 2017. It's around 40 bits but it's wafers out. Okay. So not bit output. It's just wafers out. So the 40% is wafers out. Correct. And the other comment I will make just to clarify, 48-layer we've talked about is really a learning node for us. So just to reiterate what <UNK> said, the volume as we exit next calendar year will be predominantly the 64-layer. <UNK> can help you with this as well. But I think that one of the things that has really happened over a period of time because as the hyperscale guides grow, and they get bigger, and as they need to add capacity and their growth is accelerated. And so, you just get into, call it the law of large numbers. We have to do a much better job working with the hyperscale guides on longer term capacity planning. And so, we believe we've done a good job on that. Because we don't, they don't want to ask is for product and us not have it, and then clearly, we don't want to gap out on them. So it's driven, in effect, a much more close knit planning process, longer term planning process, which the good side of that is that it allows for a little bit more predictability in terms of what's going on that side of the business because there was a time, it can still happen. But there's been conversations about the lumpiness of the business. And that can still occur, but because of the dynamics that we are seeing, we're actually getting into a little bit more longer term planning and a little bit more predictability in terms of what's happening from a demand perspective. <UNK> can kind of add to that. Yes, I will reiterate some of the reasons this is. So we've talked about this long-term growth rate of 35%. We've been, as an industry, achieving that with a number of efficiency factors flowing through. We've highlighted in the past both technological as well as operational. So technologically things like erasure coding, are widely deployed now in that infrastructure. So the efficiency gains technologically, although we expect some in the future, the largest magnitude of that will run its course. The other one is operational efficiency. And that underpins what <UNK> said, they are maturing as operational units. Their ability to sort of do things like manage inventory and repurpose and re-utilize their fleet, those processes are maturing. So really what we now see and perhaps one of the reasons we're seeing a bias up on the exabyte growth rate is we're working through those things and we're starting to approach a more natural storage deploy requirement. So that's something we will continue to monitor and see how that trends. At this point, we will stick with 35%, but as I said, I think our bias would be up from there going forward. I will say this. I think the general view of us now as we put together this broader set of assets is we're more relevant, we're more strategically important. And our engagement is changing with the broader marketplace. So things along those lines and other strategic things are all sort of more possible now. Thank you. I want to thank you all for joining us today. We look forward to seeing many of you at our Investor Day on December 6. Have a good day.

2016_WDC

2015

AXL

AXL #Thank you. Thanks, <UNK>. I will start with the second question first in regards to Europe. Europe only represents about 3% of our overall sales today. We're clearly growing right now from an organic standpoint in Europe. We'll continue to grow based on opportunities that are presenting themselves there across various product lines that we offer. But also, we'll look at inorganic or strategic growth in Europe to grow our overall business and our presence there. Again, all in the effort of diversifying our customer, our products, and our geographic footprint. With respect to Thailand, clearly you understand the Thailand market's been down. We've again adjusted our business accordingly to what we need to do. More importantly for us, what's exciting for us is launching this new Ford program, our first-ever drive-live contract with them. That launches this year. Our team is absolutely ready for that launch. The answer is yes. It operates within the existing footprint and structure. We've had to make a few capital investments to support the requirements, but minimal. We should see decent returns on that investment. <UNK>, the foreign-exchange benefit that we quantified is the marked to market re-measurement gain on the balance sheet. That was about $2 million in the first quarter 2015, down from $6.7 million a year-ago level, or sequentially last quarter. Well, that's right. The other way that the currency benefits the Company is currency move relative to the US peso is that to the extent we're being paid in dollars and have some portions of our expenses in pesos that benefits us. I'm not sure, are you talking annual or sequential. I know, but ---+ Year over year. We're probably in the neighborhood of $4 million benefit. Right now all the derivatives or programs are through Chrysler at this time, but we do have other ones in our backlog that will be launching going forward here. No. Yes <UNK>, absolutely we think it's going to flatten out around these levels. The program is fully launched. Really, the last quarter where we had any substantial increase in activity is this quarter, as the SUVs and heavy duty pickup trucks launched a year ago. Relative to that, we don't expect any significant changes. Seasonal changes in four-wheel-drive penetration, that type of thing, could have some impacts, but they should be relatively modest. <UNK>, we're not in a position to comment on that at this time. You need to have any discussions with GM regarding that matter. We're not at liberty to speak on that.

2015_AXL

2015

EDR

EDR #Greetings, and welcome to the EdR third-quarter 2015 earnings conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. <UNK> <UNK>, Senior Vice President of Capital Markets and Investor Relations. Thank you, Mr. <UNK>. You may now begin. Thank you and good morning. We would like to remind you that during today's call, Management's prepared remarks and answers to you questions may contain forward-looking statements. These statements are based upon current views and expectations. Such statements are subject to risks and uncertainties, and other factors that may cause the actual results to differ materially from those discussed today. Examples of forward-looking statements may include those related to revenue, operating income, financial guidance, as well as non-GAAP financial measures. Risk factors relating to the Company's results and Management statements are detailed in the Company's annual report on Form 10-K for the year ended December 31, 2014, and other filings with the Securities and Exchange Commission that are available on our website. Forward-looking statements refer only to expectations as of the date on which they are made. EdR assumes no obligation to update or revise such statements as a result of new information, future developments, or otherwise. Before we begin the call, you may have seen our announcement this morning regarding the launch of a proposed common stock offering. I'm sure you'll understand that in light of the pending offering process, Management cannot make any further comments regarding the offering and its impact during the call this morning. As such, request that you refrain from asking any questions on the topic, and we appreciate your understanding. It is now my pleasure to turn the call over to <UNK> <UNK>, Chairman and Chief Executive Officer. <UNK>. Thank you, <UNK>. What a wonderful leasing season once again. Our same-community portfolio opened the 2015-2016 lease term 97% leased, which is a record opening occupancy for the EdR portfolio, and is a 40-basis-point improvement over the prior year. In addition, we were able to increase rental rates by 3.4%, for an industry-leading increase in total rental revenue of 3.8%. Our operations team was able to produce rate growth at all but one of the 69 owned and managed same communities, and 64% of these communities opened the 2015-2016 lease term with occupancy greater than 99% ---+ what a spectacular job across the whole portfolio. Our new community portfolio, which includes the six new communities we delivered in August at the universities of Connecticut, Kentucky, Georgia, and Louisville, along with the District on Apache, which we acquired after the 14 leasing cycles, and our 2015 acquisition opened the 2015 2016 lease term 95.5% leased. Our on-site staff has a challenging task managing new supply, providing outstanding customer service, addressing resident, parent, and university needs, as well as navigating other market conditions, which is why I am so extremely proud of our community, staff, and operations team for producing industry-leading leasing results for the third year in a row. Turning to supply and demand dynamics in our market for 2016, which you can see on pages 14 through 16 of the financial supplement, you will see that based on market data from our community managers, as well as Axiometrics, we anticipate the volume of new supply being added in EdR markets for fall of 2016, to be down 20% from the 2015 level. This is a significant trend, and the second consecutive year our markets have seen a decline in new supply. In addition, the majority of new supply will be further from campus than our communities. The 20% decline in new supply for 2016 is a lower decline in the volume of new supply than the 47% we reported in the second quarter. Several projects previously in the planning phase, which we assessed as unlikely to be delivered in summer of 2016 have now started construction and should deliver in 2016. Also, a couple of projects previously expected to deliver in 2015 were pushed to 2016. This added 11 additional projects across our 38 markets, and increased new beds expected in our market for 2016 from 9,000, as previously reported, to 14,000. In conclusion, the 2016 supply and demand data provides a nice backdrop while we begin the 2016-2017 leasing cycle, with the economic environment in our markets characterized by a reduction in the rate of new supply, a steady increase in enrollment growth, and further modernization. These trends bode well for revenue growth in the 2016 leasing cycle and beyond. Our on-site teams finished a labor-intensive and very successful term during the third quarter, and are now full steam ahead on renewal campaigns and early leasing. I want to thank them for their dedication and effort, and recognize their success with a big thank you. I will now pass the call to <UNK>. Thank you <UNK>, and good morning, everyone. Core FFO in the third quarter of 2015 declined $300,000, 2%, to $14.5 million, and core FFO per share was down $0.01 to $0.30. The decline in FFO was due to the non-recurring $3 million John Hopkins guarantee fee recognized in the third quarter of 2014 that equated to $0.06 of FFO per share. Without the impact of the guaranteed fee, core FFO increased 23%, and core FFO per share was up 20% over the prior year. 2015 year-to-date core FFO increased 14% to $58.9 million versus 2014 year-to-date core FFO. Excluding the non-recurring $3-million John Hopkins guarantee fee recognized in 2014, year-to-date core FFO grew $10.4 million, 22% over the prior year. On a same-community basis, third-quarter revenue was up 5.2%, and operating expenses were up 3.9%, resulting in a 6.9% improvement in NOI. Year-to-date revenue was up 6.1%, and operating expenses were up 5.2%, resulting in a 6.8% improvement in NOI. Year-to-date same-community gross margin increased to 54.1% from 53.7%. Total community revenue in NOI were up 15% and 27% respectively for the quarter, and 17% and 25% year to date, reflecting the strong growth in our same-community portfolio, as well as the impact of adding the 2014 and 2015 developments and acquisitions. These results are directly attributable to our best-in-class portfolio of communities, and the hard work of <UNK> and her team to produce industry-leading same-community revenue growth. Please refer to pages 6 and 7 of our financial supplement for additional details on our community operating results and same-community expenses. Turning to our capital structure, our balance sheet strategy continues to be one that maintains reasonable current and future metrics when factoring in our development pipeline. During the past three years, our debt-to-gross assets has ranged from the low 20%s to the low 40%s, but has averaged 35% throughout the period, all while delivering over $700 million in new developments. As you know, we have delivered core FFO growth at a 13% CAGR during the same three-year period, and 9% if you use the mid-point of updated guidance range. As of September 30, 2015 our debt to gross assets was 40%, our variable rate debt was 35% of total debt, our weighted average debt maturity was just under five years, and we had approximately $279 million in capacity under our existing revolver. Our active development pipeline includes $299 million of active developments, of which $242 million remains to be funded as of the end of the third quarter. We anticipate funding our development pipeline now, and in the future, with a combination of cash from operations, debt proceeds from asset sales, and capital market activities. We have demonstrated discipline in our capital funding decisions in the past, and will continue to do so. Turning to 2015 guidance, based on our current estimates, Management has increased its guidance for core FFO per share $0.0,6 or 3%, to a range of $1.82 to $1.85, compared to the original guidance of $1.74 to $1.82. This updated guidance includes the estimated impact of the follow-on equity offering the Company announced concurrently with this release. The net increase in guidance is related to better-than-anticipated same-community NOI growth, new community NOI from the 2015 acquisitions, higher-than-anticipated third-party development fees, and lower interest costs due to interest rates remaining low throughout 2015, offset by an increase in weighted average shares outstanding. With this overview, operator please open up the line for questions. Hey, <UNK>, good morning. Thanks for the comment. The Company's historically said our debt-to-gross-assets target is 35%; variable rate debt is 35% of debt; and debt to EBITDA under 7%, and interest coverage around [4 times], depending on the math. And we continue to be comfortable with those levels. I don't think we're changing our leverage profile. We've increased our disclosure around how we think about the funding of the development pipeline. I don't think there's any change to how we're thinking. We're just trying to be a little clearer with our messaging. Well, we ---+ that obviously is ---+ I think those types of questions also relate to the equity offering that we're doing today, so I think we can't say a whole lot. But when you look at what we've done over the last two years, we've only purchased about $150 million of assets, and we've been a net seller. Granted, that's just asset sales and asset acquisitions. As you know, we've also developed and delivered about $250 million a year in development deliveries. So, to me, you've got to look at all three together. All three together would suggest that we will be a net asset addition. But if you look at just the asset acquisitions and asset sales, my guess is that would be somewhat neutral. Yes, the market ---+ there's new institutional players coming to the market, Starwood being maybe the most noteworthy. Interestingly, we're seeing compression on cap rates, with some people targeting true pedestrian tier 1 campuses core assets. Most trades today are in the very low 5%s for that type of asset on acquisition, but we're also seeing interest for value add that's a little further from campus. Those cap rates now are in the low 6%s. Clearly there's a lot of institutional interest in this segment of the market. Thanks, <UNK>. Primarily ---+ this is just repeating some of our prepared statements and all ---+ but the assets that we currently have listed for sale are very much in keeping with what we sold in 2014, which are basically non-core assets that are typically further from campus. <UNK>, I'll just add one thing. It's our view ---+ but that's what makes markets ---+ it's our view that the spread between those assets that we have been selling, versus the core assets that we've been developing and acquiring a little bit of, we think that spread is not wide enough. That's the reason why we've been selling these types of assets over the last few years. I think that's right. If you look at our history over the last four years ---+ I don't have the numbers in front of me, but we've developed something like $750 million of assets, and only acquired something less than that. We've always said that we believe that the 100- to 150-basis-point spread that you get in first-year yield on development versus an acquisition of the like kind, that that overcompensates us for the risk. That's why our focus has primarily been on the development side. Yes, as you know, that does get towards the essence of the equity offering, so we can't say a lot. But we do see outstanding external growth opportunities, and we want to make sure that we have the financial resources to take advantage of them. For some context, the last three years, we've averaged $235 million, $240 million of development deliveries. We've only announced $150 million for 2017, and $0 for 2018. There's plenty of time still to add to the 2017 development pipeline, and of course, there's plenty of time for the 2018 pipeline, as well. We're working on a bunch of opportunities. If we had others to announce, we would announce them; but we're working on a lot of opportunities. Good morning. Why don't you go to question two as our guys flip some pages. Do you have a question two, <UNK>. <UNK>, you broke up a bit there, but I think you're asking one-offs versus portfolios. We've not been successful in the past on bidding on portfolios. Others have been willing to pay more than we have. My guess would be that if we achieve acquisitions, they would be more one-off. I think we have the answer to your first question. <UNK>, say the first question again. I want to make sure I'm answering the right question. Hey, this is <UNK>. A couple of years ago we did put an initiative in place to work on our other income and our expense reductions, ultimately margins. We put a full-time person in place a couple of years ago to start working on ---+ working with partners that could contribute to our success in other income. We are now at two full-time people working that same initiative, and we're starting to see the fruits of our labor showing up in other income. It's typically partners that obviously can relate to the college-age customer that we have access to. We do have some initiatives in place for both other income and expense reduction, and we'll continue to see the fruits of that labor. Hey, <UNK>, it's <UNK>. No, I don't think there's anything one-time. I think that the margin will continue. We think the answer to that is yes, but somebody's flipping pages. Hey, <UNK>. It looks like the same community margin last year was 62%, from page 5 of our supplement. That's probably a reasonable target. No, we don't provide by property. You got that in front of you. The easy math for you to do is we've said that our yields are in the low 7%s. If you would ---+ and we have delivered that kind of return, so ---+ . Half of August. It's the same. I admit that's the first time I've ever received a statement of cash flows question on an earnings call. <UNK> is analyzing it right now. You got a next question. Yes, there was nothing unusual, <UNK>, in the quarter or from an interim. It may just have to do with timing of dispositions and acquisitions. But the change in operating assets and liabilities net of acquisitions, there's nothing unusual in the change in that working capital group. [That's all cash]. (multiple speakers) No, I mean, obviously, we do straight-line rents for GAAP and concessions and other things that would've occurred for the start of the leasing season, but nothing is any different from the prior period. <UNK>, are you looking at net cash provided by operating activity. The 2014 numbers, as you can see ---+ and I don't have a calculator in front of me, but there's three big items that impacted that 2014 number ---+ the gain on sale of collegiate housing properties, the gain on insurance settlement, and the loss of impairment. We don't have the answer for you on this call, but I'm sure we can figure it out. Yes. Thank you. No. This is <UNK>. My two best performers in rate growth were at Arizona State and the University of Arizona. They were the highest performers in my same-store. The market with the least ---+ we had one asset that had negative rate growth, and actually that was a program that was as designed. We had some occupancy struggles last year. It's an older asset ---+ a little farther from campus. We put a strategy in place this year to reduce rates in order to gain occupancy, which we did successfully. We gained 7.5%, and brought it up into the mid-90%s, or high-90%s actually. Our plan worked. My most robust rate growth was at Arizona State and University of Arizona, and my least, clearly, with a negative, was at Florida State ---+ although I do have two assets at Florida State, and the other one performed in target with the rest of the portfolio. The only other kind of down is my property at the University of California Riverside. We only had a 27 bps rate growth there; so, not negative, not flat, but minimal positivity. We don't disclose by property, but I did actually have strong growth this year. I couldn't ask for a better location. That property abuts campus on two sides. It's a fabulous location, so we actually had a lot of success at the Berk. Thanks. Yes. Hey, this is <UNK>. I just want to respond to <UNK>'s question on the cash flows. The $5 million difference in cash flows from operating activities where 2015 was lower than 2014 was because in 2015 we collected a very large receivable payment from one of our large university partners in very early October, versus last year it was in late September. That accounts for probably greater than 100% of the difference that you're talking about there. Sorry I didn't have that the first time, <UNK>, but that's what it is. No more questions. Thank you for your time, and we look forward to seeing many of you next month at NAREIT. Thanks, you all.

2015_EDR

2015

WFC

WFC #Thank you, <UNK>. Yes. The first one there was NoMa, north of Massachusetts, and we had a second now we're doing a couple others in other markets. But I don't want to suggest for a minute that you'll see 6,200 NoMas with 1,000 square feet across the franchise. I think it's a bit of everything, meaning that there is some hub-and-spoke where you have a larger established branch or a store that's been there for many years. And then you have others around that maybe wouldn't be as large. You have some like the case in north of Massachusetts where you couldn't get 5,000 square feet and 1,000 square feet is optimal for that market. So, this is really about looking at our distribution, and we call actually health of your distribution. Are you in the right location, with the right hours, the right people, the right footprint. And does the store or the branch work in concert with all the other channels of distribution. So customers can start transactions at one place, finish another place. Is there ubiquity. Is there one version of the truth around information, and how customers serve themselves or want service from us. So it's a whole bunch of things that really matter in this, and I think the proof in the pudding is our ability to grow primary checking accounts. I've never seen growth at 5.7%, and like <UNK> mentioned, it's not that we overpay on deposits, 9 basis points. This is the magic of how this thing all works together. At one-time, this goes back a number of years, in 1998 when the former NorWest decided the family I came from and Wells merged, Wells was hugely indexed, over indexed to grocery stores. And then we've been adjusting that since that time, but again, we think of it as density within a market. And sometimes to fill up that density, a freestanding ATM machines, sometimes it's in store. Sometimes it's a NoMa 1,000 square foot. So it all fits into what we call the S curve, and maybe I'll just digress for a second. If a community has, let's say, 500 banking locations. That's optimal for a community. And you have 20% of those, 100, and that's the optimal amount, you'll actually get more than 20% of the business, you'll get 25% of the business. Because certain compares will have 10% of the stores, and they'll get 8% of the business. So there's a magic to the density and where the density is and how it works together, and that's just part of our learnings after many, many years. So sometimes grocery stores fit into that, sometimes they don't. It surely would not be a lead only strategy, but as an augment, it's very powerful. <UNK>, hello. Oh, yes you've got to ---+ there's two <UNK> S' around here. It's a good question. We think of customer, <UNK>, and I'll get to the specific question. But the way we think about the business here is around relationships. Relationships with team members. My 11 direct reports have 28 years with the Company. We think of relationships with our customers, our communities, our shareholders. Buffet has been an owner of ours for 25 years, or we love long term things. So as it gets to investment banking activities, we think of that as another solution, another product, another service. And most of the revenue that comes from that business is from existing customers who have been doing business for a long, long time. When you are the number one middle market bank, when you have leadership positions in energy and ag and commercial real estate, and you do business with 80% plus or 90% of the Fortune 500, you're going to get opportunities to serve customers deeply and broadly. And if that means that through our skills, and our people, and our value proposition that customers, corporate customers, want us to help with valuation, issuing debt, issuing equity, wonderful. If we're not good enough to get that and it goes someplace else, we just have to work harder. So I don't really look at lead tables. I guess I read where ---+ in fact, I read for the first time, when I read the Journal that we were number seven or eight or nine, I can't remember the number, I could have cared less, absolutely cared less. I only care we do the right thing for customers, and if that means we're moving up, terrific. If that means that others are growing faster because they're taking risks or doing things that don't make sense to us, God bless them. So that's how we think about it. Not as a standalone business, as one more way to help customers succeed. Exactly. Just based on our skills and the market availability. I've got a couple of data points that I'd give you, <UNK>, just to help you dimension it. But if you look at Wells Fargo compared to the peer group on the risks that we run that we report in our 10-Qs and 10K, we've got a more modest set of trading businesses with a very low risk profile. At least as measured by VAR, which is the popular public version of that. Our investment banking fees, while we're thrilled and happy to have them, amount to $2 billion a year or something like that on a $90 billion revenue base. We've got ---+ I think this quarter we were in the $420 million to $430 million range for trading revenue, which is appropriate for the needs that we have for customer accommodation and for managing our own risks. But still, in the scheme of a $1.7 trillion balance sheet, the equity that we carry, and $90 billion worth of revenue, it's just a couple of the 90 plus businesses that we referred to. And it's not imagined to grow in an outsized way from where it is today. We're always trying to do more, serve customers better. We have great people. But imagine if we doubled the size of the business over some period of time while the Firm grew at its steady organic rate, we'd still be in a relatively modest percentage of the overall Firm. And, <UNK>, the risk really would be if you ever saw where the market is shrinking, let's say, in investment banking or capital markets. And we're outsized growing because we're taking on risks with customers relationship that we have not known, that's where you see the imbalance. And that's, again, just not who we are. So the first quarter was at about 2%, a little more 2.06%, which is the high end of the five quarter range. And the second quarter is operating in that neighborhood. So we feel like we're going to be at the high end of the range in the second quarter as well. There's a lot more discipline this time around, <UNK>, with gain on sale margins as you well know because you've been around, you've seen this industry over a long time. And that's a healthy thing. Hello, Matt. I don't know if it's a mix of going after as much as a mix of what's coming in. We've been very consistent, as you said. What happens when rates pop down and refis spike up is that our own servicing portfolio results in a lot more applications. Because the easiest thing for somebody to do when they want to take advantage of a rate rally is call Wells Fargo, because we probably already have their mortgage. And so that's going to have a bigger influence on a strategy that we might have around correspondent. And I think you can see in the supplement that retail was $28 billion and correspondent $20 billion of this quarter's activity. And that's not an inconsistent blend versus the last several quarters. There are more correspondents these days, as you know, that go direct to the agencies. Because the agencies have opened the window to them, and that's also a lower margin business for us. So all things being equal, we're happy to be a retail lender but we do serve a big correspondent constituency. And, Matt, if you go back in time, we actually had a larger share of the correspondent, because there was a number of compares who backed away walked away from that market. Who come and go from time to time. So that will ebb and flow as participants either stay in or get out or whatever. Yes, I wouldn't look toward mortgage. I would look toward risk management and investments that we're making and along those lines. The beauty about mortgage in the first quarter was that this refi pipeline helps use the capacity that we would have needed in the fourth quarter and we anticipate needing in the second quarter. So it was a greater level of utilization. For better or worse, the changes in year-over-year are a variety of other things. Including business mix, by the way, in terms of how commissions get paid and other revenue-related incentives. But it would be that plus investments made in compliance and risk management, cyber and information, security, things like that. We have the best people, and those are not inexpensive. I don't have an accurate number. I think we've talked about $100 million a quarter. A couple quarters ago as having been an observable increase in that category, and it's not any lower than that today. Maybe we'll see if next time around we can put a finer point on that. You're welcome. There was a little bit of downward migration. Not enough to meaningfully drive the reserve. There's a little bit of an increase in NPAs, but negligible. And we realized minimal losses in the quarter in the energy portfolio. But the change in reserve reflects all of what the actual migration and the actual observation of performance in the energy portfolio. I'd have to say yes. We're in the middle of our Spring redetermination process for the borrowing based loans, so we'll have a better feeling afterwards. We have noticed a lot of capital raising going on in the space. We talked last quarter about the risk to our investment banking income around energy related firms, because we're large in that space. And we had a great first quarter in energy and investment banking, because lots of equity was raised, lots of firms went to the debt market to turn themselves out. So that's a very positive sign there's people taking steps, and changing their balance sheets, and improving their risk profiles. So that and the combination of where the forward curve demonstrates the energy prices might be going is helpful, but that's, again, that's reflected in our early view of our allowance. And it will be better informed once we finish our borrowing base redeterminations. During this quarter. Actually, I think that's a pretty astute observation. Because we would be valuing the MSR on the prepayment expectations, which reflect that lower interest rate. And we have been taking the gain on the pipeline and what's locked, and insulated the close in the second quarter. It's a good observation, but it's tough to say. We look at that calculation regularly, but in connection with our preparation of our financial statements on a quarterly basis. And take everything into account that's available then, and that's when we strike the value. Tough to know. We don't know what hasn't happened yet, and that's what's going to the applications that will be received and pulled through in the quarter. So, too early to speculate. That's right. It's more PCI loan recoveries and lower loan fees than competitive pricing pressure. So those things that we call the variable components of interest income are harder to predict. And when a loan gets resolved that's been sitting in work out, sometimes it comes through the margin line. And then if a loan prepays or there's loan fee hung up in its carrying value, then that sometimes comes through interest income as well. It's those types of items that are tough to plan for, tough to budget. And in this particular quarter, we're lower than the prior quarters. It's too tough to call, because it depends on what happens with deposit growth. It depends on what happens with loan growth, and then other investments that we make in the securities portfolio. That's what's going to drive it. It's lead by what happens to deposit growth. And, of course, if there were a move in interest rates, that would have an impact as well. We're not trying to forecast it in this instance. Our real focus is on generating growth in net interest income, and the margin is more the result not the reason. Tough to call, because it depends on the mix. We've got a variety of commercial and consumer asset types here that each have their own market and cyclical dynamics. I think we expect cards were probably at a seasonal low in the first quarter. So between seasonality and issuing new cards, that business probably grows. Auto, we've kept ---+ its grown, but kept relatively stable. It's gotten to be a more competitive market, and we've picked our spots, I think, a little bit more delicately. In commercial real estate, it's going to be tough to spot the organic component of it. Because the purchase of the GE portfolio and this incremental loan to Blackstone Mortgage Trust is going to have a big impact in the second and the third Quarters. But if I'd add anything to that, it's that now the competitive dynamic in commercial real estate lending is a little bit different because a big competitor is exiting the business. So that probably means something for us organically. If that's helpful. We don't call it out specifically. We capture the whole portfolio in our overall allowance for loan losses, and feel that that is absolutely adequate for the loan book that we have. Which incidentally, has never been better overall. Oil and gas loans are approximately 2% to the total portfolio. Thank you. Okay, this concludes our call, so thanks. First of all, I want to say thank you to all 265,000 team members for a very, very good first quarter, and thanks for all of you on the line. We will see you next quarter. Bye-bye.

2015_WFC

2016

GNTX

GNTX #Thank you.

2016_GNTX

2015

CRAY

CRAY #Thanks, <UNK>, and thank you all for joining the call today. I'll start with some comments on our first quarter performance, then turn it over to <UNK> who will go through our financial results and outlook. I'll wrap up by discussing our focus areas for the rest of the year and open up the call for Q&A. I'm pleased to report that we got off to a solid start to the year and made strides toward achieving our full-year goals. Our revenue was in line with the target we've previously laid out for Q1, led by a strong quarter in supercomputing as well as continued progress on our big data efforts across storage and analytics. As we discussed on our last call, our goals remain to continue to drive revenue growth and to establish stronger presence in the big data market. Let me now give you a quick update on the progress we made in each of our product groups during the first quarter. In supercomputing, we have two primary product offerings, our XC and CS line. The XC40 is our most scalable and advanced supercomputer and the CS400 is our highly flexible cluster. As anticipated, during the first quarter, we completed the acceptance of the two super computers originally planned for Q4 last year. We also completed additional system installations in Canada, India, Switzerland, South Africa, the UK and the US across commercial, government and academic customers. We also completed our first XC supercomputer installation in Poland at Stalprodukt, a commercial steel manufacturer who will use this system to perform high level structural analysis and modeling for advanced steel manufacture. Also during the quarter, we were selected by Petroleum Geo-Services, a global leader in marine geophysical exploration to deliver an XC40 and Sonexion storage solution, and we're already in the delivery and installation process. IDC, one of the leading market intelligence firms pointed out that this is one of the most powerful systems in any commercial market. The main driver of this system for PGS will be to analyze huge amounts of seismic data as part of their extremely ambitious Triton survey in the deep waters of the Gulf of Mexico. This system is yet another Cray supercomputer that is helping energy customers use our unique technology to enable advanced capabilities that weren't possible just a few years ago. As we look into the future, we took a big step last month as we laid out our plans for our next generation supercomputer, which is codenamed Shasta and is targeted for release in 2018. Shasta will be a groundbreaking platform, merging the best technology from across our product families in a range of future technologies into a truly adaptive framing. It will be the full embodiment of our Adaptive Supercomputing vision, allowing seamless support of both supercomputing and analytics workloads in a single system. At the same time, we announced that Argonne National Laboratory selected our Shasta system for the Department of Energy's CORAL project. As we've discussed in the past, we'll be partnering with Intel on this product program. <UNK> will describe the financial side of this project in a bit but there are two major deliverables. The first system, which Argonne plans to call Theta is slated to be a future XC supercomputer and Cray storage and is scheduled for delivery in 2016. The second and much larger of the two is named Aurora and will be based on a Cray Shasta system, currently scheduled to be delivered in 2018. Aurora will service as Argonne's flagship system and is expected to have a peak performance of 180 petaflops. It's an exciting project that will be a major step forward in technology, providing a groundbreaking resource for computational science and engineering and we're honored that we were selected to be part of the program. Our collaboration with Intel ensures that we'll be among the first to market with new Intel technologies as they're introduced over the next few years. In storage and data management, we have two complementary offerings, our high performance Sonexion storage system and our Tiered Adaptive Storage archive solution also known as TAS. Each of these provide customers with unique scalable solutions that solves some of their toughest data management problems. During the first quarter, we completed a number of Sonexion installations around the world and among these was our first Sonexion 2000 shipment. The Sonexion 2000 is our latest generation storage solution, which we launched in Q4 last year. And it offers customers 50% more performance and capacity in the same footprint. In big data analytics, we have two unique offerings, the Urika-GD and XA platforms. As we speak, we're in the process of installing a Urika-GD for graph discovery at King Abdullah University of Science and Technology in Saudi Arabia. KAUST is a really exciting installation for us as it includes Cray systems across computing, storage and analytics, showing the broader value that we can deliver to customers. Shifting gears, we made a couple of notable additions to our leadership team. In Europe, Catalin Morosanu joined us as VP of EMEA sales. He has held sales leadership roles throughout the region, including with Intel where he was responsible for their large enterprise business across Europe. In our Asia-Pacific region, Nick Gorga also joined us as VP of sales. Most recently, Nick served as general manager of the AP region at SGI and joins us with more than 20 years of experience in the high performance computing market. We also added a new board member, Marty Homlish. Marty is a great addition for us as he has held senior leadership roles with Sony, SAP and Hewlett-Packard and is currently the CEO of AMP, a marketing agency under the Omnicom Group. I'm very excited to add these talented leaders to the Cray team. Before I turn it over to <UNK>, I want to mention that sadly Bill Blake passed away on March 31. As many of you know, Bill served on our Board of Directors from 2006 to 2012 and then as our CTO from 2012 to 2014. His influence in our company has been profound and his presence in our industry will clearly be missed. Bill was a close friend to many of us and our condolences go out to Jane and his family and we are proud to have worked with him during his distinguished career. Now here is <UNK>. Thank you Pete. I cannot agree more with Pete's sentiments and want to pass along my condolences to Bill's family and friends. Before I get to the 2015 outlook, let me first take you through our first quarter financial results. For the first quarter, revenue was $80 million and as anticipated, we reported a loss. Product revenue was $53 million and service revenue was $27 million. Please note the majority of my comments are going to focus on our non-GAAP measurements as we feel that is the best way to look at the Company and our progress. On a non-GAAP basis, gross profit margin was 31% for the quarter with product margin coming in at 24% and service margin at 45%. Non-GAAP quarterly operating expenses were $38 million, about $0.5 million higher than the prior year quarter. Non-GAAP net loss for the quarter was $10.9 million or $0.28 per share. Our non-GAAP net loss was about $1.5 million higher than our GAAP net loss due to a smaller non-GAAP tax benefit. Our first quarter GAAP operating results include $3.4 million for depreciation, $3.2 million for stock compensation and $600,000 for amortization. Shifting to the balance sheet, total cash, investments and restricted cash at the end of the quarter was $148 million, up slightly from the end of 2014. Net working capital decreased by $9 million in the quarter to $353 million. Inventory was up significantly in the quarter at $210 million with 37% or $79 million already out of customer sites and in the acceptance process. You may recall that we do not typically buy inventory until we have a customer identified or a finalized contract. So, with $210 million in inventory, you can see that we are anticipating some very large installations in the next couple of quarters, several of which are already in process. As Pete mentioned earlier, we recently had a huge win with the Department of Energy for the CORAL project. Let me provide some additional context for our role in the project. As we've discussed before, we'll be a subcontractor to Intel and we'll be working closely with them on the program for Argonne. There are multiple steps and options related to each of the deliverables, which makes for a wide range of potential solutions and corresponding financial outcomes. Intel announced that the total value of the contract is more than $200 million and at this point, we expect our portion consisting of products and multi-year services to be roughly half the total. Our portion of Theta, the initial system, is expected to be in the range of $20 million including services. As Pete mentioned, Theta is expected to be delivered in 2016 and Aurora, the larger Shasta-based system is expected to be delivered in 2018. I would now like to take a moment to discuss our outlook. Actual results for any future period are subject to large fluctuations and a wide range of results remains possible, given the nature of our business. We are maintaining our outlook for 2015. We continue to expect revenue to be in the range of $715 million for the year. Revenue is expected to ramp quarterly, with a $130 million in the second quarter and we continue to expect that roughly 40% to 45% of our annual total will come in the fourth quarter. For the year, overall non-GAAP gross margin is anticipated to be about 35%. Total non-GAAP operating expenses for the year are expected to be in the range of $195 million. Non-GAAP adjusting items are expected to include about $12 million in stock-based compensation and about $2 million in amortization of intangibles. About 20% of these items are expected to impact gross profit with the remainder going to operating expenses. Interest and other income and expenses are expected to have a modestly positive impact in 2015, benefiting from interest on a lease receivable related to a 2014 system sale. Our reported GAAP effective tax for 2015 is expected to be about 40%. This tax estimate is highly dependent on a number of variables. However, the large majority of our reported income tax provision for 2015 is expected to be offset by previous net operating losses and thus will not require cash. Our effective non-GAAP tax rate is anticipated to be in the 6% to 10% range for the year. Share count, when profitable, should be in the 41 million to 42 million range, but is dependent on a number of factors including our share price. In summary, we continue to make good progress. Based on this outlook, we expect to be profitable on a GAAP and non-GAAP basis for 2015 and we continue to expect our operating leverage to improve substantially over 2014. With that, I'll turn it back over to Pete. Thanks, <UNK>. I want to give an update on our two major focus areas for the year. The first is to drive strong growth in our targeted markets of supercomputing and big data storage and analytics. Our goal is to grow at twice the market rate in each of these three markets. With two compelling offerings in each market, we are well positioned to grow and take additional share. Following a record year for new contracts in 2014, our momentum has continued with some exciting new wins for revenue later this year as well as further out providing confidence for our ability to grow. We've been steadily improving our market share in the high end of supercomputing for the last few years and we continue to make progress with our other products. One of these new wins was just announced a couple of weeks ago as we were selected by the Department of Energy's National Energy Research Scientific Computing Center or NERSC to deliver an XC40 later this year, targeted at their data-intensive applications. This is an additional award to the larger NERSC contract we announced late last year. It will be their first system in their newly built facility in Berkeley, California and a precursor to the larger Cori system, also a Cray, that we expect to deliver in mid 2016. A couple of other notable wins we've recently secured where with a leading manufacturing company and a large pharmaceutical company each here in the US. Both of these companies selected an XC40 to expand their R&D efforts. These are good examples of how our addressable market is expanding as we continue to see more and more commercial companies looking to leverage supercomputing technology to help them with the increase of both the number and complexity of data-intensive applications being utilized throughout their organization. We're in an excellent position to benefit from this growing trend happening across a variety of industries. Our second major focus area for the year is to continue to establish a stronger presence in the big data storage and analytics markets. As I mentioned earlier, our Sonexion storage system and TAS archive solution provide customers with unique scalable offering to solve some of their toughest data management challenges. We're in the process of installing both TAS and Sonexion storage at KAUST in Saudi Arabia and we're working on several additional large Sonexion installations at other sites around the world. All told, between just four of our Sonexion customers, KAUST, PGS, Los Alamos National Laboratory and the UK Met Office, we'll be delivering over 120 terabytes of new storage capacity in the coming quarters. This is a significant endorsement of the scalability of our Sonexion solution and its ability to support a broad range of applications. On the analytics front, we have several active opportunities in the pipeline spanning a mixture of proof of concepts and new engagements across both the Urika-GD and XA platforms. Just last week, the Urika-XA received another nice recognition when it was named the Best of Show for IT Hardware and Infrastructure at the 2015 Bio-IT World Conference & Expo. The XA provides customers with a flexible open platform for analytics and is uniquely designed for high performance customers across various industries including commercial enterprise, academia and government. The annual Cray Users Group meeting, which was in Chicago this year, just wrapped up last week. It's always a great week for me and our company as we get to spend time with our customers from all around the world, learn more about the amazing things they are doing with our systems and hear about their needs for the future. I came away from it more convinced than ever that our vision of the convergence of supercomputing and big data is directly in line with our customers' needs. Before I open it up for Q&A, I'd like to give a special thanks to Frank Lederman, who is stepping down from our Board of Directors after more than 10 years of service. Frank has been a great mentor for me, and has played a key role in working with us to shape our strategy and technology vision while also leading our Compensation Committee. On behalf of the entire team at Cray and our Board, we wish him well in all of his future endeavors. Let me wrap up by saying that I'm pleased with our progress and execution during the first quarter. While we still have work left to do for the year, our strategy and plans are solid and we're in a good position in the market to deliver strong growth and improve profitability in 2015, as well as to continue to grow in future years. With that, I'd now like to turn the call over to the operator to begin the Q&A. Yes, <UNK>. We came into this year with really strong set of orders that we got last year. We had over a billion of bookings of new contract wins last year. So, we came into this year feeling really good and we kept that going through the first quarter as you've seem with some of the announcements that we made. So, we feel we're in very good shape right now for our year. We still got some work left to do. There is still a few more deals that we need to do but we're ahead of where we usually are at this point in the year when we look at our full year outlook number. Yes, we definitely have been doing that over the past I would say, six months or so, talking with a number of customers about what we're doing there, how we see this all converging and what Shasta is going to bring to the market. While we haven't got guidance for 2016, the way I would say it is our goal over a period of time, not specifying any particular year, is to drive operating margins toward the 10% area on a non-GAAP basis. We're going to make good progress we expect this year. Our plan would be to make good progress next year, but we haven't yet given guidance on that. But over an intermediate term, our goal is to get towards 10%. That's a good question, <UNK>. Unfortunately, I have to say yes. We had one particular contract where the actual costs anticipated the costs that we [bid in]. I would say the bulk of that impact was in the storage area, you can perhaps see it when you look at our segment in the Q-filing. That same kind of contractual relationship has a second phase in the second quarter. And so, we're going to be impacted both in the first and second quarter by kind of that cost related mostly to third party products and storage that we didn't expect properly. We still maintained our guidance for the year. I would just say, it's a little tougher given this particular contract's impact. No, I would say they were good-size orders that we came in much lower than our standard gross margin on because of the cost impact. I think, yes. The big systems, the supercomputing systems carry a little higher margin than the clusters do and it's just the nature of the marketplace. Storage has been at least where we are in supercomputing and generally higher and that's a view that we would continue and in big data, it's a little hard to tell in the long run, but our view is that we had a lot of value in the big data space and should be able to get more. And then, as you know, we continue our service business and the service business has the highest margins of all, between 40% and 50%. Yes. Only time will tell in terms of market forces but that's our current viewpoint. I would just say, outside [China], there is one situation we have in the first half, right, which is taking our storage and a little bit our product margins down, a little bit abnormally but going forward, we should ---+ once we get through this issue, should return to normal. Yes, I think, XA is doing for us what we're hoping, which is getting us into a broader part of the big data market and it's something that's very complementary to what we currently have with the Urika-GD product. So, having the two together actually has been really beneficial for us overall. I mentioned that we're installing a Urika-GD just right now at KAUST and I also mentioned our latest win at NERSC was around using a supercomputer, an XC40, to do a bunch of big data-like applications. So, we're seeing a lot of leverage from us being able to use a product like Urika-XA to get in a very different conversation with our customers and be able to think about where are they really trying to take things for the future and how can we work with them to get there. And I mentioned that at CUG this year, our Cray User Group, we really this notation of the convergence of supercomputing and big data came up every 15 minutes [you felt] like in the conference in many different ways. And so it was really great to see that we can start to use these product to get into that conversation with our customers and really to see how this is going to play out and trying to get in front of that and XA is definitely a key component of that especially because we can do both Hadoop and Spark on that platform, which gives us a lot of flexibility and by the way in a lot of other big data applications. So, it gives us a lot of flexibility with that platform. Commercial as a percentage of our revenue ---+ our topline has grown pretty quick this year. So, as a percentage though, we still believe that, that commercial revenue is going to continue to increase and it's really starting to be a pretty significant part of our business overall. A couple of years ago, <UNK>, when we first started getting into commercial we would get a couple of wins in a year, it would make a little dent, but it wasn't so overly material to us. Now this business is starting to approach a significant business for us. And the nice thing that we're seeing is, we're getting it across a variety of industries. Clearly, energy is our strongest segment or vertical market by far. But as I mentioned, we had a nice win in manufacturing, we had a nice win in pharmaceutical or Life Sciences area this quarter. So it's really starting to expand, I really feel commercial is a big part of our growth opportunity over the next few years, because if you look at the IDC data, commercial at the high end, so think of their supercomputing segment, is roughly half the size of that segment. And so, its half that segment, we really haven't been addressing. We have had products that could go there, but we really haven't been addressing it from a go-to-market or sales perspective. And now we've really started to ramp that up. So, it's a great story for us and I will tell you, I'm very excited this year at the User Group, we had a number of commercial companies come up and talk a little bit about what they were doing with their systems and it's as exciting as the research guys in the National Laboratories are doing. So it's pretty great. <UNK>, as we entered the year, we know what's ahead of us a little bit. We have pretty good headlights into the future. And, those wins really just built up more and more confident in our number overall. We're at $715 million. We think that that's the right number, but I'll tell you our confidence level of that number over the last quarter has gone up a lot. So, we feel pretty good about getting there and what we need to do, there is always big deals. And as you know, with us, there is always a chance that they can move around a little bit from our perspective or from things that happen with our customers, but overall, I think we feel really good for the year, but $715 million feels like the right number for us right now. Generally, <UNK>, the goal is to have the inventory comp just as we're about to build the system. And the higher cost inventories in particular, are, we bring in at the last moment just before we build the systems. So, our measurements of what I would call parts that are raw materials, parts work in process and finished goods isn't ---+ it's reflective of how they're put into our system, but in reality, most of the parts that we have in inventory are some form of work in progress. And, of course, a lot of those come into systems but they may not go into finished goods until they've finished all our testing and are ready to ship. And so, most of the time, the finished goods inventory consists largely of things that are shipped to customers or are boxed to ship to customers. So, we don't buy any significant amount of inventory unless we have very good visibility related to that customer. So, as I said on the phone, with $210 million inventory at the end of the quarter, it's really signalling that over the next few quarters, we have a lot of shipments to good out. And March, by the way, was one of our largest shipment months, maybe the largest certainly since I've been at Cray and so that's just going to continue now for the next several months, that large, high volume number of shipments. A couple of things to think about. Last year's non-GAAP margin was about 4.5%, a little less. And if you did the math with the outlook we gave you, you'll get somewhere in the mid-sevens. So, that's kind of the view of substantial improvement in leverage. We haven't changed the guidance and so that would be the best estimate at this point. Clearly, as I said earlier, our goal over an intermediate period of time is to get it into the 10% range. So, I just think there is a lot of leverage in the business and we're showing progress this year. Thank you. I'm pleased with our start to the year. Our product offerings are strong and gaining momentum in the market and we're positioned to have a great 2015 and continued success going forward. Thank you all for joining the call today and for your continued support of Cray. Have a great evening. Thank you very much.

2015_CRAY

2016

PRU

PRU #So the US rate, 10-year benchmark, <UNK>, was brought from 4.25% down to 4%. The JGB 10-year benchmark brought from 2% down to 1.9%. Okay, so a couple thoughts. First, <UNK>, with respect to the process that we go through, understand it is a well-established and well-controlled actuarial review process that we undertake and come up with these rates. We look at historical rates. We look at forward rates. We survey both internal and external experts to get their views of rates on a go-forward basis and we use a central estimate that's derived from looking at all those data points. So that's consistent with what we've done in the past and we've continue to apply on a go-forward basis. With respect to the interest rate sensitivity, if you look at our assumption updates what I would tell you is that they were not materially affected by the decline in that long-term reversion rate. We had some interest rate impact, not particularly material. Most of it was driven by the current level of interest rates as opposed to a change in that long-term assumption. And it takes about a 10-year period of time for that grade-up. We start at current levels and then follow a forward curve for a couple of years and then do a linear grade-up to that long-term reversion rate by year 10. So today's very low rates are in our balance sheet. Well, it's ---+ you could do the math. It's a linear extrapolation from third year on to year 10. So <UNK>, it's <UNK>. Let me try to take a crack at that. First, it's important to point out that we've had a significant reduction in our interest rate sensitivity post the completion of the VA captive initiative. You've seen that in both the first quarter and the second quarter, driven by the fact that, as I indicated earlier, we migrated over to a more stable statutory framework and it reflects the long-term nature of the risks. Importantly, we eliminated the internal corporate hedge, under hedge, excuse me, as I indicated in my opening comments and we're managing all of the VA risks within those same legal entities. I also note that we manage our balance sheet so that we can maintain our AA targets through cyclical stress scenarios. So that includes 100 basis point further decline in interest rates from where we are today. So from a balance sheet standpoint, we would not expect to have any degradation in our credit quality as a result of a sustained low rate of a significant quantum from where we are today. Well, in terms of the first 25 basis points down, it was not material. So I don't have numbers to put around it because it wasn't something that rises to a level where we thought it was important to provide in disclosure. With regard to an additional 25 basis points, we have not done the calculation in terms of what the ---+ if you run that through only the assumption updates for another 25 basis points down. I'd go back to the comment that I made about capital position which is that we've run stress scenarios significantly more severe than that and are comfortable that we're holding capital on a basis that would allow us to continue to maintain our AA rating and write business. I think maybe just to emphasize part of what you might be asking. Because we never used the captive to arbitrage either reserves or admitted assets or capital, we didn't go into the recapture in a hole. We actually, as you see, went into the recapture from a position of strength. So there are things out there that would have been an advantage in the captive structure that we're going to lose as a result of the recapture. The GAAP accounting has not changed, just to be clear on that. What has changed is we've taken business that resided in five different legal entities and consolidated down to two and substantially just one. We have a New York and non-New York that ---+ set of entities. All of the risks of the business are now being managed within that ---+ those two statutory entities and we're managing them through a combination of derivatives and on-balance sheet financial assets. So think about it this way. As I mentioned, before we hold to CTE97 and we do so, including under modeled stress scenarios. When you're doing that calculation in five different entities, now imagine doing that consolidated across a single entity, largely, or the two entities. You get efficiencies, as you might expect, both in the reduction in risks that result in the offsetting of risks that go in different directions from the rider than they do from the host contract and you get efficiencies associated with the capital management because you don't have the friction of having to have to move capital and hedges between the different legal entities. So both from a capital standpoint, in terms of how the calculation works and then from our ability to then manage the risk and then you lay on top of that the statutory constructs being one that is more stable, less volatile, all three of those combined to the reduced volatility that you're seeing and will see going forward and the free up of the capital. So this is the ---+ <UNK>, it's <UNK>. This is the ---+ I'm sorry, <UNK>. <UNK>. It was <UNK> on the last call ---+ question. The ---+ that is the long-term rate that's used in our actuarial assumptions as they affect the different liabilities that we have on our balance sheet. So that includes the account values and the rate at which they grow but it also includes the host of other liabilities that we have, for which we have to do actuarial computations. Okay, <UNK>. Let me take this in a ---+ and take a couple minutes on how we think about Asset Management. Because I think our view on this reflects both the uniqueness of our approach and our circumstances. So for us, Asset Management is a hybrid business model, one that we're very proud of, one that works well for our clients and ourselves. By that, what I mean is, it's not holding in which we have a passive ownership stake, as some do, and nor is it a department that's serving one client. What it is, is it's a business and it's a capability with critical interconnectivity to Prudential and its strategies. Its market-facing strength enables us to attract and retain top flight investment talent which, in turn, produces consistent investment results that are very favorable. At this point, it's got over $1 trillion in AUM. As we comment today, it's over $0.5 trillion of third-party unaffiliated assets. Actually, in terms of Asset Management fees, almost [80%] ---+ roughly 80% of them are derived from managing third-party assets. So it's a very significant third-party asset manager and business but it does exceedingly well. I think last year's flows were around $20 billion. Keep if mind, we have more fixed income assets than we have equities. So we benefit from that phase of the cycle. It's also a major contributor as well as beneficiary of its interrelationship with other parts of Pru. You see that manifested in a lot of ways, which, in turn, enables us to be more competitive and gives us an edge in various areas, whether it's PRT, in the role that Asset Management play there, or whether it's the role it plays in investing assets on behalf of our activities in Japan or the role that private placements and mortgages play to our various activities in our spread-related activities. So to us, it's very distinctive in relation to others. It's not a holding in which we have a passive stake. It's not a department. It's a hybrid and it's doing very, very well. It's doing very well, in part, because of the consistency of our investment performance and the consistency and the stability and the quality of our investment professionals as well. Don, we'll take one more question, please.

2016_PRU

2016

CCMP

CCMP #So the GAAP ---+ the non-GAAP adjustments we've made were a couple of things. One was related to amortization expense, and that will continue at the current ---+ or the rate in fiscal 2016, continuing into fiscal 2017. There is also some transaction-related cost upfront, but if you look at our third and fourth fiscal quarter, there was about 1 percentage difference between non-GAAP and GAAP and I think you ought to expect that similar percentage difference going forward. <UNK>, it's a bit of both. We're really proud of our growth and execution this quarter and for the year that we have had NexPlanar with us, but obviously far from satisfied. And you can tell we are gaining more confidence in our ability to really grow this business, and you mentioned to the improved range of $80 million to $90 million by fiscal-year 2018. That's a combination of growth from existing customers ramping ---+ we mentioned we are currently selling to eight out of the top 10, but also new products ---+ or new opportunities in the pipeline, and we mentioned a new consumable set win that we're really excited about. That's with a major memory manufacturer. And within that existing customer base, as you would imagine, as they get the pad in and get comfortable with its performance and its just lower cost of ownership, they're able to take that to different applications and proliferate it across their different fabs and different applications, and that's what we are seeing. So it is a bit of both growth with existing customers, but also a really full pipeline of opportunities in different stages of qualification.

2016_CCMP

2016

ANIK

ANIK #Right. Sure. For 2016, I think we're still comfortable with the previous guidance that we discussed earlier in the year, which is around mid to high 70% range. And for the last couple quarters, we're in that range. And given the product mix as well as the anticipated pricing, we should still be able to maintain in that range. Yes, we ---+ just another comment. So, behind the scenes, we make a fair amount of investment in our manufacturing operations and cost-reduction activities. And so, the price ---+ we've seen pricing pressure outside the United States for a while and maybe a little bit in the US now. Yet, our margin ---+ profit margins have stayed the same or even gone up a little bit. And that's a little bit due to mix, but a lot to do with the fact that we're continuing to lower our manufacturing costs and the reliability of our processes. So, I just wanted to throw that other factor in there. Thank you, Chuck. To be honest with you, <UNK>, we have been pretty busy. We don't have a lot of thoughts in that area. I think, really, their viscosupplementation product has not been a real competitor for us. And so, we really haven't paid a lot of attention. We'll take a look. Maybe on the next call, you can reask that question, and we'll have some commentary. Thank you very much. And thanks to everyone who participated on the call, asked some very good question, and listened to us today. Appreciate it. We're very excited about our plans that are current underway to advance our pipeline, bring some new products to market, and drive our continued growth. And as a consequence, honestly, we look forward to updating you again on all of these activities on our next earnings call. Have a great day.

2016_ANIK

2016

EGL

EGL #The answer to your first question is that it was all through SG&A and that we're looking at somewhere in the neighborhood of an additional $4 million for the year. I think that basically, we could talk about more in the fourth quarter then in the second and third. I don't have an exact number for the $4 million. We did. I think we had it in the script. I think we said it was low 30s going forward. So for this year, I think, we talked about this and we did the reconciliation. There was a total of about $350-ish million rolling off in different ways. That includes what we factor for our re-competes, it includes programs that have come to an end or coming to an end or are being de-scoped. We also talked about the fact that [then] publicly that we believe that, that number is going to mitigate in 2017. I don't have an exact number here for you now. As <UNK> said, we're going to be getting into 2017 shortly. Again, we're replacing that with the new business. We indicated that on the offset of the year that new business was going to be about 7% ---+ 6% to 7% and that re-compete was about 15% of the business that we had to replace. It was also obviously, some base from stretching the base. Let me just comment. We are seeing ---+ of course, the last few years things have gotten quite slow. We saw what would be perhaps a normal 6 to 12 month kind of submittal to award timeframe go much, much longer. We're now seeing ---+ and its few very data points, but that customers are very concerned about the long time lag. They are working to shorten that up. We see a slight uptick ---+ of course, the two that we won here early in the quarter, if we did kind of a pro forma on last year to this year, we think we're seeing about a 17% improvement in the adjudication timeframe. We talked about the three focus areas that we have, being space, intel and fed civ, as we brought the company together we did see some real revenue synergy opportunities, in both DoD and fed civ, but fed civ going perhaps little bit bigger and faster, as far as where our capabilities lie. We're going to continue to play our strong space heritage. We've got 40 some years. We have supported over 240 launches. We'll take existing customers in DoD, in intel space, be looking at where we can play that forward into NASA. It really is, in my mind, all about taking the new mix of capabilities we have, very thoroughly going through our client base, what are their needs, and where do we now have an additional opportunity that we didn't have before, by the combination of the TASC and Engility teams. You know Engility historically had about 1% in the intel world. Now, we're over 30%. So you'll see ---+ I guess I should've commented certain customers have certain buying habits, certainly in the work that we do on the intel and space, has historically been cost-plus so you'll see from a historical Engility, a little bit more on the cost-plus side due to that new kind of portfolio mix of the company. I think some of it, Chris, might just be nomenclature. We've long had a Vice President of Human Resources Development, People Assets, Training Development, those kinds of responsibilities. I think what we're just flagging here is, CHRO is really now kind of an industry best practice. I think acknowledging the importance, it's a C-suite job, and that is ---+ couldn't be more true than in our business where people are the engine and they drive every bit of our business. So understand that we have to go through a process here to get the total backlog ---+ rolled up, given that we pulled the two companies together and integrated. One had an automated way and one didn't. So what I'm giving you is a estimate, our best estimate, of where it was probably somewhere around $3 billion in Q4. Thanks, <UNK>. So on the business development side we talked last time about the increase, that we've been reducing our indirect spend, we are increasing the share of the spend that is going to business development and our investment in capture activities, as far as earlier. Doing the right thing at the right time, the right way. We're increasing the size of the bids so we'll submit $5 billion, we're talking about this year of new business as our objective. That's 25% more than last year but its not 25% more bids, it's about the same number of bids. They're about 25% larger on average. Starting earlier interacting with the customer, developing our solutions and vetting it with the customer before an RP comes out, are all best practice activities that we're applying. We see some early evidence of success with the awards this quarter of the re-competes on DiTra and TSA. We have a few proposals in evaluation now, where we're seeing our scores and we see them at the very high end of the scale and we like what we're seeing there. That's really good evidence. Those contracts have not gone to award yet, we're in discussions, but it's evidence that the work that we've been doing is leading to the outcome that we were after, which is a highly rated proposal; and with the highly rated proposal our probability of win, I think, goes up. Those are the kinds of things that we are working on. If I can just add one of the things that we are doing and we are doing it with a lot of rigor is really ---+ it's one thing to say we're going to start early and we're going to do the four or five things that are standard good business practice on the capture side. We are also being incredibly thorough at saying, what capabilities do we have and how does that match the customer mission, what problem are they trying to solve, how do we do it. And in the case where, this is the case in many opportunities, we're trying to take away business from a competitor, we have to be convinced that what we offer is worth the risk to the client of transitioning that business. So we have to focus and pick the right deal that sounds easy, but exercising that discipline of saying no to things, when you're trying to grow business is not easy; and we're paying a lot of attention to what are those right things. Funded contracts are 563 and funded orders is $563 million. We are investing as we said and ---+ but that's not what's driving this number. That's really a number that was driven by a significant amount of severance this quarter. Not all of that, obviously would be repeatable in the future. Another point, <UNK> you made a comment about the cost of the additional benefits. All that was in our plan for the year. There's nothing that we're doing here which is spending more money, it's how we're spending the money that we had planned in the most effective way. About $9,800. Our prime contract work is about 82%. Yes, <UNK> I'll be happy to. I think we are seeing a number of our clients step away from LPGA and move back towards best value contracting. It's a logical reaction to a number of agencies letting ---+ contracts that are very low priced, those contracts were then not able to staff and they actually were not able to complete the work. And in many of our clients as you know, that's a mission impact when work doesn't get done very important things don't happen. So again, I wouldn't say it's an industry trend, but we are seeing of view more best values ---+ what we're going to keep our eye on is whether or not a client says it's best value or not, will they award only to the lowest bidder. So I think the jury is a bit out on that. I will say that we are not ever going to get totally focused on just price. There's a lot of components to offering a solution to your customer. Cost has been a very, very important. It will remain important. We'll keep our eye on that but we're going to be really concentrating on what's the complete solution. It's about 75% to 80%. Somewhere in that range. I guess, I would say I think the world is changed. I think it would not be good thinking on our part to think we're going to go back to three to five years. So when I look at our backlog and other things, I think the new reality will remain with this kind of a two-year ---+ we might have options, but the days of getting a five-year contract and five option years and then getting another five on top of that, I think are gone. Yes. I could talk a little bit about it, <UNK>. Our bookings environment, I think we've been very clear about thing very studious about selecting larger opportunities where we can put together the right change, offer the right solutions. We're going to continue to do that. I think that ratio of about 70% to 80% has been consistent at least over the last year. So that, we have not seen a big shift there. We're going to probably see, as we just mentioned, contracts running a little bit shorter, two or three. So we have to adjust our thinking on how we evaluate our performance relative to backlog. But I do think the clients ---+ they understand, just like all of us do, that the longer the time between when we submit bids and when they award, the more things can change in their world or a requirement can be antiquated. That is the one area that I do anticipate a little bit more improvement. I don't think it will be drastic. I think we'll see a little bit faster adjudication rate. Yes, we have two more in Q2 that we have queued up. The combination of which is about $900 million. So under <UNK>'s leadership, I think we've transitioned to those larger bids and that will be kind of our normal mode from here on out. (multiple speakers) We submitted one of the large bids and two more are in proposal right now. There are several more coming along behind that, particularly if you use $100 million threshold that you mentioned. So there's a nice flow of opportunities that we've selected from among many that we're focused on and are really after a quality solution that scores well and at the right price reaching those customers which vary across the board. And actually, the duration of some of these are longer. Several of these larger ones are in the four or five-year range. So clearly, those are attributes that we like too. Could I rephrase ---+ De-scoping <UNK>, is that what you asked. (multiple speakers) I don't know that it's a huge shift. If you go back three or four years, you were seeing 10%, 20%, 25%, 28% reductions on programs, existing programs. We haven't seen ---+ we've come down that curve but there's always going to be year-over-year savings that your clients demand. <UNK>, I think the reason I think we were a little bit more conservative on the guidance was because of the integration, right. We thought that there was a certainly a chance if we didn't get all the bills out the door right away. You kind of cut over a system on January 1, you've got to get the bills out of the door by the first week and if you don't do that to the same extent you have been, your DSOs going to go up. So we were little conservative because we felt like the DSO could go to 61, 62, 63 days. That's probably the difference in what we had anticipated and what happened is our DSO stayed below 60, thanks to the good work of our folks. That's why it's a little bit better than we anticipated. That's the biggest reason. Well, normalized would have been probably where it is today or slightly lower. But, first quarter wasn't normal because of the integration. But <UNK>, if you're asking it, I think as we look forward, we think somewhere between 55 to 60 days is where we'll be. Sure. The short answer is this was opportunistic. There was a basket that we have in our credit agreement. It allowed us to do this for $10 million. There are other covenants around this basket, which unfortunately we probably won't be for the next year so going forward. So short answer is we did this once, we really don't have opportunity to do it again. The remainder of our pay down this year will be on the first lien debt. We wish we could do more of it. It was really nice saving the 12%, but unfortunately we won't be able to.

2016_EGL

2016

NPO

NPO #Thanks, <UNK> and good morning, everyone. Our results for the year exceeded the guidance we gave during the third quarter call, primarily due to the strong fourth quarter in Power Systems and cost control measures at both Sealing Products and Engineered Products. For the full year, consolidated segment profit was moderately above the high end of the range provided during our second quarter call after adjusting 2015 results for the impact of foreign exchange, acquisition expense and restructuring differences from the stated guidance assumptions. Notwithstanding this, 2015 was a challenging year for our Company like other industrial manufacturers. Oil and gas, steel, metals and mining, agricultural equipment and other capital goods sectors contracted significantly from the prior year, as a result of slowing economic growth and low commodity prices. Other markets that we serve, such as aerospace, nuclear, trucking and automotive were stable to moderately higher and some including semiconductor turned down in the second half of the year following growth in the first half. Government spending on ships and maintenance remained steady. In large part, our results for the quarter mirrored these macroeconomic conditions. In the fourth quarter, our consolidated sales were up 2%, and pro forma sales, which include the results for deconsolidated GST were about even with the fourth quarter of 2014. On a normalized basis, consolidated sales were down 4% for the quarter and GST's net sales were down 3%. Our consolidated adjusted EBITDA of $42.8 million for the quarter was up 4% from a year ago, and our pro forma adjusted EBITDA of $51.6 million was almost equal to last year's fourth quarter. Consolidated EPS of $0.30 a share was up significantly from the $0.15 a share reported in the fourth quarter of 2014. Contributing to the earnings per share improvement, is a 14% reduction in the number of shares outstanding compared to a year ago as a result of share repurchases and transactions related to our convertible debentures. Before <UNK> provides more details on our financial results, I want to give an update on several 2015 strategic initiatives important to improving our competitive position. First, we made very good progress on several important innovation projects. Over the past two years we've stepped up our investment in new product development, particularly in Sealing Products and Power Systems. Within sealing, we have successfully launched and continue to broaden a line of monolithic isolation joints for the pipeline market, seals for sanitary markets such as food and pharma, application specific products for aerospace and industrial gas turbines, and products to enhance the safety performance and improve the fuel efficiency of heavy-duty trucks. Power Systems has made great strides in the development of a new generation opposed-piston engine, which we call OP 2.0, designed to dramatically improve fuel efficiency and meet Tier 4 emissions requirements and position our opposed-piston engine technology with world-class performance in our output range. Testing of the working prototype engine is ongoing. In addition, Fairbanks Morse is pursuing entry into the commercial power market for medium speed gas and dual fuel engines and auxiliary systems through a set of commercial agreements with our partner MAN Diesel and Turbo. Second, we've also made significant progress in optimizing our manufacturing and service facility footprint and reducing cost, particularly in Sealing Products and Engineered Products. In Sealing, we successfully moved the manufacturing operations acquired from ATDynamics from Hayward, California to Stemco's Longview, Texas operations, yielding improved quality at lower cost. Stemco's distribution center largely completed in 2014, became fully functional in 2015. We're receiving some very positive customer feedback about our capabilities to support the full line of Stemco products with a single transaction in the bundled shipment. Also in Sealing, we've recently announced restructuring activities to reduce our cost in the UK by closing our Elland, West Yorkshire facility, while continuing to serve that market via our local distribution partners. In Engineered Products, we progressed on a number of restructuring moves that we talked about in last quarter's call that will result in the elimination of two plants through consolidation at GGB, and the exit from nine service and light manufacturing facilities at CPI. Upon completion, we estimate these actions would result in annualized cost savings in our Engineered Products segment of approximately $4 million to $5 million. <UNK> will provide more detail in a few moments about the restructuring actions at CPI. Third, I want to highlight our progress in integrating three strategic acquisitions in Sealing Products. Integration activities are on plan, and in aggregate, we expect results over the next two years to be in line with previously stated estimates that the three acquired businesses will contribute annual EBITDA of approximately $20 million to $25 million. In addition to our focus in 2015 on these three areas, innovation, restructuring and cost management and strategic tuck-in acquisitions, we also continued our efforts to improve operational supply chain and commercial effectiveness. Finally, I want to update you on the status of GST's acquisition ---+ sorry asbestos claims resolution process. As you may know in early January, the current claimants' committee and the future claimants' representative invited us to participate in ongoing negotiations to resolve the terms of claims resolution procedures that would be an integral part of any potential consensual settlement of the ACRP. We agreed to participate in negotiations for a limited time and the parties asked the bankruptcy court to postpone a hearing previously scheduled for January 6, and pause the expensive hearing and other legal preparation work. These negotiations have resulted in progress being made towards a potential consensual settlement. And earlier this week, we agreed to postpone the hearing until March 10, in order for the parties to continue negotiations. EnPro and GST continue to believe that the settlement with both the FCR and the Current Claimants' Committee would provide the best path of certainty and finality of the ACRP, provide for faster and more efficient completion of the case, save significant future costs and allow for the attainment of complete finality. However, there can be no assurance that the current or any future negotiations will result in a settlement among GST from both the FCR and Current Claimants' Committee. Because of the confidentiality agreements in place on these negotiations, we're not able to comment further on any details of the negotiation. We'll provide other interim updates. Now, I'll turn the call over to <UNK> to review our fourth quarter results in more detail. Thanks, Dave. You'll recall at the beginning with our second quarter 2015 earnings release, we began providing normalized net sales and normalized segment profit and margin information in order to provide greater clarity of organic sales and year-over-year earnings changes. Normalized sales and segment earnings adjust reported sales and segment earnings for currency translation, acquisitions and divestitures and restructuring. While I'll refer to both reported and normalized financial information, most of my comments on year-over-year quarterly and full-year changes from prior periods will be on a normalized basis. Our consolidated fourth quarter sales were $321.9 million, up about $6 million from the same period of 2014. Normalized sales declined 4% with Sealing Products and Power Systems each declining 3% and Engineered Products declining by 7%. In the latter case largely due to softness ---+ the overall comment is largely due to softness in North American oil and gas and general industrial markets. I will cover each segment in more detail in a moment. Gross profit for the quarter of $103 million was $2.9 million or 3% lower than in the fourth quarter of 2014. And gross profit margins decreased to 32% from 33.5%. Adjusting for the impact of the lower margin businesses acquired this year, the gross profit margin was 33.8% for the quarter, which in light of unfavorable volume in the quarter reflects the beneficial impact of restructuring actions and other cost control initiatives. The lower margins of the two businesses acquired this year, reflect their current margin characteristics, which we expect to improve overtime. As <UNK> noted, we're very pleased with the addition of these strategic bolt-ons and our integration progress and we expect these businesses to add considerable value relative to the prices paid within a short period of time. SG&A was down $3.1 million or 4% from the fourth quarter of 2014. Contributing to the decline were $3.1 million favorable impact from foreign currency translation and $3.3 million reduction in corporate costs, primarily driven by lower outside service expenses and lower incentive compensation accruals. Partially offsetting these reductions were $4.6 million incremental SG&A expense from acquisitions net of the GRT divestiture and higher spending on growth initiatives at Stemco and at Power Systems for the OP 2.0 new engine development project. Consolidated net income for the quarter was $6.6 million or $0.30 per share, up $2.8 million compared to net income of $3.8 million or $0.15 per share in the fourth quarter of 2014. As <UNK> noted, the earnings per share improvement reflects the reduced share count compared to a year ago. Average shares outstanding for the fourth quarter of 2015 were $3.6 million lower than in the fourth quarter of 2014. Adjusted net income of $9.8 million or $0.44 per share was up $900,000 or $0.06 per share from prior year. Adjusted net income has shown in the reconciliation of adjusted net income to net income scheduled in our earnings release removes the effect of several large discrete items. Sales in the Sealing Products segment were $185.4 million in the fourth quarter, up about 12% over the fourth quarter of 2014. Normalized sales were down 3% reflecting softer demand from oil and gas, truck parts, semiconductor and general industrial markets, partially offset by stronger nuclear market and aerospace sales. Segment profit on a normalized basis was even with last year and fourth quarter segment margins increased to 15.1% from 14.6%. The improvement was largely due to cost reduction initiatives and lower material costs. On a reported basis Sealing Product segment margins declined to 12.2% from 13.8% largely due to the impact of the margin profiles of the newly acquired businesses and acquisition integration costs. In the Engineered Products segment, fourth quarter sales of $70 million declined by 15% from the fourth quarter of 2014. Unfavorable foreign exchange translation accounted for about half of the reported decline, so normalized sales were down 7%. Strength in the European automotive market was more than offset by decreased demand for compressor parts and services, due to weakness in oil and gas markets in North America and the Middle East. Demand for bearings from agricultural and industrial equipment OEMs was lower in both Europe and North America. Normalized margins declined in the quarter from 13.8% a year ago to 1.6% this year, primarily due to the impact of the sales volume decline, which more than offset the benefit of restructuring and cost reduction initiatives. Restructuring charges in the segment were $4 million in the fourth quarter and $6.2 million for the 2015 full year. As <UNK> mentioned earlier, the charges was result of consolidating GGB's footprint from 10 facilities to eight, and reducing CPI's footprint by nine sites through either closure or sale. Approximately $4 million to $5 million of restructuring charges will carry into 2016, most of which pertains to facility lease obligations and severance costs. In the Power Systems segment, revenues decreased $2.1 million or 3% from the fourth quarter of 2014. The decrease was largely due to lower completed contract engine revenues, partly offset by higher percentage of completion revenues and service sales. Gross profit margin was up 1.6 points compared to the fourth quarter of 2014, due to stronger margins on engine and parts revenues. Material costs improved partly due to the benefit of the strong dollar on European sourced material. Segment profits decreased $1.2 million or 10% and segment profit margin declined to 16.3% from 17.6% in the fourth quarter of 2014, primarily as a result of higher spending on R&D for the OP 2.0 engine program, SG&A to support commercial growth strategies and $2.9 million long-term contract accounting loss provision related to the effect of the strong dollar on the multi-year EDF contract. Cash flow for the 12 months of 2015 was a use of $90.8 million compared to cash generation of $129.8 million for the full-year of 2014. The use of cash reflects the accomplishment of several of our capital allocation goals, including a share repurchase program, initiation of a dividend, purchasing the option for the outstanding convertible debentures and strategic spending on acquisitions and plant and equipment. Also contributing to the use of cash were interest payments related to the debt. To support these goals we borrowed approximately $62 million under our revolving credit facility during 2015. Our balance sheet remained strong with a net debt-to-EBITDA ratio of 1.6 times excluding inter-company debt, reflecting the strength of our balance sheet and the underlying stability of our cash flow. We announced yesterday that our Board of Directors authorized 5% in our normal quarterly dividend to $0.21 per share. Normalized net sales at the deconsolidated operations of GST and its subsidiaries in the fourth quarter of 2015 decreased by 3% compared to the fourth quarter of 2014. The decrease reflected softer market conditions, particularly in the Eastern US and Canada, due to the effect of lower global oil prices and reduced activity in the steel and mining industries. Normalized operating income, which excludes asbestos-related litigation expense in addition to impacts from foreign exchange was down 25% to $7.4 million from $9.9 million in the fourth quarter of 2014, primarily due to lower volume and an unfavorable product mix. Normalized operating margin was 13.3% compared to 17.2% last year. Asbestos-related expense was $9.1 million in the fourth quarter of 2015 compared to $62.5 million last year. You'll recall that last year's asbestos expense included an accrual of $57.9 million to reflect GST's agreement to contribute to the settlement and litigation facilities as proposed in the second amended plan of reorganization, issued in January of 2015. GST's adjusted EBITDA before asbestos for the quarter was $8.8 million, down 19% or $2 million compared to last year. GST's cash and investments balance was $271.9 million at the end of 2015, compared to $229.3 million at the end of December of 2014. The increase includes the collection of $21 million of asbestos-related insurance proceeds since December 31 of 2014. The remaining balance of GST's insurance receivable at the end of the fourth quarter was approximately $80 million. Now I'll turn the call back to <UNK>. Thanks, <UNK>. We'll close with a discussion of current market conditions and our outlook for the year and then we'll open the line for questions. As we described in the past, we don't have much visibility to future demand for most of our businesses and the current volatility in global markets makes industrial demand picture extremely difficult to forecast. In the near-term apart for some pockets of growth, we expect continuing volume pressure in several of our businesses that serve oil and gas, metals and mining, commodities in general and other global industrial markets. Currently demand levels in aerospace, European automotive and engine parts and service markets are stable and semiconductor is showing some signs of recovery from its decline in the second half of last year. However, overall soft conditions in many of our markets and the strong dollar continue to affect our results. For the year, subject to our limited visibility, we expect pro forma sales, which include the results of GST to be 3% to 5% higher on an FX-neutral basis. Much of the growth is attributable to acquisitions completed in 2015. Pro forma segment markets are expected to be comparable to 2015 with improvements in Engineered Products offset by declines in Sealing Products and Power Systems. Corporate expenses, which benefited in 2015 from the reversal of incentive compensation accruals from prior periods and other one-time items, will be closer in 2016 to the prior five-year average of approximately $33.5 million. Based on these estimates, we expect low-single digit growth in pro forma adjusted EBITDA for the year. Longer-term, we expect continued benefits from our strategic growth initiatives, including growth from recent and future strategic acquisitions and continued emphasis on improving operational efficiencies. Now, we'll open the line for your questions. Within Fairbanks, <UNK>. <UNK>, why don't you take that. No, I think, that covers it, unless you have a follow-up question. No, no. With EDF, we ---+ well, in Power Systems with EDF we have one big engine program which is the redundant backup generators for all the nuclear sites and you'll probably remember we won 21 of those total sites [where] there's 23 engines, I believe this is the number. And we're well into that program. I mean, we shift the qualification engine. We're working on the next set of engines. That's all 100% percent completion and we're on track. That schedule has not changed. They need those engines they originally said. The issue there is all FX related and as we've explained in the past, it's kind of, you got to kind of look through the accounting of that, because since it's all one contract, we have to take this multi-year loss provision and I think we explained before, we have a natural hedge that actually worked last year, in fact, we probably benefited in the segment slightly not much, because we procured more parts than the percent of completion that we did in EDS last year. However, because of the accounting rules, we can't look forward through the life of the EDF contract on all the other stuff that we buy, it's only ---+ it hurts us on the sale of EDF. But we can't take credit for the future reduction in procurement items. That obviously happens each year as we roll forward. So, we'll have to continue to adjust that loss provision for EDF up or down based on where the euro-dollar exchange rate is at the end of any given quarter. So, but anyway, but we have not seen and then we also sell fair bit of gaskets and sealing products through out of sealing into EDF from France and that business has been very steady. So, yes, the nice thing about nuclear power plants is that it's base load, so they always run. The weakness that <UNK> mentioned nuclear for 2016, it's just simply the kind of refueling schedule that we see in reactors where we have large reactor seals. That just kind of varies naturally year-to-year, just in terms of how many refuelings are scheduled and we had a pretty good year last year. This year is not quite as strong. That is not a share loss by any extreme and it's not ---+ quite frankly, it's not demand fluctuations. It's just ---+ I mean, it's not demand differences based on market, it's demand differences based on just maintenance schedule. But that's a pretty profitable line for us and so when it slows a little bit, it effects our margin. And I was going to say, $5.4 million of that is in the Engineered Products segment. Right. Well, I don't think really anything just, or sorry <UNK>, because we were doing it in the fourth quarter. So the fourth quarter is always slow in CPI. We didn't try to peel back and say I mean, certainly we were (inaudible) paying severance but that was happening during the quarter. I don't know, <UNK>, do you have a sense of whether we would have seen any actual savings to the bottom-line in Q4 on Engineered. No, it would have been in minimal in Q4. I would expect the run rate to be, to have all of the restructuring optimized by second half this year. Yes. I think we're probably in good shape. I don't think we're going to have to do more on top of this one additional facility that I just mentioned in CPI, which we'll know pretty soon, and it's a small service center, so it's not a huge deal. But beyond that, I mean the demand in CPI is weak, very weak, still relatively stable. And in GGB it's weak for everything except automotive. As you know automotive is about half that business from a volume perspective. So, I think once we get this restructuring behind this, and then we're continuing to drive pretty aggressively on some internal operational improvements, just in terms of effectiveness, I'm expecting improvement in Engineered Products this year, certainly improvements in margin with a relatively flat topline, if you exclude some of the volume from the facilities that we exited. Yes. I think if you ---+ that business Sealing is made up of Garlock, Technetics Group and Stemco. And so, in the Technetics Group that we expect that to be pretty solid. We'll get back a little on nuclear as I described, but we should gain in semiconductor. We've got the benefit of the new Fabrico acquisition that we did a year ago and that's exceeding our expectations on both the top and bottom line. So we expect that to be a solid part of that segment. Stemco, I wouldn't characterize it quite as weak as maybe you had interpreted, because yes, new builds will be down on truck and trailer side, but that's ---+ we're mostly an aftermarket company there. I think it's anybody's guess on what the aftermarket will really look like, it's just completely driven by domestic economic activity, so ---+ and the margins in the aftermarket are considerably better than the OE market. So even though ---+ and the builds were strong last year, so we expect a little bit of pressure on that side. On the other hand, we had issues with the TrailerTail business. Last year we talked about in terms of some quality issues and other issues in the field. Those are all behind us. We expect much better results out of acquisitions this year. The Air Springs business that we bought in the middle of the year, we've got significant cost reduction plans in place, mostly supply chain. Those are under qualification, those will be coming in, in the first half of this year. The margin profile already improved in Q4 of that business relative to what we bought. And we have ---+ our whole strategy in Stemco was to take advantage of adjacent products through our existing go-to market model. And so all these businesses that we bought have market share significantly below what our core wheel-in product market share is. And so we fully expect to continue gaining share in this ---+ in brake products as well as suspension products. And so that will be a net even with the market headwind. I think it'll be a net contributor to growth in seg. The main pressure in Sealing Products is still oil and gas related to Garlock, oil and gas and steel and mining and metals and so forth. That part of Sealing remains very, very weak. I mean the oil activity and commodity activity and steel activity globally has contracted significantly and we don't see that changing. So what we're doing in that businesses is we're managing costs very, very aggressively and that's where, as I mentioned in my prepared comments that we've made decision to exit the facility in the UK and to serve that market through distribution as supposed to our own operation and that will also happen in the first half of the year. So we're continuing to look in that portion of Sealing Products of what restructuring cost reduction that we can do. So we don't see that changing anytime soon. <UNK>, what do you way. Yes. It's less than ---+ it will be less than $1 million, <UNK>. Yes. That's exactly right. There's nothing unusual to that, it's just reverting back to what we would expect on an average basis. Thanks, <UNK>. We're assuming slightly negative in the aftermarket <UNK>, but quite frankly we have seen that yet. This year so far it has not been coming to ---+ it hasn't looked that way, but yes, we follow the industry publications and the industry forecasters and everybody is saying it's going to be down marginally. So that's what we've got built into our plan. Yes. I think that's a good assumption. <UNK>, I'll make a comment and if you can want add to it. I think what we're going to see is still some favorable dynamics on material costs as there will be ---+ there's typically a little bit of lag between the time we're looking at our material cost and when commodities come down, so that will continue to be benefit. Along with it, we expect that there will be and we're already seeing it increasing price pressure. So we're not building a plan that's based on any kind positive contribution differential between price and cost going into 2016 because of those pressures that we're starting to see. No. We still are looking selectively. It's not broadly across the Company, but we are ---+ we do have a backlog of opportunities that we are nurturing along the way. So it would be our hope that we'd be able to bring one or two strategic add-ons into the, into our Company over the course of the next year. Of course as you know, it can be very difficult to predict what will happen but we ---+ in Sealing Products, we continue to look at a number of opportunities and we'll see how those how those play out. But by no means are we putting anything on hold. We are being more selective and we're being very disciplined <UNK>. We have walked away from some opportunities that we like strategically because of pricing in the market. And as you mentioned, it's been a really strong M&A market over the past year, multiples have been up, we'll see if that moderates a little bit in this year. I would expect it would, but we'll see. So we are maintaining our discipline but we're still actively pursuing acquisitions as a vehicle for growth. As you know, the way we have viewed acquisitions in the past is no different than how we're looking at it now. It's ---+ if we believe we can accomplish a growth objective that's consistent with our strategy through an acquisition, we'll do that but we're not interested in acquiring just for the sake of growth. Yes, I think if we do reach an agreement in the near-term, what we're thinking is that, to step through all the legal requirements and what would be necessary to include the entire Company in this process. It would be probably re-consolidated and concluded sometime between the middle of 2017 and the end of 2017. Our current estimate is closer to the middle of 2017. But we've gone through a timeline on that <UNK>, but until we get an actual deal with the structure known, and so forth and so on, we can't get, we can't tighten up that timing any more than that. But certainly the end of next year, the end of 2017 is very conservative. But again as you know, if we do get a three-way deal, the economics become very transparent and very clear and the kind of certainty of finality also goes way, way up, so it's easy to kind of model and look at the Company on a fully, as if it were re-consolidated basis.

2016_NPO

2016

IPG

IPG #Yes, I've said this before, and if I didn't believe this, we would have changed our strategy. Conversations with our clients and the pitches that we've been involved in, although I can't say specifically it was the reason that we either win businesses or not, our transparency reputation and the fact that we are media-agnostic makes a difference with our clients. The more you see in the price about questions on that, the more it becomes relevant in our conversations. Yes, I do believe it enhances our opportunity to expand our media offerings. As I said, rather than us changing to what our competitors are doing, we're going to see a slowing down of that on the other side because clients deserve the transparency that we give them and they are entitled to realize and know where their profitability is coming at their expense. That's the right way to approach this environment. Yes, that's a fair question, <UNK>. We had said before, we didn't see a big impact on the Olympics. We did have some ---+ obviously, our marketing services businesses, Octagon and Jack Morton, obviously had events in the Olympics, which affected results, not materially. But no, actually, that's real growth (laughter) and you were kind in your question. We did on-board some new clients in Latin America in terms of LATAM Airways and Bradesco, and we see some client spend increasing there. So that's what you're seeing, the reason for our growth in Brazil. It's client specific, it's on-boarding, and frankly, what I like about it, it's across the regions in Latin America. It's not all Brazil; we're seeing strength in the other markets. We're seeing our digital offerings do very well in South America. R/GA and Huge are doing very well down there because the digital environment is ripe for growth. <UNK>ly, we use those markets for production facilities, given the talent base that we have in Latin America, and the effectiveness that we've been able to utilize that talent on a worldwide basis. R/GA, in particular, as well as Huge, use that as a base to service global clients, if you will, in the connected world, as I'll quote Bob Greenberg. And we're seeing that come to fruition using those resources in Latin America. I appreciate your question. Right now, we're really focused on getting through 2016. We haven't started our 2017 forecasting models yet in terms of our business reviews. The only way to look at this is that 61% of our business continues to be in the US. The tone of the business is solid. If you look at Magna, in terms of their forecast of US advertising, roughly 4% is the growth expectations. If you use that as a guideline, we should be plus or minus that, and we'll talk to you more about 2017 when you give you our full results for 2016. I had said I didn't say 2016 was going to be as manic as 2015. That was true, except for certain holding companies had particular items in review. Fortunately, that wasn't us. I do think that whole spectrum of transparency raises legitimate questions for clients to look at their service providers. We're doing a very strong and effective communication with our clients in terms of our transparency. <UNK>ly, some of our clients have audits out there in terms of what we're doing, and fortunately, we're coming through those orders pretty well. That's good. From a tone point of view, clients will continue to look at this. Whether it gives rise to pitches and reviews, I can't say, but I would expect we'll see a fair amount of reviews coming into 2017, not the least of which is these goes in cycles. We're heading into a third of a third year of cycles, and clients have three-year contracts, and as an order of business practices, they put in a number of their businesses in review every two or three years, so I expect to see ---+ I'll call that normal. It's not normal what it used to be, but it seems to be normal what's happening in our industry. Okay (laughter), thank you. Sure. Look, data analytics is an important part. We historically, we've done strategic acquisitions, we see most of our growth coming organically, for example, in Cadreon. We've expanded it internationally. We've coordinated their offerings among all resources and agencies within US, and we will continue to do that, so the bulk of the growth will come organically, however we are looking at strategic acquisitions in that space. We also are looking at a more coordinated basis in terms of our database, if you will, in terms of the DMP. That will be a key focus for us in 2017, to make sure that all the agencies within IPG have a consistent offering and utilizing the unique capabilities we have at Mediabrands. I see that as an important growth vehicle for us. Clients are looking for it. That's the area where we are seeing a lot of competitors, if you will, trying to have in-roads in our clients, so that's when I talk about investment in data analytics, and we're going to be stepping up our efforts in those parts. <UNK>ly, if we don't have it organically and we don't have those capabilities internally, we will look to add-ons. Look, with Mediabrands, we added two very nice agencies this past year, one in the SEO space, and one in the mobile space. Those are growth vehicles for us. Mobile, clearly, is going to be a key driver for business going forward. Our Ansible offering, we've consolidated a number of businesses with the new acquisitions to make sure that we have full integrated mobile offering across our various brands. So this is the value of a holding company across all of our networks and we continue to focus Mediabrands as a key source of providing those unique competencies utilizing these kind of data. <UNK>, the margin question, we target our agencies to deliver a margin improvement target, and whether we get leverage from both major cost buckets, one major cost bucket, it's somewhat irrelevant to us. With that said, <UNK> made a comment early on about the importance of talent, so right now we attribute our growth being tied to the investments we've made against talent. We're constantly looking at that, so to the extent we can squeeze more out of O&G to help support those investments in talent and still meet our margin objectives, that's a good answer. But with that said, <UNK> mentioned 50% of our profit is in the fourth quarter, so I would imagine that our salary line is a contributor of leverage in the fourth quarter, and as we move into 2017, in 2017, as well. You're welcome. Thank you, <UNK>. You've got 1.5 hours, <UNK> (laughter). Let me start, 10 years ago, we started open architecture, okay. It was our belief that clients, in a client-centric environment, that we should be focusing on the needs of the clients, not our particular silos. When we looked at open architecture, the issue is do we, in essence, mold all of our agencies together and say, by the way, here is our best people, and irrespective [of the silos]. Obviously, there are conflict issues, there are cultural issues, there are different go-to-market strategies, and frankly, that serves us well in a marketplace. We don't believe that we need to restructure our entire Company to make open architecture work. We've been doing open architecture for 10 years, and frankly, some of our most profitable and growing clients utilize an open-architecture model. The reason it works is because we've made it part of the DNA of our Organization. People within the, quote, silos, know that if they don't have the capabilities within their agencies, they could raise their hand and we can bring in an expertise that will work closely with them on a collaborative basis and meet the needs of our clients. You don't need to restructure your entire Company to do that. The reason we're comfortable with that is we hold our agencies responsible for collaborative work, so when we do compensation and incentive compensation, we look at the degree of open architecture and collaboration. On many of the engagements, there are multiple agents serving one client, and they don't have to worry about whose silo it belongs in because, frankly, we do that. We work closely with the agencies and we determine what's the proper allocation. Clients shouldn't be involved in it. We think that's a better way of doing this because when you have one single-purpose agency doing this ---+ we have a number of those, but most of the time when you have a single-purpose agency, it's harder to recruit talent, it's harder to keep talent, it's harder to get a sustainability of the quality of the people within those agencies. Open architecture is serving us very well. We get the highest grades of our reviews when we have open-architecture models because the clients realize that we're putting them first. And by the way, our definition of open architecture includes third-party providers, so if our clients come to us and say we would like you to work with X, Y, Z, in addition to your resources, sometimes we work better with third-parties, unfortunately, than our own, but that's part of the model. If you collaborated everyone and put them all into one silo, you will never get that, okay. So the notion of providing all the resources IPG has to a client is the correct one, which is why, frankly, we started it 10 years ago, but I don't believe you have to restructure the Company to do that. You lose a lot of the culture, you lose a lot of the accountability, and you lose the focus that our core agencies have within those particular agencies. Of course not. The first year we came in, we got rid of 50 agencies all over the world. I've said this. We got rid of Uzbekistan. We didn't need agencies in those markets, and because the world doesn't operate that way anymore, so yes, we constantly are looking at that, and ensure the dispositions that we've made are consistent with getting rid of non-producing agencies that are costing us money and aren't adding any value, so that's what we've been doing. On the question of Cadreon and Mediabrands and whether we are decentralizing, it doesn't make sense to invest all of that money in one particular offering and not have it available for all of the other agencies. When I first came to this business, I used to walk around ---+ travel to our different agencies and they would all wheel out what they believed is best-in-class offerings, in particular on the media side. We were spending a lot of money in a lot of things that we didn't have to duplicate, if everyone were able to raise their hand and work closely with the competencies in for example, Mediabrands, whether it be UM, Initiative, or Mediabrands as the holding company, if you will, of media. I think that's the right way to do it and we've done a terrific job on that. For example, if you look at MullenLowe and Mediabrands and Mediahub at MullenLowe working with Mediabrands on the Western Union pitch, that was a great example of competencies within an agency, as well as tapping into particular resources we have in Mediabrands. The same thing as Harley-Davidson. The same thing in all of our open-architecture wins. So that is the most efficient way to use our expertise and the most efficient way to meet the needs of our clients. More and more of our agencies are realizing that if they can do it that way, they get a better offering, and it's much more efficient, and clients realize that they're locking out for their behalf instead of their own silo. You're welcome. Other than that, I don't feel strongly about it, though (laughter). Yes, <UNK>, we look very closely at sequential progression of our salary line, whether that be in headcount, whether that be in other components. If you look from first quarter to second quarter to third quarter, it's clear our operators are managing that quite efficiently. As you point out, the fourth quarter is our largest revenue and profit quarter. So do we expect as that revenue starts to ramp up that we're hiring massive heads. We don't. We should get appropriate leverage through the salary line in the fourth quarter. Again, we take a lot of comfort in our operators' ability to manage sequential headcount progression and they've been doing a very good job. Let me add one other point to that, <UNK>. New clients tend to have less margins than more mature clients, and that's a fact in our business. So what ---+ I'm tempering a little bit the expectation, frankly, that as we on-board all this new business that we have, it's coming in at very high margins, and the margin number of expectation should be a lot higher than, frankly, as this business matures as we go through it. That said, we do have some revenue coming in, in the fourth quarter that we have already incurred a significant amount of expenses. Obviously, that revenue comes with a higher margin, so this is not an exact science. The timing of how we get our revenue and how our expense is, is fluid, if you will, because we have to manage to make sure we have the right people on-boarding new business, as <UNK> said, but we also have to realize that expectations of new clients takes a period of time for it to mature. It just doesn't happen overnight, which is why, even when we started the year, everyone said well why are you being so conservative in terms of your organic growth and margin, and the answer to that is staffing and on-boarding new clients and macro-economics all coming into play at one-time is a tricky thing to model. That's why we like to look at this on a full year basis as opposed to quarter-to-quarter, so we manage it as best we can, but if 50% of our margin comes in, in the fourth quarter, we can't, with a high degree of accuracy, tell exactly where that's going to come. Thanks, <UNK>. Yes, those are two great questions. Shopper marketing, it's important to FCB to have a great competency in it. I would say it's not big overall. I wouldn't say it's a major part of our business as IPG as a whole. That said, there are opportunities for those off-agencies that offer it on a very effective basis, and we will continue to invest behind it when we see opportunities. But I wouldn't call it out as one of the major growth vehicles around the world, if you will, but it is very important to FCB, and they do a great job at it. In fact, that's one of the agencies we pull out when we have RFPs that call for shopper marketing expertise because they do it so well. The more broader questions on the convergence is really how we have to look at the transformation of our industry. I do believe we are seeing new competitors entering our business and they are bringing with them CRM expertise. They are basically system integrators, and because they are already in our clients, they view it as an opportunity to bring in CRM expertise, as well as creative. Which is another reason why when we compete against those, the fact that we have standalone agencies with strong creative talent, it's very hard for these other parties to compete against what a McCann or an FCB or a MullenLowe, or our independent agencies. The fire power we can bring in on creative work, there's no way that these new competitors, if you will, can compete with that, and the results show that. Even though these outliers who are coming into our business are trying to get there, if you look across all of the holding companies, we've been pretty successful when it comes to those integrated offerings that we provide versus what they're providing. That said, we have to watch it very carefully, and clearly, they are going to be coming at it pretty strongly, so we have to be well-suited. I believe the open-architecture integrated offering is a very compelling argument against them trying to get into our business. Thank you. Operator, thank you. We'll conclude the call now. Thank you all very much for participating. Look forward to giving you the results for the full year.

2016_IPG

2016

DCI

DCI #That is correct Yes, it has bottomed out because we implemented in third quarter so you have a fourth-quarter benefit. Yes, as you would expect we look at all uses for our cash, including investing in the business, M&A, dividends and buybacks. And we have a long history of share repurchase, especially to set off any dilution from the impacts of stock-based compensation. I'm sure in the future we will continue to manage as we have in the past. Good morning <UNK> I apologize, we don't talk about forward quarters, so sorry for that, <UNK>. Honestly, <UNK> we don't have a break out of that level. The parts can cross end market so when we give you the general mix, we don't have specific trends by business by quarter. I think to <UNK>'s earlier point, on when we were talking about on road utilization - there are aspects there that were encouraging on the OE channel. Obviously last year we were hitting the first part of the destocking event that carried through the back half of the last year. So that creates some relative ease in the year-over-year comp. But in terms of end-market specific, there was nothing really that I could point to. Sure. <UNK> is looking that up. And while he's does that we will move onto the next question. Thank you. Good morning, <UNK>. <UNK>, this is <UNK>. First I'd really like to say that I'm really very proud of the global organization for the expense control that they have shown, and their resilience throughout this fiscal year. While we don't have anything to announce today, I also want to make the point that we always look at our business within an ongoing process, if you will, to make sure that we align expenses with overriding business conditions ---+ for Donaldson Company it's just standard work. So our independent channel, was up overall in the quarter mid-single digits, low to mid-single digits, and then our OE channel was up low double digits. High single, sorry. High single, sorry. Overall when you take the two components, it's clear to us that our strategies are working. They're working in Europe, they're working in the United States, they're working over in Asia where we feel that we are winning share with our strategy. And that's indicative, in this tough environment, of this aftermarket performance. That concludes today's call. I want to thank everyone for their time and interest in Donaldson Company. I also want to thank our employees for what they do every day to support our customers. Thank you, and goodbye.

2016_DCI

2016

OXM

OXM #Thank you, <UNK>. And, yes. 100%, the reason that we're maintaining guidance instead of raising guidance is really because our view on wholesale for the back half of the year is lower than it would have been a quarter ago. So the whole erosion, if you will, is in the wholesale business. And it has really nothing to do with the way that we are performing in those accounts and has everything to do with the way that they are approaching the market and their inventory planning. It is like we said, we think it is probably a pretty smart move for them and hopefully a healthy thing for the industry. But, we cannot escape the fact that we are feeling some impact from it right now. Okay. Thanks, <UNK>. Okay. So let me start and I'm going to flip it over to <UNK>. I will go in reverse order. In our Asia business, the bottom line is that we are performing according to plan. I think we are actually a bit ahead of our plan for the year. So as you know, the goal was to reduce some of the infrastructure cost, reduce the operating loss over there, grow the businesses, focus on Japan and Australia, and look for opportunities where we could perhaps go with the distributorship model in certain markets. What I will tell you is that we are tracking according to plan. Japan is actually comping really nicely and our losses there are reducing. Australia continues to grow and be a small but a nice market for us. Overall I think we are going to achieve our goals of loss reduction for the year there. With regard to Waikiki and Hawaii, as you have heard from us, we referred to it a bit in our prepared comments when we talked about the international tourist and we talked about it on the first quarter call and probably at some other points that we have spoken with you. Hawaii has been a challenging market for us for the last year or so. The international tourists are spending a lot less money there. We think a lot of that has to do with exchange rates. But overall it has been a challenging market. Within that context, though, we are very pleased with the way that the Waikiki location has ramped up. They have been in business since late last calendar year. And this summer in particular they have trended very nicely. And we believe that is going to be a very successful location for us, both as a profitable store but also as a good brand builder, particularly with regard to a lot of international tourists. And now on the women's inventory question, I'm going to that over to <UNK> and let him give you a little more detail on that. Yes, <UNK>. We had some excess women's and excess footwear inventory that we needed to clear. We did a special flash sale during the quarter, just women's and footwear-centric. There was no men's in that flash sale back in the second quarter. We also got more promotion in our outlet stores to move those categories. A lot of that, of the women's, was pre-spring, maybe a little bit of early spring, but most of it was pre-spring. We just needed to keep pace and keep our inventories clean. As then as we mentioned, our inventories at <UNK>my are down even though we have seven additional new stores and have growth planned. So we are really pleased with the fact that they are focused on the inventory reduction. But it did eat into the margin a little bit this quarter. We did comp up nicely at <UNK>my, and that was in men's and women's in the second quarter. So we were pleased to see that. Keep in mind, <UNK>, that it takes us more than a year to really make any adjustments between when you see retail selling on the floor and when you get to anniversary that and put those learnings into use. That said, we were pleased with what we saw in the second quarter. Women's sort of pulled its weight and contributed positively to that comp that we had. So it had a year-over-year increase in comp stores and e-comm, which was good to see. Overall, as you know, in the first quarter it was a little more hit and miss. And overall I think what we have learned in the first half of the year is that we continue to be very strong in women's swim and in dresses, which have always been strong categories for <UNK>my in women's. And we have learned an awful lot in regards to sportswear that we will incorporate into next spring. So a good solid second quarter. And for the total first half, I think we have learned a lot that will help us next year. It is very early stages. And to be very direct about it, our initial focus, this brand was much more earlier stage than other acquisitions we've made. And as we outlined in our first-quarter call, we thought there was a much greater opportunity here than, say, when we bought <UNK>my Bahama to really help them by providing a lot of infrastructure and back-office type functionality, fulfillment through an existing distribution center where you have ---+ and things like production and sourcing, product development. We have been very focused on bringing them onto our platform in the first couple of months. And that has gone extremely well. We think that sets them up well for growth. As you know, currently their business is about 80% wholesale, and that is primarily specialty stores. And I think they are in about 700 doors or so, specialty store doors. Then they have a very small department store business with two of the better department stores. And in total that would be probably 5% of their business, or something like that. So growth opportunities going forward, we definitely think e-comm is one. Wholesale is an opportunity. They've just gotten into doing a couple of license stores, similar to the Lilly Pulitzer license stores. And then a couple of years out we anticipate that they will open Company-owned stores as well. Okay. Thanks, <UNK>. You do have the Lilly flash sale in Q3. So that tends to pull down gross margins. Also it is a very weak direct quarter. We also ---+ Lanier, who has lower gross margins actually will have third quarter, will be a decent quarter for them ---+ fourth quarter being a little more challenging for them. All of that will weigh margins down year over year, probably a couple hundred basis points year over year, with the bigger flash sale and Lanier being a little bigger piece of the pie weighing into that. Yes. There is no question about it, at the back half of the first quarter and early in the second quarter we really felt the year-to-year difference with the Target collaboration that happened on April 19 of last year. So in May we comped down in the upper teens. And then in June and July we sort of roared back and had very strong comps to finish the quarter at a minus 1% comp in Lilly, which we thought stacked up against the plus 41% last year, and I think a plus 19% a year ---+ Two years. Both years before that. Yes, both years before that. So plus 19%, plus 19% plus 41%, and then to be at minus 1% this year with a very strong June and July, we just couldn't be a whole lot happier with that result. So hopefully that helps. I think that to be fair, I think even this time last year we were still getting some kick from the whole Target collaboration. But we have shown, I think, in the back half of the second quarter that we can more than overcome that. So in terms of comp assumptions for Q3 and Q4, I will let <UNK> ---+ Yes, and we had strong comps last year in both quarters but we still think we can comp positive. And we think it will be a more modest rate as we are going against strong comps. But we would expect Lilly to comp positive in Q3 and Q4. But again, more modestly. We generally try to avoid being in that business of having a lot on hand to support chase. There are some areas in some specific pockets of business where we do that. But, for example, in <UNK>my Bahama that is part of why their inventories year to year are lower, is that the orders came in a little light and we're trying to keep our inventories a little bit light as well. To reiterate what <UNK> said a minute ago. We feel really good about where our inventories are. And we think that <UNK>my in particular has done a terrific job. And with the flash sale at Lilly, which is a Q3 event, they came out of Q2 a little bit heavier than last year, because last year they did a warehouse sale in Q2 and then the flash sale in Q3. This year we did away with the warehouse sale, which I think was about $4 million last year. So, Lilly, we're in really good shape on inventories. Okay. Thanks a lot, <UNK>. Yes. That is a great question and very timely. We just opened a new store in the NorthPark Mall in Dallas about 10 days ago. And that is sort of the A-plus mall in the Dallas market. It is off to a great start. We are very excited about it and we think it is going to be a very successful store. We had our Lilly Pulitzer CEO and key members of a retail team been out in Texas this week. It has never been a huge market for us. We have had a couple of stores out there. But we really believe that we can build that. And then we opened a store in Chicago, I guess, that was a year ago now. And we have been really pleased with the way that that one has worked. So as we build into these markets, we want to be careful and make sure that we are building very carefully and supporting these stores well with marketing and other support in markets where we are not as well known. We believe that we can be successful and we will continue to build into those markets. It is really wholesale driven, the fourth quarter, maybe nothing is having quite the year-over-year growth that some would expect. As mentioned earlier, Lanier, we're expecting a fairly weak fourth quarter. Third quarter we're expecting to hold okay. But fourth quarter we are seeing a little lower order patterns. And we are seeing holiday bookings, people booking more conservatively. Sure, there will be ---+ hopefully there'll be some chasing going on. Hopefully there will be an opportunity to capture some of it. But as <UNK> mentioned, we're not going to have a ton of inventory to support a ton of that, but it is wholesale driven is the maybe the lightness you might feel in the fourth quarter, is wholesale driven. Thanks, <UNK>. On the loyalty gift card event, we are very pleased with the way it works. I think it was maybe a few more cards than last year, but roughly comparable to last year. It worked extremely well, as did the other two second-quarter events. We actually had an additional event last year, the Polo'ha Polo promotion that you may remember that we actually dropped this year. So on a combined first- and second-quarter basis, we actually had one less event not one more ---+ or not the same amount. Actually, the event sales themselves, we actually drove a little bit higher gross margin year over year. But we had a little more concentrated volume within the event. The event, people responded more to the event but we were able to drive a little higher gross margin in the event. We went with 175 hurdle on the flipside, which worked well. And we tend to get a little higher average ticket during that event. In outlet stores, that world is changing a bit. And I think it has everything to do with the amount of off-price that is available all over the place. So as you will have noticed, we have not opened an outlet store in a while. And we're really revamping the way that we merchandise those stores. We have tested it in a couple of markets and have been very pleased with what we have seen so far, and anticipate that we will probably do that more broadly within our 30-some-odd outlet stores that we have at this point. I think not so much for the Lilly, because of their strategy which is really not ---+ they are not into the department stores much at all. In <UNK>my Bahama, I do think it possibly creates some opportunity to do some more business. Thank you. Thank you again for your time this afternoon. We very much appreciate your interest, and look forward to speaking to you again next quarter.

2016_OXM

2017

ANIP

ANIP #Good morning, everyone, and welcome to ANI's Earnings Conference Call for the Third Quarter 2017. My name is Art <UNK>. I am the CEO, and with me today is <UNK> <UNK>, our Chief Financial Officer. Before we begin, I want to refer everyone to the forward-looking statements language in this morning's press release and ask each of you to review it carefully as important context for this conference call. Discussions will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures can be found in our earnings release dated today. Today, we reported our third quarter results: record net revenues of $48.2 million, record adjusted non-GAAP EBITDA of $20.7 million and record adjusted non-GAAP net income per diluted share of $1.11, increases of 25%, 26% and 44%, respectively, as compared to the prior year. These results are the direct result of our brand product launches of InnoPran and Inderal XL and the continued impact of generic products launched in 2016 and 2017. Year-to-date results include net revenues of $129.6 million, adjusted non-GAAP EBITDA of $54.5 million and adjusted non-GAAP diluted earnings per share of $2.83, increases of 43%, 26% and 38%, respectively, as compared to the prior year. As a result of these reported financial metrics, we are narrowing our annual guidance to annual net revenues of $181 million to $183 million, adjusted non-GAAP EBITDA of $74 million to $76.3 million and adjusted non-GAAP diluted earnings per share of $3.83 to $4. The changes to guidance reflect better than previously forecast product mix and gross profit pull-through on net revenues. Our 2 primary business platforms, generic pharmaceutical and branded pharmaceutical products, generated $30.5 million and $15.7 million in the third quarter net revenues, increases of 1% and 130%, respectively, as compared to the prior year quarter. On an annualized basis and calculated from third quarter revenues, our generic net revenues are at an annualized run rate of $122 million and our brand net revenues are at an annualized run rate of $62.8 million. As a result of our increased brand product net revenues as compared to generic products, cost of sales was 38% of net sales, excluding inventory step-up costs. This is indicative of a 62% non-GAAP gross margin for the third quarter, an increase of 2 percentage points as compared to the second quarter of 2017. In the third quarter, we launched 2 additional generic products Indapamide tablets and oxycodone hydrochloride oral solution. These product launches increased our generic product line to 23 total products, representing 47 SKUs. Combined with our 7 brand products, ANI now has as a total of 30 drug products in our portfolio. For perspective, at the end of 2015, ANI had 16 drug products in our portfolio. We continue to pursue transactions in both generics and brands to add value and scale to our existing product portfolio. We have sufficient available capital for these opportunities. Cortrophin gel and its recommercialization effort continues to progress. In the third quarter, we executed a long-term commercial supply agreement with a fill/finish contract manufacturer specializing in aseptic parenteral manufacturing using mobile isolator technology. Combined with our current relationships for raw material procurement of porcine pituitary glands and active pharmaceutical ingredient of purified corticotropin powder, we have finalized our Cortrophin gel supply chain. We continue to advance process characterization by manufacturing intermediate scale batches used to determine ---+ used to demonstrate lot-to-lot consistency in both yield and potency. Analytically, we continue to modernize the corticotropin characterization package by developing and implementing new and current analytical technologies that were not part of the original Cortrophin gel NDA. These methods are being utilized throughout the API manufacturing process as a means of establishing lot-to-lot consistency and process control and demonstrating comparability to historically manufactured commercial lots of API. Our plan is to initiate commercial scale manufacturing in early 2018. In this press release, we have included Table 5 that is intended to provide Cortrophin recommercialization milestone updates as we advance to our supplemental NDA regulatory filing. We are also advancing commercialization for another branded product, Vancocin oral solution. We intend to file a prior approval supplement in the second half of 2018. We believe the launch of this product will fulfill a currently unmet need for an FDA-approved oral dosage form of the vancomycin molecule and will compete in the market that currently exceeds $450 million annually. I will now turn the conference call over to our CFO, <UNK> <UNK>, who will provide you with more details on our financial results. Thank you, Art. Good morning to everyone on the line, and thank you for joining the call to discuss ANI's Third Quarter 2017 Financial Results. For the these 3 months ended September 30, 2017, ANI posted net revenues of $48.2 million, non-GAAP adjusted EBITDA of $20.7 million and non-GAAP EPS of $1.11 per diluted share. All 3 of these metrics represent new quarterly records for the company coming off the previous records posted in the second quarter of this year. These results continue to reflect ANI executing its strategy to broaden its portfolio in order to achieve strong contribution across multiple product lines. Consistent with the second quarter of this year, the number of product families in our commercial portfolio that posted quarterly net revenues in excess of $1 million nearly doubled from 8 in the third quarter of 2016 to 15 in the third quarter of 2017. Net revenues for the third quarter reached $48.2 million, representing a 25% increase from prior year and were driven by the continued execution of key 2016 and 2017 product launches and accelerating growth in our branded product portfolio. On a sequential basis, reported net revenues increased $3.4 million or 8% from our previous quarterly record posted in the second quarter of 2017, driven by gains in our branded product portfolio. Third quarter adjusted non-GAAP EBITDA was $20.7 million, representing a $4.3 million or 26% increase from the year ago period and representing the first time that we have posted greater than $20 million of EBITDA in a given quarter. This result was achieved while increasing our year-over-year investment in research and development by $1.6 million as we continue to advance our Cortrophin recommercialization program and invest behind our Vancocin oral solution pipeline opportunity. On the sequential basis, adjusted EBITDA of $20.7 million grew 8% from the second quarter of 2017. GAAP earnings per share increased from $0.22 per diluted share in the third quarter of 2016 to $0.40 per diluted share in the current period while our adjusted non-GAAP diluted earnings per share metric increased $0.34 or 44% from prior year to $1.11 per diluted share. Turning to the highlights of our third quarter sales performance. Net revenues of our branded products more than doubled, increasing from $6.8 million in the third quarter of 2016 to $15.7 million in the current year period, driven by gains in our Inderal LA franchise and the addition of InnoPran XL and Inderal XL, which were introduced into our product portfolio in February of this year. Net revenues of our generic products increased to modest $355,000 or 1% as gains from 2017 launches and certain key products were tempered by the nonrecurrence of higher launch quarter revenues of certain products that were launched in the third quarter of 2016. Revenues from our EEMT franchise posted a second consecutive sequential quarter sales gain with revenues of $7 million, up 21% from the second quarter ---+ I'm sorry. Yes, up 21% from the second quarter of 2017, driven by increased volume. In addition, revenues from contract manufacturing services were up $402,000 or 28%. Cost of sales as recorded on a GAAP basis includes $2.8 million of cost recorded due to the step-up of phases for finished goods inventory purchased in conjunction with the Inderal XL and InnoPran XL product acquisitions. Comparatively, the third quarter of 2016 included $1.1 million of such costs associated with the inventory step-up of previous acquisitions. Excluding these amounts, cost of goods sold represented 38% of net revenues for the third quarter of 2017 versus 40% in the year ago period. The 2-point improvement in this metric is driven by a significant change in product mix towards sales of branded products, which generally carry higher aggregate margins as compared to our generic product lines. Selling, general and administrative expenses were $8 million as compared to $6.9 million in the prior year, driven by employment and related costs to support the growth of our business. SG&A as a percentage of revenues decreased approximately 1.3 points from 18% in the prior year to 16.7% in the current year, reflecting greater leverage of our employee base and business platform. Research and development costs totaled $2.6 million in the current quarter, approaching 6% of net revenues, driven by continued momentum in our Cortrophin recommercialization program and costs incurred in conjunction with our Vancocin oral solution development program. Our overall effective tax rate for the quarter was 26% of pretax income and included discrete benefits that were recognized in the quarter. Excluding these amounts, our effective tax rate would've been approximately 31% for the quarter and relatively in line with the first half of 2017. On a year-to-date basis, we have posted nearly $130 million of net revenues and $54.5 million of adjusted non-GAAP EBITDA, representing year-over-year gains of 43% and 26%, respectively. These gains were fueled by 34% growth in generic product revenues and 78% growth in revenues of our portfolio of brands. From the balance sheet perspective, we had unrestricted cash and cash equivalents of $18 million as of September 30, 2017, representing an increase of $9.7 million from the June 30th balance sheet. This balance is reflective of year-to-date cash flow from operations of $23.6 million, of which approximately $17.1 million was generated in the third quarter. Of this amount, we utilized $5 million to pay down against the $30 million of principal that we drew against our revolving credit facility to fund the Inderal XL and InnoPran XL transactions in the first quarter and an additional $2.6 million on capital expenditures. As of the September 30th balance sheet date, we had net debt of approximately $151 million, representing just 2x net leverage utilizing estimated forward-looking full year 2017 adjusted EBITDA. We continue to anticipate strong cash generation in the fourth quarter and are confident in our ability to fund business development activities by leveraging off the strength of our balance sheet and future earnings potential. To reiterate Art's comments on forward-looking guidance, as we stated in our press release this morning, we are updating our full year 2017 guidance range to narrow our previously published guidance for net revenues and adjusted non-GAAP EBITDA. We currently project full year net revenues of between $181 million and $183 million, representing a robust 41% to 42% increase over 2016 and a corresponding 21% to 25% growth in our adjusted non-GAAP EBITDA to reach between $74 million and $76.3 million. In conjunction with this change, we are making a modest upward revision of our projected full year non-GAAP diluted earnings per share to be between $3.83 and $4 per diluted share and a favorable revision in non-GAAP cost of sales as a percentage of revenues to be between 39% and 41% of net revenues. As Art stated, this morning's revisions to guidance reflects better than previously forecast product mix and corresponding product pull-through on net revenues. In summary, with 9 months of 2017 behind us, we remain pleased with the results achieved to date and remain focused on continued execution of our business plan and daily operations as we look to the fourth quarter. We are focused on continuing to deliver near-term results while investing behind our 2 exciting brand pipeline opportunities Cortrophin and Vancocin oral solution. In addition, we remain diligent in pursuing business development opportunities in order to continue to expand our product portfolio and drive long-term value to our stakeholders. With this, I will turn the call back to our President and CEO, Art <UNK>. Thank you, Steve. Nicole, we will now open the conference call to questions. Yes. <UNK>, thank you. So for us specifically, pricing is product-dependent. It is specific based on the product, the number of competitors and, obviously, our forecasted or anticipated market share. If you ---+ if we launch a product, I think you know that we have to reduce the price in order to ---+ from its existing levels in order to capture market share. And generics to me remain consistent with the number of competitors for that particular product. The more competitors, the greater the price reduction. The advent of a brand-new consortium in terms of ClarusONE, typically, you have your initial shock to the system. They tend to do a cash grab and take money right out of your revenue base. And what we have seen associated with that is the larger generic companies not utilizing their scale to offset that. We view us as somewhat independent from that, in that the products that we attempt to choose and introduce, we take great pains to identify products potentially, again, that have perhaps more opportunity for gross margin. So our gross margin on our generics remains, I think, fairly high, and we obviously try to stay away from some of those more commoditized products. I think in terms of price stability in the marketplace, it is all dependent upon company-by-company and product-by-product specific basis. You put out a very good report from time-to-time, <UNK>, that talks more to the macro environment. But the macro environment for generics is always downward and is always dependent upon future growth for a company based on new product ---+ new generic product introductions, because we model in year-to-year, just as a placeholder, a 5% reduction year-over-year for our existing products just based on the nature of the competitive business that generic pharmaceuticals represent. We have tried also, as you can tell, to mitigate or offset some of the volatility associated with generics by moving the company into brands, and you now see that our branded franchise is representative of, obviously, higher-margin products, substantial cash flow and continues to grow. We've built that branded franchise through acquisition, and we intend to continue to do so. But we also have in our pipeline 2 very, very important products, 2 branded products in Cortrophin and Vancocin that potentially represent significant growth to the company in the near term. And so that's essentially how we view the landscape at this moment in time associated with generic pricing and how it has affected ANI and how we have also focused much of our efforts towards branded portfolio products as well. All right. I see. Thanks for the question, <UNK>. It's a good one. And before I answer it, let me give a shout out to our VP of Business Development, and his name is Rob Schrepfer. And he has found many of these assets for us in unsolicited transaction, and they have led to a significant amount of growth above and beyond what we might have anticipated initially in modeling out some of these assets that we acquired. He continues to look for us, for strategic opportunities in both generics and brand. We see a blended sort of hybrid model here, where we're not just primarily a generic pharmaceutical company anymore. But we obviously are morphing into more of a hybrid model between those 2 segments. So I can tell you that he's active in both spaces. And for smaller companies like us, as larger companies rationalize out small gross profit contributors, lot of work to maintain the supply chain, products eat up manufacturing capacity for them, as they make way for newer, maybe more lucrative product introductions, those smaller products represent opportunities to us, especially if the competitive environment for those smaller products shrinks. Generic pharmaceuticals is a function of supply and demand. The more competitors, the less the margin. The less competitors, the higher the margin. It's frankly that simple. It's just capitalism at its finest in terms of the dynamics associated with the competitive landscape for each product. So I can tell you that if we see generics that are coming to market that make opportunistic sense for our company at good multiples, I would say that we'll be front and center for those opportunities. And the same is true of some of these branded products that we obviously look for from time to time. So to answer your question, we see rationalization of generics out of larger generic pharmaceutical companies' product lines as a potential opportunity for a company like ANI. So that is not ---+ the $450 million market opportunity is not specific to Vancocin oral solution, again, a product that we feel meets an unmet patient need. That is for the entire vancomycin molecule. That includes injections, oral capsules. There is a compounded market for this Vancocin oral solution, and we are the RLD for this product. Again, that's why we can file a prior approval supplement. We acquired this dosage form from Shire in ---+ I don't want to misquote myself, but I believe it was 2014. And so we've essentially modernized the formulation, and we feel we can bring it to market. We believe that the product can reach peak sales for us of about $50 million on an annualized basis. So we think it's an excellent opportunity for us. And ---+ but that $450 million number relates to the ---+ what we feel is the entire today's market ---+ annualized market size for the vancomycin molecule. There's ---+ <UNK>, that's ---+ there's an easy answer to that. We are the RLD. There is no RLD on the market. From a GDUFA perspective, I believe the ---+ I believe it's a 6-month time line. Yes. So we will talk about that. We still intend to request a meeting in the fourth quarter. So we're in the fourth quarter now. And that is really to present our regulatory filing plan and ---+ which encompasses process characterization, modernization of the analytics, of the NDA chemistry section. And it's a very comprehensive document that's being compiled now by our VP of Cortrophin regulatory affairs. So what we will do is when we have a firm date to meet with the agency ---+ I don't want to commit to this, but chances are we'll update our milestone table and announce it, okay, and go from there. And that's how the public will get communicated to on what the date actually is. Yes. We tend to give our Cortrophin gel updates during earnings conference calls. So you should expect that continuity associated with progress on that product. I don't care. The answer is no in terms of surprising developments, and I won't comment on any agency communication. That's excellent question, and we are not ready to opine on 2018 at this moment, <UNK>, sorry. It is our sort of standard operating procedure to provide next year's guidance when we announce our fourth quarter 2017 results in ---+ I believe it's April. So it would be our next earnings conference call. Sorry. Go ahead, Steve. Yes. So we ---+ you should look for that, <UNK>, sometime in late February when we announce year-end earnings and file the 10-K. So yes, we would expect that meeting to occur in the first quarter of 2018, okay. We will request a meeting shortly in 2017. But I say it would be best for us to say that meeting will occur in first quarter of 2018. We have effectively captured share in that product. It's growing very nicely for us since launch. We have been helped by the fact that one of the competitors has had some supply disruptions. And so that has allowed us to maybe step into those contracts, and it allowed us to gain some traction in terms of market share a bit quicker. But again, it's been ---+ it was always a nice opportunity, and I think it exceeded ---+ safe to say, it's exceeded our expectations since launch. It's a good question. No, it's not a lot of noise. We have been ---+ we are marketing the product. We have had a inspection associated with that product and been granted an Establishment Inspection Report. So they are well aware. We've had no findings. But they have asked us to also do a small clinical study, which we're doing and submitting to them, we believe, in February of 2018, a fasting study. I believe it's continuing. I think that our branded step-up of 130% increase in branded revenues is something that will continue, not at that level, but at the ---+ at least at, certainly, the annualized run rate of brands that I mentioned in my narrative. And I'd like to thank everybody for joining and participating in ANI's Third Quarter 2017 Earnings Conference Call today. I wish you all a good day and a nice afternoon. Bye-bye. Thanks, everyone.

2017_ANIP

2016

CVLT

CVLT #So at the 100,000 foot level, the major driver of our Business is large enterprises as they move to the cloud. And that's helping them manage data from on-premise to the cloud, manage data in the cloud, and then help them manage data in these hybrid environments. That is the big driver in large Enterprise. And more and more, our stand-alone solutions for the mid-market are dealing with the same issues but on an individual product basis or individual use-case basis for, let's say, dev test or for DR. So the cloud has become the major driver of our Business in what we would call modern data management. And in doing so, we partner heavily with the big cloud providers like Microsoft and AWS. The numbers, what we said is that the number of petabytes stored in the cloud in the first nine months of the calendar year are more than doubled. And I can tell you the cloud is a material part ---+ a significant, material part of our revenue and of our revenue growth. And the second question, just to reference your ---+ . Well, a couple things, one is we will most likely be an early adopter of the new accounting standards, which allows you to mix and match these different license revenue models, and we'll have more comment about that on next quarter. Secondly, I believe our core business as described will continue to grow. But as we add things like software-defined solutions for big data and for digital content, those will probably be sold as ---+ on a term base. Now, as we go into FY18 is where the big acceleration will take place. They will be booked up front, and it's going to look like a perpetual ---+ the accounting of that will look like a perpetual sale, even though that term-based sale might be over 3 to 5 years. So that is probably the biggest change in time-based revenue. In addition to that, we are ---+ and this is, I think, going to be slow and gradual ---+ we are moving to a subscription-based both managed services and delivering these solutions as a SaaS ---+ as a cloud-based service. That, I think, will be a slower adoption and take place over time, and it will be booked as a typical subscription-type sale. And, lastly, in the second half of FY18, maybe sooner, but certainly by the second half of 2018, as we get into our content-based platform for business analytics and business process automation, it is likely that those solutions will be supplied on a subscription basis as well. So the way I would sum it up is you have a core business, call it a perpetual business, which should continue to grow. And these other businesses most likely will result in accelerated growth rate on top of that. So we'll give you more guidance on that as we get into FY18. Well, clearly that's been the big driver of funnel growth is our large deals. Deals over $500,000, deals over $1 million has been the biggest factor in our funnel growth year over year. And that's historically and going forward is the same. Obviously if we grew 22% in [license] revenue in the quarter, that's pretty indicative of where the funnel is going. And we also mentioned, even though we have had strong funnel growth, and we have, and it's continued and it's been consistent, we have some tougher comparisons going into Q3 and Q4. But it bodes well for the underlying momentum of the Business. We are doing both. We clearly have what I would call significant initiatives to improve productivity. At the same time, we are expanding sales capacity. So they are both built into the models. And what I can tell you, as you look out to FY18, results are going to be ---+ I think will be good no matter what on the top line, and the bottom line will be dependent on how well we achieve our sales productivity objectives. Hello, Andy. It's <UNK> here. Let me just clarify that I think you have to ---+ the comments we made were around, once you factor in the Q2 actual results and the existing consensus that's out there, it would be higher number than what you just quoted of $635 million. So maybe just take a closer look at that model, but we are bumping up against tougher comparisons. We do expect sequential growth in the second half, both for software revenue in particular, and then total revenue. We said the year-over-year comparisons will be slightly challenged due to the strong performance in the second half of FY16. But I would suggest just taking a closer look at the model, because it'll be higher than the number you mentioned. We were pleased with Fed this past quarter. It was up substantially sequentially. It was also up year over year. It was driven by some larger Enterprise-sized deals, but we got good traction out of our Fed group and we were pleased with their performance. Yes. So what I said was that services revenue would be flat sequentially in fiscal Q3, and then most likely decline sequentially in Q4. And this is just the matter of us entering into this maintenance pricing adjustment and the compounding effect of doing that throughout the year. It's also related to just overall software growth from the prior year as well is also impacting that. So we did forecast that at some point during this transition we would have a sequential decline in services revenue. And this is the quarter, meaning in Q4, that we will see a sequential decline. Yes. So I think the operative word is accelerated. So if you think about the business model that we put together a number of years ago, we are clearly working at the high end of expectations on that model, meaning the objective was to build a new foundation for growth and then enhance that. So that has worked. And if you think about maintenance revenue, which was your prior question, obviously 4 to 6 quarters out, you see ---+ you will see an acceleration of the maintenance revenue tied to what we've achieved in FY17. You'll see that somewhere in mid-2018. And that has a big impact on overall growth rate and a substantial impact in improving operating margins. And we've already built a foundation for that, and we just need to sustain it. So just going back to the fundamentals, again, the big drivers have been this whole expansion and federation of managing data to the cloud in both large enterprises and now mid-market. So what we are doing is we're adding a substantial number of core use cases or workflows that we traditionally have not participated in. So you can think of that as both market expansion and revenue accelerators in our core business, and now extend that to some really large markets on big data and software-defined storage. And then add on top of that in the second half of 2018 a significant move into expanding our ability to manage content with some really unique capabilities, which we'll talk about in a quarter or so. And we're on track on all of those to hit our own internal objectives. So the new products I talked about are being released this quarter and next quarter ---+ and early next quarter. And realistically, we will start to see the impact of those in ---+ we'll see some impact in FY17. It will start to be licensed revenue accelerators starting in Q1 of FY18, and building right through the FY18 into FY19. We haven't given that number, but it is very, very material. It has now become a substantial part of our licensed revenue is coming from the cloud. Yes, I mean, that's past history. That ship is way behind us now. That occurred several years ago. But the cloud has become a major accelerator. I'll let <UNK> expand on this a bit because the SaaS issue actually becomes an accelerator as we manage SaaS data, as well as the public cloud-related data but, <UNK>, why don't you pick that up. Yes. We're starting to see some longer-term maintenance support contracts as we go through this realignment process, and just in general as we penetrate more and more Enterprise accounts. So that's a nice positive uptick on long-term deferred that came along with it. We are not seeing ---+ <UNK>, this is <UNK> here. We're not seeing any immediate Brexit impact, although we are very aware of it. So we are watching our funnels. We're being proactive with how we're monitoring the situation. But that was not the reason for slightly suppressed EMEA growth rate. We're still pleased with the EMEA overall software growth of 12% year over year. There were mega deals involved, and that's going to swing it from quarter to quarter. But we're overall pleased. And the outlook for EMEA going forward looks good as well. I think we said that we're going to prudently accelerate investments. We have a window of opportunity here, as <UNK> laid out. And we want to take advantage of it; while we have the momentum, it is time to invest. It's not time to pull back at this point. However, we are keenly focused on our longer-term goals and we haven't wavered from that of, once we're north of $1 billion, we would like to think we could get back to that about 20% operating margins or a little bit north of that. That is our longer-term goal. If you think about it, it's really clear, even with investment, that as your maintenance line kicks in, in the second half of 2018 ---+ that doesn't mean by the way we can't do well in the first half as well. But you're going to see a significant improvement in operating margins. And if you combine that with things we're doing to improve sales productivity, both of those will drive up margins. And that 20% operating margin is a realistic objective, even though we're investing. So, what your investment does is accelerate your top line, and it also, that investment also helps you drive sales productivity. So we got ---+ the odds are all with us right now. We got lots of tailwinds, and we're just trying to maximize them over the bulk of the short and long term. I would say that we always try to consider a normal close rate when we factor our guidance. However, we do understand this is the biggest swinger that could happen throughout the quarter. And as <UNK> laid out, in terms of the risk and the model, it is the close rates on those mega deals. We feel comfortable where we're at entering this fiscal Q3. We do have a healthy pipeline, and again, we are assuming normal close rates on that, and hopefully we can execute. And we're increasing the number of those going into market over the next couple of quarters. So, one, that strategy has been successful, and you can use the sense we're doubling down on it now, as well as improving our position in the Enterprise. It reinforced what we're doing, certainly with the big public cloud providers. Certainly Microsoft and AWS, I think we will expand that. Even though we haven't put a lot of focus on Google, we are starting to get some pretty good traction. In the Google Cloud, the big GSIs clearly have been an area of focus. That was reinforced. And on partners like Cisco, we are expanding that partnership with some additional things that we can do with Cisco and Huawei. So we will expand those. Our healthcare business has been extremely strong, and we've got a number of new partners in healthcare as well. And then there is no doubt that with the increased number of stand-alone solutions, that with new, easier to use user base, web-based UIs with simpler messages that we will reenergize our core channel. It will enable them to be a lot more effective in moving stand-alone solutions globally. So our strategy is all go to just reinforce the current strategic direction we're in, both from a product standpoint, and from distribution and alliances. It's a point that I did raise that there's no doubt that at the pace that we're moving, that there is room for us to improve are good. The pace and quality of our go-to-market execution here goes through. We have a big opportunity, and it's only going to accelerate. So there's a lot of focus on that. And that effort, by the way, will track right into distribution and alliances as well. I'm going to let <UNK> answer that because he's the guy that figured a way to approach this on a targeted basis, particularly as we move into big data environments. <UNK>, why don't you take that on. The other point I'll make is what <UNK> and the guys have done here is with a web-based UO we can customize those UIs for those specific verticals, so as we go to market we'll be going into market with highly targeted customizable solutions into those market segments.

2016_CVLT

2016

ARW

ARW #Yes, thank you, <UNK>. Yes, I apologize for the confusion. I was really referencing the increase in the global components business. I was not expecting any type of gross margin change. In fact, what I was really referencing was our expense program that we talked about last year, we're making good progress. I expect this, we'll be at full run rate, as we enter the third quarter, and we'll start to see the benefits of that. So that's what I really was referring to around margin expansion. With that also, keep in mind, that the leverage we get in the business should also drive margin expansion, as we've had a couple three quarters in a row, now where our global components business has outgrown the market. Well, if we did some pro forma calculations on Q1, we'd be right there. So the answer from me would be that, yes, we'll be closing the gap, and we expect to get there. What's been interesting, as if to maybe to add onto <UNK>, is that the encouragement I think, around this for us is that we've seen North America grow again. We went through period of time, that the North American market didn't grow, and we've been able to offset that now and if we can get North America and Europe to grow, it sort of offsets some of the pressures that Asia puts on us. And you can imagine a 10% swing by any of those regions over a quarter, does have an impact on your mix. And what's we do watch. But the fact that we're seeing the backlogs in North America up, that we're seeing our design wins in North America up, that we're seeing our bookings up in North America. I think we have a pretty good confidence that this will play out. What we won't do, and what you've obviously seen by the performance this quarter, is we're not going to cut future investments around the cloud, or digital, or software, or IoT to achieve that 5%. We fully expect to do that through growth, and the external market. So I just want to make ---+ just reassure you, that while it would be easy to cut out any or one of those programs, and be above the 5% level, that's not what we're going to do here. Thanks for the question, too, <UNK>. The reality is that we have a very short window, where we can do open market buying, and then we have to put in a 10b5. To go back to the timing of our fourth quarter earnings release, we were debating the target setting for the 10b5 in mid to late February. You may recall, during at that point in time, there was a lot of volatility in the stock market, as many investors who were asking us about the threat of a potential recession in the United States. So we probably were a bit more cautious, because of the economic backdrop, what people were asking us and the volatility, and we put the10b5 plan in place, as the window closed in late February. I would say sentiment obviously changed from an investor point of view and I think some of it, in the short term, economic data tightened up in the month of March. So it was more around, trying to conform to the requirements of a window, and putting our best foot forward around the volatility, and that's the only reason why. I would fully expect us to be active in the buyback program, as you go throughout the rest of this year. Thanks, <UNK>. Sure, <UNK>. So the two acquisitions we did were modest, compared to Arrow Electronics Inc. The run rate for those acquisitions is probably about $50 million for Q2, and a nominal impact, and maybe $0.01 or so on earnings per share. I think the run rate question really is that we'll continue to close the gap on the target that we've set. And we'll see that uplift in the second half of the year. And yes, for sure we'll see uplift, year over year on our operating margins, Or that's our expectations anyway, as we go forward. Sorry, <UNK>. I wasn't clear enough. That would be the impact on Q2. Thanks.

2016_ARW

2016

AWK

AWK #Thank you, Carrie. Good morning, everyone. And thank you for joining us for today's call. We will keep the call to about an hour. At the end of our prepared remarks we will open the call up for your questions. During the course of this conference call, in both our prepared remarks and in answer to your questions, we may make forward-looking statements that represent our expectations regarding our future performance or other future events. These statements are predictions based upon our current expectations, estimates, and assumptions. However, since these statements deal with future events they are subject to numerous known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from the results indicated or implied by such statements. Additional information regarding these risks, uncertainties, and factors is provided in the earnings release and in our 2015 Form 10-K, each as filed with the SEC. I encourage you to read our Form 10-K for a more detailed analysis of our financials and other important information. Also, reconciliation tables for non-GAAP financial information discussed on this conference call, including adjusted EPS and our O&M efficiency ratio, can be found in the appendix of the slide deck for this call, which is located at the Investor Relations page of the company website, as well as our earnings release. We will be happy to answer any questions or provide further clarification, if needed, during our question and answer session. All statements in this call related to earnings and earnings per share refer to diluted earnings per share from continuing operations. Before I turn the call over to <UNK> I would like to take this opportunity to introduce you all to Melissa [Schwartzel], our new Director of Investor Relations. Melissa has been a member of American Water's finance team in Lexington, Kentucky since 2009. Her experience includes supporting rate cases, infrastructure filings and other regulatory matters in seven of American Water's regulated states. She has worked on most of the company's cost components and she's tackled challenging recovery issues. She's also provided rates-related financial planning support throughout the American Water footprint. I know that you will all find Melissa to be very helpful and a pleasure to work with. And now I will turn the call over to American Water's President and CEO, <UNK> <UNK>. Thanks, <UNK>. Good morning, everyone and thanks for joining us. With me today are <UNK> <UNK>, our CFO, who will go over the fourth quarter and full year financial results and <UNK> <UNK>, our COO, who will give key updates on our Regulated Business. On January 1, 2016 <UNK> assumed additional responsibility for operational and safety best practices across our AWE market-based businesses. So periodically he'll give you an update on those efforts as well. The employees of American Water delivered strong results in 2015 for both the fourth quarter and the full year. We invested significant capital into needed upgrades for our systems to provide reliable and safe water and wastewater services. We continued our focus on managing costs and deploying technology so that our services remain affordable for our customers. And we treated and delivered water that consistently met and surpassed EPA drinking water standards. This includes the lead and copper rule, which has generated a lot of news recently due to the crisis in Flint, Michigan. American Water samples for lead on a routine basis in our water systems continue to be in compliance with that rule. We expanded our regulated customer base in 2015 by nearly 42,000-metered customers. About 9,000 customers resulted from organic growth in our existing footprint, 24,000 customers joined our system from acquisitions that closed during the year. An additional 9,000 are from acquisitions where we have written agreements in place and are just awaiting regulatory approval. We also continued to grow our market-based businesses through new contracts and new customers. As you can see on slide seven, we reported operating revenues of $783 million, a 7% increase above fourth quarter 2014. For the full year operating revenues were nearly $3.2 billion, an increase of about 5% over 2014. Earnings from continuing operations were $0.55 per share for the fourth quarter, a 5.8% increase above fourth quarter 2014. Annual earnings were $2.64 per share, up 8.6% over 2014 adjusted EPS. The fourth quarter includes a $5 million contribution to the American Water Foundation, whose work I will discuss briefly before our Q&A session. Turning now to slide eight, you can see that we delivered on our strategies in both the regulated and the market-based businesses in 2015. We made about $1.4 billion in total annual investment, the highest in our company's history. We invested $1.2 billion in our regulated system, which improves our long-term service reliability and water quality for our customers. We're able to increase our investment at this level because of the expertise of our hard-working employees and our continuous improvement in both O&M and capital deployment efficiency. We're proud of our ability to deliver on our growth goals and effectively manage every dollar to deliver excellent customer service while we keep our customer bills affordable. Even more importantly, we know that our customers need to be able to trust that the water we provide is clean and safe. So while consistently meeting and surpassing all EPA requirements in 2015, we continued our focus on further strengthening our critical assets. Let me give you a couple of examples. We upgraded two of our company's largest water treatment plants, which serve over 300,000 customers in St. Louis County, Missouri. In Champagne, Illinois we upgraded chemical treatment facilities nearly the end of their useful lives with improvements that included replacing gas chlorine facilities with safer technology. In addition to these regulated system investments in 2015, we also grew our customer base organically and through regulated acquisitions. Our market based businesses continue to grow as well. In December our Contract Services Group was awarded a ten-year O&M contract in Camden, New Jersey with revenue of approximately $125 million. Our military service group expanded to 12 bases with a successful 50-year contract bid for Vandenberg Air Force Base with revenue of approximately $300 million. Our Homeowner Services Group expanded to 1.6 million service warranty contracts and we grew our utility partnerships by adding Rialto, California and the Orlando Utilities Commission, as you know we expanded our business through the acquisition of Keystone Clear Water Solutions. So in summary we produced excellent results for the year through our ongoing customer growth, highest annual capital investment in our history, and we continued our O&M and capital efficiencies. This continues our progress toward achieving our goal of 7% to 10% EPS growth through 2020. Based on our performance, our Board declared a cash dividend of $0.34 per share during the fourth quarter and we are affirming our 2016 earnings guidance range of $2.75 to $2.85 per share. And with that, <UNK> will now give you his update. Thank you, <UNK> and good morning, everyone. In the fourth quarter and for the full year of 2015, American Water continued to deliver strong financial results. As shown on slide 14, earnings per share from continuing operations for the fourth quarter was $0.55, up $0.03 or 5.8% over the same period last year. This slide shows the contribution by business line to quarterly and annual results. Let me walk through the numbers. Then I'll discuss the drivers of the key variances on the next few pages. For the quarter the Regulated Businesses contributed $0.54, up $0.01. The Market-based Businesses contributed $0.06, flat to the fourth quarter of last year. And the parent, which is primarily interest expense on parent debt, was $0.02 better than the fourth quarter of last year. For the full year 2015, earnings per share from continuing operations was $2.64 per share, an increase of $0.21 or 8.6% increase compared to adjusted 2014. The contribution from our Regulated Businesses was $2.63 per share, up $0.18 or 7.3% over adjusted 2014. The Market-based Businesses contribution was $0.24, up $0.02 or about 9% over last year and the parent improved $0.01 per share. These annual increases are consistent with our long-term growth triangle. Turning to slide 15, let me walk through the components of our quarter-over-quarter increase in earnings per share. The primary driver was higher regulated revenue of $0.09 per share from infrastructure surcharges and other rate increases to support our regulated system investments. This was partially offset by a higher O&M expense of $0.03, mainly from the timing of maintenance-related work as well as higher claims and pension-related costs. Depreciation, taxes and other increased $0.05 per share driven mainly by our investment growth. The improvement at the parent of $0.02 per share was mainly due to lower taxes from state tax apportionment benefits partially offset by the $5 million contribution to the American Water Foundation that <UNK> mentioned. Also, please note that the Market-based Businesses were flat for the quarter as higher growth in our military and Homeowner Services groups was offset by a 2014 tax benefit. Turning to slide 16, let me walk through the elements of our $0.21 increase from year-over-year. The Regulated Businesses benefited from higher revenue of $0.18 per share, from authorized rate increases to support investment growth as well as increases from acquisitions and organic growth. In addition, there was a $0.05 increase due to mild weather during 2014 and an improvement in O&M costs of $0.02 per share. Offsetting these improvements was higher depreciation and taxes of $0.07 per share, driven by our investment growth. Overall the Regulated Businesses increased $0.18 year-over-year. The Market-based Businesses were up $0.02, mainly due to additional construction projects under our military contracts and the addition of Hill Air Force Base and the Picatinny Arsenal in 2014, as well as geographic expansion in Homeowner Services. Parent and other was $0.01 better than 2014 due mainly to lower taxes from state tax apportionment benefits partially offset by the foundation donation. Now let me cover the regulatory highlights on slide 17. As <UNK> mentioned, we should receive the rate order from the West Virginia rate case soon. And as such we currently have four general rate cases in process, Missouri, Virginia, Illinois and Kentucky, for a combined annualized rate request of $87.4 million. For rates effective from January 1st, 2015 through today and including the $18.3 million for West Virginia, we received a total of $98.6 million in additional annualized revenue from general rate cases and infrastructure charges. We encourage you to review the footnotes in the appendix of the slide deck for more information. Slide 18 highlights our improved financial performance across the board. During the fourth quarter of 2015 we made total investments of $386 million, primarily for regulated system investments. For the year we invested a total of $1.4 billion. This includes $1.2 billion for regulated system investments, $64 million for regulated acquisitions, and $133 million for the acquisition of Keystone. Excluding the Keystone acquisition, capital investment increased about 27% from 2014. Going forward, we expect to invest $6.4 billion over the next five years, of which about $5.5 billion will be to improve water and wastewater systems for our customers, $600 million for regulated acquisitions, and $280 million for strategic capital. For the full year, cash flow from operations increased $82 million or 7% to about $1.2 billion mainly due to the increase in net income. And our adjusted return on equity for the past 12 months was 9.43%, an increase of 57 basis points compared to last year from continued execution of our strategies. We also announced the in the fourth quarter of 2015 a $0.34 common stock cash dividend payable on March 1, 2016. On slide 19, as many of you will recall, during our investor day in New York, we gave 2016 earnings guidance of $2.75 to $2.85 per share. Today we affirm that guidance range. There are certain important factors that could impact our 2016 results and as we have done in the past slide 19 outlines those factors that we have included in our earnings guidance range. Swings outside of these ranges could cause results to differ from guidance. Weather is generally the largest variable impacting our earnings. Our range of plus or minus $0.07 represents what we consider to be normal weather variation that we have included in our earnings guidance range. For our regulated businesses we see variations of plus or minus $0.03, primarily from the timing and outcome of rate cases, the timing and completion of capital projects as well as variations in O&M and production costs. American Water Enterprises variability is driven mostly from the timing of future capital upgrades in military services, and realization of our expected growth as well as claims costs in Homeowner Services. Variability for Keystone is primarily driven by natural gas prices and drilling activity in the Marcellus and Utica. I would also like to mention that our 2016 earnings guidance range includes estimated legal defense costs of about $0.03 per share related to the 2014 Freedom Industries chemical spill in West Virginia. As you may recall we included $0.02 per share of legal costs in 2015. And lastly I would like to address the expected impact from the five-year extension of bonus depreciation. From a cash perspective we are in a federal tax net operating loss position so we do not receive a current cash benefit from bonus depreciation. We look at electing bonus depreciation on a state by state basis. In those cases where adopting bonus depreciation would be in our customers' best interests and where we expect to be able to utilize our NOLs, we will do so. Assuming we elect bonus depreciation in our regulated states, this would increase our NOLs and push out the expected timing of when we would become a cash taxpayer by about one year to 2021. From an earnings perspective, while this would be expected to reduce rate base and earnings, we do not see a significant impact to our 2016 earnings guidance range. Nor do we see a significant impact to our 7% to 10% compounded annual EPS growth rate for 2016 through 2020 because the rate base impact is largely offset by lower financing needs in 2020. We also have flexibility to mitigate some of the rate-based impacts by redirecting a portion of our strategic capital already included in our five-year plan to our Regulated Businesses. As well as accelerating certain investments that continue to strengthen our critical assets for our customers. And with that I'll turn it back over to <UNK>. Thanks, <UNK>. Before taking your questions, let's review the American Water Investment Thesis we shared with you at our investor day and briefly discuss the American Water Foundation on growth. On growth, we affirm our EPS growth goal of 7% to 10% for the next five years. We talked about our unprecedented 2015 capital investment, our continued O&M and capital efficiency, and our plans for 2016. We know that reputation operational excellence, reliability and dependable water quality are critical to our growth. Where and how we expanded our customer base in 2015 leverages these strengths, growing through tuck-ins, adding wastewater customers where we already serve water, and growing our Market-Based Businesses. Our people have deep utility expertise and diversified experience and they are our biggest competitive advantage. They also care deeply about our customers and the communities in which they be live and serve. This was clearly demonstrated by what our employees dealt with in both Missouri and Illinois during the last week in 2015. Record rainfall of up to 12 inches fell during a powerful three-day storm across the midwest, hitting the St. Louis area hard and causing record flooding. Homes and businesses were submerged, highways closed and water and sewer utilities faced extraordinary challenges. Missouri American has two plants on the Meramec River supplying water to about 20% of our customers in the St. Louis county area. Thanks to early planning and the construction of a system of temporary pipes and pumps, our customers never lost service and we maintained excellent water quality throughout the event. Our wastewater teams also worked around the clock during the heavy rain to remove pumps and motors that otherwise would have been lost to flooding. But it's not just what our Missouri team did for our own customers, it's what they did for the surrounding communities in need. A local public water district had a flooded plant and lost the ability to serve its 20,000 customers. By opening a connection between the systems, Missouri American was able to help the district serve many of those without water. Additionally they worked with the National Guard to fill more than 500 tanker trucks that delivered our water outside of our service area, which brings me to the American Water Foundation funded by American Water's parent company, which keeps the communities we serve and have a better quality of life. One key foundation partnership is with the Union Sportsman Alliance, where we have worked with local union members to build walking trails, public access areas and fishing facilities for communities including projects for special needs kids. The foundation also has a partnership with a National Recreation and Parks Association in support of building better communities. Here we focus on building or enhancing nature-based playgrounds for children and educating people on water and environmental stewardship practices. The foundation also matches employee donations to qualified charitable organizations up to $1,000 per year per employee. Earlier this month, the foundation made a $50,000 donation to the Flint Child Health and Development Fund, to help the children of Flint, Michigan get the resources they need to deal with the lead exposure many have experienced. These examples of doing good as we do well demonstrate the dedication, expertise, strong character and the work ethic of the 6,700 people I get the privilege working with every day. Certainly our employees' commitment translates into our strong financial performance. But it also lets you know, as our investors, that we are a company whose people believe not just in what we do, clean water for life, but also in how we do it. And we believe that it is critical for a company who wants to be as successful in the coming decades as we are today. So with that, we are happy to take your questions. Sure, Rich. And thanks for the question. I will start and then <UNK> may want to jump in. So when we look at all of the different uses of our capital in terms of growth, in terms of raising our dividend, in terms of regulated investment, all of those different things, we look at a balance in optimizing those and also where we get the biggest value from every dollar that we spend. So we look at growth and the returns we get there. We look at regulated investment, and let me be clear that in our investment plan, the first thing we do is we invest whatever is needed in every one of our states to ensure that we provide safe, clean water that meets all EPA standards. So then beyond that, is what we refer to as discretionary but there is a base amount, which is significant, well over half of our capital that we spend to ensure that we provide those services. Then beyond that, we look at our dividend growth which, as we have said, we want to keep consistent with our EPS growth. So we want those to be correlated. So that's the guidance we've given. And we have a 50% to 60% payout ratio and currently we're at the lower end of that range so there's room there. When we look at things like debt, and I'll let <UNK> talk about this more, the question we ask is, what is best for our customers and our shareholders with the next dollar that we invest. Or whether we pay down debt or whether we're able to provide dividends. So as you know, to be in a strong financial position as we are, we have a lot of optionality and we're always looking at how we optimize that optionality. And, Rich, I would add to that that as we look and as we outlined in our investor day, when we look at the capital structure over the next five years we continue to look at about a 45%, 55% equity to debt capital structure. Thanks, Rich. Well, thank you, Carrie, and thank you all for participating in our call today. If you've got any questions, please call <UNK> and Melissa and they will be happy to help. I would like to remind everyone that our 2016 first quarter earnings call will be on May 4, 2016 and our annual stockholders meeting will take place on Friday, May 13, 2016. Thanks again for listening. And we'll talk to you in May, if not before then. Thanks.

2016_AWK

2015

VLO

VLO #<UNK>, this is <UNK>. Our unscheduled downtime during the third quarter cost us about $116 million, with the big event being the lightning strike knocked out our substation in Texas city. I quantified the impact on our results. I'm not going to comment on the impact that might have had on the market, if that is what you are looking for. I'm just saying, I'm giving you what happened to us. Yes, <UNK>, this is <UNK>. At least my view is, it is more structural in nature. We did have some refinery downtime, but I don't think that was the key driver. I think that as the Gulf Coast refineries are running lighter crude diets, that we were out of reforming capacity. You become long naphtha. And as long as you have a strong gasoline market there is an incentive to blend that naphtha into the gasoline [cool]. And to do that it takes high octane blend components. In addition to that, some of the big growing export markets have specifications that require high alkylate blends, not necessarily even for octane. And then, finally, I think one of the things that we have seen this year, is with where aromatic pricings have been, both toluene and xylene have been under their blend value which has allowed both of those components to be in the gasoline pool. Assuming we have some strengthening in the aromatics pricing moving forward, you could see that both of those high octane blend components actually get pulled out of the pool, and octane premiums remain strong. No, we don't. We are not prepared today to give the payout target for 2016. But I would anticipate that we will do that early next year. That is a good question, <UNK>. Let me let <UNK> fire away first and then if there is anything to add. Obviously, the capital market tapped in very volatile. We continue to market that. But our plan is to continue to execute upon our previously communicated drop-down guidance for 2016. And that's around $1 billion of assets. <UNK>, we are in a volatile business, right. And whether you use net income or cash flow, I think you just pick one. And we picked net income. It was one that is very easy for everybody to look at and identify the number. So, it seemed to provide the most transparency, from our perspective. I think you could probably assume that is the case. <UNK>, I think we did it at your conference last year, right. That is where we laid out the 50% targeted payout ratio. It is our objective to have a stated payout ratio. Again, this is the first year we did it. We set one out there. We viewed it as a target that we wanted to hit. Things went well this year. We were able to raise that target. So, philosophically, I think we are going to always look at our cash flows and our free cash flow and decide what to do with it. And certainly we've set our priorities with the dividend now and with the share buyback program and we will continue to pursue it. <UNK>, this is <UNK> again. The way we are viewing the distillate markets, we have seen six straight weeks of draws in the stats here domestically. Export demand remains very robust. You have some seasonal maintenance that is coming in. So, I think the combination of seasonal maintenance and exports will keep the domestic inventories in check. And then, really, the wild card is what happens with the weather and heating oil demand. As you look globally, I think a lot is being made of the stocks in the ARA, and there is just not a lot of tankage over there. So, when we talk about inventory being very high, it is 8 million barrels above where it was last year. I think some of the things that we are seeing is that the Rhine river levels are low and hindering some of the typical demand pulls we see out of the ARA. So, to some degree I think we feel like some of the inventory in Europe may be understated or overstated. But we continue to see very good demands, both Latin America and Europe for our diesel, and feel pretty good about those markets. Sure, this is <UNK>. Gasoline, we did 89,000 barrels a day of export, primarily in Mexico and Latin America. And then on the diesel side we did 241,000 barrels a day of export. It was a 65/35 split between Latin America and Europe. On the distillate, if you include kerosene, it brought us to about 285,000 barrels a day of total distillate. <UNK>, that is a good question, and it is one that we continue to wrestle with as we look at the strategy going forward. It is hard to really understand what drives the multiple. We look at some of the parts and clearly our portfolio is more levered towards refining perhaps than the peers. So, clearly, a more diversified set of earnings streams for the Company would be something that might lift that multiple. The other thing that we really couldn't factor in entirely is where, having a payout ratio, certainly the dividend that was below the peers, might affect us from a multiple perspective. You address what you can in a timely manner. And we have addressed now the fact that we have lagged on the payout in the dividend. And we are continuing to look for the opportunities to grow different earnings streams within the business. The drops from Valero to VLP clearly is targeted at trying to do this. And then we will continue to look for projects to grow the refining business, the renewables business, and then we'll look for other business lines that we might be able to get into. The objective would be to do it with a stronger currency. We continue to have this as a major point of focus. But I just don't know that there is a silver bullet that you could fire that is going to immediately get the stock re-rated and have you up to where your peers are. But we are taking the actions that we can that we think will help drive that way. No, I think, you really hit the nail on the head. We have a combination of overbuilt logistics, in light of flat to declining domestic crude production. With the current market, the US Gulf Coast bound pipeline from Mid-Continent have tariffs that are greater than where actually the market is today. So, you're just seeing people with take or pays going ahead to ship even though it doesn't look like they have economics on paper, and that is what is really driving the differentials. I think, the tariff and the midstream situation is here until we get some recovery in production. I would tell you on the imports, that is more the volatility between grades. I think what we saw is that as people started to see that production was falling, it was very supportive of the domestic light sweet pricing. At the same time, medium sour production in the Gulf was growing and medium sour exports in the Middle East were increasing. So, all of a sudden we saw a fairly wide differential between medium sour and light sweet. And it incentivized us to bring in a lot of imports of medium sour into our system. I think weak LLS market is actually supportive of the toppers. Where we were, the economics for the toppers assumed LLS Brent flat. So, as LLS has discounted to Brent, it actually improves the economics of those toppers fairly significantly. Two things causing the LLS to WTI spread being where it is today. One is it's overbuilt logistics and people shipping even though the economics don't appear to be supportive. And then, secondly, we have a lot of imports coming into the Gulf. So, ultimately you can't keep having these inventory builds of domestic light sweet. We're going to have to see those differentials come off and incentivize refineries to go back to a lighter diet at some point in time. Our plan was to self fund the drop. With this particular drop, though, we are now at a debt to EBITDA of about 3.5 times. We would likely not want to be longer than that on a long-term basis. With the next acquisition, we are going to have to go get our investment grade credit rating, which our plan is to do that late this year or next year, have the ability to go to the debt and capital market. And then with the ratio being 3.5, or approximately 3.5, the next acquisition also might require an equity component ---+ or will require an equity component. So, from this point forward, I think you would anticipate capital markets. Yes, we are using payout, that's correct. Line 9 for us is primarily fed with Western Canadian light sweet and Bakken. So, you are really looking at that spread and comparing it to a US Gulf Coast supply, or a foreign light sweet alternative. I don't think we can talk about the tariff we are paying on Line 9. <UNK>, we will let <UNK> speak to that. <UNK>, I think the way we see it is there is just going to be a lot of volatility between grades. And it certainly is an advantage for someone like us with the quality of refining assets that we have that can swing to a light diet, medium diet, and a heavy sour diet. That's the way year shaped up and I don't think we see it much differently next year. There's times when it's certainly been an advantage to run a very light diet, and then there's other times where we see very good value in Canadian heavies or heavies from Mexico or South America. But speaking more broadly, <UNK>, I think if you look at Iranian crude coming into the market, mean obviously the more sour crudes that are in the market, I think it is certainly to Valero's advantage because we definitely have the ability to process it. And as <UNK> is pointing out, we always are optimizing the sweet slate, <UNK>, as you know. But having the more availability of sour crudes, whether they be mediums or heavies, is certainly to our advantage in the Gulf. Yes, I think we definitely see the increased demand with the lower flat price. Certainly there is seasonality to gasoline. The gasoline cracks have remained stronger longer than they typically do. But I think the things that we see in the market that are supportive of gasoline going forward is the price of gasoline in the Gulf now has opened up our exports. Certainly in our system we are seeing a significant increase in the volumes we are exporting. Imports to the New York harbor have fallen way off, which is supportive of gasoline. Naphtha economics have changed to where, really, we are not putting naphtha into the gasoline pool now. We are exporting naphtha to the Far East. We have seen FCC margins fall off some, to where you will see some sparing of FCC capacity. And then some seasonal maintenance. So, I think all of those things, we feel like, are supportive of the gasoline markets going forward. Certainly, if we run at very high utilization rates and aren't allowed to export, you could become long. But I don't think we see that will happen. <UNK>, we had free cash flow available, and we did what we said we were going to do. It is what it is. I think as we look at this going forward, we laid out a target, we are going to hit it. We are not here to build cash. We are here to grow our business and to reward our shareholders. And we thought this was the right time to do it and it was the way to do it. So, that is what led to the timing. If we had reduced margins this year, you probably wouldn't have seen us step up the target. But here again, we are owned by firms out there and individuals that are looking for return, and for us to use the cash prudently, and we think that's what we did. For our capital expenditure guidance for 2015 we do remain unchanged at $2.65 billion. Now, when we provide this guidance, just to clarify, we mean capital expenditures turnaround costs as well as investments in joint ventures. September year to date, our total is $1.7 billion, so we are trending below the guidance. However, as you all know, we have an option to become a 50% owner in the Diamond pipeline and we may exercise that option in this quarter. We don't really give forward guidance on turnarounds but when we set the guidance volumes, we do take turnarounds into consideration. I think if you look in the aggregate, the guidance for this quarter is similar to the fourth quarter last year. I would say we've definitely seen greater variability of Canadian heavy in the Gulf. We ran record volumes of Canadian heavy in the third quarter. Really, the medium sour pricing, it seems to be what is setting the price of the heavy sours. All of heavy sour producers know they have to compete with an [askey] or marked barrel in the Gulf so they price their barrels to be competitive on a quality-adjusted basis with that medium sour barrel in the Gulf. And the Canadian is certainly that same way. Each barrel presents their own operating challenges. <UNK> may be better to answer that. But there are certainly some challenges with Canadian that we don't see with some of the south American barrels that we run. So I don't know. <UNK>, do you want to add anything to that. You did a fine job answering that. (laughter)

2015_VLO

2016

FMC

FMC #Obviously, I'm not going to talk about what the competition is doing on price. I'll tell you where we are. As <UNK> said earlier, we are doing everything we can to make sure we manage price in terms across North America and certainly in Brazil, where we have reduced our exposure to the Brazilian market by taking out through product rationalization a significant amount of volume and revenue. But we are very focused on making sure that we maximize price not only in terms of pricing but across the portfolio of what we are selling. I think you're going to see all sorts of different activities as we go through the next year, but for us, it's very much around protecting the margins, protecting the value of the business and certainly looking after working capital. I think in terms of pricing, just to get back to one of the comments <UNK> made around the balance of FX and pricing. As you know, we tend to have a rule in Brazil where we index price on currency. Last year, we were, with our pricing, running after the currency and trying to move up our price. This year, the same process of adjusting pricing to currency is going the other way, which means it is not any longer us asking the customers to pay higher price, but the customer asking us to lower the price to alter currency. So needless to say that for all of us, regardless of what behavior individual companies would take, it is immediate conversation from the predictability of the pricing. In these FX situations, give us a much better position to talk about pricing, more control in terms of understanding pricing in the next two quarters. I think it's got to apply to every Company. It is just an FX price situation. Yes, the direct market situation is a one-time impact. It is just a capital of situation, which happens all the time when you do these kind of a transfer. First of all, you work with your distribution network, which you're moving away from. Those guys have inventory. They have stock. They are filling it, while you are repositioning your own now warehouses to sell. So there is still time where you have two networks, which have to overlap for a little while. You have to give the time to your distributors to sell the product, they were supposed to sell in the past by contract. Second of all, you are the [stage one] so where you're distributors and not repositioning their inventory in advance. So by the time we get into ---+ this is happening as a transition now, I believe if by the time we get into European season Q1, Q2 next year, we should be in a very normalized situation and it will be stable for the future. Thank you. So I think in the first half, the way I would look at it, <UNK>, is when we give a range, we said mid single-digit to start high single-digit, maybe we were thinking about more toward, when we started this process, the lower end of the range maybe 5%, 6%, 7%. We are more today on a 7%, 8% more towards the higher end of the range. That is due, maybe less due, to challenged inventory than it was to specific reasons in Asia and Europe, mostly driven by weather. So for us when we look at the market, if you remember, we were thinking about North America and Latin America in the higher end of the range. These being helped by flattish to slightly down markets in Europe and Asia. We don't see that any longer. I mean we still see North America and Latin America on the high end of the range. But we see Asia and Europe being down in the 5%, 6% for this year. That is why, today, we are looking at maybe more the higher end of our range. For us, what we've been doing is, we've been able, no matter what, to protect our earnings by being even more drastic on price being more drastic on product rationalization. So we will be slightly lower on sales, but we believe we are going to be ---+ we're going to have very solid performance in the second half and productivity on the earnings side. I would say always the same answer, when we give the middle of the range, it is under normal circumstances from a demand and weather standpoint. There is always a range, you just need infestation, you just need very strong insect pressure or other pressure. You will drive that either to the lower or either to the higher end. Today, we believe we are very controllable with the middle of the range to see anything going up or down would be due to exceptional events not lead to channel inventory or anything of that kind, but much more to specific agricultural seasonal situations. Mostly weather. Thank you, <UNK>. Yes, so Lithium ---+ I have to say, we do have increased confidence in the future. Today, we believe this market is getting more and more solid. I have to say that we are prudent, but the big breakthrough for us is the technology we're able to develop from a manufacturing standpoint, allowing us to, at a very low capital span and efficient cost of operations, ability to create 4,000 to 8,000 tons modules for Lithium hydroxide instead of having to build, in one shot, a 20,000 or 30,000 tons. So today, we do have an improved view and more certain view of where Lithium hydroxide is doing. But all the work we've done over the last two years was to develop a manufacturing process allowing us to follow the demand growth, which means that if the growth is not as we're expecting, we can stop one or two of these modules manufacturing and slow down the capacity increase we have planned. If the demand becomes more aggressive, very easy for us to speed up the building of those modules. So first to your question, yes, we have increased confidence. Our strategy is very highly focused on the downstream product, where we have the highest profitability. Third, we have a safety net around demand by this manufacturing process we have in place, allowing to match the demand. Where are we on our forecast. We are taking pretty much the middle of the range. We are far in the process of predictability for the numbers I gave to you, to take the highest prediction from easy companies. So there could be upside, you know we are prepared also for the downside. Maybe I'll ask <UNK> to comment on the technology. Yes. Thanks for the question. On the technology, we've got a technology roadmap. I'd say that with this strategy that we've undertaken on the high-value products, the biggest shift is increased collaboration or formalized collaboration with our customers. So we do have a number of exciting opportunities that are being discussed with customers and being trialed customers. We're looking forward to that. It will continue to add to high-quality sales of new Lithium derivatives and new applications of existing Lithium derivatives. As it was the last question, let me close with a couple of words before I hand the closing comments to <UNK>. I think we went through those two quarters very highly focused on delivering what we promised to do. Everything we've done in the two quarters had done a few things for us. First of all, I believe from an Ag standpoint, even if the markets are not yet returning to the level of growth these kinds of markets could expect to see one day, we have improved highly our control, visibility and productivity of our own business. I think from the Lithium standpoint, it is a bright spot for us. We have refined our strategy. I have to say the breakthrough we had in technology around Lithium hydroxide manufacturing are an enormous win for us looking at our future. Health and Nutrition, the business is solid. The business is highly profitable, but we also understand the challenges we have on Omega-3. It is something we will be focusing on in the quarters to come. So with this, I'm going to turn the call back to <UNK>. Thank you, <UNK>. As always, appreciate the time and the questions. I'll be available [beyond] the call to address any further questions that you may have. So with that, thank you. Have a good day.

2016_FMC

2015

CRUS

CRUS #Thank you, and good afternoon. Joining me on today's call is <UNK> <UNK>, Cirrus Logic's President and Chief Executive Officer; and <UNK> <UNK>, our Director of Investor Relations. Today, we announced our financial results for the second quarter of FY16 at approximately 4.00 PM Eastern. The shareholder letter discussing our financial results, the earnings press release, including a reconciliation of non-GAAP financial information to the most directly comparable GAAP information, along with a webcast of this Q&A session are all available on the Company's Investor Relations website at www.investor. Cirrus.com. This call will feature questions from the analysts covering our Company, as well as questions submitted to us via e-mail at [email protected]. Please note that during this session, we may make projections and other forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from projections. By providing this information, the Company undertakes no obligation to update or revise any projections or forward-looking statements whether as a result of new developments or otherwise. Please refer to the press release issued today, which is available on the Cirrus Logic website and the latest Form 10-K and 10-Q, as well as other corporate filings made with the Securities and Exchange Commission for additional discussion of risk factors that could cause actual results to differ materially from current expectations. Now, I'd like to turn the call over to <UNK>. Thank you, <UNK>. Before we begin taking questions, I'd like to make a few comments. For a detailed account of our financial results, please read the shareholder letter posted on our Investor Relations website. We are pleased with our Q2 FY16 results, as robust demand for our 55- and 65-nanometer smart codecs and boosted amplifiers drove revenue up 9% sequentially and 46% year over year. FY16 continues to be an outstanding year, as share gains and content increases drive strong growth. We are very encouraged with the progress we made this past quarter towards our strategic initiatives that we believe will fuel continued growth in FY17. In the handset market, we have successfully expanded our content and existing customers, captured new smart codec sockets at a leading manufacturer and are actively engaged with numerous other market leaders to further broaden our customer base. The Company continues to invest substantially in R&D, as we target rapidly growing markets where our ultra low power sophisticated analog and mixed signal processing components add value and an ability to differentiate. With a comprehensive portfolio of audio and voice products and an extensive road map, we believe our technology is particularly well suited for smartphones, digital headsets, smart accessories, and the connected home. We are keenly focused on growing our content at our top three smartphone customers, while expanding share with other market leaders. We remain actively engaged with leading OEMs and are encouraged by their desire to provide compelling audio and voice solutions across a variety of flagship and mid-tier platforms. Longer term as features such as noise cancellation and always-on voice moved beyond smartphones, we believe there is a significant potential for our disruptive smart codec technology in the digital headset and smart accessory markets. As a leading innovator in audio and voice technology we are well positioned to capitalize on these market opportunities and deliver growth in the coming years. Before we begin the Q&A, I would also like to note that while we understand there is intense interest related to our largest customer, in accordance with our policy, we do not discuss specifics about our business relationship. Operator, we are now ready to take questions. Well, I mean, the precision that we get around giving guidance and all of that, I would say is very similar. We're a proprietary supplier of pretty complicated devices. Customers have either designed us in or not at this point. And so to some extent we're at the ---+ rather to a large extent we're at the mercy of how good of a job they have done with their forecasting. We're blessed frankly in that regard to work with really remarkably good customers that do a great job with their forecasts. I ---+ frankly, it's fairly amazing how well some of them do at predicting what they are going to need in a particular quarter. But there is a reason we don't go out past the ---+ any further past a quarter when it gets to specifics. It's difficult to get it real precisely. But I would say visibility-wise, generally pretty similar to what we've had in the past. Some customers, a little more predictable than others, but generally speaking, our visibility is similar and really very good, frankly. No, that's not something we're ready to break out, but it's definitely moved way up the chart, and we expect that node to be a work horse for us for many years. We don't think we'll be nearly as late getting to 28-nanometer as we were getting to 55-nanometer. But nonetheless, I think for the Smart Codecs, 55 is really a nice node. The analog capabilities that we have there, combined with the ability to differentiate with a lot of memory and a lot of signal processing capability is ---+ really makes that a nice sweet spot for us. So, yes. Specifically what we've developed over the last couple years is a noise-canceling headset chip for the general market. We've been out promoting that to various different customers. There's a lot of interest in it. We'll see who gets to the finish line first. But it really enables a pretty remarkable experience that isn't quite so dependent on form factor. It's a pretty heavily digital signal processing adaptive solution. It really delivers incredibly compelling performance, and a lot of customers are interested in that and figuring out how to adapt their product plans to incorporate the device. So, we feel good about that as really one of the first meaningful opportunities that is emerging in what we would call the smart accessory space for the types of things that we develop. We don't think that's the last of those things that will emerge, by any stretch. But it is something that's probably sooner rather than later. Thanks, <UNK>. Well, I mean, inventory corrections are something that we're thankfully not hugely exposed to in most places. Obviously, our customers can have inventory in their channel, and we have no ability to control that or any visibility into it, frankly. But generally speaking, distributors are a pretty small part of our business. Most of our large OEM customers manage their inventory very carefully and very well. So it's rare that we end up having any sort of meaningful impact of too much of our inventory prior to having been consumed by a customer. So no real issue there. We're excited this past quarter to launch and ramp into three, or into a handful of new handsets with the Smart Codec devices, which is, as we've talked about before, a pretty sticky device and a pretty compelling type of a product from us. Those phones were really well received, very well reviewed. So it's something we're real proud of. There's a lot of audio and voice features that are really showcased in those devices. As far as products that haven't yet been launched, that's ---+ it's not really our place to get out in front of our customers and do their PR for them, but we feel good about our opportunities going forward. Well, it's really more of the same. We see good opportunities for our Smart Codecs continue to do well. Amplifiers is a great business for us that we've been able to grow really since that product line's inception a few years ago. It's now a big and growing business for us. We see really good opportunities for that to continue to grow in the next, really next year and beyond. The headset thing is a little bit of, a little bit of a question of when people start latching on and shipping it and all of that. But the technology is so compelling that we really feel like that's something that is, is something that our customers are going to get behind and want to differentiate around. So we're out shopping that to a number of people, as I mentioned before, and I feel pretty confident that somebody's going to latch on to that in a big way. It's ---+ I've been flying around with the demo set of them myself, what we've created, and it's just such a neat thing to have. They are really compelling. So that's the number of areas for growth. Really, as I look around, I see growth opportunities pretty much everywhere for our product lines. Thanks. Well, it's ---+ I mean, Smart Codecs are a big investment by a customer and it's a pretty sticky socket. It takes a long time for any of our customers to design that type of thing in. You can find more ---+ I think there's tear downs that are out there just recently so you can probably find a little more detail on that. But I would say the design cycle is ---+ you could use the rule of thumb we've given in the past of ballpark of a year from the time a customer really engages to the time they can launch a device, give or take a little bit here or there. And in particular, if there's going to be a lot of software involved, a lot of voice and audio-based features, then it can be a bit longer than that. But the great news is that makes it pretty sticky. As far as high end and mid-tier, I don't want to cast aspersions on anybody's product line. But characterizing it as mid-tier, I think the handsets that we're talking about are all very good. They are very well received and reviewed. They are connected to a range of third party apps processors, so this is a broken bundle type of a product. In a couple of cases, it's with a flagship applications processor, and then there's one device with what I think people would probably characterize as more of a mid tier apps processor. But frankly, coupled with our device the features and functions that are delivered are things that are people are really more used to associating with a flagship phone, which is a trend that we've been seeing coming for a while, is that even in the mid-tier, people are wanting to deliver voice features and functions that are more traditionally associated with the flagship devices. So it's a big win, one we've been working on for a long time, and something we're very proud of. Well, these are general market devices that we can sell to really anybody that they are a good fit for. So, they are not custom devices. There's not a lot of hardware tweaking in that sense. The algorithms, the libraries that we provide that we provide access to from third parties and as well as the tools and drivers and all of that that we deliver along with our device so that they can be easily integrated in an android handset with whichever applications processor the customers choose, there is a lot of custom work that is done there on the firmware side. And that's a really nice advantage in that market, because that's the kind of time line that most of the android handset manufacturers are able to move along with. Most of them aren't as much willing to sit around and think about what they might want two or three years from now. But as far as what we want to execute on now and what software is needed to make that a reality, where we can pull that in in a much more limited timeframe, that's kind of where the differentiation customer by customer comes in. Well, I mean, we're certainly in a quarter that is, for most of our customers, typically a pretty strong one. Obviously, there's some new product introductions that then lay on top of that seasonality. I view our business is a little bit more product cycle-related than it is seasonal per se, although obviously our customers time their product cycle as they see fit relative to the seasonality. So they are obviously related. As far as product cycles and things that we're expecting to be in coming up, again, I don't know that it's our place to telegraph what our customers are planning and exactly when. But nonetheless, we feel very good about our opportunities to grow this year and to continue to deliver growth next year as well. Well, it's a number of different factors that drove that. I mean, that's ---+ the Q2 is a pretty typically strong season for those product lines in general. I don't know that there's any major takeaways to be had there other than just the market is in reasonably good condition. Although various prognosticators of doom and gloom, notwithstanding, things are actually holding out pretty well, and people are buying stuff, and we're in good shape as far as the customers we're aligned with. So it's a variety of things that drove those numbers. Again, obviously, the bulk of the growth that we've seen and the largest piece of revenue from the Company overall in any event is portable audio. So that's really the story. We did see growth across a number of other product lines, but obviously the needle mover is portable audio and that's what people should be focused on if they are thinking about Cirrus Logic. No, that's just, that's just us ---+ it's difficult a little bit sometimes to predict your customers' product cycle, in particular when we're talking about what would essentially be a new product on the market. We're out promoting it to this particular device to a number of, a number of potential customers for it. Lots of excitement about it. It's a demo that is really pretty impressive frankly. Every customer we've shown it to has pretty much said one word is wow. It's, it's a pretty interesting thing for our customers to think about and what kind of impact they could have on the market there. So there's a number of other ---+ there's just a number of factors in play that make it a little bit difficult to predict exactly when somebody will come to market with it. But it's something we feel good about that it will actually happen. No, it typically ---+ well, it certainly could be ---+ if we had a handset manufacturer that wanted to make noise canceling device that went with the handset, then that could happen, I suppose. But no, it really ---+ you could connect ---+ this is a headset that you could ---+ this chip essentially is supposed to be the brains in a noise-canceling headset that you could connect to a laptop or your home computer or a phone or any number of things. So there isn't necessarily a direct connection to the Smart Codec that would be used in, say, a handset. Sure. That's a category of application that is continuing to mature and develop. The device we're shipping in a watch, frankly, is a device that is also a DSP-enabled device with a fair bit of analog on it as well. It was something designed specifically for wearables. It's a pretty interesting bit of DSP really trying to implement functions like the always on voice and some, obviously some subset of what we would do in a flagship device in a phone. But we'll see how well it's received, and hopefully it will do well in the market. I've seen the watch. I think it's pretty cool looking. We'll see how it does over the long-term. It's an application space that we're excited about over the long-term. We're engaged with the right customers. We certainly want to continue to invest in that space. And along with automotive in the connected home over the long-term, we really think it's a great opportunity for Cirrus because we're developing all these technologies for handsets, which is a very high volume market. We can afford to spend the R&D to deploy these things initially in handsets, and then as these other areas of the so-called Internet of Things or smart accessories or the connected home become a reality, then we're in the right place at the right time with technology ahead of time. You bet. Yes, it's a range. It's a range of factors that you touched on all of I think. Certainly mix gets into it. There are supply chain improvements that we have from time to time, and so it's a little bit of ---+ quite a number of things go into delivering that result and something the team's done a good job on delivering. Well, we ---+ we've telegraphed that we, we think our model in the mid-40%'s works well relative to what we need to spend on R&D and our stated goal of delivering 20% operating. And that's really the goal. Obviously the margin goal is as high as we can get it without making our customers mad. Their goal is generally zero, and so we try to find the happy-medium somewhere in the middle and so we think as a long-term metric, mid-40%'s is a reasonable spot. There's other big companies that supply the handset space that are in that range, so it's defensible from that perspective. But it can move around by a few percentage points. There's ebbs and flows throughout the year, and I will keep you updated one quarter at a time, I guess. No. We ---+ I mean, you know us well enough to know, we don't get ahead of ourselves in terms of talking about meaningful design wins. But we're definitely talking to the right folks in that space. People are doing really interesting stuff with audio and voice in the connected home environment. It's an area that's been ripe for innovation for a great many years, but in order for that innovation to really take hold, somebody needs to defragment the infrastructure that's in the home. And you really see that now, whether it's the folks at Microsoft with their whole Kortana stuff. There's a number of other folks in the bay area that are working on defragmenting the home and providing a wide array of devices or a framework for a wide array of devices to connect in a home. And that's really outside of our purview. But once some of those network infrastructures within the home are in place, that gives customers of ours a really good opportunity to innovate and deliver value into the home that is in the form of audio and voice differentiation. So that's what we're positioned well with. We think we're talking to the right folks. And we're excited about that as it unfolds over the coming years. And again, it's another ---+ it would be a difficult thing to invest in today if that's what you were going after solely. But given that it's the same sorts of features and functions that we're already delivering in a handset, it's a really nice way to take our existing technology and deploy it in a new market. So that's something we're really excited about. Appreciate it. Sure, a little bit more. We did two small acquisitions, I suppose what you would characterize as tuck-in acquisitions that are pretty different. The one that we referred to specifically in the headset area in the shareholder letter was related to enhancing our software capabilities in the speaker protection space. So we had the opportunity to acquire a team that has some technology that's already in the market that is well regarded among a number of different customers. A little bit different approach than what we've had internally at Cirrus, and once we met the team and realized really how capable the people involved are and how mature the technology they already had was, we were very excited about getting them on board, and so we're a few months in. But they are getting along and working very, very closely with the existing team within Cirrus. And I think that's moved us ---+ moved us forward pretty well. The other one is a little further out on the time horizon. It's ---+ so I'll be a little bit less specific about what we're working on there. But it's really more of a research effort that is targeted towards some of the biometrics that we could conceivably get involved with as far as voice is concerned. So identifying people simply by having access to their voice rather than necessarily a recorded pass phrase or things of those sort. So that's not something to bake into any revenue models in the short-term, but it's something that felt like it's very squarely within our wheelhouse, and it's a pretty intriguing concept of things that we could do with that down the road. All right. Thank you. In summary, we are very pleased with our financial results for the second quarter, as sales of our 55- and 65-nanometer smart Smart Codecs and boosted amplifiers accelerated. Cirrus Logic's substantial investment in R&D, diverse product portfolio spanning the entire audio signal chain and innovative strategic road map have positioned the company as an industry leader. We continue to be very excited about our outlook for growth in FY16 and FY17 as demand for our audio and voice products continues to gain momentum. I would also like to note we will be presenting at the NASDAQ conference in London on December 2 and the Barclays conference in San Francisco on December 9. A live webcast of these events will be available at www.investor. Cirrus.com. If you have any questions that were not addressed today, you can submit them to us via the ask the CEO section of our investor website. I would like to thank everyone for participating today. Good-bye.

2015_CRUS

2017

NCR

NCR #I think, <UNK>, you've hit on exactly the right point there, which is, for us, the hardware revenue drives the higher-margin attach and the recurring revenue. And <UNK> <UNK>, I'll turn it over to you to kind of describe those pieces. But when we're talking about the additional revenue streams, you are talking about adding professional services, implementation services. You've obviously got the hardware and software maintenance on the recurring piece. Those are all drivers. So, don't get me wrong, <UNK>. We're laser focused on margin within hardware and being as efficient as we can. But for us, it's about driving those more profitable revenue streams. I do think you'll see 2017 as the new product introductions that <UNK> talked about roll out, you'll see hardware margins start to flatten as opposed to decreasing. <UNK>. You captured it on attach, <UNK>. For hardware, as <UNK> said and we talked about earlier, it comes down to scaling the volumes on the new models and then the incremental cost reduction that we'll drive this year. We have a very intense focus on cost, not only just for a solution going out the door but also for the total cost of ownership through its lifecycle. So, that is an intense focus for us and we expect to see improvement this year. Thank you all for joining us today and we'll see you in April.

2017_NCR

2016

MATW

MATW #To date, not necessarily. Time will tell. We've had some slowing in our UK market as we kind of go through this, but not enough to materially change our results. Most of the projects we're working on have a longer lead time than the last several weeks. So, not yet. Let's put it that way. As a practical matter, the ---+ as you all may be aware, the Food Labeling Modernization Act has passed, and the regulations associated with that have been finalized. We expect implementation to be [about] 2018, as it currently stands. There's some staggered implementation dates based on size. So, we should start to see some pickup from that. We believe that we've had some hold-back with some of our brands as they get there. But, you know <UNK>, if you look at the P&Ls of our largest CPG accounts that we do, they've struggled in their top lines, as well. And I think what we're seeing is just containment in their spending on the marketing side, especially as it relates to the packaging as we move forward. So, I think that it has more to do with the economy and a sluggish consumer than it does with any changes in their desire to spend on packaging long term. So, we think it should be a matter of time. We should see those things return to more robust markets, and we're well positioned to take advantage of that. No question, the new product release is not necessarily in the fulfillment side. If you ---+ we take a look at some of the automated warehouse literature and statistics out there. It's just a bit of a downturn as we go through this. Generally, as we approach the Christmas season, people turn off their spending as it relates to [automated] warehouses. They do not want to be interrupting their distribution at the time of ---+ the busiest of their season. We expect that to kind of return to normalcy through the first and second quarters of 2017. But at the end of the day, right now what we're seeing is a slowing, and we have enough of a lead time to see that it most likely will impact our next quarter there. But it is a little bit more of a project-based business, <UNK>. And as a result, the projects come and go. The timing of those may impact a quarter or two, but generally the direction of that group continues to be the right one. <UNK>, we typically don't quantify the specific benefit related to those commodity costs, for various reasons ---+ we'll leave it at that ---+ but we did see a benefit this quarter and this year to date compared to last year, not only in bronze but other commodities including fuel, for example. I would remind you, <UNK>, given where our size is today relative to historical comparisons, bronze is critical but not overwhelmingly controlling of our results. I think we'll start to see work trickling in at that point in time. I think 2017 and 2018 will be where we'll see most of that work flow through. To be truthful, the FLMA did not go as far as we would have hoped, from a provider standpoint. It will require changes to packaging, not as significant that we initially had proposed. But it will require a touch on every single package that's out there. It's difficult to tell at this point in time. We'd rather keep you happy at the end of the quarter. But the fact of the matter is we're doing everything we can in the markets that we operate in. We've seen a light month of July on the death rate side. So, could that come back in the next quarter or two. Sure. We have a couple of things we're waiting for results on with respect to the fulfillment side that could change a quarter. We've got a few things out there that could make it much better or put us right in line with where we expect to be. At the end of the day, suffice it to say that the next quarter is not going to make the difference. We think the direction of the whole group is going in the right way. All right. Thank you, John. Well, we'd like to thank everyone for participating in the call this morning, and we look forward to our fourth quarter earnings release and conference call in November this year. Thank you. Have a great day.

2016_MATW

2016

ROST

ROST #Sure, <UNK>. When we talk about our long-term model, we've said that low double-digit EPS growth is our long-term model. And that's based on a comp between 3% to 4%. So that's really what the most important driver of achieving that low double-digit growth. The other thing I'd say in terms of SG&A and occupancy, the leverage points for both of those have not changed. Currently, our guidance assumes SG&A for the year is about 3% and occupancy is about 4%. Sure. As we mentioned in the remarks, the 4% comp was driven by both traffic and the size of the average basket. And the higher basket was driven mainly from higher units per transaction. So for us, that's always about the merchandise and the assortment we put in front of the customer, and that's what we think is driving it. Sure. So <UNK>, just a little bit of a recap in terms of what we've done. Last year, we moved minimum entry wage rate to $9. And as we've mentioned on a previous call this year, we took our minimum hourly rate up to $10 for eligible store associates. But our expectation is that there's going to continue to be wage pressure in the general economy over the next several years. We also know that in some states, some very important states like California, there is already legislation that's passed or close to being passed that's going to set up multiple years of minimum wage increases. So those are things that we're looking at. And as part of our budget and longer-term planning process, we will look for ways to offset some of those minimum wage increases. It will get harder over time. I think we've done a good job so far, as <UNK> <UNK> said, in absorbing those wage rate increases in the last couple of years. But there's probably a limit to how much we can absorb. So that's our expectation over the next few years. <UNK>, yes, I think that 90-store, give or take a few stores, is the level we have been running at for the last several years now, and it's a level we're pretty comfortable with in terms of availability of good sites and our operational capabilities in terms of being able to open stores in a high quality way. So yes, we feel good about that number. In terms of the new region, the Midwest, we entered the Midwest four or five years ago now. I would say we're very pleased with how it's going. You'll have heard on these calls over the last couple of years, well certainly over the last year and a half, the Midwest has been one of our top-performing regions. So we are very good about the business we're building there. Tracy, it's <UNK>. I will answer that just telling you some general outline of the regional performance. The strength in comp was relatively broad-based. As we mentioned in our comments, the Midwest and California were our strongest regions. The Midwest, as <UNK> O'Sullivan just said, has been very strong over the last several years. California for us likely benefited from more seasonal weather during the quarter. And then of our larger markets, Florida and Texas were in line with the chain. In terms of absolute comp, on ladies, that's not something we would disclose on a call like this. But suffice it to say, ladies did underperform the chain, but that is somewhat of an improvement versus Q1. Yes. Sure. The ladies business, it's a very big business, and at our size it's not the easiest business to turn around. I don't have ---+ we continually are making progress, but I don't have a definitive date of when I think it ---+ I could say at a certain period of time we're going to be 100% set. It's a work in progress, so we feel like we're correcting the right things. We think we've identified our issues. But that's a very big business and a very long haul, so I really couldn't give you a definitive timeframe. In terms of holiday, we will have an emphasis on gift-giving, the way we did last year. It will be broad-based throughout the entire box. Obviously, the key classifications, the home businesses, which are traditionally good gift-giving businesses. But really we see that throughout the entire box everywhere. <UNK>, no, the short answer is no. Our marketing strategy and message has been fairly consistent over the years. The message is pretty straightforward that we offer the best values in apparel and home fashions. That still the strategy, still the message. So no significant changes. Not at this point, no. No. We plan, as you'll appreciate, with the nature of retail real estate, we have a pipeline of stores that we plan to open. So at this point, our 2017 openings are fairly far along. And as I said in an earlier answer, or an answer to an earlier question, we're pretty happy with that 90 or so level of new store openings. Well, the home business, our performance has been very broad-based. Obviously, the merchants are out there continually looking for better values and broader assortments, but in grand total, home it's very broad based. What I would say about ladies is we've done a lot of drill-down, a lot of analysis to understand what issues need to be corrected. And obviously, when you do anything like that and you look within your four walls, you're really going in and saying ---+ reviewing everything from processes to total assortments. So I would say, no stone left unturned. Really, you're looking every component of it. We ended pretty cleanly. Yes, the guidepost from last year, frankly, is going to change based on the volume this year. I think the best guidepost is to take the difference between EPS growth between Q3 and Q4 and the primary difference there is the timing of pack-away. And <UNK>, in terms of filling the sales gap to get to the 4%, as we said in our comments, our home and our shoe business has been very strong. No, there was acceleration in that trend and those businesses. Thank you for joining us today and for your interest in Ross Stores. Have a great day.

2016_ROST

2016

TLRD

TLRD #Well, we had 12, I believe, opened last year, so we'll end this year with a grand total of 172. So that may explain the difference in your model. Macy's and Men's Warehouse are consolidated under Men's Warehouse; Jos. A. Bank rental is under Jos. Bank. The freestanding tux stores average at about 1,100 square feet and the Macy's shops are around 500 feet. We're constantly working a pipeline of potential new accounts. These are accounts that are hard to win. These RFP processes can drag on for quite a while, but that's an ongoing effort. We don't have anything to announce and can't really guide you on what future new businesses we may be awarded. But there's always a healthy pipeline that we're working on. We looked at it on a heat map. It's fairly consistent; there were a cluster of states in the middle of the country that seemed to be hit a little harder than the rest of the country, but other than that it was fairly evenly distributed throughout the Business and the country. It was essentially traffic-driven, so we didn't see it within one product category over another. I'm not sure that we could draw that consistent kind of conclusion. For example, Oklahoma got hit a little harder. Texas wasn't hit as hard. So it's not clearly defined as oil-related, but it seemed ---+ what's probably a more important trend is that it seemed fairly consistent across the country. <UNK>, we didn't give the amount of the liquidation sales; it wasn't actually a very big number. So we didn't provide that. I'm sorry I can't do that. But as to the fourth quarter, there won't be liquidation sales. In the fourth quarter what we're closing are full-line stores. So we'll run those stores as usual right up to the closing date, and then we'll carry that inventory forward into the remaining chain and sell through it without concern about any kind of clearance of that product. It's all basic, healthy product. And purchases have been adjusted around it. Yes, I think one of the things the we learned early on in this business is that those big, multiple-unit transactions were almost exclusive just to that one product category. So if we were running a BOGO three-suit offer, we would sell four suits but nothing else. What we're seeing now is a much more healthy balance of essentially the closet within each transaction. We're selling suits one and two at a time, much more so than three and four at a time. But we're getting a lot more attachment to it. I think that speaks to the improvements we've made to the assortment, the improvements that we've made to the customer experience. And we're quite pleased to see that UPT grow, in spite of the fact that we're facing the headwind of these aggressive multi-unit offers. Thank you. Well, we appreciate your interest in following our story, and we look forward to updating you at the end of the third quarter.

2016_TLRD

2016

MSI

MSI #Yes, on services, we love the Airwave acquisition. We're especially appreciative and pleased with the unconditional clearance from CMA. We're always on the look, or lookout, for other, what we refer to as quote, unquote, mini Airwaves, if they're there. I think there might be some, but they're not nearly as material, or of the revenue density as Airwave. Having said that, I think <UNK> and <UNK> are teaming well to get a lot of the managed and support services growth organically. Better sales execution, software user agreements, multi-year maintenance, and I think <UNK>'s team has done a really good job tending to that. On the second part of your question ---+ <UNK>, this is <UNK> <UNK>. With respect to body-worn video, we really have two portions of our solution here. One is the evidence management solution, or the back end that stores the digital evidence. And we've taken an approach where we've integrated that in with our other command center software assets ---+ call-taking, CAD, records, counsel, et cetera. And then on the device itself, with the demands on the officer for on-body real estate, we've taken an integrated approach and integrated voice. So, remote speaker mic, with video recording, as well as radio control on a single platform. And we think that gives us a unique advantage in the marketplace. Having said that, this is really a try-before-you-buy market. And while we're engaged with a number of customers around the US, and some internationally as well, and we made initial shipments in Q2, we don't expect the revenue for 2016 to be material with body-worn video. Sure. So, just recapping services backlog, services backlog sequentially was down ---+ was down $210 million. It was down ---+ $170 million of that is an adjustment to our backlog position, based on the pound. And as we recognized $146 million of revenue in Q2 against the fixed Airwave contract, the result of those two was a decrease in sequential backlog. Obviously, absent those two, we did have sequential backlog growth in services. We did grow managed and support services, specifically 4% organically. So from a backlog perspective, heading into the second half, with respect to services, were comparable to slightly ahead of where we were the prior year. <UNK>, this is <UNK>. I think a couple ---+ maybe two comments on Europe, particularly in Europe. But our comps from an overall perspective, as we start to look at the second half of 2016, our comps ease due to the Norway roll-off. To your point around security in Europe, in fact I just talked to our Head of Sales in EMEA the other day on this, there's certainly border security issues that we think can stimulate both product and service revenue opportunities, but they're moving ---+ they're not moving super rapidly. There's funding around them, and there's governance and things like that, but we definitely see business in the second half picking up, largely due to comps. I do also think, though, from an overall tone standpoint, in addition to what's going on in Europe and the climate for policing here in the US, we've always said mission critical public safety is high on the priority list. It's as high as it's ever been. It's reinforced by some of the unfortunate circumstances that are going on. What I would say also anecdotally, while you did ask about Europe, I think we've seen some increased interest, particularly around the older systems here in the US, with a sensitivity around encryption, and protected police communications. So systems here in the US that might be older, longer in the tooth, if you will, where the bad guys may unfortunately have the opportunity, with not too much effort, to listen in. I think some of those communities are engaging in those conversations with us, making encryption and secure communications a higher priority, vis-a-vis an upgrade and a modernization that I think over time will be a positive demand driver. Okay. <UNK>, it's <UNK>. So I think as we look at the second half, we're not ---+ obviously it's not appropriate to comment on 2017 right now. But in general, to give you some regional color, North America in the second half, which is obviously our biggest region ---+ as we said all along, North America will grow in 2016. Product pipeline, as well as services pipeline, looks strong. We talked about Latin America, and again, Latin America is less than 5% of our overall revenue. Again, less pressure in the second half, due to comps. We also believe we have de-risked a lot of the large projects there. And I think on the bright side, we see southern Latin America improving. We see the business in Mexico stabilizing. And I think the big point there is, in spite of some of the headwinds we faced in the last 12 months, we've maintained our investment in the region. And we think we've created a good level of demand that we'll fulfill here in the future. When we think about EMEA, which I just commented on ---+ Europe, Middle East and Africa ---+ again, our comps ease in Europe. There is a fair level ---+ even in spite of oil in the Middle East, the business remains strong. I think one point of emphasis here would be in Africa. Africa's an area really what I would say is an area that we've invested in. We're investing in more significantly in go-to-market. We've shored up some lower end or our lower end of our portfolio product that we think is very attractive in the African market. And then as we start to pivot to Asia-Pac, Asia-Pac is actually ---+ it's been a good news story. In constant currency last year, it grew 8%. It will be up this year in constant currency, particularly, and again, as <UNK> highlighted in the opening, in Australia. I will tell you ---+ China ---+ China's less than 3% of our Company's revenue. 2016 will be a challenging year, but we've got really suppressed expectations candidly about China, just due to some of the preference that I think the Chinese government has towards some of the indigenous providers. I think that's probably a summary of the fly over as we see it regionally around the world. I'll let <UNK> answer Richmond first. <UNK>, on Richmond, it's a multi-year revenue expectation. We'll have a small amount in the back half of this year, but again, it's a multi-year, as a lot of these big milestone-based projects are. And, <UNK>, on the share repurchase, we guided annual repurchase of $750 million to $1 billion. We were out of the market largely in Q1 because of the Airwave M&A activity. We were opportunistic, given what we thought were pretty attractive levels in Q2. I think our annual guidance remains unchanged of $750 million to $1 billion. So I would just leave it at that, and that would be our expectation at this point in time for the full year. Sure. I'll take the ---+ actually, I'll take both of those ---+ the FX question first. Certainly, the FX is included in the guidance we gave for the full year. We said on the Q4 call, and in Q1, we said we saw at the time, based on spot rates, headwind of about $60 million. At this point we see headwinds in the $40 million range for the full year, but again, it's contemplated within the guidance. Specifically, the volatility has been around the pound. And again, we haven't changed our view of full-year revenue for Airwave at $450 million, despite the movement in the pound. Secondly, on product gross margins. You can expect to see the same type of seasonality, certainly as the volume increases in products, in the second half of the year. I think that the PS-LTE opportunity, as I mentioned, is slow to develop. It's certainly a lot slower and less material than we thought three years ago, just to reference a point, or even when the legislation was passed in the Middle Class Jobs Relief Act in 2012 that was US-centric. I think it's for a combination of reasons. Countries have to develop and allocate the spectrum. You've got to line up the appropriate funding. I do think, though, we're very uniquely positioned, positively, better than anybody, quite frankly. And I say that as a reflection of our knowledge and expertise in P25 and TETRA LMR, and the complexities and customization that go with that, and the interoperability and interconnection required of LMR platforms, whether they be P25 or TETRA, to the additive broadband network that gets deployed. I think it would span services, some applications, devices. I don't see consumers' smartphones replacing mission-critical radios, for a whole host of reasons around power management, spectrum, efficiency, group talk, as well as things that are embedded in the 3GPP standard and so many other things that would be required for that to happen. I think public safety LTE is a good opportunity for this Company. I think it's additive to our LMR business. I don't think it's substitutional or cannibalizing in the future. I just don't see that. And I don't think it's a reflection of our head in the sand. I really don't, because we push ourselves constantly here, and challenge each other. It's a direct reflection of what we're hearing from our customers. And it's worth reminding, in LA, we are building an LMR system at the same time, and updating an LMR system right now, at the same time PS-LTE is being deployed. That's also true in the UK, which you know about the commitment to multi-year, fixed-price contract with Airwave, and the eventual migration to ESN. And we'll see how quickly that happens, and in what complementary nature ultimately that gets rolled out in. And the two Middle East customers, right as we speak, are investing in LMR and public safety LTE. And we're getting service contracts that are multi-year, 10, 15 years plus. So the customers are speaking, and the market's speaking, and we're going to seize on both those opportunities. So public safety LTE is more muted. Again, $130 million last year, comparable this year. I would guess it's comparable, maybe slightly up next year as we round out those implementations. But between infrastructure, devices, applications, and the interconnection to make the end-to-end system work, I think we're well positioned. Let me do Airwave, and then I'll turn it over to <UNK> for contracts. The reason our guidance on Airwave revenue of $450 million is unchanged despite the contraction in the pound is a tip of the hat to <UNK> and the finance team. Because as we modeled ---+ he and the team model different scenarios, right at the close of the acquisition, we knew that there was uncertainty out there with Brexit. We wanted to get the contract in hand. We wanted to get the organization integrated. So, <UNK> and team were prudent. So, even with the pound contraction of about 15%, maybe 16% since that Airwave acquisition was done, we're not changing our revenue guidance of approximately $450 million. At this point, given the spot rate in the pound, we would expect Airwave revenue to grow next year, because we have 12 months of revenue recognition versus 10. Okay, <UNK>. So I think, <UNK>, to the second question around projects, dimensionalize it two ways. There's two things. Most of these projects, one ---+ by the way, projects we're proud to have won, the Richmond area that we talked about, we spoke about King County last year, and the State of Iowa. These are essentially multi ---+ we talked about, they could be hundreds of sites. So, each and every one of those sites has a life story themselves, meaning civil, permitting, environmental, OSHA, those kind of requirements, that tend to have longer duration. So we typically think of those things taking anywhere from 12 to really two years to revenue, to get through all the [revetable] things. That's the first piece of it. And then typically within those ---+ also within those contracts, there's a device component. And those things are more actionable, and we can work with customers to pull those in for revenue. But ultimately, each project has its own dimension. A lot of them are civil and site related, longer duration. The second piece of it is devices. We can typically action those with customers in a quicker fashion. Then the last element of them is obviously the multi-year support. I think it's noteworthy because it's been brought up a few times today. But basically every customer in North America, and typically in a lot of different countries overseas now, doesn't enter into an agreement until they think about at least five years. We've had customers that have gone up to 20 years of life cycle and managed and support service agreements. Those obviously have even a longer duration, and those revenue every year. So I think that probably answers your question.

2016_MSI

2016

ECOL

ECOL #Sure. I'll address that, <UNK>. This is <UNK>. So with regard to maintenance CapEx, it's probably in that $25 million to $30 million range. And we classify maintenance CapEx with our landfill construction. And we call that out separately in a lot of our presentations, just because some people classify that as growth. We classify it as the maintenance CapEx. So that's kind of that range. With regard to main competitors in the marketplace, it really hasn't changed. And it depends on what region of North America you're talking about. The primary competitor it seems like in most regions that we come across Clean Harbors. In many cases we come across Waste Management in most of our markets. And then you run into other, whether they're smaller competitors or just in different regions, different competitors from that standpoint. No. It's been very consistent from a competitive standpoint. Well thank you all for attending the conference call today, and we look forward to updating you on the results in July of 2016.

2016_ECOL

2015

ECHO

ECHO #Thanks. Yes, sure, happy to do that. So I mentioned the sales headcount was 1,687 people. The agents within that headcount were 278, so that brings your sales headcount to 1,409 people. Total employees was 2,430, and that's highlighted on our earnings release as well. 2,430. In total, yes. Correct, that was the end of June. That's right, yes. Well, <UNK>, yes, we've got a lot of work going on that. We've also brought in some outside help to get us through it quickly and effectively. We're targeting one year to have the technology integration completed. Yes, <UNK>, this is <UNK>. I think that is the right way to think about it. We wanted to call out the growth that we would expect to see on that base set of business and then also be able to comment on a range of synergies that we would expect to see when we bring those businesses together, but yes, you could certainly describe that as organic growth higher than that 10% to 12% once you add in those synergies. Yes. I mentioned that in the second half of the year, we'd expect roughly $9 million to $9.1 million of amortization in total. The Command amortization for the second half of the year, you can expect to be around $6.7 million, in that range. Thanks, <UNK>. (multiple speakers). Thanks, <UNK>. It does potentially change that. I think that's one of the key issues that we'll be looking at in 2016. And we would expect that our headcount additions might be a little geared more on the client side. Over the past couple of years, they've been ---+ certainly with Echo as a stand-alone business, we've done a lot more investing on the sourcing side of the business to build up our truckload sourcing capability. So it's a good question and I think that we'll get more specific about that next year, but I do see the potential to do some shifting, or potentially the hiring plans might be slightly lower, given the synergies we'll get on the sourcing side. Yes, it will stay in that elevated range through the first half of next year. And then, that would come down relatively significantly. Yes, there is some portion that's a little bit longer, but as we have mentioned, it was a $10 million amount that's been amortized or expensed over a one-year period. Thanks, Matt. Yes, I think we can make that available. <UNK>, why don't you give the numbers. The reason we stopped doing that and it's okay that's it's a trigger is that with the mode mix changing, the combination of LTL and Truckload shipment volumes, it's getting more and more to maybe not be a key metric. There's no reason we can't give it, but we just kind of wanted to be cautious about triggering too much on that as the mode mix continues to shift. Yes. And it's always been a little tricky, but it's better than nothing. We do try to capture the change in revenue per load or revenue per shipment, we've [captured fairly accurately]. Yes, <UNK>, the number is $645,000 on the quarter, which is up 19%. Well, I think on the enterprise client counts, we've decided that that metric as we've gotten bigger and that's a smaller part of our business, just doesn't really make sense to continue to update and disclose. We signed I think 10 new clients in the quarter. So we continue to add clients, high renewal rates, but we decided that that was just kind of getting to the extra information that was necessary to really driving the financial results. So we have kind of backed off on disclosing that. I think transactional client were ---+ there's no reason we can't disclose that and ---+ Yes, total clients we've worked with during the quarter and now, this includes Command as well, is 24,200. Thanks, <UNK>. The cash interest expense, yes, I'd expect somewhere in the neighborhood of $3.3 million to $3.4 million for the second half of the year. So $200 million to $300 million of expected revenue from acquisitions by 2018 and also $200 million to $300 million of expected additional revenue from synergies through the Command integration in addition to the organic revenue of 10% to 12%. Yes. So we haven't really given a percentage there. As you know, we don't guide to a margin percentage and that operating leverage is really a factor of the leverage we get over those net revenue dollars, so it's little harder for me to pinpoint something there without giving a margin percentage, but we do expect that to continue to accelerate. Obviously, that synergistic revenue is very accretive revenue for us and we'd expect that to have a nice incremental margin impact. So we're excited about that. So hopefully, that's helpful. It's going to ebb and flow depending on the quarters in the seasons and the timing of when the integration happens and when those revenue synergies come in. I think a good number to use is kind of high 30s, low 40s as an incremental margin percentage. Correct. Thanks, <UNK>. Well, I will appreciate everybody joining us today. We feel real good about the business. We're proud of the execution. We're excited about the Command deal and we look forward to talking to you all in the coming quarter and on the next call. So, thanks for joining us.

2015_ECHO

2018

SXI

SXI #Thank you, Stephanie. Please note that the presentation accompanying management remarks can be found on Standex's Investor Relations website, www.standex.com. Please see Standex's safe harbor statement on Slide 2. Matters that Standex management will discuss on today's conference call include predictions, estimates, expectations and other forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially. You should refer to Standex's recent SEC filings and public announcements for a detailed list of risk factors. In addition, I would like to remind you that today's discussion will include references to EBITDA, which is earnings before interest, taxes, depreciation and amortization; adjusted EBITDA, which is EBITDA excluding restructuring, purchase accounting, acquisition-related expenses and onetime items. We will also refer to non-GAAP net income, non-GAAP income from operations, non-GAAP net income from continuing operations and free operating cash flow. These non-GAAP financial measures are intended to serve as a complement to results provided in accordance with accounting principles generally accepted in the United States. Standex believes that such information provides an additional measurement and consistent historical comparison of the company's performance. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in Standex's second quarter news release. On the call today is Standex Chairman, President and Chief Executive Officer, <UNK> <UNK>; and Chief Financial Officer, Tom <UNK>. Please turn to Slide 3 as I turn the call over to <UNK>. Thank you, <UNK>. We delivered a fourth consecutive quarter of broad-based top line growth across all 5 business segments. Overall revenue increased 20.6% to $209.8 million, with organic sales up 8.8%. The momentum is also evident in organic bookings growth of 16% and organic backlog growth of 7.5%. Operating income was up 37.4%, and adjusted operating income increased 19.2%. GAAP EPS of a loss of $0.22 per share reflects the impact of the new tax legislation, while adjusted EPS grew 8.7% to $1.12 a share. We had a net debt position of $106.8 million at the end of Q2. During the quarter, our businesses outpaced the rate of growth for the markets that we serve, proof that our Standex growth disciplined process continues to deliver sales and momentum for future growth. Our recent acquisitions, Horizon Scientific in Food Service, Standex Electronics Japan in Electronics and Piazza Rosa in Engraving have continued to exceed our expectations as our team successfully capitalized on cost and revenue synergies. We experienced strong demand in Engraving, Engineering Technologies and Electronics. We did not see the margin leverage we would normally expect in these businesses, and we are focused on fully realizing the top and bottom line potential of these businesses. We have identified the key operational and organizational areas where we need to drive improvement, and have several initiatives underway. In Engineering Technologies, we continue to work through issues that have created near-term bottom line drag. We remain very excited about the long-term opportunities for this segment and believe we will see margin improvement as we exit this fiscal year. In addition, we remain very encouraged by the progress that we are making with Food Service restructuring in our standards products businesses. Overall, I'm very proud of the progress that our teams are making in deploying the Standex Value Creation System across all businesses. This work is critical to position Standex to become a best-in-class operating company, serving attractive, differentiated markets with solid growth prospects. We are in early innings of realizing the benefits of this work, and remain excited for the opportunities ahead at Standex. With that, Tom will review our second quarter results. Tom. Thank you, <UNK>, and good morning, everyone. Slide 4 illustrates our historical trend of adjusted earnings per share and sales on a GAAP basis as well as on an adjusted basis. On a trailing 12-month basis, GAAP earnings were $2.58 through December 31, 2017, which included a negative impact from the new tax legislation in December, as <UNK> mentioned. This compares with $3.79 through December 31, 2016. Our trailing 12-month adjusted earnings as of December 31, 2017, were $4.83 versus $4.40 in the prior year period, which is a 9.8% increase. Sales on a trailing 12-month basis were $825.9 million versus $724.7 million in the comparable period in the prior year, up 14%. As shown on the chart at the bottom of this slide, our revenue and earnings performance this quarter were consistent with our historical seasonal trends. Generally, our sales and earnings are the highest in our Q4 and Q1 during the heavier construction season. We typically experience lower sales and earnings in Q2 that bottom in Q3 as cold weather slows activities. Please turn to Slide 5, which details our revenue changes by segment. Overall, organic growth was up 8.8% with 4 of the 5 businesses ---+ Engraving, Engineering Technologies, Electronics and Hydraulics, having double-digit organic growth. The acquisitions of Horizon Scientific, Standex Electronics Japan and Piazza Rosa contributed 10% to our sales growth, and foreign exchange had a positive 1.8% impact. Please turn to Slide 6, which summarizes our second quarter results on a GAAP and adjusted basis. Sales growth was 20.6%. Operating margin was up 105 basis points on a GAAP basis and down 12 basis points on a non-GAAP basis. Earnings per share was down 127% on a GAAP basis largely due to the tax charge. On a non-GAAP basis EPS was up 8.7%. Please turn to Slide 7, which is a bridge that illustrates the impact of special items on net income from continuing operations. Special items included discrete tax items due to the new tax law of $15 million, a tax effective charge for restructuring of $1.5 million and acquisition costs of $0.5 million. GAAP net income was down 126.9%, and adjusted net income was up 8.3%. Please turn to Slide 8, which highlights the impact of the new U.S. tax legislation. On a partial year basis, the new law lowered Standex's effective tax rate by 0.7% to 24.5%. In the December quarter, there were 2 onetime charges that impacted Standex's results, a $13.8 million charge against foreign earnings and a $1.2 million revaluation of deferred taxes for the tax rate changes. As a result, the overall impact on Standex's tax in fiscal '18 is expected to be a negative $15 million. Given the current mix of domestic versus foreign earnings, we expect the tax law change to be a relatively neutral event for Standex that should marginally decrease our effective tax rate by approximately 50 to 100 basis points. Turning to Slide 9, net working capital at the end of the second quarter of fiscal 2018 was $169.3 million compared with $150 million in the prior year. Working capital increased due to acquisitions and a build to support increased volume. Working capital turns improved to 5 turns versus 4.6 in the year-ago period. Slide 10 illustrates our debt management. We ended Q2 in a net debt position of approximately $107 million, a decrease of $24 million since the prior quarter, reflecting improved operating cash flow conversion during the quarter. We define net debt as funded debt less cash. Our balance sheet leverage ratio of net debt to capital was 20.2% compared with net debt to capital of 23.4% last quarter. Slide 11 summarizes our capital spending, depreciation and amortization trends. Our capital spending was 3.4% of sales during the quarter and 3.7% year-to-date. I have just returned from my trip to China energized after visiting our Electronics, Engraving and Hydraulics sites. In our Electronics Shanghai facility, the new selective soldering machine eliminates waste, reduces floor space and improves quality. In Engraving, the new Mold-Tech facility had a production line up and running for tool finishing, which capitalizes on technologies from our Piazza Rosa acquisition. While our Hydraulics facility in Shenzhen had a new CNC machine to help meet increasing demand. The bottom line is that we continue to invest across all our businesses where we see the best opportunities for growth and productivity. For fiscal year 2018, our capital spending is excited to be in the range of $31 million to $32 million, our depreciation in the range of $21 million to $22 million and amortization remains in the range of $8 million to $9 million. Slide 12 details a reconciliation of operating cash to free cash flow on an adjusted basis. Conversion of operating cash flow was 199% for the quarter and 38.1% on a year-to-date basis, both favorable to prior year. The adjustments in Q2 exclude the onetime discrete tax items imposed by the new tax law. With that, I'll turn the call back to <UNK>. Thank you, Tom. Please turn to Slide 14, and I'll begin our segment overview with the Food Service Equipment Group. Sales for this segment increased 5.4%. In commercial refrigeration, sales were up 3.1% and bookings increased more than 15%. Scientific refrigeration sales growth of 18.5% benefited from the full quarter contribution from Horizon Scientific, which we acquired 2 weeks into Q2 last year. The Horizon Scientific team continues to do an excellent job of leveraging sales channel synergies with our legacy Nor-Lake Scientific business to drive sales growth, and advancing market tests to explore attractive adjacencies and identify new innovative products to bring to the marketplace. Cooking sales declined 1.3% from a combination of the continued rationalization of low-margin range product lines and issues related to last quarter's implementation of a new ERP system. Specialty Solutions continue to perform nicely with sales up 8.8%, driven primarily by growth in the beverage and merchandising businesses. Overall segment profitability was negatively impacted by less favorable rebate terms on historical contracts that hit in the quarter. We have now exited these low-margin buying group contracts and have renegotiated more balanced terms going forward. In addition, the standard products businesses of commercial refrigeration and some cooking product lines continued to deliver lower margins, as we implement the plant transformation, consolidation and restructuring plans discussed last quarter. Looking ahead in Food Service, we remain focused on advancing our strategy to grow our differentiated products through expanded market tests and growth laneways, while we simultaneous execute on our standard products restructuring plans. During the quarter, we implemented several lean manufacturing and operational programs in tabletop cooking solutions that are expected to start flowing through to the bottom line in Q3. In addition, we have implemented focused manufacturing footprint activities in Refrigeration to consolidate our cabinet business, and expects to realize a benefit from these efforts as early as Q4. Turning to Slide 15, Engraving. Sales increased 31% driven by strong Mold Tech sales across all regions, including a 64% increase in North America, as automotive OEMs ramped up what is still expected to be a record year of new model introductions. The Piazza Rosa acquisition contributed $3.4 million this quarter. Our efforts to develop growth laneways in Engraving have continued to be very successful, with new technology sales from products like architecture, laser, tool finishing and nickel shell up $3.1 million. Operating income was up 4.4% compared with last year, with an adjusted operating income margin of 20.1%. The Engraving margin was at the low end of our target range due to sales mix dynamics as well as the integration of Piazza Rosa and investments to support new technology growth programs. These are quite literally growing pains and we are taking actions to address them, and expect margins to return closer to historic levels in Q3 and Q4. Looking forward, our 2018 priorities in Engraving are focused on driving sales and operating growth by capitalizing on the increased automotive launches worldwide and expanding Piazza Rosa's tool finishing capabilities worldwide. In addition, we are launching several market tests to identify additional potential growth opportunities. In anticipation of continued growth laneways and new offerings to roll out in the future, we will also be modifying our organizational structure to create a focused group responsible to ramp up new offerings and allow the operating organization to focus on current offerings. Please turn to Slide 16 to our Engineering Technologies group, where overall sales grew 18.2%. In aviation, sales were up 43.3% or $3.5 million. Space sales were flat year-over-year due to the natural lumpiness in that market. However, we remain quite positive about our long-term opportunities in space. Despite the significant growth, operating income was down 18.6% and operating margins were 7.0%. As we mentioned last quarter, we're facing significant pricing pressure on legacy aviation platform engine parts, which continued in the quarter. In addition, we delivered large space development program with single-digit margins. Looking forward, we remain focused on executing key aviation and space development programs for future volume production. In the engine parts business, we anticipate margin pressures to continue into Q3. However, exiting our fiscal Q4, we believe he we will start to see margins improve as new parts begin to ramp and supply chain improvement actions yield results. We believe that once we navigate through the trough caused by the pressure on legacy engine parts and the delays in the ramp-up of new platform parts over the next few quarters, we will be in a solid position to deliver sustainable top and bottom line growth in this segment for our shareholders. Please turn to Slide 17, Electronics. Electronics continues to demonstrate a strong competitive position in a growing market. In Q2, sales increased by 61.5% driven by double-digit organic growth in all regions, another strong quarter by our Standex Electronics Japan acquisition and strength across a broad set of end markets, including utilities and smart grid. Sensor sales increased by 20.2% and reed relay switch sales were up 31.7%. Operating income was up 67.8%, and operating margins were 22.2%. The integration of our Standex Electronics Japan acquisition continues to advance exceptionally well, delivering on cost synergies and making great progress toward our Asia sensor sales targets. Looking ahead, we are focused on leveraging our leadership position in reed relays switches to capitalize on increased market demand. We are also focused on developing market tests for new sensor technologies, expanding our upstream growth laneways and capturing new business opportunities in the sensor and reed relay markets. Please turn to Slide 18, Hydraulics. The 22.2% sales increase in Hydraulics is primarily the result of strength in refuse and dump trailer markets. Margins were 14%, an improvement over the prior year due to volume growth and improved manufacturing efficiencies. We continue to expect a strong fiscal Q3 and Q4 in Hydraulics as we focus on converting our strong project pipeline and solid backlog, which increased 90% over the prior year period. And finally, the addition of new pumps for wet kits are expected to increase solutions sales going forward. Before we go to questions, let me leave you with a few key thoughts. First, our GDP+ activities are proving successful, as we are delivering top line growth outpacing the markets we serve. And for the second consecutive quarter, we had organic growth across all Standex businesses. Looking ahead, we expect to remain in this growth path in FY '18 across all Standex businesses. Second, we are confident in our ability to deliver bottom line improvements. The lean manufacturing and cabinet consolidation restructuring activities underway in our commercial refrigeration business should start to improve margins by the end of the fiscal year. Cooking standard products lean work is showing early results and expected to generate expanded margins in Q3. And in Engineering Technologies, despite near-term macro dynamics that are pressuring margins, we are excited for the projects and programs underway and are confident in the prospects to deliver improved profitability. Third, our recent acquisitions continued to perform very well, with all 3 contributing to quarterly sales and margin expansion, a demonstration of how we effectively identify, acquire and integrate high-value businesses. And finally, as we look ahead, our acquisition pipeline remains active, and our strong balance sheet will enable us to capitalize on additional bolt-on M&A opportunities. I'm very proud of our team, appreciative of our shareholders and excited for the future of Standex as we continue to execute against the Standex Value Creation System and position our company to fulfill a mission of becoming the best-in-class operating company. And with that, we'll go to your questions. Yes, well, the capacity is ---+ global capacity is tight. And you'll see in our ---+ our CapEx increase in Electronics has been to add additional cells to produce more reed switches. Well, the projections for model increases continue to remain robust through '18 and even into '19. Now we had double-digit growth this year on the left. I think the growth will modulate, but the expectation in the industry will be continued growth into '19. Yes, so this is what happened. So 2 of our businesses were ---+ we hit almost close to $1 million in kind of exceptional rebates, the way we look at it last quarter. If you rewind the clock a year ago, the discussion on Refrigeration was what's happened to all the volume of national account spending ---+ the spending on national accounts really dropped. The management team at the time was under a lot of pressure to get volume. They negotiated some aggressive deals with buying groups. And if they were to hit certain targets, they would get is optional rebates. Well, they hit the those targets, they got the rebates. We have ---+ in the last few quarters, we've talked about the changes in that organization and the team. The new sales leader and president have renegotiated the buying group deals to create, I'd say, more balanced terms. So we give fair growth incentives, but not the aggressive structure we had last year. Well, of course, we'd be interested. It's a high-margin business for Engineering Technologies. We were with the team just 2 weeks ago and we're asking them the same questions. We had very little ---+ we have relatively low expectations that, that will come back aggressively. However, if it does, we're ready to take it on. We are moving the production and the machining capability for that business to our U.K. facility. In fact, our customers are moving their production to Europe for the land-based turbines, so it will be close to them. And we also ---+ we're starting to get some inquiries for offshore work, for deep sea platforms, those ---+ the shims that are part of the mooring systems. So make what you will of that. I guess we're cautiously optimistic that it will at least kind of plateau where it's at, which is about $10 million a year run rate. And we would love to see it increase, but we're not counting on it. No, we don't. Most of the growth is coming within automotive, but we're expanding our offerings. We're selling nickel shell, which we hadn't done before; the tool finishing sales, this is a new offering; and our laser engraving has been growing. We have seen some growth in non-auto tools and molds, particularly in China but some in North America as well. And actually one of our markets test laneways in Europe is to find a more cost-effective way to go after that business so we can get more aggressive about it. So the short answer is most of that growth is through increased share of wallet in auto. I'm traveling, so I've been in and out of the call, but I just wanted to ask one question on the revenue growth. The organic growth was outstanding, 9%; acquisition growth, outstanding, 12%. What ---+ can you just comment on what your expectations are for the rest of this year on the organic growth level. And then perhaps a comment on the acquisition pipeline and how that's looking. Let me just take a look at that and see if we can kind of back into that for you. So if you look at Tom's ---+ Tom makes this great chart, it's Page 5 in the presentation. So Electronics, the organic growth is 13.6%. But I don't know price, Tom, maybe 1 point. Yes, it's 1%. [2%], I would say. Yes. Oh, yes, mostly volume. We've got reed switch volume. We announced ---+ we also described our sensor sales were up 20%, so that's kind of a mix to higher dollar per SKU, if you will. And in general, higher margin. But it's volume. Kind of where we're at, low, mid 22%, 23%, is where we've been running. No. No, it's 22%, 23%. Is our target, yes. All right. Thank you, operator. Thank you, everybody, for joining us this morning. We look forward to working hard this next quarter and reporting back to you on our Q3 results. Thank you.

2018_SXI

2015

NOV

NOV #(Laughter) Not much of which I can answer, or will answer very quantitatively. We maximize returns by trying to minimize capital going into these opportunities. We are a veteran of many, many, many transactions. We've done this many times before and built up global-leading franchises around the world, across pretty much all that we do. We're number one in just about everything that we do. And that's very central to our strategy. And so in terms of what comes available, not just out of the big red/blue merger we've all been talking about, but more broadly, what's out there, what's possible. We're always looking at opportunities. But the cornerstone of that effort really resides in market leadership. We've been very clear. We think market leadership carries demonstrable competitive all advantage in this space. We think we reduce risk for our customers by being market leader. We think scale gets us up learning curves faster. It support broader global networks to deliver products and services and equipment. Let's us leverage R&D efforts and introduce new products more quickly. For lots of reasons market leadership carries lower risk and higher returns. And so that's pretty central to what we do when we evaluate opportunities to deploy capital, <UNK>. Yes, that's the key thing, what you said last. We need sellers to reset expectations. And so we're helping them do that. [All right], <UNK>. Good morning I'm going to be a little cryptic around that because I don't really want to tell my competitors my playbook. But what I would say is again, we're focused on big picture trends in the industry, market leadership and competitive advantage. And looking to deploy capital into those areas more broadly. I will tell you specifically where we've been deploying capital the last couple of years has really enhanced our aftermarket in particular around rig. The rising installed base of NOV equipment and technology out there is pretty transparent to you and everybody. And so what we see are a lot more NOV rigs running and a lot more customers in need of close OEM support. And what we find is that these great little businesses that we can acquire. In fact, two weeks ago I was touring one that we bought in West Africa, for instance, South Africa. It's been a great addition and great reputation, and what we've been able to bring to that business is kind of the NOV global reach and scale. And so that's been a great help for our customers in that region. But around the world, all of our customers want us to be closer to the coal face, closer to their rigs for aftermarket support. So that's an interesting area. And that's part of the reason at our Analyst Day we said, growth prospects for rig aftermarket long term are terrific, and we're putting capital behind that. In other businesses, again we have opportunities to grow those, expand their footprint and so kind of a similar pattern. We're always kind of reevaluating our business model, and does it make sense. And frankly, there's already some level of competition within that business. And that's very common across oilfield services. It's not uncommon for competitors to sell to each other in one product line and compete on another. And so ---+ but we think about that very closely. We don't want to unnecessarily end up in a competitive conflict situation that really takes a toll on our P&L. So I'll leave it there. Thanks, <UNK>. Thanks, Brandon. I appreciate everyone's patience this morning and apologies for the technical difficulties that we started off with. I really also want to thank our terrific employees for the hard work that they all put in here every day. And although we have a pretty challenging road ahead, we're adapting quickly. We have lots of opportunities emerging to launch new products and to acquire some pretty interesting businesses, and really position ourselves for the upturn. So we're doing what we got to do in the short term, looking through that for opportunities in the long term. And I know we will emerge better and stronger. And again, thank you all for joining us. We look forward to updating you in July.

2015_NOV

2018

LANC

LANC #Thanks, <UNK>, and good morning, everyone. It's a pleasure to be here with you today as we review our second quarter results for fiscal year 2018. Doug and I will provide comments on the quarter and our outlook, following that we'll be happy to respond to any of your questions. For the quarter, consolidated net sales decreased 2.2% to $319.7 million versus $326.8 million last year. Retail net sales declined 1.9% to $179.3 million as continued growth for Olive Garden dressings, a full quarter of sales contribution from Angelic Bakehouse, reduced trade spending and lower coupon expenses were more than offset by the impact of disruptions in supply of our New York Bakery frozen garlic bread due to the production interruptions at a co-manufacturing facility and a slowdown in late-December outbound shipments due to insufficient freight capacity. Excluding the negative effects from the supply disruption in garlic bread and reduced end of quarter shipments, we estimate that retail net sales would have increased about 1% versus prior year quarter. Foodservice net sales decreased 2.5%, driven by the ongoing challenges of diminished customer traffic and lower same-store sales in the United States restaurant industry. Sales to our national chain restaurant accounts, including limited-time-offer programs, were below the prior year amount, partially offset by inflationary pricing. Consistent with the Retail segment, late-December outbound shipments of products to Foodservice customers were slowed by insufficient freight capacity as well. Excluding the decline of limited-time-offer programs and reduced end of quarter shipments, we estimate the Foodservice net sales would have been near flat compared to prior year quarter. Consolidated gross profit declined 9.8% to $83.9 million, driven by the impact of notably higher commodity and freight costs and lower sales volume. More specifically, the increases in commodity and freight costs for the quarter were about 2% and slightly less than 1% of consolidated net sales, respectively. Savings realized from our Lean/Six Sigma program and inflationary Foodservice pricing served to partially offset these costs. Note that the prior year results reflect the benefit of significantly lower ingredient costs with only a modest offset from deflationary pricing which, combined with lower freight costs, led to last year's record-high gross profit. Selling, general and administrative expenses increased 2.3%, driven by increased amortization and other recurring noncash charges attributed to Angelic Bakehouse, continued investments in our growth initiatives and a favorable nonrecurring item in the prior year's quarters ---+ corporate expenses related to a closed business operation. Consolidated operating income declined $47.3 million from $59.4 million in the prior year on lower gross profit and increased SG&A expenses. The Retail and Foodservice segments were unfavorably influenced by the factors referenced above, resulting in operating margin declines from 23.5% to 20.8% in Retail and from 13.3% to 9.6% in Foodservice. Net income was $45.9 million or $1.67 per diluted share compared to $39 million or $1.42 per diluted share last year and was favorably influenced by the Tax Cuts and Jobs Act of 2017. Doug will cover the tax-related matters more comprehensively in his commentary. The regular quarterly dividend paid on December 29, 2017, was $0.60 per share, a $0.05 or 9% increase over last year's amount. Turning our attention to retail sell-through data from IRI. For the 12 weeks ending December 31, 2017, we maintained our share leadership position in all 6 of our key categories. During the quarter, we were able to increase our share position in 2 out of the 6 categories, and we saw a modest pullback in the remainder due to our targeted trade reduction activities and the adverse impact from our supply disruption in the frozen garlic bread category. During the quarter, total consumption for our refrigerated salad dressings business, one which we've updated you on in the past, was up 1.5%. Our base business or dollars generated at full price was up 3.4%. Our incremental business or dollars generated on promotions was down 13.3%. During the same period of time, we also expanded distribution of our new Simply 60 Dressings and discontinued our Simply Dressed Lights, all of which will help strengthen our refrigerated dressings business on a go-forward basis. With that, I would like to now turn it over to Doug to make some comments about the balance sheet and related items. Thank you, Dave. Overall, our balance sheet remains strong, and I will comment on some of the larger line items within our balance sheet compared to last year. I will make some specific comments on the impacts of tax reform as well. From a high-level perspective, the increase in our cash balances of nearly $36 million since June can be summarized as follows: cash provided by operating activities of nearly $84 million, offset by regular dividends of $32 million, treasury stock repurchases of $1 million and property additions of $15 million. In general, consistent with past quarters, our accounts receivable remain in line with expectations, and our collections and agings remain solid. Similar to accounts receivable, our inventory balances are in line with our expectations as we exited the seasonally high retail shipping period of our second quarter. The increase of nearly $7 million in other current assets since June reflects the timing of federal estimated payments and the favorable impacts of the Tax Act, which occurred in late December. Consequently, as of December 31, we have a larger prepaid federal income tax balance than normal. This line item should normalize over the balance of our fiscal year as we adjust our future estimated federal tax payments. As I mentioned, cash expenditures for property additions totaled $15 million in our first half. This level of spend is in line with our estimated annual CapEx of $30 million for fiscal '18. Consistent with our past communications, the largest amounts have been spent on new processing equipment to accommodate growth and plant improvement projects to enhance productivity. The expansion of our warehouse and production capacity at Angelic Bakehouse continues to remain on schedule. The warehousing phase of this project is expected to be largely completed during Q3. Depreciation and amortization expense totaled $13 million for the first half, and we expect similar levels for the second half of fiscal '18. The significant decline in our other noncurrent liabilities and deferred income taxes, since June 30, largely reflects the onetime benefit of $9 million, resulting from the Tax Act mentioned in our earnings release earlier today. With respect to our balance sheet capitalization, we continue to have no debt and over $621 million in total shareholders' equity. We ended the quarter with nearly $179 million in cash and equivalents, and we continue to have available borrowing capacity under our credit facility of nearly $150 million. Finally, and broadly speaking, our income tax provision for Q2 was favorably impacted by the Tax Act in 2 ways: first, a $9 million onetime benefit resulting from the remeasurement of our net deferred tax liability as of December 31; and second, a lower blended effective tax rate. In consideration of all the significant elements of the Tax Act and excluding the onetime benefit before our deferred tax remeasurement, we estimate our blended effective tax rate would be 28.3% for fiscal '18. As previously reported in our Q1 commentary, our effective tax rate was then 34.2%. Consequently, our tax provision for Q2 was effectively only 22.5% to adjust for the over provision in Q1. As noted in our earnings release, the total impact of the Tax Act on our second quarter net income was approximately $14.5 million or $0.53 per diluted share. Of this total, $9 million or $0.33 per share reflects the onetime deferred tax benefit mentioned previously, while the remaining $5.5 million or $0.20 per share resulted from lower tax rates. Nearly half of this amount related to the over provision in Q1. Looking forward, at this time, we estimate our effective tax rate for fiscal '19 to be approximately 24%. We estimate that Tax Act will serve to lower our annual income taxes and in turn raise our annual cash flows in the range of $15 million to $20 million. Thanks for your participation with us this morning. I will now turn the call back over to Dave for our concluding comments. Dave. Thanks, Doug. Looking ahead to the second half of our fiscal year, we're implementing corrective actions to recover and to meet demand for our frozen garlic bread products. Nonetheless, we expect those sales to be somewhat constrained by supply through the end of our third quarter. With regard to commodity and freight costs, while we anticipate some reduction from the very high levels we experienced in the second quarter, we expect those to remain high ---+ remain above last year's level for the balance of the fiscal year. We're actively working with the asset carriers and brokers to rebid shipping links wherever possible. Early in our fiscal third quarter, selective price increases took effect in both Retail and Foodservice segments in response to higher commodity and freight costs. Additional Retail price increases are planned for early in the fourth quarter of our fiscal year. We project that these price increases will serve to offset the higher commodity and freight costs through the back half of our fiscal year. We will also generate cost savings ---+ continue to generate cost savings from our Lean/Six Sigma program at or above level, a mid-7-figure level achieved through the first 2 quarters of our fiscal year. On the sales volume front, we'll address our challenges through improved execution and new product introduction. For example, late in our fiscal second quarter, we're excited to introduce a 3-pack of wing sauces to the retail club store channel under a license agreement with Buffalo Wild Wings. To date, the product is performing exceptionally well. In the coming months, we will continue to add to our Olive Garden line of dressings with the launch of Parmesan Ranch, another product that we're extremely excited about. Our fiscal third quarter will also benefit from a shift in timing of Easter holiday sales. In light of the initiatives we now have in place, our current outlook for freight and commodity costs when compared to fiscal year 2017, we expect our consolidated results to show a pickup in both gross margins and operating margins for the last 2 quarters of fiscal year 2018. Before I close, I'd like to expand a bit on the recent tax reform legislation. As Doug outlined, excluding the onetime benefit for our deferred tax remeasurement, we expect to see about 600 basis point reduction in our effective tax rate for fiscal year '18 and about 1,000 basis point reduction beginning in fiscal year '19. Independent of the new tax legislation, our business priorities remain the same. In mid-fiscal year '17, we launched our growth plan, which consist of the following 3 priorities: accelerating our base business growth, drilling our margins through supply chain optimization and expanding our core with focused M&<UNK> During the past year, we've rolled out key elements of that growth plan, such as category management capabilities in Lean/Six Sigma. Both of these initiatives are already generating meaningful value. Concurrently, we've been performing a comprehensive assessment of our supply chain and business infrastructure to identify opportunities to improve the competitiveness and scalability of Lancaster Colony. The lower tax rate and accelerated depreciation for capital expenditures that the new legislation provides will make the returns on these initiatives all the more compelling. However, we're continuing to work through this assessment with our board, and we look forward to sharing the findings with you later this year and early into the next year. That concludes our prepared remarks for today, and we'd be happy to answer any questions. That's true, <UNK>. I don't think we've ever necessarily dimensionalized it, but it is a meaningful amount, and it may be worthy of benefit for the group to expand about this a bit here while we may. During the most recent quarter, we had a supply disruption due to a fire in this facility. This facility has been a long-term partner of ours for more than 20 years. As our business has grown, they have grown with us. They had the disruption. We put in place corrective actions, including our maintenance people and our engineers in the factory to work with them to get it online. We've also gone out and secured incremental co-man facility until we're completely back online with production. But what's complicating the matter is, this is a seasonal business where consumption spikes during this particular period of time. I think they're not just similar from, let's say, catch up during July 4 or Memorial Day. So the disruption took place at the very time when we want to be building inventory going into a peak season, which in turn depleted the inventory, and it's made it challenging because even though we have the factories up and online, it's difficult just to keep up with the demand because of the seasonal nature of the spiking when it takes place so. Rest assured, we have everything up against this, and we expect itself to begin to be resolved, but it did have a measurable impact in the quarter. No, no, it does. I would backup maybe just a second and address the first question. All things being equal, as an operator, I would prefer to own my facility so that ---+ the company too, so that we can have direct control over the circumstances. Having said that, I've been involved in situations at most of the companies I've been in the past where they have long-term co-packer relationships. And this pack has been in one of these relationships. And in this factor, it literally integrates into our distribution centers and everything else. So to-date, they've been a very cost-effective and service-friendly operator for us to work with. Having said that, I go back to my first comment that we would rather control it at the end of the day. Moving forward, and beyond that, you asked a question about how do we take and consider the long-term implications of what's taking place. If you think about the way it flowed through the P&L, the first thing that we did is, we went and we promote. We pulled promotional events as you would expect, and we also pulled back on advertising so that we weren't choking demand at a time we didn't necessarily want to. So when you look at the business in more detail, you're going to see a slowdown in the aggregate and then you're going to see a greater slowdown on promotion versus base business. As we get on the other side of this, and production gets back to where we wanted. It's matching the need on the demand side. What we will begin to do is resume those activities, sort of, in the normal course. You're likely to see a couple of effects. On the downside, you're going to see a little bit of a constrained situation on supply that impacts demand. On the other side, what you're likely to see is we depleted the pipeline in the business. So once we're back in business, you are going to see basically retail or inventory start to build back. So that's why we believe this is going to have somewhat of a little impact in Q3 and then, like I said, resolve itself thereafter. Sure. So why don't I ---+ I'll take it in 2 tranches. The first tranche that I'll speak to, <UNK>, is Foodservice. So as most of you and most of the other folks on the phone are familiar with, we have contracts that have escalators and de-escalators. So our Foodservice national accounts escalators are going into effect. They went into effect this month. And the second side of that business is, what we call, our branded business, which are things that are sold under our brand to smaller operators or to noncom segments, like colleges, university and health care. Those price increases have also gone into effect, and they're rolling out the door. On the Retail side, as you'll recall, when we were together on the phone in the fall, we talked about implementing price increases. And we said, hey, look, given the rapid acceleration that we saw in commodities, we felt like we could not get there by pulling trade alone. So we felt compelled to take the price increase and have those conversations, and we find that we are, after some pushback, getting price realization in those categories. I think the difference versus prior periods is every one of the retailers that we're talking to are expecting a lot of information about how we're justifying these. And as a case in point, we have a new VP of Procurement that joined us probably about 8 months ago now, a gentleman, that was a long-term Nestl\u0102\u0160 executive and then was at Kraft Heinz subsequently, has been actively involved in going out on sales calls with our sales folks, meeting with buyers to walk through the underlying cost assumption. So I think once we get to that level of granularity, they don't like it, some customers actually do. After a little pushback, I think they're happy to see it. But there are some others they don't. So net-net, I think it's just the onus is on us to be able to document what's happening and to go out. One piece that's new in this quarter, and I know we're at sort of at the front end of the earnings calls this season, is what's happened in freight and most of you probably saw the article in the front page of the Journal today that talked about this. What we're seeing on freight, which is broken out from our commodity cost is really an unprecedented spike that happened in this quarter, and it was driven ---+ it started at the last quarter with the 2 hurricanes, but really it jumped up almost in order of magnitude thereafter in sort of a 1, 2, 3 punch. The first was the bomb cyclone that took effect. The second thing was the fact that it got incredibly cold. Bomb cyclone notwithstanding in the northeast between Christmas and New Year. And then the last was implementation of the ELD, these electronic logs. That in turn combined for it to very difficult for us to get trucks, particularly refrigerated trucks. We usually don't dimensionalize the stuff, but just to put it in order of magnitude, we had 60 trucks between Retail and Foodservice that were stranded between that period of time because we couldn't get drivers in, independent of what we were willing to pay. We have since seen that normalized. We're continuing to see the up charges come in, but we're not having the difficulty getting drivers that we saw. So there was a particular pinch point that happened in that window for us between Christmas and New Year. Yes, here's how I would think about it, <UNK>. First on the pricing, the pricing is in effect, and for the first time, we're going to start to see positive price realization on this business after, in some cases, deflationary pricing. So it's actually unwinding last year around the same time the other way. So now it's swinging to the positive. That's the first thing that's going to create a tailwind. In this particular quarter, we had an unusually high amount of limited time offerings. I don't think we ---+ traditionally ---+ I'm looking at Doug here. We haven't traditionally dimensionalized these, but just to give you an idea, if you go back, and you look at, let's say, the previous 12 or 14 quarters, this was the second highest that we've had over that period of time. So we were lapping that. And the LTOs that we had this period around were lower, which resulted in a more negative offset. The other thing that happened in this business is, the 60 trucks that I described, 30 of them were tied into this business. You put all that together, normalized trucking, you put into it the fact that the LTO comp that we have in this upcoming quarter is lower and the fact, as you're pointing out, we are seeing in some selective parts of times of life, we would expect to see this business start to get better. I'm not going to go all the way forward, <UNK>, and say that we are going to expect to see normalized growth, but I think you're going to see it bounce off of where we were this quarter and start to turn towards growth. So here's the way we're looking at it right now. There are couple of things that we believe are going to happen that I would be happy to share with you. The first is, as we work our way through this, there was a big de-load of retailer inventory. Not only does this get tight within our supply chain, it constrains our ability to ship, but it even resulted in limited out of stocks on retailer shelves. So what we expect to see is as we're able to produce more than the near-term demand, we have the opportunity to go back and replenish trade inventories. So that's going to provide a tailwind for the business. The other thing that we're going to do is resume the normal levels of marketing and promoting against the business, and then we also have some new item news that we're planning to launch into the next fiscal year. So at this point, I don't expect to see this resulting in structural dislocation in the business. It was obviously an unfortunate case of bad execution on our part that we're pushing the result and get on the other side of it. Good question, <UNK>. And sorry for not being a little bit more clear on that. For the balance of fiscal '18, we are using 28.3%. Yes, in terms of just a rough ballpark figure as a percentage of the retail sales, it's going to be about 1%. Sure. I'll address that, <UNK>. What we're doing today is we're really focusing on our activity close in on the retailers' online activities. So if you think of Kroger's ClickList program and there is a whole range of other retailers that have comparable programs, and that's really where we're devoting the lion's share of our time today. We are doing sales on a more limited basis with Amazon, particularly on some of our dry products. And we're in the process of figuring out how we can do that at scale and make sure that we're doing it profitably. Yes. So I\ It's sort of look at how do our ---+ <UNK>, if I can sort of walk you through it, if you looked at almost the flow of our business from October, November and to December, the latter half of December was particularly tough for us. And we don't know if it was a big slowdown because of the bomb cyclone and the cold weather, but we did see a pretty significant slowdown in December. What I can tell you on the other side is this, we're looking at orders on a go-forward basis. They seem to have resumed to more of a normalized level. But that change in traffic patterns into restaurants, then exacerbated by the fact that we're having trouble getting trucks out of our own docks and to combine to put pressure on the business. So I think if you were to look across the scope of, let's say, the last 18 months, I don't know if I'm in a position to say, I ---+ well, it looks like it's getting a lot better, but I don't believe it's getting worse. Yes. Well, I'll walk through some of them for you. We focused a lot on New York, justifiably. Our Olive Garden business in the pourable salad dressing continues to perform exceptionally well. We launched a 32-ounce item that we expected to net cannibalize that the 24-ounce and the 16-ounce. What we're finding is that it's not and the velocity in that business remains very, very high. And the brand continues to grow. So we're extremely excited about that. It remains a great growth story inside of the Retail segment. But I also mentioned in my segment ---+ my comments on that was, we work closely with our partners at Darden Restaurants in Olive Garden, and we've agreed to launch in Olive Garden, Parmesan Ranch, that we codeveloped with the restaurant folks. We've tested it in the restaurants as well as with consumers, and it's performed exceptionally well. And we're particularly excited about that because the Parmesan ---+ or just the Ranch segment is about 2.5x the size of Italian. So if we can achieve any measure of the growth that we've seen on the Italian side, we think we have the right to really continue to grow there. Moving over to Sister Schubert's, we had a very good holiday season, Thanksgiving and Christmas, both. We continue to expand distribution behind a 20-count size. Again, we aren't exactly sure how it's going to perform in the marketplace, what we were looking for was this idea of expandable consumption that if we could get more into the freezer that consumers would consume it more often and that, in fact, is proving out. So that business continues to perform very, very well. On the refrigerated dressings side, I made some comments. So a year ago, we were talking about excessive trade activity from a couple of competitors, and we were following suite, and we shared with you how we intended to go in and make some strategic changes to our lineup, to our packaging and to address our trade strategy, and we worked our way through that and on businesses I described for you. Our business is returning to growth. We're just below the category average now. Most of the competitors, except for one, have also pulled back trade, and we've used this intervening period to clip SKUs and to focus on higher-performing SKUs. So we remain pretty bullish about that category as well. I'm going to knock on formica here, on the desk because I'm sitting on and tell you that I think the worst is behind us and the better times are here to come, so I'm not going to ---+ hopefully not jinx myself. Flexing over to dips, we had a good, but not a great caramel season. And dips remains the next focal area for that team that I described on the Marzetti that they're going to focus on. We do have some new items that were readying for launch early into next year that I think you're going to be very exciting and will change things up significantly. And then I'll move around and talk about some of our lights ---+ our smaller, what we call, specialty brands in the portfolio that really don't get a lot of attention, our Cardini's, Girard's and range of others, and there too, we're making packaging changes and we're changing formulations on SKUs, and those are going to be shipped in here in the next few months as well. So as you look across the balances of the portfolio, we feel like a lot of the innovation activities are starting to take root. We just need to do more and do it faster. No, I'll walk you through that. So we went into the year and I think the guidance we provided was that we expected to spend about $30 million, and we remain on track to spend that $30 million. What's really the one big slug of that was going to expand capacity at Angelic Bakehouse, which is on time and on budget. We're getting ready to open up the new freezer and be able to utilize that space within a week or so. And the other area where we said we are going to devote CapEx was up against our Lean/Six Sigma program, which has really fully taken root, and as I mentioned in my comments, we're generating solid mid-7-figure net benefits against that every single quarter now. So we're excited about that. As we think about things on a go-forward basis, really our expectation is to not use the windfall to drive a change in strategy. We set a strategy around the items that I described earlier on, <UNK>, accelerating our base business growth, improving our supply chain and optimizing it and improving our margins and then looking for smart bolt-on acquisitions. Really the big change for us is the change in deductibility and how it's going to help improve the IRRs. But honestly, if a project was on the bubble, I don't know, just a change in the tax rate would, for us, justify pushing it over the line. Really what we're trying to do is just be very disciplined where we're putting that money. I think it's been one of the hallmarks of Jay and the team here that led the business for a really long time, and we expect to stay true to that. Sure. Well, we're always out shopping. I can tell you that much for sure. We have a couple of things that we're looking at, but nothing necessarily that's imminent. As far as prices and what's going on in terms of multiples, I don't ---+ we haven't seen it necessarily trickle down into the way people are thinking about multiple expectations. I think the landscape largely remains the same. So I think good assets are expensive, but not out of reach. It's a lot of times just convincing the sellers that the time is right to sell. So most of my questions have been answered. I did want to ask housekeeping and forgive my ignorance if you addressed this. Appreciate the color that you gave on the top line impact from the production and supply issues as well as the freight capacity. Did you give a sense or if you didn't quantify this, if you could, the impact on the operating margin line. Of commodities or of freight, you're asking. . Just anything ---+ I guess ---+ and you can give it me aggregate. It would be fine as well. Just anything outside of just normal commodity. I mean, obviously, we ---+ commodities inflation you had, but anything that you sort of would define as beyond unusual in the quarter that you wouldn't think is sustainable beyond the next quarter or 2. Yes. So a couple of things maybe that I'll look to <UNK> and Doug to jump in and maybe hitting commodities first. I think the way we characterized it, so if you're thinking about your modeling is on commodities, we said the amount was 2% of net sales. And by the way, that's a net number. That's net of procurement activities that we had. The growth inflation that we had in this particular quarter was even higher than that. As we look at the outlook on inflation, we expect to see it to start to moderate. So as we look at eggs, in particular, eggs were a high watermark in this particular quarter, and we're starting to see that abate somewhat, offset then, of course, by pricing activities and stuff like that. On the freight, I think the way we characterize that and this isn't the disruption in timing, but this is the cost increase that we incurred, I think we characterized that as slightly less than 1% of an upcharge just in transportation costs within the quarter, is the way we've explained that. We would expect that to remain higher than prior quarters, but then start to come down. The real measures that we're looking at here is, what we call, PNOC, which is pricing net of the commodities. So that would be, if you look at commodities, both gross inflation and the net inflation, after our, let's say, procurement activities and things like Lean/Six Sigma, and then we look at pricing and for the last 4 quarters and last 2 quarters, in particular, we have had very negative PNOC where the commodities have significantly out swayed our ability to cover on pricing. As we swing into the back half, we're going to start to see PNOC swing in our favor for the first time due to the Lean/Six Sigma activities, procurement where we've been able to get out in front of this ---+ some of the stuff as well. So that's probably worthy of note. <UNK>, this is Doug. The one thing that Dave alluded to that, I think, is worthy of emphasis is the pricing of the eggs. And as he mentioned, they are beginning to come down, but they're still going to be at levels still higher than that of the prior year. And we live in a bit of a delicate balance with the laying flock and certainly the issues that were happening over in Europe. And so I think a big piece of what Dave is conveying is the continued decline in the egg price that we anticipate seeing. Should there be an interruption in the supply of eggs. Somewhere around the globe that could certainly swing things the other way pretty quickly and abruptly. So just a bit of caution on that. Tremendous color. Last question for me, just kind of a big picture. Taking note of what we're seeing in the scanner data for you guys. You talked a little bit about just Sister Schubert's last quarter. I think it's interesting when you sort of flush out the data, the kind of growth that you're seeing on the other side of SKU rationalization efforts and the tighter focus on your best-performing SKUs. I think that's netting out to something like high single-digit growth into year-end, which is obviously very impressive. We're seeing total points of distribution declines, accelerating for you, I think, across croutons and dips, for instance. And I think you talked about being proactive in SKU rationalization last quarter as well. Maybe 2 things: one, is that certainly ---+ is this support ---+ what we're seeing in the data supportive and what you talked about last quarter with being proactive. And obviously, the second part of that is innovation, where ---+ how long is ---+ how long and how painful is this process in the near term. And if we look at Sister Schubert's, is that a fair proxy for what you think you could do on certain of these brands where you tighten that focus here. Yes, Sister Schubert's is the role model. That's the blueprint that we're using. So if you go back, we've reduced the number of SKUs to what the team called Sister 7 and refocused all of their selling activities against getting that assortment right to ensure that instead of having items number 1, number 14, number 15 and then number 5, 6 and, et cetera, that first and foremost you have items number 1 through 7. And then layering on top of that good innovation, and that is the model. So that's the model that's being applied across the board. If you look at dips, for example, which you called out. If you look at where we are losing distribution on that or the Otria dips, accountably, just we're underperforming. So we've discontinued that subline, and we have innovation that we're readying that's going to come in behind it. At the same time, I want to be forthcoming with you guys as well though that a lot of this is intentional. That being said, I don't like seeing the timing where we're dipping down before we're coming back up. We'd like to see longer term is a tighter match of our timing between when we're making discontinuation decisions and when we're launching the new items. So I think, let's say, that we're launching part of the bluebook effect or the playbook effectively, but we're not all the way there that we want to tighten it up. Well, thank you everybody on the call today for joining us. We look forward to talking with you this spring as we share our third quarter results, and we hope to get a chance to see some of you guys in the marketplace early this year. We'll talk to you guys later. Bye now.

2018_LANC

2015

PBI

PBI #No, we've not. We were pretty purposeful about what we said at Analyst Day, and I'll repeat it. First of all, if you start with available free cash flow, as you get into 2016 through 2018, we see a pretty big opportunity to drive real cash flow. That will become very congruent with earnings. The second thing we said is that our view of capital allocation is we'll be balanced between share repurchases and acquisitions. And the third thing we said is we'll have a bias towards share repurchases in the short term. And I think all those comments still stand. I'm not prepared to say a lot more than that, however. Yes, so I would say that's a business that over the last couple of years has performed quite well. As you look at the pipeline that they had in the third quarter, they had an opportunity to do much better than they did, and I would say our sales execution was not what I would have expected. So as I remarked, there's positives and negatives about the quarter. Software, I thought the optics were less good than the actual execution. In shipping, I just didn't like how we executed. So I think we'll be back on the horse in the fourth quarter, but they certainly didn't perform the way I wanted to in the third quarter. I would say the answer to the first question is what. And the answer to the second question is we continue to look at other outbound markets. So not to be flip, <UNK>, if you look at where we are in the UK, we are very early, so I think there's a lot that can be done there in terms of driving that even further. There's opportunities in terms of more listings. There are opportunities in terms better conversion rates. So we're early innings there. We're going to continue to do better, and we are focused with our partners to do that. As it relates to other countries, that's clearly part of the plan. Right now I'd say that we'll go wherever we can find the next anchor client that would really provide the foundation for our business. As you look at the markets that you'd likely find that, I'd say Germany, India, China, and Japan are the ones that we're pushing the hardest on, but we have to do it in a way that makes economic sense. At this point, the biggest thing that will drive productivity, or two biggest things, are one is the removal of the duplicative expense. So that by itself has a positive benefit. And the second is as that channel becomes more experienced, so there's nothing structural at this point that's in the way, so now it's just a matter of time. We have all of the people in the seats, and that's really what was transpiring over the third quarter. Now it's moving up the productivity curve. Yes, so again, I think if you look at that business over the last couple of years, they've done that high single digits and actually low double digit performance, so it's not even quarter to quarter. Software businesses are never quarter to quarter, particularly ones starting with the level of scale that we have. The next move for them is to think where we started. We went from general (technical difficulty) to product specialists. The next turn of the crank is to go from product specialist to solution sales. So let me give you an example of what that means. So we have our customer information management businesses. That's a line of business that's a product specialty, if you will. As they mature their channel, they will move from product specialists that know those products inside and out to people that know about money laundering and know your customer and other types of application areas that become important to the client. So I can get the predicate of your question looking at the third-quarter results. I would say that they've hit the ball fairly consistent with what we think our long-term expectations are over the last couple of years. And they got more opportunities for productivity. The other thing that will help, and we haven't talked about it a lot, is we've not done as well this year on our services business in Software as we had planned. As you move more into the solutions aspect, it will drag your services business along with it. Thanks. So let me recap. As I mentioned, from a quarterly perspective, there were some positive and negatives. That's not to be unexpected. That's generally the way. As we pointed to at Analyst Day, we expected the third quarter to be better than the first half, and the fourth quarter to be further improvement from there, and I think that's the way it's going to turn out. In terms of our strategic road map, and I think this is the headline of the third quarter, we made little progress over the last 90 days. And I would just recap, too, because I think their economic consequence is so substantial, the fact that we got Canada out the door from a systems perspective is significant. As we've talked about, that's the next important step to realizing that $125 million of benefit. I would say we've seen productivity improvements beyond what I would have expected where we are in deployment already. And the second really important strategic item that we're able to make progress on and the third quarter, to <UNK>'s question, was the integration of Borderfree. We've talked about $25 million to $30 million of synergies over the next 18 months. Collectively, those two items represent $150 million benefit. So as I said, you'll get fluctuations and a little bit noise quarter to quarter, but our focus and our perspective is squarely on the long-term creation of shareholder value. That will conclude our remarks for today. We'll talk to you in 90 days.

2015_PBI

2017

LZB

LZB #Thank you.

2017_LZB

2017

WWE

WWE #Thank you, and good morning, everyone. Welcome to WWE's Second Quarter 2017 Earnings Conference Call. Leading today's discussion are Vince <UNK>, our Chairman and CEO; <UNK> <UNK>arrios, our Chief Strategy and Financial Officer; and <UNK> <UNK>, our Chief Revenue and Marketing Officer. We issued our earnings release earlier this morning and have posted the release, our earnings presentation and other supporting materials on our website, corporate. wwe.com/investors. Today's discussion will include forward-looking statements. These forward-looking statements reflect our current views, are based on various assumptions and are subject to risks and uncertainties disclosed in our SEC filings. <UNK>ctual results may differ materially, and undue reliance should not be placed on them. <UNK>dditionally, the matters we will be discussing today may include non-G<UNK><UNK>P financial measures. Reconciliation of non-G<UNK><UNK>P to G<UNK><UNK>P information is set forth in our earnings release and presentation, which are available on our website. Finally, as a reminder, today's conference call is being recorded and the replay will be available on our website later today. <UNK>t this time, it's my privilege to turn the call over to Vince. Good morning, everyone. We are pleased with execution of our strategy to optimize our long-term value of our content. <UNK>s you know, revenue increased 8% to a quarterly record of $215 million. <UNK>nd we delivered our earnings results pretty much essentially in line with our guidance. Live event revenue increased to quarterly record of $53 million, which I think is notable. We are reaching 85 million year-to-date with our global attendance up about 100,000. The Network segment reached a quarterly record of $55 million as our WWE network paid subscribers increased 8%. Similar interesting things that we've got on as well is ---+ there's something called the Mae Young Classic named after one of our more extraordinary female performers of the past. It's one of things that Paul Levesque is putting together for us as he did the Cruiserweight and, of course, all the young individuals who are scheduled to one-day compete for us down at the Performance Center. The Mae Young Classic is really an opportunity to bring up young female performers, which is very ---+ is vital actually to our overall product, many of the quarter hours you see in television reflect our women superstars. So this is an opportunity, obviously, to grow that base, which we haven't done all that well in the past. Overall, one of the things that I look at as one of my barometers is the overall interest in the product. <UNK>nd for the first 6 months of the year, our digital video views reached 9.1 billion, which is pretty much extraordinary. It's up 18%. Our social media followers continue ---+ certainly surpassed the 800 million, which again I think is a tremendous indication in the overall interest in our product. That's always been one of my big barometers. Global sponsorship looked pretty good. Its revenue grew up ---+ grew about 25%. Some of the more blue-chip advertisers have joined us, KFC, Nestl\xe9, <UNK>T&T and some gaming partners as well. We have selected Lagard\xe8re in terms of our best-in-class marketing agency to help us develop our global sponsorship business. Other notable things going on, we have a live event in Shenzhen over in China on September 17, which is going well and just part of our strategy in China, which looks good to-date. <UNK>nd we localized some of our weekly television shows, which is working out well for us in India and in the Middle East. We will probably continue to do more of that going forward in other markets. When we speak of other markets, we completed a multi-year agreement to televise Raw and SmackDown on SuperSport, which is definitely the way to go, that's <UNK>frica's premier sports broadcaster. Those are some of the things that we've got going on among others. Thank you, <UNK>. <UNK>, we are ready now. Please open the lines for questions. Thank you, everyone. We appreciate you listening to the call today. If you have any questions please don't hesitate to reach out to us.

2017_WWE

2016

STI

STI #Thanks for the question, <UNK>. We're just trying to be a little bit careful here. The majority of the loans we put into non-performing are actually still performing today. They are performing loans. But these are loans where when we look at those particular clients we think that there is a risk that they will become non-performing sometime in the next couple of years if oil stays where it is. Remember how quickly this move has been on oil. It was only 15 months ago we were at $100 a barrel. The move has been very rapid. And we're just trying to make sure that we try and stay ahead of this so that we don't end up surprising you and ourselves later. Yes, it was just a handful of credits, <UNK>. I don't know if they were shared national credits. But it was a relatively small number and they were all either upstream or services. Some of it was. There was one charge-off in energy that related to one credit. That's mostly midstream and downstream. When you look at midstream and downstream, that makes up the remainder of what we call the energy book. When you think about what lower oil prices do, for midstream it's sort of a non event, and for downstream it's actually beneficial. So, for our downstream clients, the decrease in energy prices will help them. Let me answer those backwards. Investment grade versus non-investment grade, I don't have that exact number in front of me but, as you would expect, we have a relatively higher proportion than others of investment grade. So, think about the context maybe of a third to a half of our book would actually be investment grade. And, as you would also expect when you think about a conservative underwriter like SunTrust, the criticized portion would be relatively low, and for us that's on the order of 20%. The vast majority of our loans are first lien.

2016_STI

2016

NWE

NWE #Thanks. No, there were some other things we talked about, some other delivery charges I think in there, and I think that was probably a third of the cost, slightly less than that. But the depletion was the primary driver. I think it's too early to tell. I think now at some point in time there will ultimately need to be a rate case. The fact that we're using Dave Gates differently, I would expect there would have to be a rate case, both from a FERC and MPSC perspective at some time in the future. Right now we're still ---+ we're in the optimization mode, certainly still testing how this works. We heard earlier about RBC and how that impacts things and so as <UNK> talked about, we're still looking through that. Ultimately, to ultimately get the resolve from a revenue requirement perspective, there will be rate cases in our future. Certainly there's that possibility. We acknowledge that. But the Montana Commission was I think quite direct in inviting us to file a natural gas case, and we think it makes sense to focus there this year. Thank you. Thanks, <UNK>. Well, thank you all for the good questions and for your support for the Company throughout the quarter. We'll see a number of you I know over the next month or so down at AGA and elsewhere and look forward to visiting with all of you next quarter. This concludes the call.

2016_NWE

2016

EXR

EXR #Yes, so I mean our models obviously are always going to focus on maximizing revenue. And when we looked at the models early in the year and the end of last year and estimated where the model would take us, we estimated that we would have more occupancy benefit than we have had. The model has taken more rate and not pushed as much towards occupancy. There are certain markets where we have maybe tweaked the model a little bit, in markets such as Denver where we have seen some softening of occupancy. A couple of other markets where we've seen supply we have had to do the manual inputs into the model rather than ---+ just because things were going on within that submarket or that overall market that the model ---+ it is impossible for the model to read. I would tell you Boston is one that is up against tougher comps. We have seen some construction but not significant amounts of construction. Boston was a very strong market for us last year. And Washington DC is another market that has never been great. I wouldn't tell you it decelerated significantly, it has been steady. We actually had snow costs slightly above where we had estimated. So we had a late storm and then it is timing of some invoices and things like that. We had made some accruals, but our snow was slightly higher than what we were estimating. I would tell you, <UNK>, over time I think it is going to be difficult. Whether that is 4Q or Q1, I don't know. I think it is going to depend a little bit on the strength of markets. But I think things will at some point revert more to the historical norm. I think that is just going to be natural. That is the beauty of a diversified portfolio, some markets will be stronger than others. You have seen some markets revert more to that historical norm already and others are lagging. Our payroll and our turnover is very similar to prior years and we are not seeing a lot of pressure on our wages. There's been some discussion about minimum wage and it has not become an issue for us just based on where we pay our managers today already. So, <UNK>, it is <UNK>. Let me give you just a little performance. You have got revenue expenses, I am going to focus on NOI, because that is really where the rubber meets the road. Over the last 10 years the simple average for NOI growth for the entire (technical difficulty) sector has been 5.3%. For Extra Space during that same 10-year period it has been 6.7%. The fact that we just posted 9.4% ought to tell you that even with some moderation we are still way above any historical norm. And I don't see us falling off a cliff by any stretch. Storage, if you go back to 1998 when I started with the Company, was used by about 6% of the US population. Today that number is more than 9% of the US population. One of the questions is, does that top out at 10%, 11%, 12%, 13%. I don't know, but I think that at the end of the day we are in a really good position to maximize revenue. And as I tried to state in my closing comments, look, NOI is only one contributor to our overall FFO performance. You look at joint ventures, the most successful acquisition program in the industry and all the other elements that I enumerated which I am not going to repeat, they all contribute to what we are trying to do and that is grow FFO. And we have got multiple levers that we are pulling to [produce] the industry's best FFO growth year in and year out. It is just a good [markup] for us. I think again, it is the cyclical nature of it. I think Atlanta is doing really well today. I think next year it could slow a little. I would tell you it is probably ---+ I think supply will have some impact but I think also it is somewhat the fatigue within a market. At some point you can't continue to push rates at 9%. So we have been successful in keeping up our acquisition pace primarily through off-market transactions and transactions we are able to generate through our management plus or joint venture pipeline. Pricing on the open market, for some of the reasons you mentioned, is difficult for us to get our minds around in general. But we still think that these other avenues of growth are going to be available to us and will continue. Prices are good particularly in the stores we manage. We have been able to take their NOI up to very attractive levels. And it is a good time to be a seller. So, <UNK>, it is <UNK>. As you look at our revenue management algorithm which has 56 different inputs, the whole philosophical underpinning is not about rate or occupancy, it is about maximizing revenue for a particular unit size code and a particular property, based on what we know about those elements that are under consideration. So it is not rate, it is not occupancy, it is revenue. I would tell you in terms of trends in the updated NAREIT I would tell you it continues to be ahead in revenues and behind on expenses. So when we said it is performing within our expectations that is in terms of NOI. So revenues are better, expenses are higher. The majority of those expenses are timing. We probably spent more earlier on R&M and on some of the office supplies, repair and maintenance type supplies than we originally estimated. And we hope to recover some of those throughout the year. But overall revenues are strong. And then in terms of same-store pool, it will go in next year, January 2017. So, <UNK>, it is <UNK>. Just a couple of observations. Number one, we do triangulate to the best of our ability using broker data, our own external field observations, the hardware vendors' data and just what we hear from other sources to come up with an estimate. And when we talked about the 700 properties being built in the United States at this time, you have to recognize there are 14 states we don't even do business in. And back to my earlier comment, it really doesn't matter what the number is, it just matters what the number of properties are that are being built within your competitive trade ring, whether it is 1 mile, 2 miles, 3 miles. And I don't know how as an industry at this point we provide something that all analysts can triangulate on, but I think each of the individual public companies have generally been guiding toward what is coming up out of the ground that is within the trade area, because if it is not in the trade area it doesn't matter. I actually don't have that right in front of me, but I know it has been trending in line with our estimates. Our philosophy and our understanding is we think that we are approaching max occupancy. And the reason being is it takes time for units to turn. They typically sit vacant for a certain number of days before the new renter moves in. They don't necessarily pass each other in the hall as one is moving out and the next is moving in. And that comes from a lot of factors whether it is demand or whether that is our reservation policy at the time, where we allow someone to reserve a unit for maybe 7 days or 14 days depending on the occupancy of that unit. And then that reservation may or may not turn into a rental. So, at some point you are theoretically full, we have estimated that to be around 95% ---+ 96%. So, 95%, is it possible. Yes. Right now we are not estimating we will hit it this year. There is a good amount of product on the market. I would say that a lot of it is of lesser quality. We think cap rates have compressed a little bit this year, maybe 25 or 50 basis points. Clearly there is a big premium for portfolios, we saw that in the large portfolio transaction that was previously announced by one of our peers. And it is just ---+ it is a competitive lift. The secret of self storage is out and there is a lot of money chasing it. I think I would answer yes to most of your questions [with that], <UNK>. The fact of the matter is the market is red-hot and for Extra Space, looking at 630 assets that are not wholly owned that are in our system to us is a meaningful acquisition pipeline that we can go after for years to come. And I believe that every market travels in cycles. And although things might be extremely competitive today, that necessarily won't be the case in future years. So for us, we are going to continue to use a multi-pronged approach to growing this Company. And I have talked about several growth levers that we are employing to make sure that we deliver the industry's best result. <UNK>, I would maybe at one other possibility to kind of your realm of possibilities there and that is the deal doesn't actually sell. At some point pricing will get to that point if it continues to not meet people's IRR curdles and their return hurdles. It is possible things don't transact. And I guess lastly, as was previously mentioned, you have seen us do a few more transactions in a JV structure because we get a premium return through that structure, which helps kind of bridge the gap between market pricing and the return that we are trying to get for our shareholders. So it obviously differs by market by property. If you look at where we compete with brand-new properties that are opening, I will give you a couple of examples. We had one up in Harlem where we had a property open by one of our peers, a large property that filled up quickly. Our properties still grew at almost 10% that year. Now, that is not to say it couldn't have growing at 15%, but we still had a very solid growth. We have had another property or two where for a year's time we had flat or slightly negative growth, but we haven't seen them fall off the map by any sense here. So, we are pretty happy with where we are. We don't see it going up significantly. But if you look at the markets historically at least recently the bets on variable-rate debt have been right. And we feel like it is at a point that is good for our shareholders as well as prudent. I would tell you in terms of properties we buy that were not managed as well as CofO properties there is more runway. Typically these properties are at lower rates than our properties, so we have the ability to push them for longer. And typically in a Co O store we open at a rate that is below market and so we have the ability to push rates longer because it takes them a little bit of time to get them up to Street rates or what are normal market rates. <UNK>, it is <UNK>. There is one other thing on this renter fatigue. I wouldn't take it too far because more than 50% of our customers walking in the door have never used self storage ever. So they don't even know what they are up against. So it is the more mature properties where you have got a lot of really long-term tenants that you might start to feel it.

2016_EXR

2018

UVE

UVE #Thank you, Michelle, and good morning, everyone. Welcome to the First Quarter 2018 Earnings Conference Call for Universal Insurance Holdings, Inc. My name is <UNK> <UNK>, and I'm the Vice President of Investor Relations here at Universal. With me in the room today are Chairman and Chief Executive Officer, <UNK> <UNK>; President and Chief Risk Officer, <UNK> <UNK>; and Chief Financial Officer, <UNK> <UNK>. Following <UNK>'s opening remarks, <UNK> will provide an update on several important current topics and <UNK> will review financial results. The call will then be reopened for questions. Yesterday afternoon, we issued our earnings release, which is available under the press release's section of our website at www.universalinsuranceholdings.com. A replay of this presentation will be available on the homepage of our website until May 9, 2018. Before we begin, please note that this presentation may contain forward-looking statements about our business and financial results. Forward-looking statements reflect our current view of future events and are typically associated with words such as believe, expect, anticipate or similar expressions. We caution those listening, including investors, not to rely solely on forward-looking statements as they imply risks and uncertainties, some of which cannot be predicted or quantified and future results can differ materially from our expectations. We encourage you to carefully consider the risks described in our filings with the Securities and Exchange Commission, which are available on the SEC's website or the SEC filings section of our website. We do not undertake any obligation to update or correct any forward-looking statements. With that, I'd like to turn the presentation over to our Chairman and Chief Executive Officer, <UNK> <UNK>. Thank you, <UNK>, and thank you, everyone, for joining us today. As usual, I'll begin by providing some highlights from the quarter and we'll then review our growth initiatives and strategy. <UNK> will cover several important current topics and <UNK> will conclude by discussing financial results. We are pleased with our results for the first quarter. Overall, reported net income of $40.1 million and diluted EPS of $1.12 for the first quarter of 2018, which equates to an annualized ROE of 34.6% for the quarter. We reported excellent top line growth in the first quarter, with 10% growth in direct premiums written, including 7.2% growth within Florida and 32.7% growth in other states. Our underwriting profitability was strong with a 76.5% combined ratio for the quarter. The current year's quarter includes no weather losses beyond plan and a negligible reserve change, and we highlight this because we have taken a conservative approach to our underlying loss pick in light of the increased level of catastrophic activity in recent years, coupled with the impact from current market conditions in Florida, most notably related to the assignment of (inaudible) claims. Our service company subsidiaries continue to produce benefits in the aftermath of Hurricane Irma, as both Universal Adjusting Corporation and Blue Atlantic Reinsurance Corporation contributed positively to the first quarter results. Lastly, as <UNK> will discuss in more detail later in the call, our effective tax rate for the quarter benefited from the federal tax reform that was passed in late 2017, which had a meaningful positive impact on our net income for the quarter. I'd like to briefly discuss our growth outlook heading forward. We believe we have positioned Universal well for the future by pursuing various organic growth avenues, which have resulted in a more stable, diversified and balanced business. Our core Florida book continues to produce strong organic growth and we continue to believe that we can profitably grow on an organic basis in Florida, using both our robust agency network and our direct-to-consumer platform, Universal Direct. Our 3.4% average statewide rate increase was approved by the Florida OIR in early December and the new rates were effective for new business on December 7 and for renewals on January 26, and our retention ratio of these impacted policies has continued to run over 90% during the first quarter. Geographic expansion remains a key element of our growth strategy. In direct premiums written within our Other States book grew a strong 32.7% in the first quarter. We now actively write business in 17 states after writing our first policy in New Hampshire in early April. And we have licenses in additional 3 states: Illinois, Iowa and West Virginia. Universal Direct, our unique direct-to-consumer online homeowners insurance platform, is available in all of our active states and continues to demonstrate solid growth trajectory. Currently, we have approximately 8,700 policies in force for more than $10 million of in-force premium. We are off to a strong start in 2018 and continue to believe that Universal is extremely well positioned going forward. We remain confident that our multipart organic growth strategy will enable us to deliver profitable premium growth in both Florida and the 16 other states where we write business. We have a solid balance sheet with a conservative investment portfolio, minimal debt and an appropriately set loss reserve position. And we are protected by a comprehensive reinsurance program. And our unique vertically integrated structure positions us well to capitalize in the event of a disruptive industry catastrophe, as was highlighted by our performance during Hurricane Irma. Given these strengths, we are excited about what the future holds for Universal, and we expect to continue to deliver substantial value to our shareholders. With that, I will turn the call over to <UNK> <UNK>. Thank you, <UNK>. I would like to first start with an update on Hurricane Irma and then discuss the current reinsurance environment as we are soon approaching our June 1 renewals. By way of background, on October 10, roughly one month after landfall, we released a public estimate of $350 million to $450 million in gross losses from Hurricane Irma. We are now 7.5 months removed from when the storm first made landfall in Florida, and our information on the event continues to evolve on a daily basis. More importantly, as we advised previously, given our reinsurance tower extends to $2.8 billion per UPCIC, Hurricane Irma is a retention event. As we advised last quarter, the manner in which our reinsurance program responded reduced UPCIC's retention for this event to $27.2 million. None of that has changed. However, at this time, following a comprehensive review of the event over the past few weeks, we are advising that we are prospectively increasing our estimate of gross losses relating to Hurricane Irma by $50 million. Again to confirm, this change in gross loss estimate will have absolutely no impact on the financials of UPCIC. Our comprehensive reinsurance program performed as it was designed and will continue to limit total net loss and LAE from Hurricane Irma to the $27.2 million for UPCIC and the $2 million for APPCIC, which is below the combined retention of $37 million for both of our insurance subsidiaries due to additional recoveries received from our UPCIC Other States reinsurance program. This change in gross loss estimate comes primarily due to the continuation of reported claims. We had 10,173 new claims reported during the first quarter of 2018 and an additional 2,300 in the first 3 weeks of April, bringing our total claim count to date to 76,283. We have closed 68,487, roughly 90% of these claims, with an average loss and LAE severity across all claims of approximately 5,200 and an average loss and LAE severity of just over 7,500 on claims closed with payment. We can also report that the percentage of claims reopening with a resulting change in incurred loss is running just 14.5%. I believe this compares to the 35-plus-percent number announced previously by Citizens. All of this is a testament to the hard work of our employees, many of whom have been working long hours since the storm made landfall in early September. As a result of Hurricane Irma, both the fourth quarter of 2017 and the first quarter of 2018 included the benefit of additional revenues within our service provider subsidiaries, which led to a higher level of profitability than would otherwise be the case in a normal quarter. Blue Atlantic Reinsurance Corporation received $600,000 of reinstatement commissions during the first quarter of 2018, and Universal Adjusting Corporation produced $10.4 million of pretax profit during the first quarter of 2018, the vast majority of which was related to additional revenues created due to the continued increased workload as a result of Hurricane Irma. Switching now to reinsurance. Over the course of the past 2 months, we've met face-to-face with the vast majority of our reinsurance partners to discuss our experiences in Hurricane Irma and the upcoming June 1 renewals. I think the most important takeaway is the reinsurers desire to truly differentiate the insurance companies that operate in Florida. As Hurricane Irma continues to evolve, it has become more evident to reinsurers that companies that had made a quality investment in their claims option and those who had not. It is very difficult to catch up post event, so any lack of preparation will continue to manifest itself in higher severity numbers and a greater percentage of reopened claims. As we have stated many times since Irma made landfall, we are very pleased with our reinsurance program design and the response of our professional reinsurance partners. Without a doubt, Hurricane Irma was a devastating event for many. But from a professional reinsurer perspective, it was exactly the type of event that is modeled for, priced accordingly and expected to occur. From a reinsurance renewal perspective, when you take into account our previously discussed multiyear capacity and the coverage we purchased from the state-run FHCF, we have just 32% of our total reinsurance premium budget up for renewal this June 1. After receiving and evaluating quotes from our lead reinsurers, we entered the market with firm order terms last week on the core All States catastrophe tower for UPCIC. At this point in the process, I'm not going to comment on specific pricing levels, but I will say that when you factor in all of the variables, including the rate change that <UNK> mentioned, the 2018 renewal is shaping up to be a year where we'll be keeping our catastrophe retention at the same level, buying catastrophe coverage to a higher level and spending the same or less as a percent of earned premium to do so. With that, I'll turn the discussion over to <UNK> <UNK> for our financial highlights. Thank you, <UNK>. For the first quarter of 2018, net income totaled $40.1 million, an increase of 28.4% compared to the first quarter of '17. Diluted EPS was $1.12, up from $0.86 for the first quarter of 2017. We reported strong total revenue growth of 9.5% in the quarter, driven by growth in premium volume, the statewide rate increase of 3.4% in Florida, net investment income, commission revenue, policy fees and other revenue. Direct premiums earned grew 11% to $262.3 million, offset by ceded premiums earned of $79.7 million, leading to growth in net earned premiums of 13% to $182.6 million. Ceded premiums earned, as a percent of direct premiums earned, was 30.4% during the first quarter of 2018 compared to 31.7% in the first quarter of '17. Commission revenue, policy fees and other revenue each posted solid growth versus the prior year's quarter. Included within commission revenue was $600,000 of fee income related to the reinstatement commissions received by Blue Atlantic during the first quarter of 2018. We generated a net combined ratio of 76.5% in the first quarter of '18 compared to 78.9% in the first quarter of '17. The net loss in LAE ratio improved to 41.6% from 43.7% in the prior year's quarter. First quarter of 2018 included no impact from weather events above plan compared to $3 million or 1.9 percentage points of weather losses above plan in the first quarter of 2017. Prior accident year reserve movements were negligible in both the current and prior year's quarters. The first quarter '18 loss adjustment expenses included the benefit of $10.4 million or 5.7 percentage points from additional revenues earned by Universal Adjusting Corporation related to Hurricane Irma. Our underlying loss in LAE ratio increased compared to the prior year, reflecting continued geographic expansion as non-catastrophe loss ratios in Other States booked are generally higher than in Florida; an increased level of projected weather losses; and the marketplace dynamics within our home state of Florida, including the impact of AOB-related claims. Our net expense ratio was 34.9% in the first quarter of '18 compared to 35.2% in the first quarter of '17. Our net policy acquisition cost ratio increased to 20.8% compared to 20.1% in the prior year's quarter, with the increase largely driven by geographic expansion as our Other States book typically has a higher commission expense than within Florida. Our other operating expense ratio was 14.1% in the first quarter of '18 versus 15.1% in the prior year's quarter, which generally reflects the benefits of economies of scale. Net investment income was $4.8 million, growth of 77% from the first quarter of '17. The increase is the result of higher returns from our available-for-sale of debt securities, driven by growth in total invested assets, favorable market trends and actions taken to increase yield while maintaining high credit quality, as well as higher return from cash and cash equivalents due to actions taken to optimize treasury management, coupled with an increase in interest rates. We reported $2.6 million of realized investment losses during the quarter compared to $63,000 of realized investment losses in the first quarter of '17. We reported $5.1 million of unrealized investment losses during the first quarter of '18, driven by a decline in our equity securities portfolio. Notably, this line item was added in the first quarter of '18 as a result of the adoption of accounting guidance for equity securities. The comparable number from our equity portfolio for the first quarter of '17 was $1.7 million of pretax gains, which was not included in net income in the prior period, but was included in other comprehensive income on an after-tax basis. Total unrestricted cash and invested assets were $974.4 million as of March 31, 2018, growth of 17.9% from March 31 of '17. We take a conservative approach to managing our investments and maintain a high-quality investment portfolio comprised primarily of fixed maturity securities, which are 99% investment grade. The weighted average duration of the fixed maturity investments in our available-for-sale portfolio as of March 31, 2018 was 2.5 years. The effective tax rate for the first quarter of '18 was 22.5% compared to 34.1% in the prior year's quarter. The decrease in our effective tax rate is primarily the result of the enactment of the Tax Cut and Jobs Act of 2017 which resulted in a reduction in the federal corporate tax rate from 35% to 21%, effective January 1, 2018. The current year's quarter included a credit to income tax expense of $1.8 million for excess tax benefits resulting from stock-based awards that vested and/or were exercised during the first quarter, benefiting the quarter's ---+ the current quarter's effective tax rate by 3.5 percentage points. The prior year's quarter included $2.1 million of credits to income tax expense related to discrete items, benefiting that quarter's effective tax rate by 4.4 percentage points. We remain committed to actively managing our capital position. During the first quarter of 2018, we repurchased 92,749 shares for $2.7 million, an average cost of $29.61 per share. Our current share repurchase authorization program has $17 million remaining and runs through December 31, 2018. We paid a regular quarterly dividend in the first quarter of '18 of $0.14 per share, which equates to an annualized dividend yield of 1.7% based on current share price levels. Stockholders equity was $465.1 million at March 31, 2018, growth of 5.7% from year end 2017, while book value per common share was $13.28 as of March 31, 2018, growth of 4.8% from December 31, 2017, or 16.8% from the end of the first quarter in 2017. Combined surplus for our insurance subsidiaries was $338 million at March 31, 2018 compared to $324 million at December 31, 2017. Annualized return on average common equity was 34.6% for the first quarter of 2018, compared to 31.4% in the prior year's quarter. We remain dedicated to providing value to our shareholders and believe this level of return on equity is an excellent result. At this point, I'd like to turn the call back to the operator. Just ---+ first question was in terms of the growth, it's been pretty strong in the premium growth. Is this kind of like 10% level sustainable. Or should we think of it as more kind of mid, upper, mid-single digits. Good morning, <UNK>, this is <UNK>. Because of our geographic expansion and our loyal agency force that continues to expand and Universal Direct, I think you should look at as a bracket basically of between 7% and 10% going forward that is definitely attainable. Exactly. I mean, we're definitely putting some business on. But the current rate environment we just don't believe is adequate at this time, and we're not in the business of chasing premium. But we are set and ready to go in case there is a disruption in the marketplace. But at this time I just don't think the environment is adequate enough for us to be putting on business. Okay, that's fair. And then in terms of subrogation, would you say you reached a point with subrogation where you're, sort of, I guess, like a fair run rate going forward. Or do you think there's still kind of improvement to be had in that ---+ in your subrogation operation. Subrogation unit continues to improve because of the hard work of our employees and the material investments we have made over the last 3 or 4 years in that space. I think it's a little too early to determine basically what the critical mass level is and where we'd be bottoming out at as far as picking a percentage. We are continuing to improve going forward and I believe that will continue specifically over the next year, a year to 2. I believe it's approximately $2 million in Q1 and a little bit under that in Q4 off the top of my head, <UNK>. <UNK>, this is <UNK>. Good morning. Excluding discrete items, I'd put a range on the effective ---+ the underlying effective tax rate between 25% to 27%. There will be some, but not as great as Q1. Obviously, we're seeing a reduction in the claims that we're receiving currently right now, so I wouldn't expect anything, such as what we put up in Q1. Well, first and foremost, obviously there's a lot of transient folks in Florida that have 2 different dwellings that live up north, et cetera. So sometimes you get situation where folks come down, realize they've had a loss and turn it in and that causes a delay. Also some of the AOB situation has to deal with it where an individual insured would have had their claim handled and it would have been below deductible and because of some certain situations that, be it public adjusters, or attorneys, et cetera, have been marketing, people then sign up with these folks and the claim would reopen. Our reopen rate is running significantly lower than everybody else, approximately right around 14%. So I couldn't really give you a definitive answer, but I think it's a blending of those 2 situations. I didn't hear what you said. I heard you say reopen but then you went a little bit radio silent on me there. Yes. In other words it could be recoverable depreciation, anything at all that's a supplement, all that goes into that same bracket. No. It's running about the same rate. You should think of it as on top of the $450 million. So $500 million is the new number going forward. Well, right now I can tell you that 25% of the losses are a little bit under HO 6. And the HO 6 severity is running right around 4,200. And the H all other, let's just call it is running around 7,200. Thank you. As always in closing, I would personally like to thank all of our shareholders, employees, Board of Directors, policyholders and my management team for their hard work and loyalty to Universal. This concludes the call.

2018_UVE

2015

GTY

GTY #Thank you very much. I would like to thank you all for joining us for Getty Realty's quarterly earnings conference call. This afternoon the Company released its financial results for the quarter ended March 31, 2015. Form 8-K earnings release is available in the investor relation section of our website at www.gettyrealty.com. Certain statements made in the course of this call are not based on historical information and may constitute forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to trends, events, and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Examples of forward-looking statements include our 2015 guidance and may also include statements made by Mr. <UNK> in his remarks in response to questions, including those regarding lease restructuring, future financial performance, and the Company's acquisition or redevelopment activities. We caution you that such statements reflect our best judgment based on factors currently known to us and that actual events or results could differ materially. I refer you to the Company's annual report on Form 10-K fiscal year ending December 31, 2014, as well as our quarterly reports on Form 10-Q and our other filings the SEC for a more detailed discussion of the risks and other factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. You should not place undue reliance on forward-looking statements which reflect our view only as of the date hereof. The Company undertakes no duty to update any forward-looking statements that may be made in the course of this call. Also, please refer to our earnings release for a discussion of our use of non-GAAP financial measures, including our revision to AFFO and our reconciliation of those measures to net earnings. With that, let me turn the call over to <UNK> <UNK>, our Chief Executive Officer. Well, thank you, Josh, and good afternoon, everyone, and welcome to our call for the first quarter of 2015. This is another quarter showing consistent improvement in our operating results coming from modest revenue improvements but reductions in operating costs. The headline result is AFFO of $0.33 per share which was consistent with the prior quarter which ended on December 31, but showed an 18% improvement quarter to quarter compared to 2014. Moving forward we expect ordinary variability and fluctuations quarter to quarter and more gradual but smoother improvement in our operating performance on an annualized basis. On the revenue side, we had a 5% rent growth quarter over quarter. The increase was primarily attributable to contractual rent growth, then benefit from our 2014 acquisitions, and our ongoing lease activities. Turning to the expense side, both rental property expenses and G&A were consistent with the prior quarter. When adjusting for certain pass-through expenses in the rental property expense line, we continue to experience reduced costs as a result of our ongoing portfolio optimization process. Our environmental expense increased by approximately $1 million quarter to quarter. The primary reason for the higher figure was additional non-cash accretion expense resulting from our additional environmental accruals at year end. Our overall environmental accrual also increased during the quarter. This occurred as a result of the combination of the net effect of higher-than-normal increases in estimates from our known environmental liability driven by regulatory changes and lower-than-normal actual remediation costs driven by seasonable factors that were magnified by the harsh winter. Over time, we anticipate this trend will smooth out and the net effects should be a steady quarter to quarter as we work through the reduction of our overall environmental liability. Our acquisitions pipeline is full with potential opportunities, but we will remain thoughtful and deliberate in our approach. I think it is useful to articulate some of the features we're looking for in acquisitions including accretion. We want acquisitions to be accretive in the first full year they are completed. Second, we want to target high-density markets that have high barriers to entry, strong traffic counts, and healthy operating results at the unit level. Third, we look at corporate level credit quality characterized by institutional quality tenants with significant operations. Fourth, geographic diversity. We like our home markets in the East Coast and the northeast, but we are also open to expanding our reach outside that region to increase the size of our national footprint and finally, fifth, we're looking for growth markets. We are keenly focused on geographic regions showing the fastest population growth on a long term. We are mindful that a significant portion of our value proposition is in the potential appreciated value that we'll someday realize which underscores the importance of placing our investments in the path of this population growth. Fortunately, all of these activities can be supported by the conservative leverage levels on our balance sheet. Our balance sheet affords us meaningful capacity and flexibility to support our growth initiatives. In summary, we remained energized by both the organic and external growth opportunities we continue to pursue. We are well capitalized and have significant financial flexibility. We will work to continue to enhance our values for shareholders in 2015 and beyond. That concludes my prepared remarks. So let me ask the operator to call for questions. I think it's a number on the order of ---+ it's less than 100 at this point. I think that the number itself, <UNK>, doesn't convey the fact that there's not a whole lot of value in those properties. A lot of the improvement we've been showing in recent quarters has been from essentially disposing of those properties and reinvesting the proceeds in more profitable exercises or enterprises. No because it's really very small, to tell you the truth. All of the ones that we believe we'll get sold in 2015 are either on the market or slotted to go into it fairly soon. The process by which these things happen is a long-tailed process in terms of getting everything lined up from a contractual title and everything else. Then you put it into the market and you execute the transaction fairly quickly. So we will be opening into the market fairly soon with a relatively big by number sale exercise. By value, it's really not a big number. I will throw a number out, plus or minus $5 million between now and the end of the year. I don't want to get too specific about that because the market has gone really hot and cold and there have been a number of transactions that have occurred and other people have done thing at values we don't like. Right now what I will say is we are seeing more better stuff than we have certainly in the prior 14 months or so and I think we're going to be able to execute on that this year. Well, certainly more than $100 million, maybe even more than $200 million. We have a view, <UNK>, that based on enterprise value that we can operate to create a higher multiple and a lower cost of capital, if we can grow the Company to say 2X or 2-1/2X of where we are today and maybe somewhere along the line you start on the down slope with respect to cost of capital because you open up access to other ways and avenues to raise capital. As you get larger, you become more rating agency eligible. So certainly to the extent that we can find acquisitions, we're not just going to make acquisitions that are not accretive or are not in growth areas of the country, but certainly to the extent that we can find acquisitions, we do have a commitment over time to grow in order to basically take what we think is take advantage of that lower cost of capital that's open to us as we grow. I just want to thank everybody for continuing to listen to our calls and being interested in Getty. We look forward to talking to you again either at the Newry Convention in a few weeks or on our next call in 90 days. Thank you.

2015_GTY

2017

SKYW

SKYW #Thanks, everyone, for joining us on the call today. As the operator indicated this is Rob <UNK>, SkyWest's Chief Financial Officer. On the call with me today are Chip <UNK>, President and Chief Executive Officer; <UNK> <UNK>, Chief Commercial Officer; <UNK> <UNK>, Chief Accounting Officer; Mike Thompson, SkyWest Airlines' Chief Operating Officer; and Terry Vais, ExpressJet Airlines' Chief Operating Officer. I'd like to start today by asking <UNK> to read the safe harbor. Then, I will turn the time over to Chip for some comments. Following Chip, I will take us through the financial results. Then <UNK> will discuss the fleet and related flying arrangements. Following <UNK>, we will have the customary Q&A session with our sell-side analysts. <UNK>. Thank you, Rob and <UNK>. For the second quarter, we continued with good progress on our overall business and fleet plans as demonstrated by the results outlined in the press release. The quarter also brought about planned increases in total production as we prepared for peak summer months and both airlines delivered strong reliability overall. I want to thank our more than 18,000 employees for their great work during the quarter. There's a lot of noise about airlines this year and our employees have done a great job focusing on strong service and reliability. I appreciate the dedicated efforts of our people to deliver a very good competitive ---+ in a very competitive environment. The number of flights our 2 entities operate across North America is very significant. And together we operate more than 280,000 flights during the quarter. Operational reliability for our airlines was as follows: SkyWest Airlines continues its exceptional operating reliability with 99.94% adjusted completion in the second quarter, even with increased total departures in June. ExpressJet also delivered strong 99.85% adjusted completion for the quarter. Both of our airlines have great reliability and have been top performers in United's portfolio for over 2 years. During the second quarter, SkyWest Airlines secured a 4-year extension to its existing pilot contract with a new agreement through mid-2022. We believe it's important to continue to invest in our people and while we don't disclose the details of these agreements, it delivers competitive compensation within the industry and positions us well to continue to attract and retain exceptional professionals. Importantly, securing this agreement provides a solid foundation in which to pursue opportunities within the marketplace. Pilot staffing is a central issue across the airline industry and it's a challenge we're continuing to monitor at each of our entities. During the second quarter we experienced reduced attrition at both of our entities and each remain well staffed. From an industry perspective, however, there is no question that it's a challenge that we come ---+ that will become more acute. We are focused on proactively addressing the issue and ensuring we continue to provide exceptional pilot careers. Also during the quarter, we continued progress on our fleet plan which <UNK> will cover in detail in just a minute. To date, we have 103 E175s on property and expect to have 104 by year-end. We have nearly completed our CRJ700 transition from United to our Delta and American operations and removed 50-seat aircraft from unprofitable contracts as we previously discussed. Demand for all aircraft types from each of our four partners remains very strong. It's been a very dynamic few years in the regional space and our proactive evolution has helped us continue to meet our partners' needs. We have built and maintained very strong relationships and credibility with each of our four partners and that remains a key focus going forward as we continue to adapt and respond to what we're seeing as strong demand for solid, efficient and reliable operations. I will say that operational performance has been somewhat of a challenge in certain areas of ExpressJet operations and we continue to work for evolving that entity towards stability. As we've stated in previous quarters over the past couple of years, the long-term success of ExpressJet requires significant change as we make progress toward a smaller, more efficient and productive airline. And we're increasingly optimistic about that progress, as we successfully evolve and move forward the stability and long-term outlook at ExpressJet's model continues to improve. Overall, we continue to see strong demand for our product. Our objective is to ensure we are the best positioned to meet the industry's demand, better than anyone else. Again, I want to thank our more than 18,000 professionals for their work across our operations during the quarter and every day. Rob. Today, we reported net income of $50 million or $0.95 per share for the second quarter of 2017, up from net income of $40 million or $0.77 from Q2 2016. Our pretax income increased 22% year-over-year to $81 million. Revenue was $810 million in Q2 2017, up $9 million from Q2 2016. With fewer aircraft in service but with an improving mix, the moderate increase in revenue included the net impact of 47 additional E175 aircraft, less the removal of 51 ERJ145s, 18 CRJ200s and 7 CRJ700s from service compared to 1 year ago. We expect to put 1 more E175 into service during Q4 of 2017, to bring our total fleet of E175s to 104 by year-end. We also completed the transition of 49 CRJ700s from other partners to American under a previously announced multiyear agreement, further mitigating our financing tail risk on those aircraft. <UNK> will provide some color on the fleet in a minute. The tax provision rate for the quarter was just a little under 38% and benefited slightly from the new equity accounting rules that went into effect starting with Q1. Our future provision rate may vary, based on the timing and amount of stock option exercises, restricted share vesting, stock price performance and other factors. Generally, we anticipate a future effective tax rate between 38% to 39% in Q3 and Q4 and between 37% to 38% for all of 2017. Our total fuel cost per gallon averaged $1.89 during the second quarter, up from $1.69 per gallon in Q2 2016. The increased fuel cost per gallon cost us about $2 million or a $0.03 reduction in EPS from a year ago under our prorate business model. You can see in our release that the expense line item for aircraft maintenance is up about $10 million year-over-year. This increase largely relates to a higher percentage of our engines now being covered by long-term Power by the Hour maintenance agreements, including the 47 new E175s in our fleet, since last year at this time. We believe our engine Power by the Hour agreements significantly reduce volatility in future engine maintenance costs. The vast majority of our engines are now covered either by long-term agreements or are a direct expense pass-through to our partners. Let me say a couple of things about our balance sheet, a critical point of differentiation in our model. We ended the quarter with cash of $635 million, up from $586 million last quarter and $513 million last year at this time. We issued $227 million in new long-term debt during Q2 to finance the 10 new E175s delivered during the quarter, with total debt increasing by $146 million net of debt service. Total debt as of June 30, 2017, was $2.8 billion, up from $2.6 billion last quarter. SkyWest also used $21 million in Q2 2017 for other CapEx along with $40 million in cash and deposits toward the acquisition of the 10 new E175s. Absent new investment opportunities, nonaircraft acquisition capital spending in the second half of the year should continue to run in the $20 million to $30 million per quarter range, with only 1 remaining E175 aircraft left in this order by year-end. Debt ---+ again, absent additional aircraft orders ---+ is likely at a near-term peak. With little CapEx in the second half, we continue to expect strong cash flow ahead. We ended the second quarter with $365 million of prepaid aircraft rents under our long-term lease agreements. We anticipate this asset will amortize over the next several years as a noncash rent expense that will contribute to our operating cash flows and will enhance the cash flow quality of our earnings. During Q2, we did not repurchase any stock under our 3-year, $100 million repurchase program authorized by our board in Q1. We have $90 million in authorization remaining under this program and expect to fully utilize it. And finally, net of the items mentioned earlier by Chip and the ongoing transitions, we would expect Q3 earnings to be slightly better than Q2. <UNK>. Okay, Drew. We are ready for Q&A now. That's right, yes. That was ---+ we took delivery of 10 airplanes during the quarter, Mike, and that was ---+ we raised $227 million of new debt against those deliveries. <UNK>, this is Chip. I'm impressed how much detail you know about this from the perspective of the how it ---+ not that I don't think you are an extremely smart guy, but I think that (multiple speakers) the last month or so I've been living this a little bit in D. C. and talked to lot of people about the FAA reauthorization bill. And in our view, look, we love the concept of it, but from our perspective it falls short in 2 distinct areas: One, it does not address the pilot issue. And fundamentally from our perspective will it. I hate to speculate. I will tell you that if we look at the data it is absolutely positively clear if we're really going to move the dial on what is a very emotional safety issue, if we really want to look at concrete data to enhance safety relative to this situation, we have to address it through additional training programs and modify the pathway. I'm actually for 1,500 hours but I'm also for alternate programs that clearly need to be evolutionary toward safety. And I don't think anybody who has looked at the data or is willing to look at the data could argue that there's not some significant opportunity there. And we're optimistic and we're very supportive of the overall process but in its current form today I can tell you it's falling short of what we think that several local communities ---+ both with the pilot issue and the funding issue, many local communities throughout America are going to have a big impact if this is not addressed in this bill. Yes, <UNK>, salaries are correlated with production and as you can see we're down about 5% year-over-year in block hour production. <UNK>, one more thing, this is Chip. On a per unit basis I thinks it's up slightly but on a ---+ when you take that much production out on a gross basis, it shoves down. But it ---+ I think that ---+ I think on a unit basis we're up a bit, which is in a balance where we want to be. We want to make sure we're taking care of our folks the right ways. Those are under capacity purchase agreements, so it's all contract. Yes, <UNK>, this is Chip. We continue with all workers on ExpressJet to have active dialogues about new contracts. We have both pilot groups are coming due at the end of this year. Our fundamental strategy, as we talked about it in the script, I think it's necessary for us to be transparent and provide some good long-term vision about a longer-term fleet strategy with ExpressJet and then enter into those dialogues more substantially. So I can tell you right now that the dialogue that we have with the pilots of ExpressJet is fantastic. There's good engagement and a good collaboration on long-term success of that entity. Savi, it's Rob here. So I would say that it's sort of more of what we've been talking about. That we feel like there are still a number of opportunities from the legacy side of our fleet to make improvements. In terms of turning pink squares to green in our presentation model. I mean I think there's still a lot of opportunities to do that. And so I think growth can still come from a number of different areas but we feel like we're far from the end at this point. So the question is just on the block hours came down slightly from our entire guidance on block hours. There's just been some ---+ as we're taking down some of the 46 CRJ200s, some of those are coming out probably a little quicker than we had originally anticipated, which is fine and stays within our models. Steve, so I sort of hit that in my script but again a lot of it has to do with when you're looking year-over-year. We have 47 new E175s, that are in there and they all have Power by the Hour maintenance agreements on their engines. And so like a bigger percentage of our fleet year-over-year are under those Power by the Hour agreements where you accrue it as you go. And ---+ so that explains the bulk of it. Well, yes, I mean ---+ like we say, like right now, like virtually all of our engines are under either a long-term Power by the Hour type maintenance agreement or are pass-through expenses to our customers. Thank you, and again we want to thank everybody for your continued interest in SkyWest, especially as we continue our long-term evolution and progress. And we'll talk to you next quarter. Thank you.

2017_SKYW

2016

TSN

TSN #Sure. It's <UNK>. What we've seen is both in retail and Food Service the answer to your question, it's more in retail. Overall, consumer product, so food that Tyson sells to consumer retail stores and otherwise, we have been ---+ year-over-year we're doing great. We have fantastic volume growth, as it relates to Chicken specifically. That's where the largest benefit is coming from. The Chicken business in Food Service is strong, and I would say getting stronger. So it's not a ---+ we don't make either/or decisions, because all that business is very profitable to us. We talk about value-added, if you think about our retail and Food Service businesses collectively, that's what we mean. So as primary products that we're focused on, and so it's been in this quarter, I would say more retail benefit, but looking forward, I think we're going to be well-balanced in both channels. Yes, so a couple of things about Beef. So it looks like that next year's fed supply will be up, I think, a little better than 2%, maybe even approaching 3%, but certainly somewhere in that area. And if you look out another two or three years past that, I think you can count on the same thing, maybe barring another drought, like we had three or four years ago. So it looks like to us that the fed supply will continue to increase, and as the fed supply continues to increase, that certainly having more cattle available to process improves our business. There's another thing that I think helps us with our outlook, or feel more and more positive about our outlook on Beef, and that is the continued growth of our case-ready offerings. Coming up in, I believe it's October, there is a new regulation on retailers around having to keep up with where the raw material comes from, as they grind ground beef back of house. And I think that portends a bright future for our case-ready grinds business. We've certainly been in lots of conversations, and we have the capability to do a lot more of that business than we're doing today. So that could also help improve our Beef margins over time. We've got a solid outlook, and feel very, very good about that part of our business. <UNK>, so certainly the export factor is a part of it. We do over-index, particularly into Asia, and with the drop credit being down some 15% or 20% versus a year ago, and those markets being a little softer than we'd like them to be, and certainly the values going to those markets being a little softer than we'd like them to be, that has affected us versus the competitive set. But there's another factor I think that needs to be weighed in. If you look at the regional disparities in, let's call it the Southern region of cattle procurement and the Northern region, we way over-index in terms of our slaughter capacity in the north, and cattle in the south have been about $1 a hundredweight, so somewhere on the order of $8 a head cheaper than cattle had been in the north. We think that will change over time, as some of the smaller feed lots that tend to be in the north, closer to the grain, begin to increase capacity, as the supply of cattle increases. So we think that favors us going forward, certainly from where we have been. I think those are really the two biggest factors. Our plants are running great, our efficiencies, all the stuff that Steve and his great group are doing to manage the business are in good shape. Those environmental factors are what they are, and we'll continue to manage them over time. Thanks, <UNK>, it's <UNK>. So think about the way that we are growing or have grown the Prepared Foods business, the retail branded portion, the same approach is going to be applied to, and it's starting to be applied to the Tyson brands in Chicken. So overall, speaking to the Core 9, we have, like I said, a lot of innovation in the pipeline. There's a lot of great things that are already out there in the marketplace: Jimmy Dean hash browns, Jimmy Dean frittatas, new Hillshire snacking platform, which Hillshire snacking is going very well, by the way. It's going to be definitely on the back of innovation. There is no question about that. Applying that to the Chicken segment, your question in particular, we see there's going to be a plenty of opportunity for us to drive growth in areas where right now there hasn't been a lot of innovation. You think of fresh tray pack chicken, it's been relatively static for years and years. We like that opportunity for us to continue to think about how it can be different. So I would expect you to expect that our innovation efforts against an entire portfolio, Chicken and Prepared Foods, will deliver some significant benefits. And we'll be talking, like I said, more about that in the future quarters here, but we are applying the same model in terms of marketing innovation to Chicken as we have historically to the Prepared Foods business. I'll let <UNK> comment on some the other, I'll comment on some of the other. Let me talk about China in general, in particular. So our China business continues to improve over expectations year over year. As Sally and the team work to shift our strategy from being a customer-centric strategy to be more of a consumer-centric strategy, we're seeing that long-term will provide, we think, significant value. And she has a new general manager in China in place, a new sales lead in place. We've got a very, very strong team in China, and I'm very optimistic about their ability to continue to improve over time. I will say, though, that the dynamics in that market are very difficult. Corn and soybean meal are significantly higher in China than they are here in the United States, and the wholesale markets ---+ we're still somewhat beholden to the wholesale markets because we haven't made a full switch into value-added retail yet. So the wholesale markets continue to be weak, and quite a bit weaker than we would have thought the wholesale Pork market would have indicated. Usually, those two markets move in concert. The wholesale Pork market has moved up, and Chicken has not moved up near as fast as the wholesale Pork market has. So very difficult operating environment, but the team's doing a great job strategically turning that business. There's some other stuff in other, and I'll let <UNK> address that. <UNK>, what also is in other is that bucket of expenditures that doesn't necessarily apply to segments. So for example, merger and integration costs have been in there, and to a lesser degree, we also have our SAP activities. We've had one launch and we're in the process of another upgrade over the next year. So you'll see some of those costs in there, as well. I don't know specifically that we were seeing the exact same thing. What I would say, <UNK>, for our Prepared Foods business, a lot of the pricing ---+ when we have input cost deflation, it flows through pricing at a pretty significant way. We try to of course continually decrease trend line margins over time, but that's ---+ whatever benefit we would see, there's large part of that, that flows straight through to pricing reduction. So whatever movements that we would see up or down, that's our intent. And like I said, trying to make that less volatile over time, in terms of our earnings, is all about brand investment, innovation investment, and continuing to drive the agenda there. That's the way that he we think about fluctuations in commodity cost inputs, through the Prepared Foods business. We'll have <UNK> dig in a little deeper on your question. He can follow up maybe later today. Okay. <UNK>, it's <UNK>. We haven't set guidance as it relates to where we think we're going to hit the top end. What we have done is really spent a lot of time on what our innovation pipeline is setting up as. I would say not just in retail, also in the food service. And we like where we sit today. 10.9%, and sitting at sort of that lower end of the range for us the right spot to be right now, given the investments that we're seeing, the availability of those investments in the business. As it relates to where we start to hit the ceiling, we have different MAP objectives, marketing, advertising, promotional spend by brand, and some of them are more ready than others, so Jimmy Dean, we have called out in the past, as something that we continue to invest highly against. Lots of ROI there. And our intent is to get more brands to that same position over time, and it will be done by continuing to innovate, and bring the investment up. So no guidance forward, as to where we think the ceiling is. What I would just say is, as we start to see the progress, that would get us closer to the top end of that range, we're going to invest to continue to have a strong, growing Prepared Foods business at those ---+ within range margins. So for ---+ we have announced last year I think you've seen this that we will be by the end of 2017, calendar 2017, our entire system will be with no antibiotics for use in human health. And we feel this is a really consumer-driven discussion. We have No Antibiotics Ever products available today. We continue to be ahead of, frankly, executing our strategy that we've intended, and we will go where the consumer is. So in terms of what our supply chain is doing to support that, the message you should take away is we feel good about where we are. Actually, we're a bit ahead of where we thought we would be, and we'll continue to make progress to drive that agenda. Thanks, Rob. One of the things that we continue to come back to are those five elements that I talked about in the prepared remarks. Not commenting on competition, how quickly they can come up the curve, I won't speak to that. But it's not any one thing, it's all those in combination that give our model the strength that is has. And the operations improvements, we don't typically talk a lot about, but it's been really, really impressive, what we've done. We're really thinking about what's the headline there. What have we done that is going to be notable or should be notable is that we feel the Chicken business is now in a spot where it's a pull business versus we're pushing supply on the market. So our pricing mechanisms reflect that. Our move to more value-added products, whether it's par-fried products, fully cooked, we're building capacity against those because we continue to see tremendous demand. The buy versus grow strategy we have talked a lot about, and then just staying on top of all those things that give us the best supply base, that can make sure our customers are served excellently with great service is really what we're about. I don't know if that's satisfying to you or not. It's really those five things we talked about, in combination. I can't point to any one that's going to be the silver bullet or the panacea for somebody that competes with us to get right, but that's what we're proud of, and that's what we continue to stay focused on. Well, we love consumer insights. So how revolutionary we can be, will be dependent upon what the consumer tells us, and where that takes us. We're sorting through right now. It's going to be an exciting time. There's a reason to believe that we should ---+ not only in I would say fresh, frankly but also in the frozen case, be doing things that would be above and beyond what people are thinking about today, based on what consumers are telling us. We really double down on those consumer insights. You've probably got to wait and see, and without stealing the thunder of anybody on our innovation team. We'll talk more about that, whether it's Cagney or other events; that's something that we're really going to be continuously focused on, and we're excited to do that. I wouldn't say that, <UNK>. We couldn't ascribe any certain amount of basis points that are going to drive any one part of the model. What I would say is as we've talked about our margins prospectively into 2017, we feel like they're going to be about the same as 2016. The idea that we have done things, like we don't have unprotected fixed prices, we continue to drive our business throughout the channels that we have access to. There's a lot of reasons to be happy with the model that you have here at Tyson, as relates to Chicken, because we aren't just a one-trick pony. We have a lot of focused channels that we do really well in, and we're continuing to drive our expertise in those category captaincies. We're up to 143, which I think is about double from where we were at the time of the acquisition. Things that we're working with our customers to get to a better place, those are the things that we'll focus on. Grain, we've looked at this, have the same margins, up or down, are we going to have some periods of time based on the slope of the curve. That's the course that's going to affect margins. On balance, we look to make sure that we run our model with no excess, and that's where we've been, and that's been the driver of our success. We think the volume growth ---+ depends on which category you're talking about. The overall Core 9, as we've talked, has done really well. Can't speak to what our competition's going to do. Certainly, we have predictive models, based on what input costs are doing. We think we're pretty good at that, understanding where they would go in a rational environment. We're not very good at predicting irrational behavior. I think if the competitor is are going to act rationally, we have a pretty good bead on what we should be doing in terms of investing against our brands. The idea that this has done a great job for us, we continue to stay focused on where are the right levels, and where are the right gaps, because into the fall of last year, our gaps became such that it was detrimental to the volume of the business. And like I said earlier, we want to make sure that we're in the right spot as we go into 2017 with protein, that's going to be available, and we want to make sure that we're available on shelf and we have the primary position. Don't know if that answers your question, but we feel we're in the right spot right now based on the investments that we've made. Sure. The main drivers are just really the thoroughness at which we're approaching our projects. We're embedding a heavy amount of safety practices at a new level, and also continuous improvement. So that's delayed the spend a bit, but it's still coming. What I would say is we don't say there's going to be a certain level that we would top out at necessarily, in terms of investment. It's going to be ---+ let me use an example. If every brand came up to the ROI that we get on Jimmy Dean across the Core 9, we'd be spending a lot more, and be getting fantastic return for it. The model, what that looks like across every single property, we haven't necessarily done that, I would say. The idea of us continuing to invest, when we get the margin structure that we have and it continues to get better, we will put the foot on the gas. The idea is that we will not find ourselves in the position, we don't think, where we're stopping the investment, because we feel like it's going to be way too high. We generally focus on our investments continuing to go north on our branded products. But where that ceiling is, it's really something I can't comment on right now. No, I wouldn't say, I would say no, it wouldn't. Really, it's ---+ for us, it's more about the slope of the curve. So it's not whether or not it's going to be at a certain sustained level or not, it's how quickly we go up or down. And that certainly affects all of our business, frankly, not just poultry. So we feel like our model is in a much better position, because we have the value-added mix. So we have the pricing mechanisms that don't change all at once. And so, we feel like we're in a really good spot there. Yes, that's fair. I'd say again, I'd point to the slope. It depends upon the slope of the change. So before we go, let me reiterate something that we said earlier. With the expected adjusted EPS growth this year in the neighborhood of 40%, we have set the bar high, but we have momentum, and we're confident in our ability to achieve high single digit growth next year. We're growing now, and we're going to keep growing. Thanks for joining us, and have a great day.

2016_TSN

2017

BLL

BLL #Thanks, <UNK> As <UNK> said, we're pleased with our first quarter results Ball's comparable diluted earnings per share for the first quarter of 2017 were $0.76 versus last year's $0.59, a 29% improvement First quarter comparable diluted earnings per share reflect the benefit of last year's beverage can acquisition, solid operational performance in all of our businesses, increased global demand for both beverage and aerosol containers and the lower tax rate These benefits were partially offset by higher compensation and project costs, as well as higher interest expense and a higher share count Details are provided in note 2 of today's earnings release and additional information will be provided in our 10-Q Our Beverage Packaging North & Central America segment comparable operating earnings for the first quarter 2017 were up year-over-year due to the contribution of the recently acquired plants in the U.S and Mexico, plant efficiencies and continued specialty can growth Industry demand in the U.S and Canada as measured by the Can Manufacturers Institute dipped just slightly in the first quarter likely due to Easter slipping into the second quarter of this year and no leap year, while volumes in Mexico continued to grow in the beer sector Overall volumes in our North and Central America segment were up 5% on a pro forma basis Drivers for Ball's growth were craft beer, super premium beer and imported Mexican beer brands, coupled with robust demand for certain specialty cans in the CSD category As a reminder, the acquired JVs in Guatemala, Panama and South Korea, as well as our legacy Rocky Mountain Metal Container JV are not consolidated and are reflected in equity earnings of affiliates along with our other equity investment in Vietnam As you can see, these operations performed well in the quarter, largely due to strong can demand in these regions Our Beverage Packaging South America segment saw improving volumes as we went through the quarter after a lower-than-expected January and February from a volume perspective, the industry saw strong March volumes and overall demand was up nearly 4% in the quarter and we were up roughly in line with the industry For the full year, the South American team feels much more constructive about the market and economy Our customers are using specialty cans to grow their business and deliver what the consumer is looking for It may be too early to call, but the Brazilian government appears to be taking action to stimulate their economy, and while there are many challenges for the economy to overcome, it appears that the economic situation in Brazil is starting to improve Results for the Beverage Packaging Europe segment reflect the typical seasonality and performed in line with our expectations As we mentioned in January, our European beverage segment has work to do on its margins and certain initiatives to support multi-year plans have been initiated to improve revenue and cost management via repositioning into sleek, slim cans, as well as previously announced intention to close the Recklinghausen, Germany facilities In the near-term, cost savings benefits in the region, including better operational performance will bolster second half performance Industry supply demand is healthy, specialty demand remains favorable and construction of our new Spain plant is progressing as planned Our other includes Ball's legacy Asia-Pacific business, the acquired EMEA business and corporate undistributed cost Note 2 of the press release references approximately $45 million of corporate undistributed costs in the quarter, which is higher than the fourth quarter run rate, largely due to three equal items including the relocation of certain pension costs that formerly resided in the legacy Europe segment, higher stock based compensation in the quarter and incremental project costs that will benefit the corporation in the long-term After netting off the corporate costs, you could see that the operations in Asia and the Middle East performed well Moving to food and aerosol, comparable segment earnings were up year-over-year due to continued growth in global aerosol up 6% in the quarter, largely due to strong aluminum aerosol growth offset by U.S food can demand declining 6% in the quarter Starting in the second quarter, the segment will benefit from this cost savings associated with the West Virginia metal service center closure and anticipated growth for aluminum aerosol products In summary, our global packaging businesses posted strong results and everyone is extremely focused on keeping this momentum going, meeting demand and effectively managing their invested capital base to drive EVA dollars from the combined business Thank you again to all our operations teams around the globe You will notice that our first quarter net debt came in around $7.5 billion This is right on top of our plan and the debt will begin to come down as we move to the back half of the year As we think about 2017, our previously communicated goals remain intact We expect full year 2017 comparable operating earnings in the range of $1.3 billion to $1.4 billion, excluding the amortization associated with acquired customer intangibles After spending in the range of $500 million of CapEx, 2017 free cash flow is expected to be in the range of $750 million to $850 million The full year weighted average diluted shares outstanding for 2017 will be closer to a 179 million shares, given the dilutive effects of recently adopted accounting guidance for stock-based compensation plans and the absent – and absent the impact of timing of share repurchases Full year 2017 interest expense will be in the range of $280 million The full year effective tax rate for 2017 on comparable earnings is now expected to be in the range of 26% due to a more favorable foreign rate differential Corporate undistributed will now run about a $140 million for the full year 2017. The difference from our previous estimate of $115 million is divided pretty equally across three buckets The first bucket is the inclusion of both the one-time true-up and stock-based compensation as well as accruing for higher incentive compensation this year The second bucket has to do with some project costs related to more transformational projects now underway since the first stage of integration is behind us, and the third bucket is the inclusion of inactive retiree pension expenses moving to corporate from the legacy European beverage can business no longer owned by Ball With that said, the operational performance is certainly enough to offset this full year increase At current FX rates, we continue to expect year-end net debt to be in the range of $6.2 billion to $6.3 billion As you begin to think about the progression from the first quarter to the second quarter, there will be a nice step-up in profitability due to the normal seasonal ramp-up and moving in the third quarter, we need to phase in the closure of Reidsville as well as the phase-in of synergies With that, I'll turn it back to you, <UNK> Yes And even the aerospace backlog, I mean it continues to be incredibly strong, and we chase more work I think on the some of the projects that we're going after as it relates to corporate costs, I think we're finding a lot of opportunities to streamline, centralize, standardize things And those types of things will take a little bit more time to have a benefit, but we're feeling really good about those opportunities And on the working capital front, our sourcing teams, treasury, the operations, I think we're finding a lot of opportunities, to get after it, it's just a question of when those things will show up, will we get benefit in 2017, or how much benefit will we get in 2017, and how much will we get beyond And you are comparing – it's not helpful to compare Europe year-over-year because we have two different businesses There was just a – there's a difference in interest rate assumptions that will impact 2017 going forward Our pension cost in total, if you think about the company in total, it's not at all different than what we thought, it's just in different buckets Yes The number I gave was a full quarter number, it was actually down in January, February and then it bounced back in March So, it actually – coming out the of quarter was at a much higher run rate than that The tax rate – yes, maybe, if you think about it, I gave a little bit lower tax rate by a couple of 100 basis points versus the original tax base or the tax rate would offset it (26:35) too Yes I think they were higher in the first quarter They'll come down as we move through the back half of the year It's not going to run at the same pace as the first quarter And despite softer volumes, the financial performance was right in line with what we expected there Both those regions are going to do a good job of cost out So the financial performance will be fine Thanks Thank you We'll get more on the back-half than they will in the front-half We're going to get – the 150 run rate is still going to – is still good We haven't seen much of that other than the closure of Millbank in the first part of the year and then a lot of the other things that we've been working on start to run through our P&L in the second quarter, but you're not going to see the benefit of those things until we get to the third quarter and fourth quarter Yeah First with – we said we were down more than the overall market, but there was no share loss All of our customers, every customer is a bit different, but it's a very seasonally slow quarter, in some of our quarter our customers just weren't pulling as much as we had expected So, I wouldn't read into that too much As for the pack, as we go to summer, it's too early to tell It's beginning of May and plantings are just starting to go in many of our customers and so, we'll be able to update you as we go through the summer on that And then your last question about cost savings, remember we had a very big cost saving, a big project about the closure of our Weirton, West Virginia facility and investment on the cutting and coating side in the Canton, Ohio Weirton, West Virginia didn't officially close until the end of March, but we've gotten no benefits of that So, as we go forward, that's where we see a lot of the improvement to come from Yeah In terms of the ramp up, it's really no different than historically what we've seen And remember, we really do three businesses in that, we've got a – I'll call it as the traditional satellite business, we've got a components business which is the tactical products, things that go in the Joint Strike Fighter for example and then we have a services businesses The first two, the satellites and the tactical products is really where we've been winning the preponderance of the work and majority of those types of things, it spread out, but majority of them are cost plus in nature And so, as you get started on these new programs, the margins that show up are a little bit less because as you de-risk the programs, that's when the margins start to increase And so, I think our margins in the first quarter were slightly down relative to last year It was wholly expected because of these new startups and as we go through over the next couple of years, you should see an improvement in those margins as we de-risk these programs that are just starting now In terms of the opportunity set, we've talked about this in the past, some of our capabilities are exactly what the U.S government needs right now A lot of it's in the classified world, so we can't talk about it, but when you think about the needs for intelligence, surveillance and reconnaissance and you also see in terms of the budgets being relatively restricted, they need more for less and the exquisite maybe important, but sometimes we can do something at a cost basis that's a little bit less than what other people can do And I think the government in this environment is looking for new ways of doing business with them, and that's where it falls into our sweet spot Thank you We're running it out of the system, so I mean, the obvious would be to look at Brazil where we acquired a much bigger business than what we had before, so the vast majority of that would be what we acquired in Europe, we exchanged a large degree – a new business and sold our old business, so it's an apple and a pear there And then North America, we're running it from an integrated standpoint, we're now looking at it as these are Rexam earnings and these are Ball earnings, they're all Ball earnings So, we don't really look at it that way It was really – we've done this historically a number of times, when we get to this range and splitting the stock without a nice juice of the dividend doesn't really do much So it was really about confidence in our cash flow going forward and liquidity in the shares We will continue to be – once we de-lever to the point we've talked about, we will be an aggressive acquirer of our shares So creating more liquidity in the stock helps, so splitting the stock and bumping the dividend is a sign that we feel pretty good about where we're at and where we're going I think it will be better than that I think our teams, treasury, sourcing, the operations are all working great together And we're an EVA company, we acquired pretty big businesses that didn't focus on EVA, and didn't focus on their capital base And when you get people focused on working capital and what we can do and people get paid off of EVA, I think we're finding no shortage of opportunities, it's really a question of the execution – the timing of the execution of those opportunities and how much will show up in 2017 and then how much will show up beyond 2017. There is all kinds of buckets, I mean, every component of working capital we're looking at, so You know, receivables, payables, inventory, I mean every – I'm not going to get by region, by segment We run it in total I think the benefit over the next few years will be well in excess of the $100 million Yeah Well, first, we've got a relatively – not relative, we have a large position down in South America, and we do business with every major customer down there And so, I think it's safe to say as the mark goes, so do we So I wouldn't really focus on over-weighted one customer relative to the other because we're big with many of the customers down there With respect to the new competitor coming in, as I said, the overall, the market was down a little bit last year It's actually come back strongly particularly as we move through the first quarter and it's obviously going into a seasonally slow, but we see some tightness in there and I don't want to comment on what the customer activities, we're focusing on what we can do The other thing we really haven't talked about is we always focused just on Brazil We also acquired a business in other regions as well including Argentina and Chile and have the ability to serve multiple of markets in that and the can continues to gain share in those markets as well and so that's one of the areas we're also focused on Yeah We'll – again Russia is – the first quarter is seasonally slow, Russia is going okay right now There is nothing magical about it, it's a slow quarter, but then it was up a little bit in the first quarter We expect for the full-year it to be up modestly as a lot of the trends we've talked about earlier and our capacity I think it's in reasonably good shape right now And so as we look to it – it is different than the business in Europe that we used to have, because it is more weighted to the second quarter and third quarters and it was the first quarter and the fourth quarters, and we're just about to enter into the that seasonally strong period, but nothing – no big deviations from expectations Well, I'm still trying to go through your math, but I got to be honest I don't think my computer could work that fast But in all seriousness, what we standby everything we said, which is 20 – what we said, it was $1.3 billion to $1.4 billion, it's too early to say, where we're going to end up in that We've got our most strongest quarter is coming in front us over the next two quarters So it's premature to really talk about that But we laid out what we thought for interest expense, what we laid out for the tax rate, what we laid out for the share count And when you do all – and then we also talked about 20% to 30%, when you kind of do all that math, I don't disagree with exactly what you said All right Thanks, Chip

2017_BLL

2015

SRDX

SRDX #Morning. Good morning, <UNK>. Yes, IVD as we talked about in the past is, you know, we view that as a mid single digit growth business and obviously they have much tougher comps they are coming up with this next year. We still think that's a mid single digit growth business for us. And so with that growth we think we'll continue on that rate and then we continue to believe that there will be underlying growth in Serene, as well as growth in the reagent sales. But really what the driver here is for fiscal 2016 is going to be the TL-3 the third generation and how much of that is actually going to be in the channel at the time of that expiration of the patent and the reporting on that and that will be largely reflected in starting the second quarter and we'll see more of that in the third quarter. Sure. So the second part of the pipeline just for the intent is to balance our portfolio. We have a fee PMA type things going on. Certainly we wouldn't be doing the pivotal, but in terms of getting 510(NYSE:K) clearances, we see an opportunity with some of our new chemistries that we have that actually as we have done our own data package testing of the currently marketed products, our new chemistries on these products actually enhance performance dramatically. Now when you think of SurModics our customers wanting to technically and clinically but also regulatory de-risk things, we believe we can put those on some of advanced cases of these designs and actually get a product that has improved device design by itself and then you put our technology and events like the a non-linear battery effect that we can see. So we can ---+ if we can get those design ---+ of designs frozen and then file for the 510(K) then we can offer our products what we believe are going to be new benchmarks in some of these products. In terms of, I think you're think your question is heading towards, do we have the R&D capability for the device design part of that, the short answer is we have the initial component of that, but as we look and contemplate acquisitions, that is going to be a critical competency gap still for us and we see it actually to be able to innovate under device itself. So big role in that. Exactly, just a note <UNK> you're seeing extruding capabilities, I am not, but certainly with the base type stuff you'll have to have capabilities like that. Clearly there are partners who can do this. But also remember our focus of M&A is to bring that in house and also have the ability to manufacture it because part of our strategy depends on having a margin that can actually be attractive to both us and a strategic as we try to supply that product and license it to them. So the M&A continues to be a real big pivot pole of this strategy, if we are not able to execute this M&A in the way we think, then certainly things could take a little bit longer if we are having to do it just from an OEM partner view point. No, no, just to be clear. I think the timing I should clear up. We're doing the product development of those products in fiscal 2016, so that we can file and seek for approval in fiscal 2017. Start to finish on our 510(k) type product, I think are good benchmark, a rapid benchmark is about 18 months start to finish on that. So clearly we have nothing in front of the agency right now from a 510(k) view point. But the aim is to have that developed frozen and hopefully some of that even filed in fiscal 2016, so we can get approvals in fiscal 2017. I'll give you broad overview and keep - remember its sort of a like a real options analysis because if we don't get a good preclinical data from olimus then we're going to stop. So when we think about olimus program I would think about $1 million this year would be an investment in general. Now again its, you scale, you go from data to data and if the data doesn't look good and doesn't look we can get in olimus, we're going to spend up to that amount, but if the data does look good, we will accelerate into the next phase. So $1 million is not a bad ballpark to consider for that. Yes. Certainly with our excipient program we have the ability ---+ I've described the platform is anything that requires a short term contact with tissue to be able to deliver a drug, that's on a broad category how we consider these excipient's that we are doing research on. As far as various anatomical targets, we have nothing seriously ongoing in non-vascular systems at this point, that's not to say couldn't change, but we have our hands full with the vascular anatomies in front of us and the investment required to do those adequately. So the platform and the IP we have filed we are confident and that will be there for our tissue anatomies, but for now we're sticking to vascular. Yes. couple of good questions there. <UNK>, and the tax rate we expect to be similar and within that range of $0.70 to $0.80 a share whether encapsulate any R&D tax credits if they are enacted, and that's embedded in the rate right now. And if you look at margins, you look at them being similar to where they were this year, we ended up the year at about 60 basis points, up from last year at 65.4% gross margins and you should expect us to generally be in the 64% and 66%, and a lot of it has do with mix, related to as we commented in the quarter, antigens which is a product we distribute has a lower margin and that would have some impact on the mix for the year, but all things being constant, be in the 64% to 66% range would be reasonable estimate. Thank you. Good morning, Beth. Sure. Beth, I call that three legs too, and typically a three legs to usually have two legs and you are adding one. SurModics has one very strong leg and we want to add two. So we have really incredible technology content, not just drug delivery but new chemistry that go on surfaces that could make our devices even perform better. So we have that strong leg. The second leg we want to add is really to have our own independent device design capability. So from balloons to catheters, certainly we would like to have that so that we can improve not just the technology content, but the device itself. And so that's a big part of our M&A strategy. The third leg on the stool which is also part of our M&A strategy is our future business model is going to require manufacturing capabilities that have - what I call two components, one is very high quality systems standard of manufacturing, but also the ability to make these products at substantially low cost. So we can't stop at the innovation and say we're better, there has to be enough margin to go around for SurModics and for the strategic we intend to provide these customers for. So our M&A strategies looking for those two legs, device design and manufacturing and even better if it comes in one company that's even sweeter spot for us. We have looked at over 100 companies in the last two years and we don't discuss anything that's eminent we certainly have been very, very active in that and we feel very confident in that space. So we want to provide whole product solution to our customers, I'll take to it to the extreme just to make an example, is any reasons SurModics can't provide a product that's regulatory cleared or approved, and finish sterilized label than packaged and all customers we just ship it to them to be able to do that and do at a proper margin requires us to have a good manufacturing competency the board applied the technology content into manufacture device, yes. Thanks, Beth. Thanks. Thank you. Well, thanks to all of your questions. We are pleased with our fiscal 2015 performance and a solid fiscal 2016 with a right move that can accelerate our transformation towards delivering whole product solutions. This ensures that SurModics is relevant to our valued customers well into the future. I believe it's the best way to build long-term shareholder value. Thank you everyone.

2015_SRDX

2017

AEGN

AEGN #Good morning. What we expect to happen on the international side of the business is actually to have a much stronger year in 2017 than we had in 2016. We entered the year with good backlog, remember where the CIPP operation in Australia and then in Europe. And we are entering 2016 with much better backlog in Europe than we had at this time last year in 2016. So we expect the contracting business in both those locations to be stronger this year than what we saw last year. What we are saying in terms of the overall margin is that we see some impact potentially on margins in CIPP just because of the increased oil prices will increase our resin costs. We are also going to see some pressure on wages, the construction industry in US is going pretty strong and we will see some wage pressure from that. And then we have made some investments both in R&D and in sales because we want to compete in some regions in North America, where we haven't been competitive in the past. That requires us to put sales and construction resources on the ground it will take a while to fully optimize those. And so, I think we are investing in growth, we expect that investment to pay off in 2018 and 2019. We look at it as an investment opportunity in North America to grow a very strong business. I think there is two things. Remember, we went through a difficult restructuring last year. We took out I think almost $80 million or $90 million worth of revenue from two large upstream contracts that we exited at the end of 2015 in beginning of 2016. And as we exited that business we had trailing costs and we also had some project overruns that occurred on projects that were in process when we exited. And so we are going to overcome obviously that won't reoccur this year. The second thing is that business has really benefited from our continuous improvement program, they continue to drive utilization up they continue to have more accurate billing. And as they improve we expect all that to hit the margins. Also our margins on turnarounds are slightly stronger than our maintenance margins. So we had all those together, we feel really good about the outlook for that business for this year. I don't know. We had a pretty good year in 2015. Last year was probably down a little bit. This year is going to be strong. I don't have a good sense of 2018 yet, we will probably get a better, better feel for that later this year. But I don't think that it is up, I don't think it is necessarily a catch up. I think there is a little bit of variability year-to-year in that business. You are welcome. Well, thank you for joining us. We are excited about our prospects for 2017. Our plan is based on realistic assumptions and favorable end markets in North America municipal pipeline rehabilitation. Midstream pipeline, Corrosion Protection and downstream refinery maintenance and turnaround services, we remain focused on improving sales and operating execution for organic growth in greater efficiencies across the Company. With the hope of a clear line of sight in the energy markets, we expect 2017 to be a good year for Aegion. Thank you for joining us.

2017_AEGN

2015

TOL

TOL #Hi, <UNK>. This is <UNK> <UNK>. We've looked at EB-5 but really haven't delved into it. There are some issues related to long-term job creation. We're primarily building condominiums. We've been able to access capital very easily given our scope, our size, and financial relationships. So EB-5 comes with some challenges, some timing issues, and other things so we've actually kind of stayed away from it. We have a lot of good joint venture partners that we deal with, very institutional quality. So if we were going to joint venture a deal, that's a more likely way we would go. Thanks, <UNK>. 38%. So 38% is a pretty normalized rate. The federal government wants 35% from us and the states want something in the neighborhood of 4.5% from us. So tax planning saves us a little bit. In 2015, our 32.4% number benefited from a settlement and reserve release with a particular state in the second quarter that was in the neighborhood of $14 million, and we also had a $5 million or $6 million state valuation allowance reversal in the fourth quarter. We do not expect either of those two items to recur next year. The assumption is that there are no impairments. You've restated it correctly. Sure. So the impairment was a community in suburban Philadelphia that accounted for almost all of that impairment, north of $4 million of the $4.4 million. And the reserves for warranty and litigation are revisions of our estimated costs associated with the stucco disclosures we mentioned last year. I think that is a similar situation but the amount is not that much. If you were to ask me what the reserve was for, I would tell you it was additional water infiltration stucco repair costs. Thank you. Thank you, Chad. Thanks, everyone. Have a wonderful holiday season, and we'll see you soon.

2015_TOL

2016

CF

CF #We are constantly looking at all of our costs, as <UNK> has mentioned, whether that be SG&A, production, CapEx. I think in this type of environment, we're driven to do that. And obviously, logistics is one of those areas. And our logistics team has done a great job in terms of leveraging the various platforms that we have. And what we have done, I'll tell you, the rail rates have gone up, and it's been an impact on UAN. And we have met with the railroads and we continue to do, whether it's spot situations or looking at the complex as a whole. One of the things we did last year was we opened up Stolthaven, which allowed us to get on the NS and bypass some of the blocked activity we believe we were experiencing in Donaldsonville. We've also leveraged and moved up our barge participation on UAN, increasing the level. And then, like I mentioned earlier, the exports. So, we are able to achieve a fairly attractive netback, moving our product all over the globe but principally to Argentina, Uruguay, Europe, and some new markets we're developing. We have moved to France for less than $15 ---+ $14 a ton. We can't move to St. Louis for that on UAN. So, as you see us develop and grow and mature, we're going to continue to leverage those options, and to benefit us. Other opportunities for what we're doing, we have met with the railroads on shipping out of Port Neal. We have UP and BN servicing that plant. But we have built that facility to fully load that product out by truck. You have to take defensive measures during these times to be able to position yourselves to pull in the attractive pricing for rail and other logistical options, and that's what we're doing. It depends on where you go. Obviously, D-ville is a huge plant and we have a lot of urea coming out of there, but most of it moves by barge, and now we have the ability to move that out by vessel. Some of it will move by rail. But the product that we have been moving by rail into Iowa, Nebraska, the Dakotas, all of that will come out of Port Neal, and that will all be very competitively positioned. We can load the trucks with a pup so you can average more tons and lower your freight cost. We think that will reach 500 to 700 miles by truck outside of the plant. So, then it's going to have to be: Do the railroads want to compete with that. We have already worked with our customers to be able to receive this product. So, we believe that we have linked the system together to effectively serve and move our product at all times at the lowest cost possible. Good morning, <UNK>. As I said earlier, in September we tested the granulation part of the urea plant. We have been stockpiling ammonia into the tanks. And anyone who is in the Port Neal area has seen the flare stack lit up, so we've got gas and steam going into the reformer front end. As we work from the reformer through the CO2 removal system, we are going to start sending CO2 over to the urea plant and then be able to pull ammonia out of the tanks. So, that's what we are planning in terms of the parallel commissioning. So, it's very likely that urea will actually be online before the ammonia plant is fully up. It's a simpler plant to commission, and granulation is already operational. But our expectation is it's a matter of a couple of weeks, maybe three or four, depends upon the number of little issues that you find as you go through it. But that was fairly consistent with our experience at Donaldsonville. Hopefully we will be able to improve on that because of the great team we've got from D-ville that's up helping the Port Neal guys. So, I would say our expectation is urea hopefully here by the end of this month, and ammonia plus or minus a week after. When you look at our system, as I mentioned, we do have the flexibility first on production. We can produce ammonia, urea, UAN, and some of the other products. We will continue to do that and leverage those options up and down as the market necessitates. Then you go into loading options, where we have pipe, barge, truck, rail, vessel. Then you go next to terminal opportunities and where those terminals are. We have taken on some additional terminaling space, which we believe is in our long-term interest in markets that we have not necessarily participated as much in the past, and we can effectively serve now with our logistical options. But you are right, exports are a great opportunity because you can immediately put 40,000 tons out and load it in a day. That's a great leverage point when you're looking at inventory at the plant and how you are moving it out incrementally into the interior. Buying patterns have changed and we anticipate that they will probably be this way for another year or so. But, at the end of the day, you do have to have your product in place to serve the farmer customer. You can only move so many railcars per day, and railcars can only make so many trips, and they have to return empty and load out and get in line. So, we believe that, as that window closes, and every day is another lost shipment day, that will challenge the delivery system. This is more of a UAN story than it is for urea because I think you can move that out by barge and up through the various terminals. So we are fairly positive looking forward into 2017. If you really look at it, for Texas and Oklahoma, that will start applications in February; the Midwest, March and then April. So, you are not much more than four or five months away from application. We are just starting winter and we are already looking to spring. We think it's going to turn out pretty well for us. I wouldn't infer too much into that because what we are doing is just creating optionality for the Company. I would rather have 10 options to take 1 ton than have 1 option to take 10 tons. So, we would rather create these options, whether they be exports or the coasts. And we have looked at the coasts throughout the years and participated in various manners. But today, when you look at the East Coast, that's a 1 million ton market that we probably had 50,000 to 100,000 tons five or six years ago. And I think that presents a tremendous opportunity for us. That's why we are getting on the NS, looking to get on the CSX, utilizing Courtright on the CN. The West Coast, we've got some good agreements and partnerships out there with some of the distributors. We are able to rail directly from Woodward on the BN, from Donaldsonville and Port Neal on the UP. And we have been moving product by vessel through the Panama Canal to the West Coast, and that's an attractive opportunity for us. Yes, new products and new production is coming online in various parts of the country, and we're going to continue to participate in those areas. We, ourselves, are adding capacity right in the heart of the corn belt and we're just preparing. <UNK>, the other thing to remember is, as we indicated I think in some of our materials, the nitric acid and UAN plant at Donaldsonville is the largest single train that's out there at 4,500 metric ton a day, which is about, at nameplate, about 5,000 short tons a day. That plant is running over 20% above nameplate. We have done several days here, just even this week, at over 6,000 tons a day. <UNK>'s got a big job in terms of finding a home for all of that product, given how well those plants are running. And as he points out, what we're trying to do is just try to get the best aggregate netback across the entire system. That's going to really vary based on market conditions. The trade patterns are evolving and starting to adjust for where the new capacity comes out. We certainly have an ability to export as much as 3 million, 4 million tons a year, but that wouldn't probably be our first choice, all other things considered. The point though that I would like to highlight, just to remind everybody of, and we've got a slide to this effect in the appendix, but even after all of the new capacity that's in flight in North America comes online, North America is still going to be a very import-dependent region where there's about 30% of our total nitrogen demand has got to be met by imports. When we are exporting here and there, it really is just around the edges and primarily during periods of time when there isn't a lot going to ground in North America and there's demand in other regions. It's a way to maximize overall system netbacks, not a have-to-do kind of thing. Sure, <UNK>, this is <UNK>. You're right, and we said that in our prepared remarks that basically those things were taken out in September as part of financing the OCI deal. At the time we did that, we weren't in a position to issue registered debt or even 144(a) debt because we wouldn't have had the requisite financial information we needed to issue debt. So, what we did is we looked at a couple of options. We looked at potentially taking out a 3- to 5-year term loan to provide the financing. The reason we rejected that option was because, effectively, if you looked at the post closing of the OCI deal, there would've been, had we done that, around $4 billion worth of maturities occurring between 2016 and 2020/2021. And that was a concentration of maturities that really was a bit high risk for us. So, what we did instead is we went to the private placement market where we could basically throw a lot of those maturities further out to 2025 and also to 2027, so that we would have a more laddered effect. With the business that we intended to have coming out of that deal, which would have included three new operating plants and, through time, significantly less debt, and also the operating environment that we foresaw at that time, the covenant structure in the private placement notes was not perceived to be problematic. But a couple of things happened since that point in time. A, we didn't do the OCI deal, so we never got the three additional operating plants. In addition to that, and certainly with respect to third quarter, things turned out a bit more adverse than we had anticipated. What that highlighted to us was the need to make sure that, with respect to our long-dated capital, that the long-dated capital that we had in place to finance the Business should be long-dated capital that is consistent with a business that is cyclical, and goes through ups and downs, and is robust to that from a covenant perspective. And the reason that's important to us is because having a more appropriate set of covenants gives us the flexibility, as I said, with respect to the revolving credit facility, to continue to pay the dividend and do other things on the equity side that would be more difficult otherwise. So, the actions that we are taking here are really around reducing the risk and uncertainty around that sort of stuff, and putting our capital structure in a framework that's far more appropriate for the type of business that we are today and the environment we are in. Yes, <UNK>, we have been in, as you would imagine, very close communication with the guys at Mosaic. They have been keeping us abreast of what's going on from a delivery schedule perspective on the vessel. <UNK> and his counterpart have been working well at coming up with different ways to manage that situation, whether it's giving them ammonia via the pipe or sending some stuff up through their terminal, doing some time product swaps and others things like that. So, we are on top of it and managing it jointly with the Mosaic guys and don't foresee that as any real issue. Yes, good morning, <UNK>. The plant's got to be basically put in service and operational in order for us to be able to depreciate it. We need the plant to be running. Now, that said, as I have talked about, it's not an all-or-nothing kind of thing. We've already tested the granulation plant at urea. We are ready to put CO2 into the urea melt plant, the synthesis plant, and get that up and running. The off-sites have all been tested and are operational. Once we've got CO2 going over to the urea plant, then the front end of the ammonia plant is operational. Again, this isn't an all-or-nothing kind of thing. We are putting sections of the plant in operation as we go. But, again, our expectation here is, based on our experience at Donaldsonville, the urea plants are sister plants from one another. The one at D-ville started up within a week. So, we think we've got plenty of time to get it up and operational. The Port Neal ammonia plant is a lot less complex than D-ville because Port Neal is a 2,200 ton a day plant, where D-ville is a 3,300, and configuration of the syn-loop in Donaldsonville is much more complex. There's a whole 'nother section to it. As we look at this, we feel very comfortable in terms of being able to get the plant online here by the end of the year. That's why we continue to say $800 million in terms of the tax refund next year because we expect to get everything online. <UNK>, this is <UNK>. I just want to clarify something that I heard in your question. The timing of the receipt of the refund doesn't have anything to do with what happens at Port Neal. The timing of the refund has to do with when you get your tax return in and when that gets processed through. Given what we see today, we anticipate that will be a third-quarter event next year, that is the refund. As <UNK> described to you, the Port Neal piece has to do with the amount because it's what drives ultimately for a portion of our depreciation, whether you have depreciation in your tax loss for 2016 that you carry back or whether you don't, and how much. And like <UNK> said, it's not an all-or-nothing type thing. There's a continuum of outcomes. But our strong expectation remains that we'll be fully depreciating those assets this year. As you point out, this is based on a pro forma simulation of the various spreads that existed for our last full year, which was 2015. And if there are differences going forward, that's going to change. The vertical axis is our realized price. But I think in the third quarter, the published average NOLA price was $180 and our realized price was a little over $200. We would expect that spread to go up once Port Neal comes online because we are adding about 1.4 million tons in market that's going to have a $30, $40 a ton premium associated with it because that's the transportation cost from the Gulf. That gives you a general sense of the premium to the Gulf that we would expect. In addition, although ammonia is a little bit different animal because of the volume that's available out there in the deepwater market, we would expect UAN premium to come back in line with urea. We can switch back and forth between granulating more or producing more solution depending upon where that premium sits. And to the extent that you don't get the corresponding bump that you would expect in UAN, we'll just shift the product mix. I think over the medium to long term, those things have to come back into rough equilibrium, otherwise the producer is going to shift the mix. And the end values have to trade at a minimum on parity with very likely UAN continuing to command a premium the way it has. When we mention the weakness, it's more of the weakness in the ammonia price structure and why that was driven more in relation to the contractual structure of our industrial book of business, which is gas-based, as well as Tampa-based, and Tampa is very low. Demand has been a little bit lower in the industrial segment due to some of the issues around caprolactam and phosphate. I think it's just more of additional phosphate exports out of China has put a little more pressure on some of the other phosphate producers in terms of overall volumes and possible changes in mix as moving some to micronutrients, as Mosaic has mentioned, away from possibly DAP. Weakness ---+ I don't think it's anything we are concerned about. Our volumes are, we think, going to hold steady. Regarding DEF, we are positive what's going on in the DEF market, continued demand. We are going to have a record year on DEF volume. Pricing is holding up. We are continuing to see the growth of, the 30% to 40% that we have seen year on year. I do think, just due to the slight slowdown in shipments, you have probably seen the Class VIII truck volume, the new truck volume, slowing down a little bit on that end, but you do have additional demand coming from off-road, as well as different segments. So, we are positive on the DEF front, and continue to invest and grow and build the team and participate in that business. There is something important to remember here, which is, the ammonia price, when it's weak, primarily affects the industrial demand that <UNK> was talking about. In order to be able to get ammonia into the farmers' fields you have to have a place to move it to. It's not like urea where you can just leave it on a rail car, put it in a shed kind of thing. And UAN, there's a lot of availability of tank space. With ammonia, you have to have the big cryogenic storage tanks. There's principally only three companies, and they are the producers that own those. CF's got the largest network of ammonia tank terminal system. Coke has got some, and Agrium has got some. And then there's onesies, twosie tanks here and there that are owned by other people, like [Tramino], and so forth. If you don't have the storage terminals, then you can't take Gulf ammonia up into the marketplace and get it in the hands of the farmers because you've got no place to move it through. So, even though there is some impact in terms of agricultural prices for ammonia, it's not directly tied to Tampa ammonia the way urea price in the Midwest is tied to NOLA urea price. That's one of the reasons why the distribution and terminal system that we've got in ammonia is so valuable because it allows us to capture a pretty sizable spread between the value of agricultural ammonia versus relatively cheap deepwater ammonia. Relative to your question on demand and changes in demand patterns, we have experienced two falls, 2014 and 2015, that were below expectations and below normal, but that was weather driven. And then we experienced two record springs in 2015 and 2016. As I mentioned earlier, when you look out on the 10- to 30-day forecast, we see some positive developments in all of our terminal regions, even up in Canada, which receives snow in October. In limited applications, we see that drying out and temperatures staying in the 50s in the afternoon, allowing probably the applications to accelerate. When you look at, as a farmer for corn, you have a number of options for N and applications thereof. For ammonia, traditionally in the past was 180 pounds per acre. You put it on in the fall and you plant in the spring and off you go. That has changed with different agronomic prescription. So, we have seen a little bit less applied in the fall and then pick up an additional application in the spring, two-, three-, and four-stage applications, a combination of ammonia, maybe side-dress ammonia, or UAN top-dress, or even flying over with urea. Each of those are positive for us. We do see ammonia in the fall as a component to good agronomic corn practices, and we see that continuing. <UNK>, on the dividend, if you look at our balance sheet, we had almost $1.6 billion of cash on the balance sheet. We've got an undrawn revolver and we've got $800 million of cash coming to us next year in the form of a tax refund. That's before dollar one of operating profit. So, the problem is not, from an investment grade standpoint, the dividend or our liquidity situation. We've got plenty of cash. The issue is all around, in the near term, the pricing environment and the EBITDA generation relative to the aggregate amount of debt that we've got outstanding on the Business. So, change the dividend, don't change the dividend, it doesn't have a meaningful impact in terms of that particular metric. And that's why we've worked really hard on the secured credit facility to make sure that we've got the flexibility that allows us to continue paying the dividend going forward, because that's an important element for the equity holders. Our focus is to get back to investment grade. And we are planning, as <UNK> articulated earlier, to retire the debt that comes due in 2018. That's $800 million. So, we will be delevering at that point. That will certainly help. And then as we move into price recovery in the sector, about that time, we expect that will help as well. We are going through a short-duration situation here, but it's not really dividend dependent. <UNK>, do you have a ---+. No, I think that's right. I think consolidation, generally speaking, is a constructive force. It allows for rational behavior. In general, there's synergies to be had. So, I think it's the natural consequence of things when you go through these cyclical trough periods like we're going right now. Let me go back to one question, the second half of the question you asked earlier, which is, is our preference dividend or share repurchase. As a general theme, we like to maintain the dividend. We don't want to be in a situation where we are reducing that. But I think, on a day-in, day-out basis for consistent and timely return of capital back to the shareholders, our bias is towards share repurchase. We think that tends to be a more efficient vehicle to do that with.

2016_CF

2015

WBS

WBS #I want to add to that, that however, overall investments in the businesses will continue. And the art of what we've been trying to achieve is to make those investments in support of our bankers and our businesses, and improving our technology at the same time as managing expenses in the disciplined way that we have to keep the ratio at 60% or better. I think in ---+ it's not behind us. We continue to rationalize the branch network, and in the third quarter I think you'll see another consolidation. It's like a 3 to 1 type of deal, Mark. But the team there continues to rationalize the branch network and reduce the footprint size. Sure. Mark, it's <UNK>. I guess what I would say is more a return to a normalcy. I think it would be ---+ we're ---+ inside the Bank, we see this as really a step coming perhaps closer to a normalized state, when you think about where our positions are. So there isn't a concern that we have with respect to the portfolio. We talk to the people about the flows. There is really nothing there that would suggest that this is anything other than coming to a normalcy for our organization. No, no. If implicit in that question is oil and gas, or they have been implicit in that is Shared National Credit, everything is running within normal bands for our particular business. So, yes it is within the middle-market bank, but again, we really like where the classified and NPL levels are in the book. Could they go down and get better from here. Absolutely. Could they go up a tad from here. So just ---+ but go ahead, <UNK>. I think you covered it. As I did in my comments, I think we are at historically low levels in there. And so it will bounce around as things ---+ and you see the trend, the flow: things coming in, being cured, things coming in ---+ back and forth. So I think you will see some lumpiness in there. That's right, <UNK>. We've got a couple of classifieds. One is just paid off in full. One significant one was ---+ got additional capitalization, already been upgraded and approved. So again, just ---+ we'd love you to think about our portfolio as having $10 million to $20 million to $30 million exposures that move around. And we're at such a low state right now that any one of those makes a basis point move for us that might appear, on its face, material. But again, just working with the guys just the other day, and working with our Dan Bley, we just don't see it. We don't see anything here that would suggest that there is anything other than a bump along for the foreseeable future. Right. And then you look at the days past due in the commercial or the consumer book, and those levels are still declining. Yes, so I think ---+ let me start and I'll hand it over to <UNK>. But with regard to loan growth on the consumer side, you saw a significant growth quarter-over-quarter, and that was ---+ some of that was a reflection of the market rates. We had seen apps slow down a little since the first quarter, so that's factored into our thinking here on the residential side. And on the commercial side, I'll let <UNK> touch ---+. Hey, <UNK>. Certainly the good news is that Webster has been investing in our people and our markets for some period of time. So we like to think that we've got more good athletes in various markets helping us do well. But in fact what happened in this particular quarter that we think will happen in the next quarter is some growth, which we had expected to see in Q2 quite frankly on the pre-pay side. And I'll be even more specific with respect to our I-CRE book. So, that should have happened in Q2. It probably will happen in Q3, and so how <UNK> guided you is probably appropriate. Now, we'd love to surprise a tad on the upside to that, but our guess is we think that's fair guidance for you. Well, that's a ---+ we've run it through our model, so it's not ---+ it depends on each portfolio. And that's where we are right now; once we get the loan growth, and we look at our existing portfolio. And that's how we ended up being in the range of where we are today. As we indicated in the past, we like to be anywhere from 1.10 coverage to 1.15, and the model informs us about where we are. So it's going to depend on where the growth comes during the quarter, as well as the existing portfolio. But he's right: we're guiding to the same, but it could be lower. Could be higher, too, right. Could be higher; could be lower. Well, sure. That would be the plan, would be that over time ---+ and we've talked about this ---+ we ought to be able to get it down. What we're trying to be careful about is to continue to invest in our businesses, so it's not all a save. It creates opportunity, that revenue growth, to not only manage efficiently but to invest in the businesses. So we're just trying to achieve that balance. And that's why we're saying at this point, on just a single forward quarter basis, that we think we can keep it under 60%. Over time we think we can drive it down and invest in our businesses. It's about $2 million a quarter, somewhere around there. From a premium standpoint, we think it will be about flat quarter-over-quarter. Yes. No. HSA is part of it, but we did add staff, a customer-facing staff. And more significantly is we go through our annual incentive comp cycle at the beginning of the second quarter, so you get a full quarter of that. So, if you look at base comp, all things being equal, you would expect that to go up about 2% on an annual basis. That's driving it. And then the last piece, which is worth a couple hundred thousand dollars as well to that number, as you saw, our stock price went up about $2.50 quarter-over-quarter, and the accounting for that probably is worth about $600,000 to $700,000 for the quarter. The other income included ---+ I think as we highlighted in the first quarter call ---+ first quarter over second quarter, swap volume was about half of where it was in the second quarter. And I think <UNK> just hit that. Yes, that's correct. We had less snow in the second quarter (laughter). No, seriously, we had about $1.8 million in snow removal expense in the first quarter. So you can call that seasonal, I guess. That's all a driver. Well, they could. I think that, again, it's the balance there. I would say that most providers of HSA accounts are less concerned with the deposit rate than they are with the quality of the service they're getting from their partner; and the technology, the platform, the experience that their employees are having. So, we'll just have to see what happens in a rising rate environment. But we believe that these purpose-driven, long-duration, low-cost deposits are not going to have a high elasticity going forward. We'll just have to see, but that's our view. And to the extent that that does become a competitive factor in terms of what the rates are that are paid, we'll be sensitive to that. But at this point that hasn't been the driver. We could, but we've tried to plan for that in our projections. Well, you're saying where we're sweeping to the investment accounts. No, we actually ---+ we have planned for that activity. I think you probably know we have $1 billion right now that is managed in that fashion. So there's trade-offs. There's obviously less expense that's involved. There could be nominally lower revenue as well, but we look at it as part of the overall program. Yes, and <UNK>, they typically have higher balances, deposit balances, as well, those that sweep into investments. (multiple speakers) we don't think it will have a meaningful impact. Yes. <UNK>, that's in the run rate for the quarter. There will always be additional capital spends, particularly with respect to mobile banking and online expenditures like that, but the risk piece is all in our run rate. So, it's primarily 30-year jumbos at about 4%. And as far as projections, I think that's going to be subject to where the rate environment is. Yes, it's the rate environment. It's how we want to manage the balance sheet; interest rate sensitivity ---+ all those factors come together. But it really is a great relationship development tool and very, very high quality with a decent return. And our mortgage customers have six products with us. It's not just about the mortgage loan. It's about relationship development. It's consistent with the mass affluent strategy. This is all positive. Not off the second quarter. I think you'll see it taper down a little bit. We see it staying relatively flat for the next year. We have noticed a little bit of percolation. Some of the community banks have been pushing rate a little bit. Some of the larger banks have been having specials that they've provided, so we're tuned into it. We have our own set of specials we could offer. We haven't felt too much pressure at this point. We haven't seen much uptick in overall cost of deposits. In fact, in some cases, we have been able to continue to drive it down. So we're alert to it; but, as yet, it has not created a major event. Yes, it will stay around that. Around that level. Yes, I think we're good with that over ---+ as we look out over 12 months. Thanks, Christine. Thank you all for being with us today. Have a good day.

2015_WBS

2016

PBCT

PBCT #I know we are very optimistic on both parts. We have a great C&I team there and we've made really great, what I would call steady progress through that timeframe. Built a really nice team and have good customer base. I also think the Suffolk team joins and integrated, I see a lot more progress on that front. When I think about pre-book, I know we have mentioned and announced fairly recently the addition of a senior executive in the New York market, and Mark Melchione and he has brought in a very experienced team and we are very excited about their progress. We've had some closings already and we have a very strong pipeline and we are looking forward to a positive impact there. That is what we would call our traditional pre-book. We're looking for relationship customers that will have multiple transactions with us and deposit relationships very similar to what we've experienced across the rest of the franchise. So we do continue to move away from the New York multi-family smaller transactional piece. So we see a lot of opportunity as we move forward. No. It's not. It will be the same. 32.4%. So we were accruing at 33.5% through the first two quarters. And we trued that up. That's all it is. Full year. The $3.1 million included costs associated with both Suffolk and Gerstein Fisher. You will probably see a small amount of costs in the fourth quarter and then the restructuring charges when we close the deal. Which should be first quarter. And just want to remind or maybe give you more perspective on the New York lending just to make sure I interpret your question right but we really have a New York customer base that includes the customers in ABL, equipment finance, large corporate, a lot of business banking activity. So while you ask about C&I and CRE if you think about our total business across the New York Metro area, it includes all of our business lines. Got you. Thank you <UNK>. Professional and outside services. Yes. About $900,000. Actually $700,000. They were not prepared to give any guidance for next year at this point. That's not in our hands at all and very difficult to call. I think you're going to have to make that decision yourself. It is purely in the regulators hands, and we have no idea when we will get any final answers. As we said, and what we've been saying consistently for at least a year and a half is the size and in the back half of 2016. So on the calendar it continues to move forward but we can only be as specific as before the year is over. I think that is still a good place in terms of looking at it. I think everybody recognizes now and through our history we have had very low nonperforming levels and charge-offs and it gets pretty bumpy at these levels. Every once in awhile you have an asset that turns heads so I think planning in the range you are talking about is appropriate. Thank you. Sure. So I will go to where you started first with the CRE thinking. There is a dynamic taking place right now that involves the pullback from the New York multi-family portfolio. That is running off and we are still gauging the pace of that. Probably somewhere between $20 million and $40 million a quarter. But we will see how that goes. It has slowed as of late. On the other hand, we have obviously a large customer base across the rest of the footprint and now a very strengthened group in New York, and we are getting I would say good origination. I expect we will start seeing some growth in CRE as we go forward. And the only contrary I guess or signal I would give there the market does seem to be a little slower, a little softer in terms of transactions this year. So that's CRE. C&I is very steady across the middle market. Starting to see a little better progress on business banking. ABL is having a very strong year. Mortgage warehouse is having a very strong year even though they had a flat quarter if you will or a modest quarter. And equipment finance is also doing reasonably well although slower overall than it has been in the past. And so on the residential and consumer side, the residential side there is a shift going on, the mix of purchase and refi is kind of 50/50 lately and the volumes are strong is, the pipelines are strong. The branches tend to do a little less purchase so the refi as it slowed down I think is affecting that. We are getting a lot more activity through the mortgage originators, mortgage account officers and we are adding as we have told you the past mortgage account officers particularly inside 495 in Boston and in New York. So those numbers of mortgage originators are up fairly considerably. And then our wholesale business is seeing a good amount of activity as well. So it's a mix of the channels if you will in the residential area. The consumer I think consumer has been flat and continues to be on the flattish side and it tends to build as we build households and it tends to pull back when refi is more active and people tend to roll their home equities outstandings into fixed rate longer terms. I just want to correct I said $20 million to $40 million a quarter. And it is monthly. The $20 million to $40 million of multi-family runoff is per month. Not per quarter. If you notice you have seen the pace of NIM compression slow dramatically and then this quarter actually it went up a basis point. It is too early to call a bottom in the NIM. There still is a small and shrinking differential between the existing loan portfolio and new business. And you are correct, you saw about an 8 basis point decline quarter over quarter in security portfolio yield. So the way I would answer the question is, are we buying guidance on the margin with 275 to 285 in July and it looks like we are on track to be right there in the middle of that guidance plus or minus. I did call out the $2 million increase was driven by an acquired private investment partnership. So there is a little bit of that in that line. That was about a little over $3 million in the quarter. There is a lot of little things that go through there. Credit card fees is probably one of the larger drivers that has been growing. We talked about that before, where a few quarters ago we entered an agreement with Elan, and we are getting a lot of traction in our customer base adopting the credit card offering that we now have. That was almost nonexistent over the last couple of years. That is the primary driver. But the rest of the stuff our fees around some retail, home equity, HELOC accounts. Things of that nature. What we said when we announced that deal in Q&A is from a ---+ their annual run rate of revenue is about $17 million. We also said that it was modestly accretive to 2017. It is spreads. It is a combination of LIBOR which we called out and then spreads. That entire portfolio is not one month LIBOR based. We got a little better spread performance during the quarter. You are welcome. I don't believe it has anything to do with that. It really is the normal process that you probably are aware the process is an extended on a post crisis and I think it is generally getting slightly better as of late but what we see is transactions taking six to nine months, and we are in that timeframe. We are certainly hopeful to be on the shorter end, but we ---+ as I said, it is nothing in our control. So to get to the nature of your question, I don't think you should view it as it is taking longer than normal. No, I wouldn't over complicate that. We have gotten regulatory support to maintain our dividends and our approach to dividends over an extended period of time. Our dividend payout ratio continues to improve if you will to get lower over time. And as we move through ---+ go forward the next few years we expect to continue to improve our profitability, to improve that ratio, and we also expect that the regulatory view of levels of dividend payout ratio for all banks our size and banks in that 50 will evolve. And it has been evolving. So trying to be clear that we believe that we will continue to reduce that payout ratio and we believe that in our dialogue with regulators that we will get support. We obviously can't predict exactly where the payout ratio will be or exactly what the regulatory view will be, but we've got very good communication and relationships with our regulators, and we will approach those dialogues, I should say we have them regularly and we will continue to have them regularly. That issue will get discussed. Thank you again for joining us today. We appreciate your interest in People's United. If you should have any additional questions feel free to contact me at (203)338-4581. Have a great night.

2016_PBCT

2017

GHL

GHL #Thank you, <UNK>. We reported first quarter revenue of $56.9 million and a GAAP loss of $0.02 per share, which was negatively impacted by new accounting requirement, which I will describe shortly. We've noted in every quarterly earnings release that our quarterly revenue and net income can vary materially depending on the number, size and timing of completed transactions and other factors, and this quarter illustrates that in a variety of ways. Our revenue outcome was light as a result of the fact that our transaction completion piece for the quarter related to relatively smaller transaction and transaction timing was also a major factor in our results, as our year-to-date revenue, cost and earnings would all have looked satisfactory if measured as of a week in the April rather than at the end of March. Our shareholders will recall that last year started similarly for us, with lower than typical first quarter revenue, resulting in an unusually high compensation ratio and an unusually low profit margin. Yet our compensation ratio moved back to a normal level already by midyear, and over the course of the full year, we achieved both the fastest advisory revenue growth of any of the 15 major firms that disclose that figure and the very attractive 26% pretax profit margin that was our best in several years. Given the number of unusual factors this quarter, I will walk through each of the relevant items briefly. With respect to revenue, during the quarter, we closed a fairly typical number of transactions for us, but as noted above, no large M&A deals came to completion during the quarter. Relative to most of our close peers, our work has always skewed more towards larger transactions, and that strategy has served well over time in terms of high profit margins, strong cash flow, a large dividend, and sufficient share repurchases to maintain a roughly flat share count for 13 years. But that strategy could also result in a volatility in quarterly revenue that has led to occasional quarters like the one we just finished. Thus, our focus has always been on delivering strong results on an annual basis and over longer term periods, although we also aim to reduce quarterly volatility over time by expanding the firm in ways that increase the diversity of our revenue sources. In the capital advisory business, it was also a slow quarter, in both the primary and secondary businesses, though again we believe that was simply a matter of transaction timing, and we continue to expect improved results for the year, driven by an increase in large transaction assignments. In our financing and restructuring advisory business, the first quarter was a good one, though our team focused on that business is smaller than that in most of our peers, so this wasn't enough to offset a lack of large M&A transaction closings. Looking at revenue on a regional basis, the quarter's revenue was heavily weighted to the U.S. market, with fairly modest contributions from other regions. Turning to compensation costs, while our expense for the quarter was almost identical in absolute terms to that of last year's first quarter, the low quarterly revenue resulted in an usually high compensation ratio. Our objective is to bring that ratio down significantly in the quarters to come, just as we did last year. Our non-compensation costs were very much in line with last year, apart from the fact that we recorded a $6 million benefit, resulting from an adjustment to the value of the earnout liability related to our 2015 acquisition of Cogent Partners. For the first 2 years earnout period that ended March 31, 2017, the revenue target was narrowly missed, a potential outcome that we signaled on our last quarterly investor call. As a result, for accounting purposes, we needed to remeasure, as we do each quarter, the fair value of the contingent cash consideration based on the probability-weighted present value that the revenue target will be achieved on the second 2-year earnout opportunity provided for in our acquisition agreement. We continue to estimate that it is likely that the earnout will ultimately be achieved, and have, therefore, retained the same probability factor for the second earnout as in prior periods. The adjustment in this quarter is therefore related entirely to the present value impact of deferring any payment to the end of the second earnout period. On taxes, our results were impacted by a new mandatory accounting requirement that changes the way we record the tax effect at the time of vesting of restrict stock awards. Prior to this accounting change, we reported the tax effect of the vesting of restricted stock awards as an adjustment to equity rather than to the provision for income taxes on our income statement as we did this quarter and will going forward. Excluding this accounting change, which does not impact the amount of the cash taxes that we pay, our tax rate would have been 37%. That figure is higher than last year's level as a result of the fact that our income was more heavily weighted to the U.S. market than was the case last year. We continue to be hopeful for corporate tax reform in the U.S., particularly in periods like this when activity is weighted toward the U.S., a lower U.S. corporate tax rate would have a substantial positive impact on our earnings and cash flow. With respect to capital management, on top of paying our normal $0.45 per share quarterly dividend, we repurchased more than 423,000 share equivalents in the quarter as part of the annual share settlement payment for withholding taxes on restricted stocks invested. With respect to our balance sheet, we ended the quarter with more net debt than typical, but by the end of the first week of April, we were back in our targeted position of having global clash in excess of the amount drawn on our revolver. As our press release notes, since quarter end, we also made the term loan payment on the Cogent acquisition debt that was due at the end of April, and there is now only $11.25 million that remaining outstanding on that term loan. And we also completed the annual renewal of our revolving credit agreement and increased the size of our credit line to $80 million. This increases our flexibility to hold cash overseas offset by domestic borrowing until a change in the U.S. corporate income tax rate makes that unnecessary. Now let me comment on the transaction environment and outlook. First, while we see our quarterly revenue result as largely a function of transaction timing, it is also true for the market as a whole that the year has had a relatively weak start in terms of transaction activity. Both the number and volume of completed transactions were down meaningfully in the first quarter as compared to the first quarter last year, and the 5 largest U.S. investment banks have already reported an aggregate decline in advisory revenue for the quarter relative to last year. And that's on top of that same group having reported a full year decline in advisory revenue in 2016 compared to our 29% full year increase. In terms of announced deal activity, the number of transactions is down and the volume is about flat versus the first quarter of last year, but it's worth remembering that last year also started slowly, amid steep equity market declines. Notwithstanding the slow start to market activity this year, we remained positive on the outlook for deal activity going forward. Clearly, there was a degree of market euphoria following the U.S. presidential election as investors came to expect tax cuts, regulatory relief and infrastructure spending, which together, were expected to drive higher economic growth. As more clarity develops on the potential for such business-friendly government policies, which we are hopeful for in the near term, we believe more of the ongoing strategic transaction dialogues we are seeing will convert into actual transaction announcements and related advisory revenue for firms like ours. Finally, I will close with a brief comment on recruiting. We said last quarter that we thought the recruiting environment was quite favorable, and that we expected to recruit at least as many managing directors as the 6 we did last year. We are pleased to say that we've already announced the addition of 6 new managing directors in the year-to-date, including 2 who will open an office in Spain, once we complete the regulatory process for that, 1 in Australia and 3 in North America. And we continue to be in dialogue with other candidates as well. Going forward, we believe that our pure advisory business model combined with our culture of teamwork will continue to make our firm an attractive destination for talented bankers. With that, I'm happy to take any questions. It's pretty much the former. I mean, as I indicated, I mean I think you would say it was a good start to the year, if you measured it as of a week in the April and it's less than a good the start to the year if you measured it as of the end of March, it really is about as simple as that. We don't, obviously, make forecast for a full year ahead, but I ---+ look, I think, in many ways the interest among companies in transactions is higher than it has been in a long time. I think the presidential election, as I noted, had a big impact on that, but I think if you look at the data, it just hasn't translated into a significant pickup in announced deals activity yet. So I think as more clarity develops, which I think it could, maybe it even started to this week, I think you'll see a lot more of those kind of transaction dialogues lead to more speedily to transaction announcements. But, obviously, there's uncertainty as to that as there always is, particularly at a time of what could be significant change in terms of various government policies. I think I would make a very similar comment, I think, about Europe. I mean I don't doubt that, and again if you look at the data, there's not been a big surge on transaction activity. You're looking an awful lot like last year looked and like the several years before it looked, but I do think the French election sort of removes some uncertainty. I think that British election, I think everybody probably knows how that one is likely to come out, but it still will provide some more certainty about what Brexit might look like when that election is completed very shortly, so I think getting things like those 2 elections out of the way will lead to more kind of stability in Europe, less uncertainty and therefore, more transaction activity. So kind of like here the run ---+ the brink run, that runs sort of the threshold of a fair amount of change in terms of political leaders and how Brexit's going to play out and how Donald Trump's changes in economic policy are going to play but those things are starting to become clear, and that should lead to more activity on both sides of the Atlantic. I don't think the pace of hiring is such that it's going to have a dramatic impact on the comp ratio. I mean 6 is a meaningful number, but it's not huge relative to number of an MDs we've got. I do think certainly as I've suggested, there are other dialogues going on. We could end up with more, if we end up with a lot more it could have some impact on the comp ratio, but I wouldn't leap to any conclusions on that. I think the main driver of comp ratio is always revenue. It can have some impact on the margin to do more or less recruiting. But, as I said, 3 quarters ago, we feel like there's some good talent out there that was interested in joining us, and we've talked to lots and lots of people and came away with 6 so far. And I think we'll probably come away with others who should have a meaningful impact on the firm's revenue in 2018 and beyond. It's essentially no change since year-end in terms of sort of attrition of any kind. So no change there. Some of these people haven't started yet of course but it's essentially there's no meaningful change since last year ---+ or last quarter, rather. I don't want to offend the people who came last year and the year before by saying this class is better, so I'll refrain from that. But look I think we've had some very senior people, I mean, people who are very far along in their careers then, including in Australia and Canada, and I think we got ---+ Spain is not a huge M&A market, but it's, we think a growing one I think we got 2 people ---+ 2 of the top people out of the top domestic firm in that market, so I'm excited about who we brought on and I'm excited about some of the ones we're still talking to today. So a question on the competitive landscape, I'm not sure why you used the large investment banks as the competitive set in your remarks. I guess it's 2 independent banks that reported so far have posted the 1Q results to the 42% up in average year-over-year versus down for you guys. So stepping back a little bit here, if I think about the growth momentum in 2016, which was pretty good after 3 or 4 years they were a bit lackluster, give us your confidence level that 2016 was an exception and kind of you're back into kind of growth mode again here. I focused on the large investment banks only as it illustrate the points at the market, I think the pool of advisory fees actually shrank in the year-to-date. I mean there are 2 European banks have announced, and they're both down as well first quarter versus last year's first quarter, so I think the pool shrank some. I think what has probably helped some of our peers relative to us is really 2 things, and both hinted at in my script, one is that there is a lot of talk on the transcripts I read about small and mid-cap M&A in a market where there wasn't as much large-cap activity. And I think some firms have very intentionally gone for a strategy that kind of builds out that part of the business in a way that we've not focused on. And the other is that while we have an outstanding restructuring team, and we've had a great first quarter on restructuring, and we have a good business in restructuring, we have also not made that as big a part of our firm as others. So I think the beginning of this year was one where a focus on small ---+ smaller-cap deals, and then a focus on restructuring paid off in terms of revenue and I think that's probably why you're seeing the firms that focus on those 2 areas do really so dramatically better than the 7 big banks that have announced so far because they obviously don't really do restructuring and they certainly tend to skew toward much larger focus on M&A deals. Okay, got it. And then in the hiring front, absolutely impressive into the 6 MDs, some of them look pretty interesting, but I'm just curious what exactly your pitch is to the very best bankers. I guess from a very high, very simple level, if you're a top banker at a bulge bracket and you look at Greenhill's share price, revenue growth, accomplished over the last 5 years, my guess is you would've ---+ you would probably assume other boutiques are more attractive destinations, just my guess here. So maybe just help me understand what exactly is the unique or ---+ the unique selling points you are ---+ you offer to these banks as you pitch them. I think a few things. I think one is kind of the point I just made, which is that we tend to focus more on larger transactions. And there are a lot of bankers out there, particularly at some bulge bracket firms that, that's their history. They'd rather focus on a few home runs than a lot of singles and they prefer a firm that has that strategy. I think, secondly, I would still argue that we're the most global of the independent firms. Putting aside Lazard, which is 150 years older than us, but I would still say we're actually very, very similar to Lazard in terms of if you look at how much revenue comes from clients outside the U.S. besides us and Lazard, the other firms are all really quite significantly lower, so if you're in a sector where cross-border, global activity is critical to what you do, I think you're going to be drawn to us. Third, I think we're known to have a really collegial team-oriented culture, so it's important for you to work in teams to do complex cross-border things. I think that's a positive for joining us. And fourthly, I think frankly a big one, is that we're smaller. I mean some other firms have grown really dramatically in the last few years, so they've just got less white space. And people who kind of have had a 20-year career somewhere and they look at Greenhill, and depending on what their niche is, what their focus is with the clients, they might see an awful lot of white space here where it becomes quite interesting, whereas slotting into be the fifth MD covering your space at a firm that's built out a lot more, on a personal level it's not nearly that interesting, so that's fundamentally my pitch, and I hope some ---+ a few recruits are listening to that and they'll give me a call tomorrow. Okay. And just lastly, just on your commentary that if the quarter was 1 week later, you'd had a good quarter, can you, in any way, just help us quantify. Does that mean you would've been better than last year. Would've been better than consensus. Just trying to get a sense, just again given the ---+ and I absolutely appreciate that 1 quarter is a not a way to look at the business, but just given the scale of the miss, I think it'd be helpful just to understand how 1 week could have changed the results of the firm. Look, we can't quantify that thing because, obviously, when you put out specific numbers, they have to be audited and all that so I wouldn't be able to do that. But look, I'll put it this way I mean it may seem like a big miss, but if you look at it on a revenue sense I think we're like $10 million or $11 million below consensus. You can work on one $1 billion M&A transaction, and earn a fee of about that amount, so you can have pretty random timing of transactions and you can have deals accelerate and slow down, and you can have deals die of course, in some cases, as well can drive things or new things can get announced and suddenly you've got a big announcement fee. So I would just say, as we've said in the commentary, that if you look at this a week later, we and you, I think, would be feeling very good about the year-to-date 1 quarter and 1 week in, in terms of all the key metrics. And I think that kind of says it all that in terms of what, yes, I know in sort of percentage terms may seem like a big miss but it's really the movement of 1 fee makes all the difference and in 2 fees and suddenly you're well above expectation. So pretty modest really in the scheme of things. I mean we don't hire people who we think are worse than our median, so I think they are ---+ I feel as I mentioned a minute ago very positively about who we've recruited. I've look at this over time though and it's interesting, when you look can at sort of your highest-paid people or something and it's a pretty random mix of people who've been here forever, like myself and some others who have been here for almost 20 years. People who came up through the system and joined us out of business school or something like that and many years later have grown into being prominent producers or came here 5 years ago, 2 years ago or 1 year ago. So it's always hard to predict this, it's not all about the quality of the person. If you're somebody focused in a sector that suddenly gets very active or you've got a set of clients who were particularly loyal to you and suddenly after you move, they do a big deal then as opposed to doing 1 year earlier or a year later, you can get a quicker return on the investment. But certainly we feel good about the people we brought in. I think we're ---+ mining is a sector we obviously never covered really at all, and we've got some really senior people focused on that now. We've made a change in leadership in Canada last year. We've now built that out with a couple of more senior hires, and we're excited about that and as I mentioned about Spain a minute ago, we're quite excited about that as well. We hired a senior industrial person in the U.S. Industrial has been a real big area of success for us and to bring in somebody who is adjacent, to where you've already had a lot of success is kind of a higher probability of success, higher than entering a new area. So we feel good about them, but obviously, time will tell. I just have the sense it is ---+ what I'm trying to do is reconciled 2 facts. One is that I ---+ it feels like there is a very strong pace of dot-transaction dialogs and interest in transaction dialogs when you go see clients but at the same time you look at the market deals statistics for the entire market and it looks pretty soft. And that the only way I can reconcile that is people are feeling sort of generally bullish about the future for reasons of tax cuts and deregulation, and so on. And yet, they're not quite seeing that clarity to want to ---+ to really make a firm commitment, borrow the money, spend the cash, do whatever it takes to do a transaction. So I think, look I think the biggest factor is taxes. There was talk about not letting interest be deductible. That would have a huge impact, not on deal activity overall, but certainly in the kind of deal activity. There would be ---+ border tax could have a huge impact on some companies, retailers and many others, and so I think once there's some clarity around what's going to happen with taxes and it doesn't have to be some huge miraculous tax bill, I don't think, to really unleash a lot of transaction interest, I think that kind of clarity will make a big difference. No. Look, I wouldn't read too much, again, into what is not a really significant difference between the revenue that maybe I and our investors might have expected for the quarter and what it turned out to be. As I've said, it's sort of 1 transaction could make all the difference. By the way, I don't want to comment and never do on any particular transaction, but I will comment that we do not work on the one that you referred to a minute ago, so you must have us confused with another firm on that. So ---+ but it ---+ in general, look, we feel ---+ we do feel like there's a lot of interest in transactions out there, including in quite large transactions of a strategic nature with big public companies doing things. And I think ---+ I can't tell you the pace at which those will unravel, but I think that the year didn't start off that differently than what we really expected. It just did, as the matter, as I said, of timing and some slower announcement activity, but again, I think as policy clarifies a bit, I think that will remedy itself pretty quickly. I would say, if you ---+ I mean again, what do you mean by start. I mean I didn't ---+ we don't predict quarters, and so we never said anything about the first quarter. What I'm saying is essentially I think as of a week into April, we and our investors would've thought that's a strong start to the year. And I think as of the end of the March, obviously, you wouldn't say that and neither would I. But I would say that even only a short period into April. That's been our standard approach for a long time, we don't really consider ourselves leveraged. As you said, we normally aim for cash in excess of our revolver balance. Yes, we do sort of think of the term loan for the Cogent acquisition differently, but that's not down to $11 million, so that's a pretty trivial thing. And yes, we did take up the revolver size a little bit, but I think we've done that almost every year because our approach is this one hopes the business gets a little bit bigger each year, and we want to have a lot of flexibility, as I said, to not have to bring cash back from overseas to pay higher taxes on it. If we get a tax cut, I mean, forget about the 15%, if we just got want one to 25%, there would effectively be no limitation or even hesitation on our part to move cash around the world. And I think at that point, you would see us with a different kind of balance sheet, rather than having a fair amount of cash but offset kind of a similar amount of debt. I think you'd find us with a simpler balance sheet and less kind of absolute amount of debt. Without getting too specific, I would say we don't feel like that number's really changed that much in recent years, so I think the number we used back then is still a reasonably good number to use in terms of the fixed costs of the business. I think you should sort of take some guidance from last year, when in the first quarter, we had a similar situation. And look, there's a point below, which you don't want to take compensation. Obviously, you can do what ---+ in theory, whatever you want on the quarter-to-quarter basis, but you have to ---+ you had not only the fixed part of compensation, but you've got ---+ obviously, you've got to pay people bonuses where that's appropriate and generally it's in our industry. So we thought rather than have it be sort of artificially low, just ---+ we did the same thing we did last year, which is kind of what we think is the right sort of absolute level, and you saw last year that as revenue evolved the ---+ we had a lower comp ratio and it kind of netted out on a year-to-date basis to a reasonable place by midyear and a very good place by the end of the year, and so I think that clarifies your question. It probably is going to most likely move in ways that you will almost not notice at this point. This was a big moment, obviously, where you go from ---+ in this net present value accounting calculation from thinking that the payment could be imminent to ---+ the payment having to be 2 years out. What we did over those 8 quarters before that, which we'll do for the next 8 quarters as well, is just kind of tweak it each quarter based on the present value movement as we get closer to that date and also our view of the probability. So if there ---+ if the business is performing very well on pace to achieve or exceed the earnout, we'll kind of tweak it up each quarter appropriately and if it goes the other way, we would tweak it down each quarter appropriately, but I wouldn't expect an abrupt move like we had this quarter, when you obviously switched from a year 2 earnout to a year 4 earnout. No. The accounting change that impacts our tax rate in relation to the vesting of stock has no cash impact at all, not in terms of the amount we pay, or the timing we pay or anything like that. I don't remember giving specific guidance on that, but I think we're ---+ look, if you look at the recent years, we've been really in a fairly narrow range in terms of comp ratio. It's been certainly at or below our peer group level, but it's within a fairly narrow range. And you can see how a little more or a little less revenue has impacted that, depending on the year you look at. And so I think that gives you some guidance as to what we're ---+ what our targets is going to be as a go forward. As I mentioned, we have a very good restructuring business staffed by very good people, but it's not a huge team the way it is that many of our peers and in a quarter like we just went through, that benefits some of those peers who are bigger in restructuring and benefited even more than we did from the kind of energy wave. But look, our team is busy, and we think there will continue to be some good opportunities in energy. I would probably agree that something like retailing, as much as it's under a lot of pressure, is probably not going to create as much restructuring advisory opportunity as energy would. But we're not ---+ at the same time, we're not going to have very low interest rates forever, and we're not going to have a growing economy forever. And at some point, we'll be facing a higher rate and/or recession and you'll see an increase in broader restructuring activity. I mean, we really have very little for the last several years until the energy price collapsed and that led to a lot of companies defaulting in that space, or coming close to default. But it's not ---+ what the question you asked was not kind of a huge driver of how we'll do for the next 1 year or 2. Probably of more a questions maybe for some of our peers. I think, broadly, if you look, our noncomp expense has, apart from this one as Cogent has earnout adjustment, has been quite consistent in recent quarters, and we don't foresee a dramatic move in either direction for that. So I think that continues to be a pretty good number. No, I wouldn't say that. I mean, first of all, I tend to think more in North America because people work very much across the borders between U.S. and Canada, particularly in some of the sectors like mining. So ---+ and a number of the people we're still talking to are based in the U.S., so no, I wouldn't say that. We are looking for, what I would describe as sort of great athletes in our business. And when we find them in a particular market, we're going to take them. So at any given time, you could take 2, 3, 4, 5, 6 and have been skewed towards some particular region or type of advice or sector or something like that, but the strategy is certainly a broad one and if anything, we're probably much more involved in recruiting discussions in the U.S. than we are elsewhere right now. Okay. Thank you, that was our last question, so thank you all for dialing in, and we'll speak to you again in about 3 months from now.

2017_GHL

2016

GM

GM #Well, certainly, as we go through the launch cadence not only on passenger cars and new entries in the Cadillac portfolio and refreshing the oldest crossover lineup, we would expect to see that profit dynamic shift and obviously improve those profit pools in passenger cars and crossovers, vis-a-vis trucks. The other thing that's just mathematically impacting that shift from the 2014 K to the 2015 K is we are selling more vehicles in Mexico and obviously, there are more passenger cars there and they are lower priced, lower profit, obviously lower cost and that's having an impact as well. Relative to trucks, the way you protect your profit pool in trucks and SUVs, great products, great brands, continue to take advantage of that, align supply and demand and continue to drive cost efficiency and our trucks well into their lifecycle continue to perform very well. We had just under 38% retail share in the first quarter. We continue to lead in the industry. We just launched a refreshed truck, which will carry us to the next generation truck and we feel very confident that we will be able to protect those pools because we've got great products. Well, as I mentioned earlier, <UNK>, overall, the lease portfolio continues to perform well for GMF. Obviously, trucks and SUVs are performing very well. Cars are performing not as well as they had been, but at a portfolio level were okay. We talked about very specifically our strategy to reduce our daily rental fleet sales and that's really focused on repurchase because, at the end of the day, what we are trying to do is reduce our exposure to the used car market, continue to focus on retail deliveries, which drives better residuals ultimately and better owner loyalty. So that's part of the strategy as well. Well, first, talking about connectivity, I really think when you look at putting the customer at the center of what they want, they want that in today's business. So it's vital to have integrated into the vehicle from a tech perspective to meet and exceed the wants and desires of customers today. From an autonomous perspective, I appreciate your comments. I think we are looking at it very seriously and with the extensive technology capability we have inside the Company, along with scale and understanding how to do and execute vehicles with this type of technology safely, I think it is something that really is an opportunity for us and that's why we are moving so quickly on it. But I think right now when you look at it, it's looking at how the business is going to evolve and we will look at that over time. But the technologies I see are ---+ many are very core to selling vehicles today. And even on autonomous, that's a journey. There's an evolutionary path and a revolutionary path and we are working on both. Well, I touched on this before, but when you look at it, first of all, we have two global brands, Chevrolet and Cadillac. And there's also pure EV like we have with the Bolt EV that will be coming out later this year. We have extended range electric vehicles with the Chevrolet Volt, but then we also have a lot of electrification, the Malibu hybrid and we will be launching over 10 new electrified vehicles in China. So to us really the electrification is something that we integrated in the portfolio that allows us to build not only our capability and spread it broadly and reach more customers, but also to build those brands so they are viewed appropriately as technology leaders. And I think we continue to do that, so we see it as core and integrated. Yes, again, going back to the comment I made earlier, I think look at working capital separately, which was a $400 million impact versus $600 million at the first quarter of 2015. When you look at accrued and other liabilities, that's the other line that is impacted by reduced customer deposits associated with daily rentals. So as we sell less daily rentals, we get less customer deposits. As we de-fleet, it has an impact on operating leases, so you got to kind of look at those two lines together and net-net, it was a $1.1 billion impact in the first quarter of this year versus $1.5 billion last year, which is a $400 million improvement, broadly speaking. Well, we borrowed $2 billion. We will have contributed $2 billion. We are done. Obviously, that was, as we talked about it, a risk management approach to push out some of the timing on the liabilities into a 20 and 30-year timeframe and push out mandatory contributions from maybe 2019 and 2020 to the early 2020s, 2022, 2023. We would expect, as interest rates increase, when they increase, that that will help close the remaining gap at least from a US perspective going forward. Well, one, our subprime portfolio originations have been relatively constant over the last number of years, so we are not growing that. That's first. Two, AmeriCredit, now GMF, subject matter experts in subprime and managing the risk associated with subprime. Third, our delinquencies and credit losses associated with subprime have been very stable over the last number of years. We see no incremental risk associated with that. And then, finally, we are running today originations as we execute our captive strategy. 80% of originations are prime, near prime. So again very stable levels of subprime activity at GMF. Yes, we've talked about with the Bolt EV and with the strategic work that we do with LG and with some other key suppliers, but we think we are on a path with the Bolt as we launch and get to scale of being in an industry-leading position of $150 and then continuing to improve that down. So we work very closely on that. We think it's key and when we ---+ not that we talk about it specifically with numbers, but we've seen dramatic improvement from the first generation of the Volt to the second generation of the Volt that is carried into the Bolt EV and will continue to drive that down. I believe it's all in, but I think when you say all in, everybody may have a slightly different definition of what they mean when they say all in depending on how they have architected the vehicle. We can provide more detail on that, but again I think there's some variation in how people are defining that. Thank you. Thanks, <UNK>. Nothing has changed vis-a-vis the China fundamentals versus what we've been talking about for the last year or so. Fundamentally, price continues to be a challenge. Last year it was in the range of 4% to 5% negative price headwinds. On carryover, we expect that same level this year. That's what we've seen play out so far in the first quarter and we are offsetting that impact through significantly improved mix and you saw some of those results ---+ the Envision as an SUV, sales up significantly; the Baojun, 560. We are launching critical new products like the Cadillac CT6 and the XT5. So mix has been a mitigant to the price headwinds, as well as carryover material performance. And when I look at those two together, they kind of offset the price headwinds and where you see the benefit, at least on an aggregate equity income or profit perspective, is volume. And we would expect to see that play out. Obviously, we continue to focus very much on cost efficiency, both material logistics and fixed costs, but broadly speaking favorable volume, favorable mix as we improve our Cadillac portfolio and launch more crossovers and MPVs, favorable material performance offsetting or more than offsetting price headwinds, as well as fixed cost increases, we bring up new plants. That's the broad strokes, <UNK>. Well, we expect for us specifically we had pretty strong lease penetration in the first quarter driven by again some of the model wind-down efforts around Malibu, Cruze and the SRX. We would expect to see that moderate. We will be somewhat below industry average because trucks don't lease at the same levels and obviously, we are overweight in trucks. So we would expect to see that continue. We are taking a number of actions to make sure we optimize residuals. We talked about the Express Drive rental hubs, anything that you can do ---+ the factory pre-owned collection ---+ anything you can do to take that supply out of the auction generally will help residuals over time and clearly that's a focus that we have going forward. Well, thank you very much and thanks, everybody, for joining the call this morning. I have to say I'm extremely proud of the team for what they were able to accomplish this year, but we know we have more opportunity as we go through the year. We are going to continue with the discipline and detailed focus on strengthening the core business and the adjacencies, but also taking advantage of growth opportunities and our ability to lead as personal mobility is transformed and redefined. Thank you.

2016_GM

2017

M

M #I'll just say that we are just working very closely with our core vendors. We have a number of smaller brands that are performing okay. But we've got to get the big guys on track. And we are working very closely with them. We feel good about the initiatives that they are taking. They are so committed and so aggressive about getting the business turned around because we are such important partners to one another. So I can't tell you specifically what ---+ I know what we're doing, but I can't reveal exactly what we are doing. I don't want to share everything with our competitors. But I can tell you that we are working very, very closely and regularly and feel good about the cooperation and the strategic thinking and planning that we are doing with the big brands that we are counting on making a difference here. You know, it's a number of things. We would both admit we had such a ramp-up of success, as you will recall, for a big part of 2011, 2012, 2013, and 2014, and we ramped up very quickly and grew the business very fast. And I think it got to a point where supply became greater than demand, and it was just almost as simple as that. And when that happens, when you back up with inventory, when you back up with inventory, somebody wants to reduce the price. And when somebody reduces the price, others match that reduction, and then it gets away from you a little bit. I think that's what happened, and I think that now that getting that supply and demand back on track is the first right answer. And a total whole focus on design and the product itself trading up, adding more quality back into the product, and making sure that we are covering the higher price points as well as the opening price points. And we are as guilty because we went after expanding the product to many stores, and that required us to have the more opening price point, much more so than the balance that we once had with these brands. And I think us getting back on track with the quality and the uniqueness and the design of the product being the driver as opposed to just the price is going to be good for both of us. And it may take a while, by the way, to sort that out and for consumers to appreciate the change. So we're working patiently with these brands to make sure that that happens throughout 2017. And we feel good about the very strong cooperation we have working with these brands. Great. Well, thank you all very much. And let us know if you have further questions. And in the meantime, thanks for your support and interest. Take care. Thank you.

2017_M

2017

SAH

SAH #Good morning, everyone. Joining me on the call today are David <UNK>, our Vice Chairman; <UNK> <UNK>, our CFO; <UNK> <UNK>, our Executive Vice President of Operations; and C. G. Saffer, our Chief Accounting Officer. I trust everyone has read the documents earlier this morning. I will provide some brief comments and then we will turn the call over for your questions. For the quarter, we generated $0.84 from continuing operations on a GAAP basis and $0.66 per share on an adjusted basis. These results contributed to annual results from continuing operations of $2.06 per share on a GAAP basis and $2.01 per share on an adjusted basis. Please see our earnings release for a discussion on [non-GAAP] adjustments in the quarter. In 2016 we also continued to return capital to our shareholders. In addition to our dividend declaration during the quarter of $0.05 per share, we invested approximately $2.5 million in share repurchase to repurchase 147,000 shares at an average price of $16.90 per share, bringing the total year-to-date investment to $100 million for 5.6 million shares at an average price of $17.89 per share. This represents a significant level of capital return to our shareholders. Combined with dividends, we returned approximately $109 million to our shareholders in 2016. In addition, subsequent to year-end, our Board of Directors increased our outstanding share repurchase authorization by $100 million, giving us a total of $145 million of authorization going forward in 2017. We will continue to evaluate our repurchase program as we identify windows of opportunity to reduce our share count and enhance shareholder value. The rollout of OSOE, One Sonic, One Experience, technology continued in our Birmingham, Chattanooga, and Los Angeles markets during the quarter and we plan to roll the program out to our first BMW store in the first quarter of 2017 in Greenville, South Carolina. As discussed previously, we anticipate the opening of our Newpoint Audi store in Pensacola, Florida, in the third quarter of 2017 and expect a Q2 opening of another EchoPark store located in Colorado Springs to augment our (technical difficulty) stores in the Denver market. We are aggressively pursuing a goal to open at least three and maybe up to five or six additional EchoPark stores in the Texas market by the end of 2017 and we will discuss this a little bit later in the call. Our outlook for 2017 continues to be positive. We expect 2016 ---+ 2017 SAAR range to be between 17 million and 17.5 million on the retail side and we project our consolidated diluted earnings per share from continuing operations to be between $2 and $2.10 per diluted share. Now this is a target based upon our investment in several ongoing things that we have, but we've decided that we want to try to maintain $2 to $2.10 in earnings. This includes the expected loss related to EchoPark, which is projected to be approximately $0.23 to $0.27 per diluted share, and the future for 2017 continues to look bright. So at this point we would like to be able to open up the call for your questions. <UNK>, it's <UNK> <UNK>. Houston certainly isn't ---+ throughout the entire year last year it sort of dropped and I would tell you that it flattened out towards the end of the year. And I want to see ---+ I want to go to the end of March this year before I can really tell you for certain that it's really flat. We don't see it dropping like it was dropping, but certainly Houston played a big role in the month of December for us, just because of our brand mix there and the number of stores we have there. We sold a lot of cars and made a lot of money in that market during December. Our inventory is in good shape. We are getting all the Takata cars out, which is really good. Obviously, we've got actually less cars on the ground in January than we did in December just because of the big sales rate, but our days supply is a little higher just because the sales rate in January is slower than what was in December. But, overall, our inventories on both new and used are in good shape. We could always use more sport utility vehicles. They are retooling as quickly as they can from a manufacturer's perspective, but I have no problem where we are on inventory. We are in good shape. And Takata is becoming a thing of the past, or it won't be at the level that was in 2016, so we feel good about that and I feel good about where our inventory is. No, no, we can source inventory through the dealer network, no problem. There's so much inventory out there right now, <UNK>, that it's just not a problem to source inventory. At EchoPark now we are selling off the lot ---+ and this is a January number, February number ---+ but we are 34%, 35%, 36% of our cars now are cars that we either traded for or purchased off the street. That has been gradually growing every quarter for us and our goal is to get that up over 50%, so plenty of inventory out there for us. We don't do a lot of piggybacking off of the Sonic dealerships [with] inventories. As a matter fact, we really haven't done any, but it doesn't mean that we couldn't. We can certainly do that if we needed to open up and buy cars from that resource. A few things there. One we buy a lot of inventory out of Colorado and ship it in, so that adds cost to it. We expect our margins to improve when we move to Texas, maybe by $150 a car or so. But the rule is ---+ I mean you go and you buy cars at auction and you're buying 50%, 60% of your cars at auction, your margins are going to be tighter than it would be if you are trading for the number of cars. We trade for about six out of every 10 cars that we look at at the Sonic store, so our margins are just a little better. But really our pricing system is dictating the PUR. What we are really looking for is the balance between the volume and the PUR so we generate the most gross that we can, because that's what you take to the bank. Doesn't matter if your PUR is $1,300 or $1,100 or $1,700, as long as you mix it with the right volume so you generate the most gross dollars and that's what our system is doing. Just remember, at EchoPark we price 100% electronically so you don't have an individual sitting down there; you have algorithms that are pricing that inventory for us. I would expect those margins to move around all year long. Our margins in February are actually better than they were in December and January, so that's just the system doing that and as inventory goes up based on what we trade for and what we purchase off the street, I would expect our margins to go up. Look, this is <UNK> <UNK> again. What I said was that it's not dropping like it was. It certainly seemed to flatten out. It was not flat in October and November. It was a tale of two cities for us in the quarter, because October and November were really soft and December was the strongest month we have ever had as a company. In order for us to have a strong month like that, Houston has to play a role in it because of the number of stores and the brand mix that we have there. But 2017 is kind of starting off like fourth quarter started off: it's soft in January and February, and Houston is playing a role in that, no question; picking up a little bit in volume here for us in February and March. We are expecting to have a big March. It's one of our best, probably the second-best month of the year for us overall on a historical basis and so we will see how it goes. But I would not say or coin the phrase at all that Houston's economy is improving. I would just tell you that it has flattened out and it is not on this steady decline like it was. This is <UNK> <UNK> again. We are going to obviously brand ---+ the mix of inventory that we are selling is going to help, so more sport utility vehicles bring higher margin. Then the Takata thing is becoming a little bit of the thing in the past, both on the new and the used car side it's going to help us. So both of those things will play a role in improving the margin. And we have been able to flatten out our new car margin here lately anyway because those scenarios have been improving, both the two things that I talked about before there, so I think that plays a role in 2017 as we move forward. I don't expect to see just massive gains in new car margin. I think that the margin and where it's at today is going to kind of be where it is. I don't think we're going to see big gains. I also don't think we are going to see a bunch of reductions. You might if you had a big, big import mix in your total group, but the High Line stores should improve, and in particular for us BMW, as we move through this year. New 5 Series out, some different things like that should help us improve. Incentives are going to continue to be aggressive from our perspective. As long as you can balance yourself and hit those incentives, then I think you can take advantage of that. But I don't see them getting any worse; I just don't see them getting a whole bunch better. I think used is going to be ---+ it's the same as new. I think it's going to be in and around that 1350 range. It's sort of where have been for the last few years. I think our internals are higher than that in terms of our budget for 2017 (technical difficulty) volume. We are actually ---+ guys, this is <UNK> <UNK>. We are actually budgeting between the high single-digits growth in used car in volume and a modest increase in GPU. And so remember that includes EchoPark in that number. We expect EchoPark just to continue to roll as it did in 2016 and as we begin to open some new stores, with the store opening in Colorado Springs and then stores in the fourth quarter in Texas this year. Certified preowned runs about a third of our business overall and I don't expect that to change. It's going to be somewhere in that 30% range. I think we grew it 10% for the year last year and maybe 9% for the quarter, so I expect that to be in the same ballpark and have the same effect on GPU that it did last year. Well, for my own edification if we could get the government out of our wage management that would be a fantastic deal. But, look, I think there's a couple of segments here that you have to look at. Millennials you've got to hire and pay differently, more salary-oriented. I don't see wages ---+ it's a competitive market. It was a competitive market last year; it was a competitive market year before. In the states that are pushing minimum wage up and putting a lot of pressure on us to change pay plans and the way that we pay, yes, there could be some wage increase there, but I think we're fairly resilient in how we manage that. A lot of our stores have moved to flats per car or salaries anyway. Echo Park is totally a salaried dealership group. All of our One Sonic stores are salaried, so our compensation is very predictable when it's like that. I think there is some competition out there to hire the right people, in particular around technicians, and so that becomes expensive. I expect us to hire someone in the 200 to 250 technician headcount this year to keep up with the demand that we have, and the turnover when you add that all together, but I don't see it being any different than last year. I think that wages are competitive and they always have been. Yes, we had every number that we could possibly hit with them. As you know, they are a third of our profitability and we would have never had the quarter that we had without hitting those numbers with BMW. We maxed out all the stair-step programs across the board for BMW. From a BMW perspective, a margin perspective, a very, very good month in December, which they sort of wrapped in October and November. You got paid back on cars if you hit certain levels all the way through the quarter, so very, very positive into the year with that brand. No, that's a good question; I'm glad you caught it. There's a re-class going on there for us where we had ---+ for example, BMW has a three-year 36 on 2017 model cars and I think a five-year 50 on 2016 and back. We had some of those ---+ we had that customer that was coming in. It really wasn't customer pay; it was warranty pointed towards customer pay. And so we started in 2016 moving all that to warranty so that we properly classified the customer pay and warranty through the different manufacturers that had those type of programs. Toyota being another one. Porsche being another one. So we made some adjustments there and, as a result, I can tell you throughout 2017 and 2016 the CPE and the warranty numbers, on a revenue basis and a gross basis, for parts and service are going to look funky. We can give you the actual numbers and so I think <UNK>'s has got them. <UNK>, this is <UNK>. If you actually back out that re-class, customer pay is down about 1% and warranty is up 1.4%. In gross. And then in revenue ---+ Customer pay is up 1.3% and warranty is up 1%. Yes, throughout 2017. Correct. And then as 2018 gets here it will be clean, so we will try to call that out each quarter so we can show you kind of exactly where we are. I think if you look at our fixed operations targets for 2017, we are in that same ---+ we are in about the 5% growth range. There's a lot of noise in our numbers because of all the re-class that's being done and so we will have to call out for you as we go throughout the year. I can tell you that ---+ I said this earlier ---+ technician and hiring technicians has really gotten competitive. That is something that we are fighting with our competition set on tooth and nail to make sure that we keep our tenure and that we are hiring people into these positions. And we are also building more capacity. We've opened several new BMW stores, a couple new Mercedes stores, and we're adding shop capacity there to help us with the number of guests that we have coming through. A little bit of a down shift that we are seeing ---+ and we are hearing it from our competition as well ---+ in customer pay ROs the first few weeks this year. We will see how that goes. I don't expect that to continue. I don't know what's causing that, but we will see. I do expect us to grow in the 5% range, though, for the year. So we've got to have ---+ included in that $0.23 to $0.27 is our EchoPark corporate overhead and we need about 25 stores is our estimate right now, up and running, to make that happen. And I don't see that happening until the end of 2018. We will hopefully get seven stores opened this year to add to our six stores or, excuse me, we will get eight stores open this year to add to our five stores we have, so we will have 2013. Maybe it happens the next year, for certain the next. And we are very delighted with ---+ the great news is that our original store is profitable in Thornton. It made money for the year. We have stores that are now cash flow positive and we are selling the volume. We think we have also sort of dialed in the right inventory mix and the number of cars that we carry in each lot. We have really been playing hard with that. Our pricing tool is working and working very well. How we have become a part of the community through a bunch of different organizations, in particular a lot of the public school systems and things that we are doing, have all been a plus. I'd tell you, if I laid out on the table here and said what's the biggest challenge, probably the number of cars we have to bring into the Denver market and get them reconditioned and out on the frontline. The amount of time it's taking us is longer than what we are used to, so we are working very hard on correcting that. But other than that very pleased with where we are with EchoPark so far. This is the first call that we've been able to sit back and say we actually got a store that's profitable. We believe we've got that formula dialed in and look forward to opening up more as quickly as we can to cover the overhead that we have. Yes, guys; this is <UNK>. We were almost 20 basis points better year over year. The improvement was in fixed comp and a majority of that was driven by our medical expense quarter over quarter or year over year. We had improvement or leverage on our variable ops as a percent of gross. And the things that were worse: we were a little bit higher on loaner, IT, and real estate expense. Legal was a lot better. Do you keep in mind the GAAP number does have the Volkswagen settlement of approximately $14.8 million.

2017_SAH

2016

EGHT

EGHT #Thank you all for listening in on today's call, and we look forward to providing continued updates on our progress at our upcoming investor conferences and meetings. Again, thank you very much. Thank you.

2016_EGHT

2017

THS

THS #That's a revenue trend, <UNK>. <UNK>, this is <UNK>. I'll take that. Your question on private label penetration in the US and the age-old question of when will it approximate what we see in Europe, I think there's several different things at play that we've talked about before. Differences between how people shop in Europe versus how they shop in the US. First of all, retailer consolidation has occurred or retailers in general are much more consolidated. You'll have a few top retailers in Europe that are really driving the business. And so that enables them to get more scale behind a few private brands. And you also see people shopping in a very different way. So I think there was at one point a lot more trial and more shopping frequency, which led to an increased performance or increased sale of private brands. So there are some consumer trends and retailer trends that have really pushed private label. But I think what we are seeing in the US is we continue to see that consolidation. It seems like every year we have one or two of our top customers join up. And so for us that obviously presents an opportunity for us to simply our business and take some costs out. And so we see both that and then with the trends with how the millennial is shopping, which mirrors much more closely the way European consumers shop, feel like both of those things give us a lot of confidence that going forward we'll start to see more increase of private label penetration similar to what we've seen in Europe. <UNK>, it's <UNK> and, surprise of surprises, both <UNK> and I are still here. Having a wonderful time. First of all, the changes that have been brought over the last four months have been extraordinarily positive for us and that the plans that we laid that were somewhat disrupted now have been completely put into place. And we are pleased to have not only <UNK> here and <UNK> in his role, but also that in a go-to-market sense we've strengthened the business. And the five division presidents, they are all active like they are latter-day versions of <UNK> Vermylen, off and running. With regard to the President search, that's underway. We have retained a very fine leading firm. We are delighted to have both internal and external candidates and we would expect that position will be filled in the foreseeable future. And again, I'm really quite pleased with the turnout in that regard. And then lastly I'll say that the executive team at TreeHouse and the senior management team that are working in the combined operating units have become even more cohesive and united in this period following the unexpected troubles in November. I think the tone of what you are hearing today is something that we are very positive about 2017 and going forward. By the way, everybody, we will take two more callers please and then allow you to get on to other events. Well, the Condiments, as we said, was the first to go. So in a way that was maybe the first model. But everything is really modeled just like what we did in the Condiments in terms of sales. And in fact for most of the year it wasn't that we had a dedicated sales team there, it was just that we had a dedicated management group running that. And it was a little bit easier in that division in the sense that there was one primary factory that made all the products that went into the Private Brands condiments. A little more complicated than the others because there can be multiple locations. But clearly that's where we are going. I don't have a margin number to provide in terms of what it was where we are going, but it's clearly this new structure is what we think we need to do to also drive the margin profile. I did mention like in the snack nuts, we've got five factories and currently they're making a variety of different products. Yet when you look at the factories themselves, each one seems to have capabilities that are more specialized. And if we can reroute the product so one is high-speed production, one is custom products, one does a variety of roasting, one plant doesn't do roasting. So if we can mix and match that around ---+ those are the things we really couldn't do without having a consolidated look at it. And having a management team and an operating team focused strictly on snacks is what's going to allow us to take advantage of that and drive the margin. So, I don't have a number to give you, <UNK>, but it's clearly something that will be a catalyst for driving that margin improvement. Well, structurally on January 1, a month and eight days ago, nine days ago this became effective, so all of these structures were in place to start the year in January, including the condiments. People were identified, they're named, they're in their teams, not just sales and marketing but the operating teams as well, we have finance, everything is there. So, they are off and going now and targeting not only the operational improvements but the SKU simplification, looking at customers, looking at products. So it's there now. This is not a 2018. We don't. We still don't; we don't have them on our SAP system, which is what we need to be able to code the labels because that's how we do that. So until we get more of them on we're not going to be will provide a detailed number on that. So in general when I talk about those numbers for the legacy I think you discount it slightly for the Private Brands. But it's a little more challenging in their world because you get things like retail bakery that don't necessarily have a particular label. But as we move them onto SAP we'll get a better sense of how the total portfolio looks. Well, we focused on doing that but it was a very difficult process, which is why you haven't seen the big change in the margin profile for that Canadian business. There's just too many of those inputs that are sourced in the US because they had to be sourced in the US. The difference now though is with the Private Brands business and also with we're our broth business. They tend to get a bit of a gain on that based on the businesses that we have on there. So we are starting to at least dilute the huge negative effect that currency had caused in Canada ---+ not solely but a bit. But I think the important thing, <UNK>, is what you brought out is that we're seeing stability in the Canadian dollar. And that's going to take away the huge year-over-year comp problems that we were having when we went from that north of [100] and hit back down into the [60s]. So our plan for this year is it stays in that roughly $0.76 range. And if that's the case it will be pretty comparable to a year ago and we'll kind of eliminate those year-over-year problem comparisons. Thanks again, everyone. You've displayed a great interest in our Company today. And as we always are trying to find new ways to sustain our TreeHouse, growing strong, standing tall, we're delighted that you're with us. Talk to you in a few months.

2017_THS

2016

MKSI

MKSI #Thank you. Good morning, everyone. I am <UNK> <UNK>, Vice President and Chief Financial Officer, and I am joined this morning by Jerry <UNK>, our Chief Executive Officer and President. Thank you for joining our earnings conference call. Yesterday after market close, we released our financial results for the first quarter of 2016. You can access this release at our website, www.mksinstruments.com. As a reminder, various remarks that we make, both future expectations, plans and prospects for MKS, comprise forward-looking statements. Actual results may differ materially from those indicated by these statements. As a result, there are various important factors, including those discussed in yesterday's press release and in the Company's most recent annual report on Form 10-K, which is on file with the SEC. These statements represent the Company's expectations only as of today and should not be relied upon as representing the Company's estimates or views of any days subsequent to today, and the Company specifically disclaims any obligation to update these statements. With respect to share repurchases discussed in today's call, the timing and quantity of such repurchases will depend upon a variety of factors, including business conditions, stock market conditions, and business development activities, including, but not limited to, merger and acquisition opportunities, and such repurchases may be commenced, suspended, or discontinued at any time without prior notice. In addition, today's call also includes non-GAAP adjusted financial measures. Reconciliations to GAAP measures are contained in yesterday's earnings release. Now I will turn the call over to <UNK>. Thanks, <UNK>. Good morning, everyone, and thank you for joining us on the call today. This morning I will review our results for the first quarter of 2016, including some key highlights. Following that, I will give some color and an update on our progress with the Newport acquisition and, finally, I will provide our outlook for the second quarter of 2016. <UNK> will follow me with further details on our financial results, and then we will open the call for your questions. Total first-quarter revenue was $184 million, up 7% from last quarter, and our non-GAAP EPS was $0.38. Our results were at the high end of our guidance range, driven by strong revenue from our semiconductor customers. Conditions in the semiconductor market have improved, and our first-quarter revenue was up 18% as device manufacturers ramped 16 nanometer and smaller devices utilizing 3D structures and multi-patenting. Both 3D NAND and multi-patenting rely heavily on etch and deposition processes, which require a high degree of content that MKS provides. We believe that the industry will rely more and more on multi-patenting and 3D structures as features shrink to 10, 7, even 5 nanometers. Double patenting will advance a triple patenting and even quad patenting for some layers as features can be even shrink, doubling the number of etch, deposition and clean steps required. This increase is a capital intensive in these processes, which will drive growth opportunities for MKS for a number of years to come. As features get smaller and critical etch and deposition steps increase, achieving quality, uniformity, and repeatability become increasingly more difficult. In critical etch, one of the challenges our customers face is the ability to deliver energy to etch a deep, narrow space while maintaining etch productivity, selectivity, and smooth straight walls. To achieve this, OEMs increasingly are turning to RF pulsing. In the second half of 2015, we launched a new RF generator platform called edge. In the design, MKS developed a capability we call adaptive pulse technology that delivers exceptionally repeatable pulses resulting in defined profile control, which helps balance the trade-off between etch accuracy and speed. This launch has been highly successful, and we are already receiving production quantity orders from major etch OEMs for this revolutionary generator. Before features can be etched, thin uniform layers must be deposited. And with smaller feature sizes, atomic layer deposition ---+ ALD ---+ and plasma enhancing atomic layer deposition ---+ PALD ---+ are being (inaudible) to deposit extremely thin and conformal layers of material needed on the wafer. Based on the history of technical and commercial performance, our paragon remote plasma source, as well as numerous other MKS technologies, have been selected for the next generation ALD platform from the leading ALD OEM. More broadly, in our semiconductor business, we had additional design ins and wins this quarter and a number of applications, including RF power for die simulation and semiconductor packaging, liquid zone dissolved ozone systems for wafer cleaning, remote plasma sources for [FD] exhaust cleaning, and revolution plasma sources for strip at a major logic manufacturer's new fab in China. I am pleased to see additional success in our core semiconductor market. Especially in RF, we have made significant progress against the competition. Moving to our adjacent markets, last year we announced that we had entered into an agreement with a leading vacuum solutions provider to supply properly labeled and customized gauge products. This opened a new sales channel to the industrial and process marketplace, an important market for our vacuum, flow, and analytical products. In this quarter, we started to fulfill the orders against this agreement. In another industrial process application, we had additional sales this quarter for microwave products using candy manufacturing as a customer's production was extended to North American facilities. In the environmental monitoring market, we were pleased to receive orders from yet another government agency for our AIRGARD chemical warfare detection and monitoring systems with safeguard critical infrastructure from airborne hazards. In addition to new design wins, follow-on business is extremely important to our success. I am pleased to report that we have meaningful recurrent business across many markets, including thin film applications such as OLAD and solar cell manufacturing where we continue to ship our liquid zone dissolved ozone, flow, pressure, power, and gas analysis products. At this point, I would like to move to the Newport acquisition. On February 23, we announced our intent to purchase Newport Corporation, a global technology leader in photonics, lasers, and precision optics with a broad portfolio ranging from components to integrated subsystems. Newport has a balanced participation and a diverse array of end markets ranging from semiconductor to life and health sciences, which will both expand MKS's position in our existing markets and extend our reach into new markets. This supports our strategy to expand into adjacent markets while increasing our served addressable market and our core semiconductor business. I am truly excited about the combination of MKS with the complementary technology Newport brings. Both Newport and MKS are technology leaders with a long history of designing solutions that address the difficult challenges our customers face. Together, we will have an even more formidable portfolio of products and capabilities to address the needs of technology-enabled solutions. I am further encouraged by the number of positive comments from our customers, particularly our largest ones. About the opportunity to bring integrated technical solutions to these customers that the combination of Newport and MKS can provide, which no other competitor can. Our thesis with this acquisition is that we will capitalize on synergies between the two companies, which will allow us to realize additional growth and profitability. We have a dedicated integration team in place and have developed extensive plans, which include product cross-selling and synergy activities immediately after the acquisition closes. We anticipate reinvesting some of the savings from these activities into high-growth areas within Newport's product portfolio. From a market opportunity perspective, we estimate that the addition of Newport will expand our served addressable markets by $4.8 billion. Geographically, we operate in many of the same locations, and we have the opportunity to optimize and leverage our combined sales channels to improve customer access, enable the cross-selling I referred to earlier. From a technology perspective, both Newport and MKS are leaders in critical technologies that enable advanced processes. Control of the interrelationship between process parameters is crucial to productivity and quality in advanced manufacturing. And the combination of Newport and MKS would give us critical mass to synergistically respond to these complex challenges with integrated solutions that satisfy customers' needs. MKS continues to differentiate ourselves from the competition, and this acquisition gives us many exciting new places to grow. MKS has a long history of successfully acquiring and integrating high technology companies, and this acquisition and preliminary integration planning activities are progressing well. We are excited about the teamwork we have seen so far between the companies and believe there is a strong cultural fit between the organizations. We have received all the necessary regulatory approvals, secured financing for the transaction, and subject to the approval of the transaction by the stakeholders, stockholders of Newport tomorrow, we anticipate closing this Friday. And finally, I am pleased to announce that [Dennis Worth] will assume the leadership role as Senior Vice President of Newport, reporting to me. This ensures continuity and stability in a Newport business unit as we continue integration into MKS. At this point, I would like to turn to our outlook for the second quarter. The semiconductor industry is recovering from the softness we saw late last year and, based on the input from our customers as well as industry analysts, we anticipate continued recovery as we progress through 2016. 3D NAND and multi-patenting will continue to propel growth as the industry implements 10 nanometer and small align with designs. Based on these factors, and looking at current business levels, we anticipate that MKS stand-alone sales in the second quarter may range from $185 million to $205 million. And at these volumes, our non-GAAP net earnings could range from $0.41 to $0.54 per share. At this point, I will turn the call over to <UNK> to discuss our financial results and expand on our guidance. Thank you, Jerry. I will start with the first quarter (inaudible) provide an update on the Newport acquisition financing and, finally, I will discuss our Q2 2016 guidance. Revenue for the quarter was $184 million, an increase of 7% compared to Q4 revenue of $172 million, a decrease of 14% from Q1 2015. Revenue for the quarter was near the higher end of our guidance range, primarily due to strong demand from a semiconductor customers. GAAP and non-GAAP gross margin was 42.4%, which was within our expectations at the sales volume. Non-GAAP operating expenses were $51.2 million, also within our expectations for the quarter. Our non-GAAP operating margin was 14.6% of sales. GAAP operating expenses were $55.4 million and include $1.7 million in amortization of intangibles and $2.5 million in transaction costs associated with the Newport acquisition. Non-GAAP net earnings were $20.1 million or $0.38 per share compared to $18.4 million in the fourth quarter and $35.5 million in the first quarter of 2015. Our non-GAAP tax rate was approximately 28% and our GAAP tax rate was 26%, which includes the US federal tax benefit related to the Newport acquisition-related costs. GAAP net income was $17.6 million or $0.33 per share. Now, turning to the balance sheet, cash and investments increased by $8 million in the quarter to $667 million or approximately $12.51 per share, all of which is classified as short-term. As of March 31, our cash and investments were about evenly split between the US and our international operations. Total book value net of goodwill and intangibles increased to $928 million or approximately $17.42 per share. In terms of working capital, days sales outstanding were 56 days at the end of the first quarter compared to 54 days at the end of the fourth quarter. This slight increase in DSO is primarily due to the timing of revenue in the quarter. Inventory turns improved to 2.8 compared to 2.6 in the fourth quarter. Capital additions for the quarter were $2.2 million, depreciation and amortization expenses were $5.3 million, and non-cash stock compensation was $4.2 million. During the quarter, we paid a cash dividend of $9.1 million or $0.17 per share, and we repurchased 45,000 shares of stock for $1.5 million. Now, I will go through more detail regarding composition of revenues for the first quarter. Sales to the semiconductor market were $135 million for an increase of 18% compared to the fourth quarter and represented 73% of first-quarter revenue. Within the semiconductor market, sales to semiconductor OEMs increased 18% from the fourth quarter and comprised 60% of total sales and sales to semiconductor fabs increased 20% in the quarter and comprised 13% of total sales. Sales to other advanced markets decreased by $10 million or 16% from the fourth quarter and were $49 million, representing 27% of total revenue. Approximately one-half of this decrease is due to timing of orders within the quarter and remains within our thin-film markets, which include applications in solar, data storage, and LED, which are project based and can vary from quarter to quarter. Geographically, sales in the US were 51% of total revenue, sales in Asia were 38%, and sales in Europe were 11%. Sales to our top 10 customers represented 50% of total revenue. Sales to Applied Materials and Lam research comprised 19% and 17% of first-quarter sales respectively. Our headcount at the end of Q1 was 2160, down from 2181. The slight decrease is primarily due to normal seasonal attrition within our China-based manufacturing operations. In connection with committed financing to fund the acquisition of Newport, on April 19, we successfully allocated $780 million of Term Loan B that will be used to finance the acquisition. We are very pleased that the term loan was multiple times oversubscribed and, therefore, due to the strong demand, we were successful in reducing expected pricing by 75 basis points through both a lower spread and lower original issued discount than what were indicative terms we announced the transaction on February 23. The term loan was allocated at LIBOR plus 400 basis points with a 75 basis point floor and 99 original issued discount, which currently equates to a 5% annual interest rate. Immediately after the close of transaction, we expect an estimated cash on hand of over $400 million and a $50 million asset-backed revolver and additional liquidity. We committed to delevering the balance sheet, and we are pleased that this issuance was well received by debt investors. The term loan was rated BB by S&P and BA2 by Moody's. Finally, I will turn to Q2 2016 guidance, which includes transaction costs associated with the Newport acquisition, but does not include projected Newport results. Based upon current business levels, we estimate that our sales in the second quarter could range from $185 million to $205 million. Based on its expected sales range, our Q2 gross margin could range from 44.5% to 45.5%, reflecting these volumes' projected product mix. Q2 non-GAAP operating expenses can range from $52.5 million to $53.5 million. In the second quarter, R&D expenses could range from $17.8 million to $18.2 million. And SG&A expenses could range from $34.7 million to $35.3 million. The range of operating expenses in the second quarter reflects the timing of stock compensation expense, as well as the seasonal increase of certain compensation costs, more normalized work schedules in the US, and continuing investment in certain key research and development projects. As we have mentioned in previous calls, the timing of these projects is dependent upon a variety of factors and could vary from quarter to quarter. As indicated in our January call, we expect expenses will be slightly above our target property model for the first half of the year. It will return to more normalized levels in the second half of 2016. In the second quarter, amortization of intangible assets expect to be approximately $1.7 million, and Newport acquisition-related costs are expected to be $8.5 million and net interest income is estimated to be approximately $500,000. We expect our second-quarter non-GAAP income tax rate to be approximately 28%, reflecting the anticipated geographical mix of taxable income. Our GAAP income tax rate could be approximately 27%, reflecting the tax benefit of acquisition costs, which are deductible against US taxable income. Given these assumptions, second-quarter non-GAAP net earnings could range from $21.8 million to $29 million or $0.41 to $0.54 per share, and GAAP net income could range from $14.7 million to $22 million or $0.27 to $0.41 per share on approximately 53.7 million shares outstanding. This concludes our prepared remarks, and now I will open the call for questions. Yes, we will probably do that ---+ we are working on it right now. Probably in a third-quarter earnings call, we will definitely do that, perhaps a little bit earlier. We hadn't closed the transaction yet. We need to get through that first, and so it may occur later in the quarter, but certainly no later than the Q3 earnings call. Yes. Nothing we can share in a public forum. We obviously have internal models that we have vetted quite extensively, but we are kind of going out a couple of quarters would be more or less giving guidance, and I don't think we are ready to do that quite yet. We aren't going to delever the balance sheet, and if you look at combined companies on a pro forma basis, looking back in history, we generated about $1 million of free cash flow in the last 10 or 12 years on a combined basis. So the cash generation is quite strong, but I think I will wait until we get to the Q3 and lay out a little more of a Q3 model I think at that point in time. Actually, we had seen the order rates start to improve in the quarter. So my expectation is that we would see improvement in Q2 on the revenue side on non-semiconductor. You know, it is really kind of a bit of a lumpy business, but we are very excited about flat panel as an example and OLED in solar. In the OLED market, we are seeing there's like a 16% CAGR through 2020. And with that, with the Apple transition to the new iPhone late in 2016, the nonplanar curve displays for TV and mobile, we are excited about the continued strength in OLED, and it is across the board. It is great because our LIQUOZON zone is permanently used for cleaning. It is a great product that is well embraced around the world. It is particularly strong in Asia, but then we have our residual gas analyzers, pressure products, flow control. So we expect to see Q2 look better for the non-semi and hopefully continue on through the rest of the year. But it comes in waves, and it is kind of lumpy, and we did see the orders pick up, but they were longer booking than just the turns business as we expected. Well, I would actually like to spend a little more time giving you some more specifics. I would rather not answer right now, but if you look at the concentration we have in terms of the equipment manufacturers and the position we have with people like Samsung and others, it is a pretty significant opportunity. But I will give you the exact SAM at a later date. Well, thank you, <UNK>. Well, the leadtimes have been constant. One of the things we do every day is we look at booking and shipments every single day. That is the first thing I do when I come into work, and it is something I have done for over 30 years. And what it allows me to do is keep a pulse on the business rather than wait for a month of recorder. And we run the plants 24 x 7, so we have full utilization of all the equipment, which keeps the lead time and cycle times short. We have a flexible workforce that we can bring in in terms of temporary operators. We have the overtime that we use. And then, if you look at our inventory turn, some people might say, gee, your inventory turned don't turn that great, and part of that is we have what we call stored capacity, which is, because it is a lumpy business and it turns on a dime, we will have prebuilt inventory and whipped and then finished goods locations to adapt to an upturn in the business. So between keeping a pulse in the business every day, having a flexible workforce that we use in terms of temporary labor and over time, the strategic investment in stored capacity and inventory, I don't worry about turns in the business. It is actually ---+ we can go up in a quarter in the past 60%, 70%. I used to run around with my hair on fire back in the day. So if we are going up 20% in a quarter or 30%, that is something that is almost a yawn for MKS. So I mean I think people come to us because of technology, but they stay with us because of the operational capability. So we have got a pretty good thing around the pulse of that. Well, first of all, we've bought about 20 companies since we went public in 1999. So I believe we are really good at doing the due diligence and then outlining the integration strategy. We have established an integration steering committee, which I sit on with my direct reports. Then, the integration project teams report up into them, up into the steering committee. So we have flights for all levels of integration ---+ operations, supply chain, sales, product management. And I feel pretty comfortable that the actions that we have outlined in terms of integration and synergy attainment are well-known. We like the ---+ on the sales side, we really like the diversity of the markets they are in. We think it is nice to support us, and we have a little mild ---+ a reduction in the semi cycles. I have gotten some really good positive feedback from major customers about integrated subsystems longer-term they would like to see. And what is even more interesting is, after the deal was announced, one of our largest end-users called us and said, we want to talk about optical sensing. We think the combination of optics at Newport provides in the sensing capability of MKS is a game-changer in the fab and on the tool. And so we see cross-selling opportunities from the technology side. We see cross-selling opportunities because they have a list of customers in analytical instruments areas and other areas that we don't get to. They have a lot of feet on the street, and we have connections at the end users that they do not. So I think between the alignment of the teams, the continued focus we have on a weekly basis in terms of the work they are doing on the synergies and integration, and then the opportunities that we have looked at from the technology side, I think there is great opportunity. And I had a phone call from one of our largest customers, our VP of Supply Chain, and he had said that ---+ I can't get into who it is ---+ he said his COO commented on this is the type of company, MKS, that we should be doing business with. So, as they do their continued work and growing their business, they see us with a Newport-MKS combination as an incredible resource for our integrated subsystem business, and they expect to do more business with us as a result of it. So the whole thing is really positive. And it just takes a lot of time, a lot of effort, a lot of follow-up. But I think that is the type of work that MKS is really good at. And then, lastly, we have technology integration teams, and they have already started to talk about the roadmaps at Newport, about the roadmaps at MKS, how we can take the optics technology that they are developing in Newport and apply it into our environmental monitoring business because we use optics in a big way in terms of a stack monitoring and emissions control. And conversely, they are looking at sensing capabilities that we have into some of the other areas of Newport. So it is pretty exciting. Everybody is really (inaudible) up and ready to go about this one. Well, I think the cross-selling is immediate. I think the fact that we are already working ---+ our strategic marketing, Marcon groups, are already working on the sales resources that are necessary to go into alternative customers to cross-sell. So, if you can sell photonics and optics and lasers, you can sell flow controls and valves and pressure measurement instrumentation. So it is a matter of getting their salespeople trained and up to speed quickly. I think the integrated solutions piece, that could be a year or two out. Yes, that is going to talk about cross development and working roadmap with customers. But the cross-selling itself, I think, is almost immediate. Yes, <UNK>. So probably about three quarters of that mix is outside the US. So bringing that back, we would obviously pay a tax bite. So that is kind of the bigger equation there. There is ---+ working on it right now, there are, we believe, opportunities with this transaction to bring back a quantum of that offshore cash we think with very minimal incremental tax. And that is not baked into the models right at this point. We think we can probably optimize the onshore cash for this model. But right now, the way I look at it is $400 million of cash plus about $100 million in the US, outside the US it is kind of a rough sizing right now. Yes. So if we could, again, bring some of that cash back to the US ---+ we mentioned a minute ago, with kind of a very minimal tax bite. We will do that, and that gives us more flexibility. The cash in the US, we share buybacks, delever, all those things, obviously. The cash offshore right now is to fund the international operations and we have made some acquisitions outside the US the last couple of years, but I think you will see us really focusing on delevering the balance sheet. So we would like to bring that cash back to the US for that purpose in the short term ---+ next 12 months, for sure. I mean, it is possible we could do a small technology investment ---+ $8 million, $10 million, and it is something that we think it is emerging technology. What we don't want to do is not ---+ we want to take advantage of the technical advances in semi. And if we see organization or a business that has technology we want to get our hands on, we would make a small technology investment still. But in the range of $8 million, $10 million, something like that. Yes, probably a little bit of inventory. But, for the most part, it parallels pretty much what we see the customers doing, and it matches what we are seeing from people in terms of prospecting the growth in the 3D NAND and FinFET side. We are seeing some, but we expect a little more of it towards the latter part of the year. But people are already ---+ we are already involved in ---+ the nice thing is, we are already involved in 10 nanometer, but we are also involved in 7 at this point, too. It is beyond roadmapping, but actually, as they implement over time, we are already in practical applications. So we are already getting ahead of it. No. No, I contacted ---+ I mean, there was one facility from one of our Japanese customers that had some impact, but I don't think it was anything that was significant. We contacted them, and we have heard that they were in pretty decent shape. But none that we are aware of. Yes, in Q1, the order rate was substantially higher than the revenue rate, so definitely it is a trend heading in the right direction. And the double-digit growth rates we had in the past, it has been over a period of time. We help will have some quarter to quarter fluctuations on various markets like solar is a good example. But we still feel very good with the long-term growth rates in those markets, and again, the order rate we are seeing now in Q1 has trended in the right direction. So we are pretty positive about that. Well, we did see ---+ if you notice, we did come in on the high end of the guidance from ---+ in Q1. So we have a tendency sometimes to have people pull ahead of what they guide to or get ready for their production. And we see a steady pace in the business, but we think it is the best rate. I think people have us at an average of just under [200] for a midpoint we guided around [195]. So plus or minus $4 million or $5 million in this business, to me, is just a matter of an order or two that people pull in or push out. Thank you. Thank you for joining us on the call today and for your continued interest in MKS. We look forward to updating you in our continued progress when we report our second-quarter results in July. Additionally, we hope to see you at some of our upcoming investor conferences, which include KeyBanc, Pac Crest Industrial Conference in Boston and the D. A. Davidson Technology Forum in New York, both on June 1, the Stifel Technology Conference in San Francisco on June 6, as well as the Stifel Industrials Conference in New York on June 13, and Semicon West in San Francisco July 12 and 13.

2016_MKSI

2017

MED

MED #Thank you, <UNK>. Good afternoon, everyone. We're pleased to discuss our third quarter 2017 financial results with you today. I will provide a brief overview of our financial and operational business performance. Tim will then review our financial results in more detail and share our fourth quarter and annual 2017 guidance. Tim and I will then be available to answer your questions. Our third quarter results reflect some early successes of our strategic growth initiatives, and we're pleased to report revenue and earnings above our expectations. The successful execution of our growth and operations initiatives positions us for the revenue and earnings acceleration we achieved in the third quarter. Third quarter revenue of $77.2 million, up 12.6% was above our revenue guidance of $72 million to $75 million. We also continue to see operational efficiencies across the organization, as we've aligned and focused our resources behind our key growth initiatives. Combining this improvement with our accelerating sales, we experienced a 90 basis point improvement in SG&A costs as a percentage of revenue, which drove third quarter diluted earnings per share of $0.55 ahead of our $0.48 to $0.51 diluted earnings per share guidance. As we have done this, we have also created a powerful and focused transformational message around optimal health and wellbeing that has resonated across our business. This has helped us fuel excitement, energy and enthusiasm from our corporate team, our field leaders and their clients. We're experiencing solid business momentum, and we have never been better positioned for the future. As we discussed on our Q2 call, we hosted our largest ever convention in Dallas, Texas this past July. At this convention, we officially rebranded our Take Shape For Life business unit to OPTAVIA and completed the rollout of our essential line of OPTAVIA products. We've been extremely pleased with the incredible positive response we received from OPTAVIA coaches and clients, and this has directly translated into tangible results. Revenue through our OPTAVIA Coach model posted the largest quarter in the company's history. The third quarter also represented a record number in the number of active earning OPTAVIA coaches, which grew for the first time to over 14,000. We have a powerful message with distinct, exclusive OPTAVIA products, enhanced business tools and an incredible, focused OPTAVIA Coach community working together to take our business to its next level of growth. Focusing on our Q3 operating results in more detail. OPTAVIA reported its eighth consecutive quarter of year-over-year quarterly revenue growth, up nearly 18%. Sequentially, this was up from a nearly ---+ the nearly 11% revenue growth we reported for OPTAVIA for the second quarter of this year. We entered Q3 with 14,200 active earning OPTAVIA coaches, an increase of nearly 11% over the third quarter of last year. In August and September, we set a new high mark for the company, as more OPTAVIA coaches joined our coach community than at any 2-month period in our company's history. During the third quarter, we also continued to generate increased coach productivity resulting from higher new client acquisition and a higher average order value year-over-year. Just a couple of weeks ago, I had the pleasure of attending the OPTAVIA Leadership Retreat held in Sundance, Utah. This annual retreat brings together some of our most talented and successful business leaders for our ---+ from our OPTAVIA Coach community. The retreat focused on building the leadership skills to enable our mission of bringing the world life-long transformation one healthy habit at a time. It was wonderful to hear their inspiring stories of success and aligned together behind the fourth quarter and 2018 initiatives. We've worked hand-in-hand with our OPTAVIA Coach community to develop enhanced business tools and resources to make it easier for them to grow their business and connect with new clients. Beginning next month, we will launch Phase I of a new digital technology platform created to help OPTAVIA coaches be even more successful. The new systems enable OPTAVIA coaches to share information more seamlessly, leverage social media content and receive real-time business activity insights to help the coaches, manage their business and improve client interaction. With OPTAVIA we've created a powerful transformational message that is easily shared and is both inclusive and appealing to the diverse demographics, which, we believe, will enable us to expand our OPTAVIA community and positively impact more lives. Looking ahead, our OPTAVIA Coach community is now stronger than ever, and very well positioned to build upon the current business momentum. We continue to make progress in preparing for future growth, which includes deeper penetration of our existing U.S. markets as well as expansion into new markets over time. OPTAVIA coaches inspire others every day as they share our vision and mission of offering the world life-long transformation one healthy habit at a time. Last month, we also moved into our new corporate office in Downtown Baltimore, Maryland. As Medifast continues to establish itself as a national leader in the health and wellness space, we're pleased to join this growing business community. Our new headquarters will honor Medifast's rich history and will serve as a destination and home away from home for OPTAVIA coaches from across the country, who represent an integral part of the company's business and culture. Now let me move to Medifast Direct. The rate of the year-over-year quarterly revenue decline improved again in Q3. Medifast's year-over-year performance is no longer a significant drag on our overall revenue trend. Our team has been working to find the right balance of advertising spend, placement and messaging to ensure we have a sustainable model to acquire a growing number of customers to support the long-term profitable growth of the business. We continue to test our Medifast Direct platform as a digital lead-generation tool that will support our OPTAVIA Coach community. This ongoing testing is an example of our emphasis to move our direct response and OPTAVIA units to an integrated business model for the benefit of our coach community and our clients. We believe that this alignment will help to enhance our long-term success and will facilitate the expansion into new markets over time. In summary, we're very pleased with our accomplishments thus far in 2017. This is demonstrated by our operational and financial results, the strategic initiatives to evolve our business have begun to generate an accelerated rate of growth in both revenue and profitability. We have positive business momentum in our OPTAVIA business units and when combined with our scalable infrastructure and strong balance sheet, we are well-positioned for the future. And with that, I would like to turn the call over to our CFO, Tim <UNK>. Thank you, Dan, and good afternoon, everyone. In the third quarter, revenue of $77.2 million exceeded our expectations. OPTAVIA, formerly Take Shape For Life, accounted for approximately 84.1% of revenue; Medifast Direct accounted for 11.3%; Franchise Medifast Weight Control Centers accounted for 4.3%; and Medifast Wholesale accounted for 0.3% of net revenue. Revenue in OPTAVIA increased 17.5% to $66.4 million from $56.5 million in the third quarter of the prior year. As Dan mentioned, for the record number of active OPTAVIA coaches at approximately 14,200 in the third quarter compared to 12,800 in the same period last year and 13,500 in the second quarter of 2017. Average revenue per active earning Health Coach for the quarter increased to $4,693 as compared to $4,421 in the third quarter of last year. We launched the remainder of OPTAVIA Essential product line in July. So nearly the full complement of OPTAVIA products were available for sale during most of the quarter. While we don't plan to specifically report revenues by brand on a regular basis, we thought it would be helpful at this particular stage to report that 45% of our total revenues in the quarter were comprised of OPTAVIA-branded products. Our Medifast Direct revenue decreased 3.7% to $7.8 million as compared to $8.1 million in the third quarter of 2016. Total Medifast Direct advertising in the quarter decreased $100,000 from $1.7 million in the third quarter of 2016. Revenue in the Franchise Medifast Weight Control Centers decreased to $2.8 million from $3.7 million in the same period last year. The decrease in revenue was primarily driven by fewer franchise centers in operation during the period. We ended the quarter with 35 franchise centers and 2 reseller locations in operation, compared to 55 franchise centers and one reseller location at the end of the same period last year. Medifast Wholesale revenue, which is mostly comprised of revenue from health care providers, decreased to $200,000 compared to $300,000 in the prior year period. Lower revenue is consistent with our previously communicated strategic direction. This business unit will be fully integrated into our OPTAVIA Coach model during the fourth quarter of this year. Gross profit for the third quarter of 2017 increased 11.5% to $58.2 million compared to $52.2 million in the prior year period. Gross profit margin as a percentage of net revenue decreased by 70 basis points to 75.4% versus 76.1% in the third quarter of 2016. This decrease in gross margin percentage was driven by an increase in manufacturing costs, as the company is no longer building inventory for the OPTAVIA launch. As you may recall, we were overproducing in the prior year to build our initial inventory of the OPTAVIA brand. Selling, general and administrative expenses in the third quarter of 2017 were $48 million or 62.1% of revenues compared to $43.2 million or 63% of revenues in the third quarter last year. The increase in SG&A was primarily a result of higher OPTAVIA commission expense, based on the growth and success of our OPTAVIA Coaches. Net income in the third quarter of 2017 was $6.7 million or $0.55 per diluted share based on approximately 12.1 million shares outstanding. Third quarter 2016 net income was $6.1 million or $0.51 per diluted share based on approximately 11.9 million shares outstanding. Our effective tax rate was 35.5% compared to 32.7% in the third quarter of 2016. The increase in the rate was primary driven by an increase in state income taxes for the period. Our balance sheet remains very strong with stockholders equity of $108.2 million and working capital of $89.1 million, as of September 30, 2017. Cash, cash equivalents and investment securities as of September 30, 2017, increased $18.9 million to $95.7 million compared to $76.8 million at December 31, 2016. Our Board of Directors declared a $0.32 quarterly dividend during the quarter, payable on November 9. Returning to our guidance, we expect fourth quarter revenue to be in the range of $71.4 million to $74.4 million and earnings diluted share to be in the range of $0.46 to $0.49 per diluted share. We are, therefore, narrowing our 2017 full year revenue guidance range to $295 million to $298 million and are raising our full year earnings per diluted share guidance to be in the range of $2.15 to $2.18 per diluted share. Our fiscal year 2017 guidance assumes a 33% to 34% effective tax rate. Well, that concludes our operational and financial overview. We appreciate your interest in Medifast, and Dan and I are now available to take your questions. Operator. Yes. We're ---+ this is a pretty common question. We're ---+ where we are at this point is this ---+ in December, so next month, we will go live with our new platform that will be the final piece to enable us to actually make those decisions. And we'll make more specific announcements post December. We don't have an exact timeline at this point. But certainly, as soon as we do, we'll be sharing that with you. Yes. I think to your point, I mean, there's typically a ceiling on productivity. Two things are happening: one, we're seeing the transition of ---+ from the Medifast brand to the OPTAVIA brand among our coach community. Those products have a slightly higher price. So a portion of that productivity is related to the higher-priced product. But I think the more important part of it, which makes up the majority of that improvement, relates to a ---+ the communication and the excitement related to the launch of OPTAVIA. So while that number won't continue to go up, we should continue to see that number be at a very healthy level and maybe, see a little bit more growth in the near future. Sure. I think what you saw this past quarter is normal. I think what you saw last year this time was, effectively, as we overproduced, you have a higher-level absorption of your overhead cost into your standard cost. So when buying goes up, it's a good thing for margins, and it spiked. So our utilization of our plant is still under 50%. So there's a great opportunity, I think, to continue to improve margins with volumes. But I think it's more of an indication of where we were last year this time than it is this year at this time. Great question, <UNK>. And I'd say that the ---+ what we completed at the convention was the complete rollout of the line, as it existed, kind of, from the flavor profile with Medifast. Now what you'll see is a consistent refresh. So as an example, these are fairly minor rollouts, but this past several weeks, we launched 2 ---+ several new snack products under OPTAVIA. And we'll continue to roll out products to keep the flavors, kind of new and current, and we'll continue ---+ given ---+ from an graph extension standpoint, to look at other categories that may fit our positioning as a health and wellness company. Yes, I mean, <UNK>, the consolidated revenue, bottom end of the guidance is 14%, high end of the guidance is 19%. And the other business units have historically had a little bit of a drag. So it's, certainly ---+ your math is not off. It's certainly possible to be over 20%. I think what you'll see in the future is probably around that level. Our biggest initiatives for Medifast Direct is the testing we're doing to use Medifast Direct as a way of bringing new clients in for our coach community. So we are then working on that for several quarters. As we do that, it's possible, once we, kind of, identify the key levers in doing that, it's possible that we could wrap up again. But I think for your modeling purposes in the foreseeable future, kind of keep it about where it is. Yes. So <UNK>, we initiated dividends at the end of 2015 and we initiated a 3% yield. And last year, we raised it 28% and brought it back up to 3% yield. Those decisions sort of not sure haven't been made yet. That decision the board will evaluate coming up in December but I think what we said is we would like to be a strong dividend payer, and we have been ever since we initiated the dividend. So the exact amount hasn't been determined, but I think that the growth story with a strong dividend is a powerful combination. In the past 2 years, it has been. So past 2 years, it was declared in December, payable in the first quarter. Our projection is to go live December 1. And I think like any company who is selling online, it won't be our final investment in IT. But this is a significant one related to the OPTAVIA launch. So that has some important branding components that will rolled out on December 1 that the coach community has been waiting for and then some basic enhancements on some of the general technology that we use to facilitate the business. Yes. That's Phase 1. So there's not really a ---+ there's not Phase 2. This is Phase 1. And this will be complete for what we needed to do on the front-end. Meaning, we've upgraded our shopping cart, as well as made it capable of being multi-country, multilingual, multicurrency. So those are the most important elements that we're updating. We're also giving our coaches a new back office. So essentially, a way for them to look at and manage their business, much more simple and much more information rich. So those are the ---+ there are also another ---+ a number of other elements that will help them share their story more effectively on social media. So this will be the most important, kind of, technology introduction of the last year. But again, we'll continue to invest in our systems as we go forward to make sure that we meet the expectations of how we do business and how we allow our coach community to leverage technology in their businesses, as they go forward. Yes. So we're coming out of third quarter. We're very pleased with the momentum we have. And our guidance in the quarter implies 14% to 19% growth coming off of 12.6% growth. Historically, Doug, we've been a little seasonal in the fourth quarter. So if you look year-over-year for as long as I've looked back, fourth quarter is a little softer, we think, primarily because of the holidays. And what we don't exactly know is, we have very strong momentum right now, the way that we can blow through that seasonality. But based on our modeling, we've historically seen some seasonality late in the fourth quarter. So we have that factored in. Yes. You should expect to see that, as we determine exactly and finalize where we are going to go. As you're pointing out, it's fairly typical to start making those plans in advance of any announcement and in advance of an opening, certainly because there's a lot of work to do to get there. Yes, I think the major ones have been there. I think that the first thing we've focused on is making sure that we have a platform ---+ technology platform that's capable of supporting a multi-country, multi-language, multicurrency, that will be complete with this rollout that we were just talking about. The other thing that's been happening is testing to ensure that our products, our pricing, our concept, our message are well received in the potential target countries that's was ---+ that was completed portion of the phase ---+ what we need to do. And the last thing that you're pointing out is getting the people to manage that. And I think that's the right next sequence. And that's the way we're thinking about it and looking at it as well. Great. We'd like to thank everyone for your interest in Medifast. And appreciate the participation in today's call. We look forward to speaking you again, as we report our fourth quarter and full year 2017 results and have a nice evening.

2017_MED

2016

EZPW

EZPW #It's quite a bit in there, Dave, but so let me just see if I can pick it all up. I mean the gold price has been moving pretty much between about $1,200, close to $1,300 over the last couple of months but we're seeing commodities all around the oil and iron ore starting to come off and [Compass] coming off as well. So gold has actually held that range quite strongly as the others are starting to move. So I think that it seems to have settled around that $1,250 to $1,275 level. That doesn't really change it too much for us. I mean we haven't been an active scrapper where some of the margins were made previously and I think if you go back to the heady days of 2010-11, we were actually making some substantial profits through the scrapping, you'll see here the margin on scrap for the quarter was 13%. Some of our competitors are actually having lesser margins than that on scrap. So I think in order to make the heady days, you would have to see gold moving back towards that $1,400, $1,500 level, which I don't think we're going to see. But that's just my view, I'm not a very good commodity speculator. So you might have a better view of that than me. In terms of the industry's consolidation, and I think the question is when would we ---+ you would think EZCORP would see multiples close to where our competitors are and whether the shareholding is a depressant on those multiples. I think once [new] Grupo has been dealt with, you will get a cleaner position to be able to value the Company and we're showing that with the pawn results and the focus on the customer, we are getting some very strong returns from what has been our core business. So we need to ensure that we manage the Grupo process well to actually show the Company's potential to the investment community. Now, the split shareholder structure, I think everyone has got a view as to whether there is some form of discount for having that structure or whether there isn't. And I'm actually reasonably neutral on it to the extent that as long as we are outperforming our peers and moving forward with our customers, the focus I have is more about driving the value in the business, not worrying about the shareholding structures of the business. And if I were to look at where we are in nine innings, we're certainly nowhere near the seventh innings stretch. I think once we move Grupo and deal with it in the right manner, I think we're still probably in the second or third innings, which is where I think we are in our strategic three-year cycle as well. So I hope that answered all those questions, <UNK>. I don't think we've put $17 million in. (inaudible) and got that hit. I think for the next quarter, we sort of indicated that we'll think for the next quarter is probably running that, maybe, the two to three, but it's $1 million per month, but it depends on the funding lines we put in place at Grupo as to what that actually plays out to and as <UNK> suggested, post June, some of the amortization of some of those funding lines pick up and we are working closely with an advisor to actually make sure we can have deadlines in place through that period of time. So we will probably be in a better position at the end of the June quarter, build with that funding line to give you more clarity about the quarter ahead. I'll say enterprise value is probably a better landing point based upon the current sort of capital structure that EZCORP has within Grupo and extrapolating out for five plus years on a DCF basis. So it's a mechanical type of process out there that comes up with that valuation. [Mention the net assets]. Yes, [apply the] fair value of what the assets in theory worth, not necessarily what's on your balance sheet. So if anyone wants a hour-and-a-half accounting seminar, please let me know. I think we've had interest from all of the above. So it's not specifically coming out of one quarter. So we have had expressions of interest from US as well as Mexican. So it's still too early to see where it lands, <UNK>, because I think obviously, [some will be kicking tires, some will be interested] and we will figure that out over the next few weeks. Thanks, <UNK>. I would like another one of those, but no, that's it. <UNK>tian, that's all there is Last February 2015, we acquired a business. At that particular point in time, equity was used. And there were certain structures in that. The share price wasn't allowed to move by certain amounts for went down. Then, we had to ---+ Yes, and substitute with cash. Yes, I think it was Cash Pawn. It's Cash Pawn, is around the Austin area and Central Texas area. That was payable a year after the deal was signed. So there is no more sitting on that one. It's actually called a simple pub structure. At an EZCORP level, we have $230 million worth of convertible bonds. I beg your pardon. Basically the pawn business. The last 12 months EBITDA for the pawn business. Off the top of my head, I don't know, but the maturity profile is in 2019. And so, and that's when the $230 million is due, there's no payment, there's no covenant, there's nothing ---+ no operating covenants sitting underneath that. So that's a pretty straightforward type of fund. The rest of it is associated with Grupo Finmart into the two components as I alluded to earlier on. And that really is split between the VIEs, which is about $50 million, $90 million is Grupo Finmart's direct debt and that has amortization schedules associated with it and obviously, you're trying to substitute new debt. No, there's no ---+ a lot of the loan structures have ---+ you have the assets sort of sitting against it, you have the loan books sitting against us in our assets, sitting there to service those loans. So it's pretty straightforward. It's not really structured around EBITDA multiples or any of those type of metrics that normally you see floating around. We would have to look at some of the other options which, one might be complete sale or might be partial sale, would look at another range of options, but looking at putting some instruments to financing and place to ring-fence it, but it's a good business and we want to make sure that we represent it completely and we've got good expressions of interest. So we don't have to reconsider that in-depth at this point of time until we get further down the track. As you've seen that there is some change of control issues, I think that's hidden in some of these, we will be having discussions with them around that. But we don't think that should be too much of an issue. Yes, that's correct. We sort of mentioned it just briefly before a call. We think it's probably a couple of million a month through to June, but we're trying to work with some new financing structures, which will alleviate the pressure on us. So by the end of June, hopefully, we'll be in a better position with those discussions underway to give you a better color around that, what they would be going forward. As <UNK> had mentioned on the slide that June, we start some of the amortization of these lines start increasing. So we're doing a lot more than that to try and minimize any cash that does have to go into the Grupo business. In what regard, <UNK>. Not that I'm aware of. I haven't been through the documents and that full deep ---+ there's nothing I'm aware of and seem to have ---+ No. The base point one has with the recourse nature has requirement on us to top up any cash if there's a shortfall in the servicing. And that has been that $0.5 million a month, I think it amounted US dollars. But typically, most of these structures have overcapitalization in them, which means that even if some of the delays do occur, there's self-servicing and with our improved collections sitting behind it, the improvement in those collections has meant that they're really self-sustaining. Under the main VIE which therefore, they would be required to ensure the servicing of those loans occurs loan with the contracts that are in place, the monthly contracts in place. So there would be, as we've outlined previously with those particular VIEs, there is a requirement on Grupo in the first instance and the EZCORP ---+ in the second instance. It's the same that 2017, that the four major VIEs run off and there is a surplus portfolio of assets that sits within those. So can we start with the first one. Page 2 of ---+ It's public securitization. It's a public securitization that was done. So, that (multiple speakers) that start amortizing in June (multiple speakers) a bunch of assets against that. Listen, I don't ---+ if we just move on the next one, I'll pick up the answer to that question. Assets and liabilities when they can ---+ yes, that's the consolidated assets of Grupo, including the trusts. That would be the net value of the loans on the books that are performing. If I [come at] you, first, just to your first point, the securitization there that does the public securitizations that amortize, and it's starting, I think, we pulled it up, it's a better million a month to somewhere in another note in the Q. And that is probably $35 million of the total Grupo budget. So your point was, great, you need to take that off to see what's all the public securitization. Thanks, Kate. We would just like to thank everybody who dialed along (inaudible) webcast. Thanks for your interest in the Company. <UNK> and <UNK> are available for follow-up questions later this morning. And this concludes our call. So, thanks very much for everyone.

2016_EZPW

2016

PBCT

PBCT #No, there isn't. Well, as we look at it both in terms of through the year and into the coming years in our planning process, what we see is basically continued focus on growing revenues and kind of leveraging the opportunities that we've created with the people that we have on the ground in the various businesses. We'll continue to grow the revenue pieces and to continue to tightly manage expenses and reduce expenses where we can. We see it gradually, slowly, but gradually improving over time. So I'm not going to give you a number for the end of the year but we do see continued movement forward. We really spend a lot of time, Steve, as we've said repeatedly in terms of focusing on managing our expenses. We have an executive level expense management committee, EMOP, that is meeting on a regular scheduled basis and on an ad hoc basis probably close to every day. We scrutinize every hire, every position refill, if you will, replacement of folks that are leaving. We look at every contract on a regular basis. We get ahead of those contracts as we've described over time. I'd rather have us do that, the bankers on the ground with the understanding and the expertise of the Company than hire somebody to do it. I don't think we need to do that. Sure. We are doing the prep work as we've described before. We actually have within our PMO structure, project management office, a full project that looks across the requirements to close ---+ to across the $50 billion mark. Kind of like I just described with the consultants idea on the expenses, we're putting time and energy into understanding what it would mean and then attacking the work that goes into preparing for that. So whether it's moving from DFAS to CCAR filing or whether it's writing a living will, et cetera, et cetera, understanding what it means, reaching out in the industry and understanding what other folks have done. We think ---+ really we've been preparing I'd say beyond ---+ this is more than a year ago that we started this. It will continue forward with the idea that if we get to a spot where we are crossing $50 billion, whether it's naturally, organically or through acquisition, that we're prepared to do that. Basically, we position ourselves so that has minimal impact. Obviously, it will have some impact but it will minimize it. Yes, I would say, we are not totally done but we're ---+ we've got everything clearly in sight. We've got a lot of work done. If it were obviously the appropriate opportunity, understanding the commitment and the strategically the importance of that type of transaction, we would consider it if it were right. Thank you. Sure. In aggregate, as we said, the new business that came on in the quarter was higher than the originated portfolio. When we look at spreads of new business relative to the existing portfolio, individually the C&I ---+ if you look at our major portfolios, C&I is additive at this point, primarily reflected by the Fed move last quarter and one month LIBOR moving up. That's mostly a floating rate portfolio. Same thing would be for our HELOC portfolio. Where we're still not additive would be longer term fixed rate loans that are more susceptible to the shape of the yield curve. So commercial real estate is still not additive. Equipment financing is slightly negative as well at this point. ABL would be additive because, again, it's a LIBOR based portfolio. Hopefully that's helpful. Yes. My response to <UNK>'s first question, when we think about the margin coming in where it did, it was primarily driven by lower loan volumes. With that comment, I'm not being specific to whether it was floating or fixed. It was just higher yielding assets that didn't hit the books or hit the books at a lower volume rate than expected. So that's really just a volume issue. When you think about our asset sensitivity, there's really ---+ there's two components. That's why we talk about yield curve twists and show the slide. So, we try to show investors what the short-end impacts are to us as well as long end. With what happened from mid-December or just in the last two quarters, if you will, is we had benefit from rising short rates, Fed funds and LIBOR, but some of that benefit was given back as the yield curve flattened. So when we look at the balance of the year, those two components will still come into play as well as volume. Sure. So, Jack, I would say ---+ I would characterize the commercial business lines, pipelines generally ---+ obviously not all of them, but generally in about the same range they've been over the last year, quarter to quarter. There's a couple that are a little ---+ up a little more substantially. But for the most part I think you think about the whole book, the pipeline flow is about in line. On the residential mortgage as I just mentioned, that's up significantly and at a high point in recent times. So I hope that helps. All right. Thank you. Thank you again for joining us this morning. We appreciate your interest in People's United. If you have any additional questions, please contact me at 203-338-4581. Have a great day.

2016_PBCT

2015

KLIC

KLIC #Thank you, Joe, and thank you all for joining our call today. I am pleased to announce we ended the March quarter with $145 million of revenue, which was at the top of our guidance range, and represented 35% sequential growth. Demand for equipment and services were weighted towards the back of our fiscal year, as it is usually the case of our second fiscal year (sic) due to the Chinese New Year holidays. [On the year] Considering this late demand, as well as our ongoing investments in new product development we were still able to generate $7.9 million of net income. I will provide additional color on these initiative as we go along. During the March quarter, demand for our solutions remained robust. From a high level, this ongoing performance reflects a continuation of many of the broader trends we've outlined in prior calls, such as ongoing capacity additions and technology advancements across our traditional customer base. This trend is further supported by our exposure to higher-growth opportunities in end markets such as memory, mobility, connectivity devices, and sensors. From a business line standpoint, the ball bonder business was up 36% sequentially, driven primarily by China-based sales, specific LED and lower pin count opportunities, as well as continued demand from a broad mix of IDM and OSAT customers. March quarter ball bonder sales were overwhelmingly weighted towards our latest generation, high-performance IConn, IConn PLUS ball bonder platform, which continues to serve the industry's most challenging wire bond application. Copper capable ball bonding sales in the March quarter were approximately 67% of our total bonder sales. LED bonders sold in the March quarter represented about 8% of our wire bond sales. Switching to wedge bonder, we launched a new Asterion solution this past March, which adds further support to our already strong market position. While we experienced a slight sequential reduction in sales during the March quarter, the broader market remains very strong, and demand continues to be diversified across a wide customer base. In parallel, we continue to pursue other meaningful diversification opportunities in this core technology. Finally, the integration of our recently acquired advanced packaging mass reflow business, which will reference going forward as APMR, is progressing smoothly and according to our plan. Many collaborative projects have been identified. As you may recall, this business is split between advanced semiconductor and advanced SMT equipment. With a material portion of this March quarter sales stemming from advanced packaging equipment, this business is clearly complementary and synergistic to our overall advanced packaging strategy. I will now turn the call over to <UNK> <UNK> for a more detailed financial review of the March quarter. <UNK>. Thank you, <UNK>. My remarks today will only refer to GAAP results, and will compare the March quarter to the December quarter. Net revenue for the quarter was $145 million, gross margins were at 47.2%, with $68.6 million of gross profit. Gross margins were down sequentially, largely due to product mix. We generated $9.8 million of operating income, $7.9 million of net income, and $0.10 of EPS. Our global engineering team did an excellent job executing key initiatives while managing costs. R&D came in at $23.2 million, slightly below our previous expectations for the March quarter. We ended the March quarter with a total cash and investment position of $528.8 million. From a diluted share standpoint, this cash position is equivalent to $6.82, and our book value equivalent is $10.32. Working capital, defined as accounts receivable, plus inventory, less accounts payable, increased by $28.9 million to $175.2 million, largely due to our recent acquisition. Our days calculation better highlights our ongoing focus on working capital efficiency. From a DSO perspective, our days sales outstanding decreased from 102 days to 93 days. Our days sales inventory increased only slightly, from 89 days to 90 days. And days of accounts payable increased from 47 days to 60 days. Our effective tax rate for the quarter came in at 20.1%, which is above our prior long-term guidance. This is primarily due to additional income booked in higher-tax jurisdictions, transfer of development-related R&D expense from US to Singapore, and valuation allowance consideration associated with carry-forward tax losses from recent acquisitions. In the longer term, we expect some additional movement in this tax rate resulting from further simplification of our operating and legal entity structure, shifting global demand patterns, and effect related to our recent acquisition. Considering these effects, we are currently anticipating our long-term effective tax rate to be about around 15%. This concludes the financial review portion of our call. I will now turn the discussion back over to <UNK> for the March quarter's business outlook. Thanks, <UNK>. In terms of our guidance for the June quarter, we are currently guiding in the $160 million to $170 million revenue range. We continue to make meaningful progress, and continue to invest in our advanced packaging local reflow, which we will reference as our APLR business, which is our own organic advanced packaging business. R&D resources are being deployed to a variety of customers and projects with specific manufacturing process requirements. Our close partnerships with these customers continue to be a critical element in validating our development efforts and programs. In parallel, the industry continues to make progress towards these new and challenging advanced packaging processes. Fundamental manufacturing changes such as these take time, and we continue to believe that the architecture and feature set of the thermos-compression platform, like many of our other offerings, will become the industry standard. We continue to be on track for introduction of our APAMA C2W for thermo-compression solution during the September 2015 Taiwan SEMICON show. The recent addition of Assembleon, our advanced packaging mass reflow business line, has filled several gaps in our product and solution lineup, extended our reach into new diversified applications and markets, and has opened the door for many more strategic and long-term opportunities as we look ahead. This concludes our prepared remarks. Operator, we will now be happy to take any questions. <UNK>, we don't break down the Assembleon equipment and expendable tools. I think while <UNK> looks for the numbers, it is not necessarily different from the past, and it's 10% expendable tool [volumes]. I would say 90/10 split. 90% equipment about 10%. I'm sorry, what. Yes, it does except that as you've seen, I mean the Assembleon needs selling in euro, and we continue to sell in euro at least for the time being. And as you've seen, the euro end of 2014 was in the 135 range and today it's around 105 or so. So in terms of dollars for us, we are getting less dollars for equivalent sales, but nonetheless we are tracking in terms of dollars in the $20 million-plus like we were expecting. I mean, we are getting a little bit less dollars that we thought we would because of this exchange rate issue, but it is not in the grand scheme of everything, if you want is not really, really material. Just to add one point, <UNK>, for the rest of the business, we do sell in US dollars, so the overall net impact is just impact on the euro FX perspective. So on the TAM for thermo-compression bonder, for this year it is I think estimated to be in the range of $30 million, if I'm not remember the numbers correctly, or in the range of about 30 machines, okay. The two types of bonders, the first type which is the chip substrate is just really aimed towards the memory modules, and on these, we have roughly four or five dual head machines already deployed at customers. We've also seen a sharp increase in demand for chip to wafer thermo compression bonder which goes into also memory application and it will also go into logic application, but I would say not the memory [tube] or the memory stack type, more sophisticated application which typically goes in infrastructure telecommunication. So we started to accelerate the program, and we have currently about three machines in deployment, and I would say by the end of the year, fiscal year, total we'll have at the minimum a total of 12 machines, both chip to scale and chip to wafer deployed at customer around the world. Since the launch of the program, we bought back about $10 million of shares and we have $90 million to go. We guide for the third quarter. Yes, so it comes mainly from the ball bonder, okay, and we are in the midst of really analyzing that business, which is our core business, in detail. We are trying to understand if it's a pause in orders like watching, generally speaking, in the overall semi industry or if it's more, I would say, linked through the technology move towards smaller nodes, which require flip chip, high accuracy flip chip and some other advanced packaging technology. What we know is that the small pin count, especially QFN packaging, aren't flip chip. But the problem is that being small pin count, you do not sell as many ball bonders as you would for more complex application. So we are in the process of re-analyzing are we coming to a new world of the word bonders which is basically reaching finally this kind of plateau and entering more replacement market. Is it a pause in the market or is it something which is more technology driven and hence, then we could have some tailwind as soon as the IOT devices are picking up significantly because right now they are still in the infancy. And for us, we definitely believe that the IOT will give us some tailwind. They are ---+ they contain essential basically all the, I would say, 90% of the devices at least in our IOT device contain wire bonded parts, okay. And here again, when we talk about IOT, I'm talking about the more complex type of IOT, not the simple bracelets, reading, or hobby toy or the number of steps you've took. More the watch and the other more complex applications. So while waiting for that to pick up and that actually could be a good tailwind for us in terms of ball bonder units. Yes, definitely. We continue to see a diversification in customers, in application. In wedge bonder, we had a very significant breakthrough in the battery applications with our Asterion machine, so we do continue and we do continue to push for, I would say second-tier type customers, but more importantly, diversification of application in areas traditionally not really served very well by ball bonders. It was mostly seasonality. You will see that while we don't give a breakdown, but we expect that market to do ---+ continues to do well. We had our sixth consecutive quarter of profitability and the application ---+ battery application that we are talking about were regarding the wedge bonders. And that could have quite significant repercussions, as I'm sure you've recently read what's up in the internet space, but I mean we are not just talking about automobiles, but a number of application that could use battery in a very different way that we have used them before, and we have the perfect solution for that. Yes, our fixed cost is now about $50 million in terms of fixed cost components and 6 to 8% variable, so you could calculate the OpEx on that. All right. Great. Thank you. What we are seeing is a slightly different seasonal profile that we have seen in the previous year. Typically, we tend ---+ that's why I've made my remarks earlier, that's why we are looking in very much detail what is happening exactly in ball bonders. Because typically, our ball bonder tend to grow a lot more from third to second-quarter fiscal and then typically continue to slightly grow in the fourth quarter or plateau, and then we start to see the typical decline we've seen in our first quarter, which is the last quarter of the year, where all the investments have been made for the holiday season. So this year I would say it's a little bit different. There is a new ---+ a lot of new technology from a silicon perspective that has been launched earlier in some cases than obviously stated. The IOT market has been ---+ it's still very much in its infancy. The tablets also have been declining a fair amount, but on the other hand, we're still very much linked through connectivity, mobility, all this type of applications, smartphones, and so on. This continues to do well. We have actually had a very good second quarter compared to the seasonal trend, and so I want to take a little bit more time to analyze what exactly is going on, on our core business here. Is this a technology change which is accelerating faster and in which case we have a solution with our new acquisition because now we do have a flip chip solution. And we have also two projects already ongoing in this area and also in the Fan out wafer level, which we already have, but need, I would say, to be improved and in that case, may require a slight adjustment of our roadmap and product development cycle. No, it is different from the ball bonder business. I would call it a lot more stable business. Of course, you see quarter-and-quarter variations, but nowhere as steep as you would see in the ball bonder product which are, I would say, almost commodity products and that you personalize or customize really at the last layer of the fabrication process. While the Assembleon machines have much longer lead times and I'm sorry, the Assembleon machines, have a much longer lead time and are customized pretty much from start. So each machine is really built for a specific customer, hence, you tend to have (inaudible) some situations but not huge situations like you would see for wire bonders. So the lead times are a little longer for the Assembleon machines, probably two or three times longer than the ball bonder, which ball bonder's 9 to 11 weeks and Assembleon machines are about 30 weeks. Well, you know we continue to aim for an average of 45% gross margin for the total company, and the APMR, or Assembleon business line, it is slightly lower in terms of percentage, but we are looking through how we actually can integrate and improve the profile over time. So this first year obviously, there's a lot of work being done but longer term, we want to continue to actually focus on achieving a 45% gross margin for the Company. Yes, while we certainly had a number of one-time expenses including the integration expenses related to APMR. We also had some R&D expenses as well in there, so we continue to manage our OpEx As I've mentioned earlier to <UNK> <UNK>, is that it is $50 million of actually fixed expense in terms of fixed cost now, and about 6% to 8% of variable expense going forward. No problem. Thank you.

2015_KLIC

2016

PX

PX #Sure. I won't give a specific number, but consistent with what we've said in prior quarters, we definitely do have several steel customers that are running below and they continue to pay. This quarter is a little more difficult, simply because you have Carnivale and you have summer holiday. We always tend to see a few more customers, even on a normal year excluding what's going on in the ground, dip below MTOPs. Similar to what you see in Asia with the lunar new year. So that's more a seasonal bit. But primarily steel customers; they are paying. And as you've seen from our numbers, we did see some sequential improvements, especially from a very low December, so I think that aspect has been pretty good. In fact, we had a couple that were below MTOP last quarter and now they are above MTOP in Q1. So I will start on a high level. I think, <UNK>, we are constantly reviewing our geographic portfolio around the world to evaluate do we have the density that we believe we need to achieve the type of returns and the quality and the reliability of a business model that we need. So that is always an ongoing effort. And as you stated, we entered into certain countries in the Middle East and I would say the countries that we are in we do have a fairly meaningful density model, but not where we want it to be and we're not participating in Saudi Arabia, which is the largest country in the Middle East. So we continue to evaluate Middle East and see what options we want to take there, but that's something our portfolio will always evaluate. Russia is another area. We've been building some density. Given the situation in Russia today, we've slowed that process down, but we have built some pretty strong density in the Volga region as well as out in Yekaterinburg. And the assets that we do have on the ground there are running as expected and running fairly well. So those are two regions that we do see some opportunity to modify our portfolio one way or the other, but we will continue to evaluate that. As far as Iran, we will clearly work with the US situation there and what they allow with companies. But to say the least, the Europeans will have a head start on that just given the US relationship with Iran versus I'd say the European relationships will probably soften first. We will keep our eye on it, but it will be tough I think for American companies to get in there before any European companies. I think, <UNK>, clearly let's remember we took out about 7% to 8% of the workforce here toward Q2, Q3 of last year, so we haven't quite even had the anniversary of that yet. But that was a series of actions we took and, frankly, before we took that action people were asking us that same question: what can we do. We seem to have run out of levers. I'm not saying that we would go to another action of that nature. We feel that the actions we have taken are well in line with the market we are seeing, but I'd also say that we continually look for productivity opportunities. As the markets change, whether volumes go down or volumes go up, it makes new opportunities in our logistics management. You are seeing mill rates around the world change quite differently and it makes projects, in some cases, more viable that we may not have done in prior years, whether it's an increase in mill rates or, in some cases, a decrease in mill rates. And so as the dynamics change on these type of input costs for us, as the dynamics change in terms of the customers we serve, it can create new productivity opportunities that may not have given us a sufficient return under prior scenarios. We're always looking at these changes. We're always trying to evaluate how long that they will be like this and then we attempt to take prudent actions. But we've had to have a lot of productivity just to sustain the margin levels we've had. As you know, every time we lose volume it falls at pretty high margins, so we need to take a lot of actions in productivity and pricing to negate that effect. And that's what we've been doing. We look to continue to do that. I'm not anticipating any headcount action at this point, given how we are seeing the market, but I am anticipating we will continue to push productivity the way we always have. And we will continue to try and find some opportunities around that. I think when we look at the growth rates from a high level, I still firmly believe it's consistent with how we've laid it out in prior years and I think how most of the industry has laid it out in prior years. That the growth rates are really going to be a function of, I will call it, four basic things, if you are looking at the top line. It will be price and price tends to be, in my mind, more tied towards inflation. So if we do see some inflation here that should help. We've seen it in prior years with inflation; we've seen it in markets with inflation. It tends to be tied up acquisition activity. We are seeing more rollup opportunities in this environment and were an example of some of the acquisitions we're doing. Then it's a function of both projects and organic volume. On the project side it's clear backlogs are going down. Customers, or potential customers, are not making capital investments they had. This is part of the cycle you see in the capital cycle. That is something that if that returns or when that returns, especially in some industries that have been fairly muted for a while, like mining, heavy equipment, and areas like that, that will give growth. But if it doesn't return anytime soon then that will be an area of growth that will still be a little sluggish. Then finally, to your point, is this organic that we've usually used IP as a proxy. And to your point, what we have always found is emerging market IP multiples almost always tend to be stronger than developed market IP growth multiples. It makes logical sense, because in an emerging market it tends to be more infrastructure-related growth; you tend to have a lot more application-related growth. That gets to that whole intensity of industrial gas per capita and that is a real thing we see. So when the emerging markets slowed and the commodity markets slowed, you saw a portion of the backlog projects be reduced as customers didn't spend money. You saw the highest IP multiple markets be reduced. In fact, go negative. And the combination of those things really did make the, call it, growth algorithm weaker. But the question is do you believe emerging markets are out forever. I personally don't believe that. I think we're in cycles like any other cycle. Some of the issues we have today are demand driven. There are one or two that might be supply driven, but when it does rebound you get back to those multiples you have seen in prior years. Developed markets, in my mind, tend to be more closer to IP, a little bit above IP, but that's kind of how I view it. So those are the factors of growth and right now, yes, we are in a position where a lot of people are not making investments. Emerging markets are struggling and that has created some dampening effect on the growth. But I do expect that will recover and return. When. I don't know, but we've seen these cycles in the past. I could maybe put it this way, because I don't want to throw a bunch of numbers out there given just the complete uncertainty. As you know, June will be another Fed decision, so our view was basically this. We felt, I will use the word comfortable, enough to take spot rates and some forward rates as they stood a few weeks ago to call it for Q2. Come June, all bets are off because we just don't know what could happen with the Fed decision. And, frankly, we don't know what will happen tomorrow, let alone come June. But, clearly, if rates are better or if spot rates hold, holding all else equal, we will have better EPS than what the guidance says. And that is holding all else equal. So there clearly is some upside. I'd rather not get into numbers because what spot rate, what day, what currency ---+ there's a lot of moving parts there. But you could probably do the math from what you get from our 10-Q we will file. You will see what the average rates were and then you could plug in whatever spot rate assumption you want. It would probably be a fairly rough proxy, but it can get you close enough. We always go around on this internally. My opinion is this: the equipment portion of hard goods does tend to be a leading indicator. Clearly, if people stop buying the large automated equipment, if our customers are not confident in their backlog or growth prospects, they will not invest in new capital equipment. So we saw that drop off first over the last, I call it, nine months or so. What we are seeing now is some of the equipment, but also just consumables. And consumables, in my mind, tend to move with gas, to an extent, as far as how they drop. If you need less shielding gas, you probably use less contact tips or you lose use less wire. Those things tend to run together. I'd say, at this point, we've already seen some of the leading indicators on equipment and now we're kind of just seeing with gas and the consumables down together. We don't have any projects with Petrobras. In fact, we have very, very little business direct to Petrobras. What I would say the impact of the car wash situation and the Petrobras situation in general has just been an overall kind of paralysis on any industrial investment. Petrobras, like [Pemex] in Mexico, is a very, very big part of the economy. It creates a very large supplier chain network of many various industrial companies that supply Petrobras directly and indirectly. So there are many customers that we supply that supply Petrobras and, clearly, they are not doing as well. A perfect example, a steel company that makes tubular steel. They are not making much anymore given Petrobras. But in my mind, the situation on that has been baked into our results for a year now. Their sort of negative reaction from carwash and some of the curtailment in their activity has already been reflected in several quarters. I think, if you look at Brazil now, the question we get is what's going on with the potential impeachment. Would that make any difference. Right now we just don't know, we just don't know. Clearly, the financial markets have been reacting positively, if you look at the real, if you look at the BOVESPA, but we haven't seen much industrial change yet. What I would say on an overall basis, the fact that they are trying to root out layers of corruption is a good thing. And that should position them well for long-term improvement in the economy. And we are seeing some positive developments in Argentina. With Macri coming in with his ability to resolve some of the bond situation, his ability to issue bonds is creating a positive effect and renewed interest in Argentina. I hope with Brazil we can get over this hump, but it's still going to still take time to play out and we will have to see. We're not anticipating much recovery in Brazil this year and we will have to reevaluate for next year based on how we see the next few quarters play out. We've been seeing, I will call it, slow and steady improvement, but very incremental. We have had project pick up. On an organic volume basis, we have been seeing some good strength in Spain. Italy has not been as strong. But I'd say overall for Europe, it's kind of continued to improve slowly. Where we have the biggest headwind right now has been in our upstream energy business, primarily around the North Sea. That has been a continual headwind that is really offsetting some of the organic growth rates in the rest of Continental Europe. So I would say, when you exclude that upstream energy, we are getting organic growth in addition to our project contribution, so that part has been good. And you see some of it in the margins as well as we've been able to get the value of that volume contribution and capture it with some improved margins. I would say Scandinavia in general is a little weaker, as you would imagine, given it is an oil-based economy. We continue to see interest and investments and strong volumes in Port of Antwerp area, which would make sense given the euro is a little weaker, given oil is a little lower, and fee shipping costs are much lower. That really helped the competitiveness of that petchem enclave. In Southern Europe, like I mentioned, Spain has continued to improve here. We will have to see what the election situation, where that ends up, but it has still been improving. Our medical business, which we have a fairly large medical business, is quite strong across all of Europe. In fact, we just did some recent acquisitions, one in Italy in the medical, and also NOxBOX, which was UK, which will serve more global. So that has been good. And I would say in general in Russia, the on-site assets we have are running well as our customers are globally competitive, especially at this lower ruble. And the merchant business and package business is somewhat soft as you would expect in a stagflationary economy, which they still are today. So, in general, the Northern in Benelux is doing well, Southern doing well. Scandinavia is weak. Russia on the ground is still a little weak, and anything upstream energy is quite weak. But slow and steady improvement is the general view we have. Yes. So we hope to finalize that here in a few months, so we're still going through the last remaining requirement. I don't anticipate any significant obstacles on that. We would still consolidate it, but to your point there would be a minority interest impact with that JV structure. So yes, that would be the way to model it. Inversely with Yara, we would take what today is a minority interest impact and that would go away with the consolidation of the JV. And then with the Yara CO2, that would obviously just be a brand-new consolidated acquisition. With the Yara version, we just have one more real regulatory hurdle here that we are not overly concerned about that should be fine. So I expect both of those by back end of Q2, hopefully, should be finalized, but you never know on the timing. So we just need to keep it open. In North America, I would say metals. There are a few metals customers that will be below take-or-pay. I will say that we are getting paid on all of them around the world, frankly, we're getting paid, but a few in metals. And some, when you see turnarounds, in the Gulf, but again that's more seasonal. As there are turnarounds, they fall below and we see that each turnaround season. So there's no concern on that front. Well, we do have double digits from food and healthcare, probably 10% to 15% growth rates. On the metals, yes, it's dropping at a rate I would say consistent, if not more, than industrial production. But remember we have take-or-pay structures so they will mitigate that from a contractual standpoint. What we are seeing is, from my view, on the industrial side the customer volume levels are fairly consistent with what you are seeing in the overall results, but our contract structure helps mitigate that. Then on the more resilient industries we continue to see very strong results. When you add that together, plus price you're getting with some of the inflation impacts there, it is allowing the organic growth to still be fairly respectable. But we still need more work in that area. As I mentioned, we are still going to work more on the pricing side and we will have to see how volumes bear out in these coming quarters. But so far with April, as expected, coming out of the March results. I would say, in general, Yara we have encapsulated. It's more a back half; I wouldn't anticipate much contribution in Q2 here. But from a back-half perspective we are accounting for a general bucket of the acquisitions and I would say Yara is one of them. So yes, it would be in there. Okay, yes, because my first answer would've been that the pricing is more geographic dependant, on a lot of cases that you know. So within the US, I would say ---+ and we had this discussion a little bit earlier ---+ there will be some mix effect that could influence that when you have some higher-margin sales that are going away. And we've seen some of that, so that could negatively influence that. But I would say pricing is still very, very regional. It's within a couple hundred mile radius and it tends to be a function of any contracts that may be renewing and/or new opportunities that could be coming up in that region. And it will just be a function of the product supply available for that. But it's very, very small, transaction by transaction. And that's why, every time we continue to look at this, what we tend to see is at the top of the house inflation tends to be a fairly good proxy for it. There are some regional differences that could be driven either by geographic differences, even within the US, where product might be tight or a little looser. And there could be some industry perspectives where, for example, a certain end-market may get extreme high value out of a product and the pricing might be a little better than, say, another end-market where there are alternate substitute, maybe different than industrial gas. From that perspective I'd say it's not too different than what you may see in other industries, but given the contractual nature, given the proximity of supply, really on the top of the house inflation still tends to be a good proxy in my mind. I'd rather not go down there, <UNK>. How people define mix in and of itself is a whole other equation. We tend to do straight volume on molecules and then the balance goes there, which we consider mix. Because there's customer mix and there is product mix, right. There's two types of mix. So rather than getting into that on this call, let's just say it's all in there. Sure. Clearly, we continue to look at every market and we continue to look at it from a return perspective and an opportunity set. Our focus on resilient markets doesn't mean we are ignoring industrial markets. What it really means is this: when we look out, at least in the near term ---+ and it's no surprise that there is a bit of a commodity and emerging market retrenchment going on right now ---+ that some of these more cyclical markets could take some time before they will show any new growth opportunities. A rebound of lows we are already connected to them. Our pipe is already there; our tank is already there, so coming off of a low and rebounding we will just automatically get without focusing or without investment. They are still under contract, so there's no worries that the rebound we wouldn't be capturing. The focus is more on new investment. Where is money being spent today. There is a good amount being spent in these resilient areas. The growth trajectories in those resilient areas are greater, excluding the rebound effect, on some of the more cyclicals. So that's why our focus has been there. But it doesn't mean we are not focusing on all the growth opportunities we have. For example, in South America we still see some opportunities for decamping in some areas that would be cyclical. We've done that in the 1990s and it was very successful for us, and we will do it again now. So those kind of things continue to happen. But when we look at healthcare, we look at food and beverage, we look at some consumer-related end-markets like refining and electronics, they are growing well. We are focusing our applications technology, our salesforce, and even some of our acquisitions towards those resilient market, and they will give a nice compounded growth that is more based on either demographics or more resilient trends than kind of up-and-downs that we will see in some cycles. So the view is if we have more focus on there, we get those compound growth rates, and cycles return, you can get a pretty strong growth and a growth rate that is a little more stable. So that's how we've been doing it. By no means do we regret any of the exposures we've had. They've served us quite well and they continue to serve us well. It's just that the growth opportunities in those areas are not as great right now in this current environment.

2016_PX

2017

MTX

MTX #Look, I think there's absolutely additional growth in earnings in 2017. You know, I'm made a little cautious about the contribution from the services businesses. I think we feel much better, as I mentioned today, as we sit today looking into 2017 for both Refractories and energy services, we were facing some pretty significant slowdowns and declines last year. But where those businesses hit this year and what those markets are this year, much healthier position. I'm cautiously optimistic. I don't think until we see oil prices, if we want to talk specifically about energy services, to really see something over $60 per barrel. I don't really think that is driving some meaningful production and filtration business, but we are seeing some better activity today so that's a positive. Refractories business is at 73% capacity utilization. That's up almost 7% from where we sat last year. That's another healthy indication. And maybe while do first, and then I will conclude, Dan, is I will let <UNK> give you a little bit of color ---+ <UNK> <UNK> ---+ give you a little color on what we're seeing here around the world in oil and gas, and then <UNK> <UNK> on refractories and steel. Yes, Dan, its <UNK> here. I think we kind of bottomed out at the beginning of Q4 last year, and I think that we're at the beginning of an upcycle now. We are seeing stabilization of the rig count here in the US offshore. We're seeing an uptake in the rig counts on land, and internationally our business is growing quite well, I would say. I think we predicated our plan on $45 to $55 oil. We're around the high side of that today, around $54. As <UNK> said, once we get to $60 and we can sustain $60, then we'll see much more infrastructure spend, I would say, in the EMP environment. So I think we're at the beginning of the uptick and I think we're looking forward to a good year. Want to give us a little color on refractories. Sure. Hi, Dan. The global steel production in 2016 was fairly flat, and the utilization rates were around 70%. As <UNK> pointed out, our expectations are to be better this year. So, US rates, when you look at US rates, as he pointed out, we went early in the year from 70%, we're up to about 73%, and we're seeing orders picking up for the steelmakers over Q4. So that's a positive indication. Expectations for us, for 2017, we expect them to remain at similar levels for the time being, but also expect a possible uptick in the second half, so that should help us in our growth initiatives. Dan, let me complete the picture for you. Look at the minerals businesses, we just had 22% growth in metalcasting. We've got some really strong orders in China for metalcasting. So we see that continuing. We are going to continue to ramp up Sun Paper filler satellite in the beginning of this year, which will improve some PCC volumes. You know we tripled our Resistex sales this year, and we look at that growth continuing especially as we start to introduce some of those products into Asia. So I think there's a lot of good things going for the Company to start generating some revenue growth, and I think that will yield higher earnings in 2017. Thanks. Hi, <UNK>. Sure. The sales in China is about 15% of the Company sales right now. It's growing at about a 10% pace on an annualized basis. So it's becoming a relatively sizable portion of the Company. When I talk about developing the organization there, that will require some overhead expense and SG&A, but the way we look at things in the Company is, we manage our total overhead expenses to the Company's growth rate. So we will be moving and shifting ---+ we always have been doing this as we shift resources from areas that may not be growing to those that are. So we will manage that expense control ---+ or manage that expense outlay. But it will require some broadening of talents to better support that growth and accelerate it, even in China. Capital will require capital ---+ we are the two main areas of capital expenditures for growth will be in the performance materials and the Paper PCC business, as it always has been. No real capital needed, very small capital needed for construction technologies. We've got plenty of capacity around the world and in China right now. So, it will be more for new technologies in the Paper PCC business, and in performance materials. You don't sound very good, <UNK>. A cost savings target for 2017. Well we do have targets, we set them internally. We set, actually, pretty tall stretch targets for <UNK> Mayger's team, who runs our supply chain group. This year we probably had about $10 million to $13 million of across-the-board supply chain savings. The way we planned the Company, <UNK>, is when we plan our business units and operating income, we do one thing very standard. We put, we build into our forecast a 10% per year productivity improvement. And a 3% variable cost improvement in each of our businesses. That's the target. Expense savings, we look at it based on the business and where it's growing, and what it needs, but on an operating basis, we target those levels every year. Now what that has yielded is about a 3% variable cost savings, and a 5% productivity improvement on average every year for the past six years. So those are targets, and they're kind of standard. But we do have some supply chain targets as well. This year will be a little bit more challenging with energy costs flattening out. We participated in some energy savings last year. But we do have those targets as well. G&A, <UNK>, was $92 million in 2016. CapEx, you're right, it was only $62 million this year. We expect that to probably be around $70 million to $75 million next year. Really is dictated on ---+ it's really driven by Paper PCC. We built ---+ we finished building one satellite plant this year and so that will be, the increase will be, if we start to build satellites, but that probably won't be until late if at all next year. We had actually ---+ we did and we mentioned on the last call. We had some working capital as a challenge for this year. Especially in the first part of the year. We had a number of payment terms extended on us, particularly in energy services and steel, as those large customers kind of inflicted some changes on us, but that drove up our working capital. You know we took some actions toward the second half of the year, though some of that those receivables were extended. We tried to offset that with payables and work through some inventory reductions. We did make some progress in the fourth quarter, some good progress on inventories. And improved our outstanding collections, but it was something with more of a draw this year than last. Working capital ---+ I can give it to you on a day's basis. We typically run around 90, 97, 92 days, so we're looking to get ourselves back to where we were. I don't have the exact numbers, I think in 2014 we were around 92 days. I think we're up about six days in total working capital as a Company. What I can give you is, from over the past two years, our sales ---+ foreign exchange has impacted our sales negatively by $135 million. It's impacted negatively operating income by about $18 million to $20 million. So as we stay here, I'm not making any predictions on where currency is going, but if you go back to 2014, that is the kind of leverage you are looking for. Yep. Thanks, Rosemary. Let me answer the last question first and then I'll give you some color. New products constitute ---+ new products that we've launched over the past five years ---+ constitute about 12% of the Company's sales today. We've got, of those there's probably about 83, 85 new products, and they have the potential ---+ the growth potential of about a little over $300 million, a little over $300 million, $325 million in total sales. Of things that we've launched that are still developing. What I mentioned in terms of development of new technologies, they are in areas in the Paper PCC business. We've developed ---+ we've launched our New Yield product last year. New Yield, that was the first facility with Sun Paper, and so we've worked through that technology at that location, and have made it more robust over the past year, so that has matured. As well as commercialized, it has matured. Our geosynthetic clay liners like Resistex have also matured. We've deployed them through a number of red mud containment ponds, as well as coal ash. And we've refined that product even further over the past couple of years and it has become more robust. So let me let <UNK> <UNK> give you a little feel for some of the technologies in paper that he's seen trial activity on, on and those that have been maturing. That's right, <UNK>. Well, as you know we have a good technical capability for coating of high-end packaging. But beyond that, beyond producing glossy coating with our PCC product, we have other technologies with Fulfill and New Yield, that we're pursuing into packaging. Fulfill and New Yield can provide strength, light weighting, fiber displacement, all of these properties are important in the packaging market and we some good active opportunities there. In fact these opportunities are not just in China, they're currently active in all regions. Further out, we have some new technologies in addition to Fulfill and New Yield, that we've not announced yet, but they are advancing in Asia and in fact, the rest of the world as well. So, beyond PCC several good developments there. Some other technologies in the performance materials, Rosemary, things like Enersol, and our lightweight litter, and I'll let <UNK> give you a little color on those. Hello Rosemary ---+ on lightweight litter, I know you've asked about that before, that's been a product that we commercialized really just over the last year here in the US. And it's been pretty successful in terms of the traction in the overall market. The space ---+ within the space in the cat litter category, the lightweight litter now is about 12% to 15% of the retail dollars. It's held steady at that level. Our customers are principally large mass merchandising retailers, they're getting a private label product on the shelves as we speak, and we're seeing pretty good development of those markets as we go along. So, we're still on the small end, in terms of what the value is but the rate of growth looks quite promising. But beyond the US, we're really looking at that lightweight litter technology that we have and the capabilities we have to move quickly into China and other parts of Asia to introduce that product. The whole idea of domestication of pets in that category is rapidly changing in that emerging market area, and we would like to jump fast into this type of product into that region. We think it makes a lot of sense. So we're pushing very heavily and I'd like to think that we will be introducing a product in China by the end of this year. In terms of the Enersol area, which again is our crop health additive, we have distribution now well-established in key geographies, principally Brazil, China, India, and of course here in North America. Some areas of that are influenced by crop prices, like we are seeing today. However, on a number of different smaller crop areas, fruits, vegetables principally, we've seen very good trial data and beginning to get more each year into broadening our distribution in the key geographies. Once the key money crops begin to recover, we see a quite substantial growth potential beyond that base that we have today. It is not a replacement it's an enhancement, and in some cases, many cases now, what we're really doing is called formulating our particular additive with the micro nutrients that are used in soil additives. So we're sort of compatible, if you will, with existing macro and micro nutrients. What I guess I'm referring to is our technology pipeline. So, two things. One, we operate our technology development in a stage-gate process. So every year, we have a number of ---+ and we will probably show this to you in the next couple of calls, but I will highlight the new technologies that are coming in. The ones that are moving through, and the ones ---+ the ones that we've developed that have matured another year that are becoming ready for commercialization. So with any new product, and they evolve as they're out on the market. When we enhance them, and we make them even more effective, once we see how they've worked with a number of different customers. I think those that are in the pipeline have matured another year and will be commercializing this year. And those that are already commercial, that have been enhanced and changed and developed for a broader customer base. That is kind of what I mean by matured. Both, in and about to be in the marketplace. The other thing I will let you know, I mentioned some of the produced water technologies that are taking hold in the energy services. We've got the new laser systems and other refractory formulations as well in refractories. So there are a number of fronts where we see new products contributing to growth in 2017. Part of my dissertation, as you put it. It felt like it, I guess. Some of the changes, the organizational changes that I intend to make are getting a little bit closer to those customers and making sure we have the points with those customers. Because really understanding how these things are working and quickly making decisions, and quickly enhancing them. So just speeding up that communication with these new products are some of the things that I think can help us go faster, and that's what I referred to in terms of organization changes that I think will help the growth trajectory. They are good margins, Rosemary, and its really driven by the market price of chromite. So, we have a general fixed mining cost, so that we're price takers in the market of chromite. I will give you an idea ---+ chromite prices at the beginning of last year were around $100 per ton and they've climbed almost $340 a ton late this year, so very quick climb, and that's what we're participating in. It is really driven by demand in China, so over the past two or three years, stocks, market has changed a little bit. Maybe I'll let <UNK> give you an indication of what changed three years ago, but it was driven by consumption in China right now. Yes, <UNK>, the situation that this chromite is used ultimately to produce stainless steel. So a lot of more consumer, as well as some industrial area. So that demand has continued to be fairly strong in China, particularly. China must purchase all of the raw materials that go into ultimately into producing these goods. So, the chromite the comes from South Africa ---+ where our mine is ---+ is approximately 70% of that supply going into the country. And essentially what's happened over time is there has been a rebalancing of the grades of the chromite going into the country and that rebalancing is more favored ---+ the type of mineral that we have at our disposal. So we're definitely riding that wave, that wave goes up, it definitely can come down. But at this time and for certainly a foreseeable future, we see a fairly positive outlook, but it is a volatile, it can be a volatile end market. Appreciate that, <UNK>. Look, we usually don't guide out even a year, so I'm going to hesitate to give you numbers out three to five years. I do think though, that the Company has the potential, at least the minerals segment of the Company, has the potential to grow the top line, with traction. Again it may not be linear, but has the opportunity to grow 5% or 6% range. The challenges we've had over the past couple of years in terms of our top line have really been two things. The services businesses, energy services and refractories, I mentioned over the past two years about $230 million of sales decline due to foreign exchange. But I think that growth, as it is now stabilized and will turn the other direction, I think what those growth trajectories in the top line are possible over the next five years. I think that will yield even higher levels of earnings growth on the bottom line. And that's because we ---+ our ability to turn a dollar of revenue into very strong profits, I think is evident. So I think over a longer period of time, that 10%-type earnings growth, albeit, it may not be linear, on a comparable basis of the next 5 to 10 years is possible. The trial activity is actually quite a long sale process. It requires, what it requires most is time on the machine. And when you are trialing ---+ so first, understanding the needs of the customer, understanding the pigment they're using, the paper grades they are producing, understanding how PCC can help them in terms of enhancement of quality in paper and saving cost in terms of pulp. I can give you a quick equation ---+ PCC is a direct one-for-one replacement for pulp. Pulp, if you're making it, averaged $350 cash cost and we sell PCC for $120. If you're buying pulp, you're probably paying $800 a ton and we're selling it to you for $120 per ton, so there's a big cost advantage. Not so easy, you have to make sure the paper works. It works within the chemical systems and on that machine, and that's the trial activity. So first, its understanding the value equation for the customer, describing that value equation and then getting time on the machine. It's been difficult to get time on the machines in China and Asia the past year, due to some of the dynamics have been changing over there in terms of paper and supply, with Indonesia. With a lot of paper that has come back from the US into Asia, it's circled his way through India, Indonesia and China and that made it difficult to get time on those machines. Once you get time on the machine, and that may be scheduled out a number of months, it may take a month, a three week trial, and then some feedback, and it may take another trial. But once ---+ and we've seen this over the past 25 years ---+ it's almost always shown that PCC is a higher value pigment, saving money. And then it gets into, what type of capital required to put a satellite on that location. And then how we negotiate a 10 to 15 year commitment by both parties, and that's not something taken lightly by either side. Getting together and putting a satellite on-site of a plant and being there, I think the average lifespan of our satellites right now are almost 20 years. When we're doing these things, we are there for long periods of time, as partners with that customer. That cycle takes time, that can take a year in some instances, and that's what's happening right now. I think, certainly, in the minerals-based businesses, we all focus acquisitions. Our template has been ---+ mineral-based, but minerals that have a technology component, or something that we can apply mineral technologies to. To make them value-added constituents in whatever they go into. I think, you know with a bentonite-based set of businesses, it provides us avenues in that mineral. But also in the markets that are in metalcasting, consumer-products, household personal care, those markets and that mineral provides an area and platforms for those growth. Same with the carbonite side. In our specialty minerals segment, we have opportunities for growing in the specialty segment and also in further development of those minerals around the world. So, we have both market-type platforms that we can move into, and also mineral-type platforms. It doesn't necessarily have to be bentonite or carbonite that we look at, but something that is also parallel in a market that we currently serve, maybe in another mineral. And that's what we looked at when we bought AMCOL with bentonite. I think I gave you a two-dimensional kind of pallet for where we can explore, but primarily it will be in the minerals businesses. Well, absolutely I think making sure we have the reserves around the world to support the growth in the regions that we're growing and our current base business. Sometimes I don't think about it an acquisition, but as necessary ongoing capital to sustain the business long-term. But that may come through acquisition in terms of buying a position that comes with those reserves. What I think of is, I balance, obviously the shareholder value creation of the acquisition. So it really depends on what it is. We tend to look for being accretive right out of the gate. If something wasn't or if it was neutral, it would have something in there that generated significant, relatively near-term cash flow improvements for us to want to buy it. Were pretty disciplined about how we look at acquisitions and how we value them. We value them from many different angles and you've probably seen historically we've been pretty disciplined about how we go about that. That concludes today's conference call, and thank you for your interest in Minerals Technologies, and have a nice day.

2017_MTX

2016

HRB

HRB #Yes, I'll start off, <UNK>, and then <UNK> can add on. I would say our main focus is on arresting the decline. Obviously growth is the ultimate goal. But coming off the year we just had in both the assisted and the DIY channel, our main kind of step one, if you will, is arresting the decline. Obviously we're hoping for growth, but not necessarily targeting it at this point. So that's ---+ and what was your second question, <UNK>. Yes, I think ---+ go ahead, Mike. Sorry. Yes, with regard to the first half, second half, I don't think we're in a position yet to comment on the split or where we would ---+ where that will land. I think <UNK> laid it out well, that the goal here, we can't afford to have another year where we're down almost 1 million clients. So job one is to arrest the decline, and that's where our focus is. I think sometimes that's an artificial construct. But clearly, we have to be focused on the client number. So I'm not going to comment more specifically than that, but just that our primary focus is to arrest the client decline. I'm not sure I heard the second ---+ did you hear the second part. Just partners for offering (multiple speakers) Okay, so now I understand. So obviously with the expansion in RALs that were offered last tax season, our estimates are that there are over 1 million of them offered, primarily through the independent channels. So we have certainly taken a look at that. We are continuing to look at that. Whether we will have one or not is certainly something that we're not ready to comment on this year. We would be in a position where we would partner on this. I'm not going to say what we've done with regard to any discussions with partners. But as I've said, in terms of having an aggressive tax season, in our mind, everything is on the table, and at the appropriate time we'll reveal what our plans are. Yes, as I said on the Q4 call, we were surprised that the impact was not growing in tax season 2016. Every indicator was that it would be, but it didn't happen. The number of people in exchanges, again this year, has gone up. The IRS now has all the 1095 forms that everyone had to file last year. So everything is set up for an increase in terms of the impact on the tax season. But we'll just have to wait and see. I still believe that over time, this will be a net benefit to a Company like H&R Block. But hard to say what it will be in 2017, given that we were surprised. But all the indicators would show that the impact will be higher in 2017. Thanks, <UNK>. All right, thanks, Marianna, and thanks, everyone, for joining us on today's call. Hope you have a great day. Thank you.

2016_HRB

2016

TRST

TRST #Thank you. Good morning, everyone. As the host said, I am Rob <UNK>. I thank you for joining us this morning to hear a little more about our Company. As usual, joining me on the call today is <UNK> <UNK>, our Chief Banking Officer; and <UNK> <UNK>, our Chief Financial Officer. Kevin Timmons, who most of you know, is also in the room. The plan is for me to start with a summary of our quarter hitting the highlights, then turn it over to <UNK> for detail on the numbers. He will hand off to <UNK>, who will discuss our operations, mostly the loan portfolio. We're happy to report a good third quarter here at the bank. Our net income was $10.9 million was greater than second-quarter 2016 and greater than the same quarter last year. Our deposits grew to almost $4.2 billion. This is up about $70 million more than the same period last year. We're happy to report our time deposits dropped by $10 million during the same period. Meaning, we've been able to grow our base of core deposits, reducing our reliance on the higher-priced time accounts. Total loans are up to just shy of $3.4 billion. Growth was driven by our residential mortgage lending operations. That portfolio was solidly over $2.8 billion. Commercial loans were down as we continue not to chase transactions for rate and standards. The combination of loans and deposits resulted in a slight margin expansion from the same time last year to 3.09%. Some would say flat, but we'll take anything we can get. Now is a good time to remind the group that all of our business is done in our branches. We do not buy loans or except broker deposits. We also do not pay premium rates for large CDs. Those that are regular followers of our Company will remember we have a strong liquidity position and a large investment portfolio with relatively short maturities. Our asset quality continued to improve as nonperforming assets to total assets fell to 0.64% for the quarter. Our loan-loss reserve is 1.3% of total loans and the allowance coverage ratio was 1.6 times. We are still operating 145 full-service banking offices. Our efficiency ratio settled down to just over 54% for the quarter, down from recent prior periods. Our tangible equity ratio went over 9% this quarter and our total assets held over $4.8 billion. Our return on average assets was 0.9%, up from the prior year, and our return on average equity was over 10%, down from the prior year due to having a larger equity position. No update on the formal agreement with OCC. Great progress has been made, and we remain confident we will emerge a stronger Company. We are proud of our third-quarter results and look forward to a strong finish to the year. Now, I'll turn it over to <UNK> for the detail on the numbers. Thank you, Rob. I will now review TrustCo's financial results for the third quarter of 2016. As Rob mentioned, net income increased to $10.9 million in the third quarter of 2016, or 4.5%, compared to the $10.5 million for the prior quarter. Let's start with the balance sheet growth. Our average balance of interest-earning assets increased by $43.4 million from the second quarter to $4.7 billion. This growth was focused primarily in the loan portfolio. The average loan portfolio increased to $3.4 billion during the third quarter of 2016, an increase of $48.4 million on average, or 1.5%, over the second quarter and $108.7 million, or 3.3%, from the same period in 2015. As expected, the sustained growth continues to be concentrated in the residential real estate portfolio. This continues a positive shift in the balance sheet from lower-yielding investments to higher-yielding quarter loan relationships. The total average investment securities decreased during the third quarter of 2016 by $20.4 million, or 2.9% on average, from the second quarter of 2016. As you'll remember, when rates dropped at the end of the second quarter, we took the opportunity to sell approximately $45 million of mortgage-backed securities for a gain of $668,000. Total sales were replaced during the quarter with investment purchases of approximately $105 million in the mix of agency mortgage-backed securities and corporate bonds during the quarter. We also had a $45 million of agency securities called during the third quarter. On the funding side of the balance sheet, the third quarter is notoriously a difficult quarter to attract deposits due to the end-of-the-summer doldrums, property and school taxes coming due, and back-to-school focus for a good portion of our customers. In spite of this, we continue to be successful in increasing balances. Total average core deposits increased $51.2 million for third quarter of 2015 when compared to the third quarter of 2016 and $29.4 million compared to the second quarter of 2016. While average total deposits for the third quarter were $4.2 billion and our cost of interest-earning bearing deposits decreased to 37 basis points for the quarter, which continues to reflect our pricing discipline with respect to CDs and non-maturity deposits. Our net interest margin for the third quarter was 3.09%, the same as the second quarter of 2016 and a basis point higher than the third quarter of 2015. The impact of the growth in the balance sheet coupled with the changes that we've made in net interest margin had a pretty significant impact on taxable equivalent net interest income. For the third quarter of this year, our taxable equivalent net interest income was $36.7 million, or approximately $612,000 greater than it was in the third quarter of last year. And that was a very sizable increase on a quarter-to-quarter basis and represents a core increase in earnings for the future. While we also note that we retained $684 million on average during the quarter in overnight investments, up slightly for the average for the second quarter of this year and up $31.5 million from 2015's third quarter. In addition to the liquidity that is on our balance sheet, the current rate environment ---+ in the current rate environment, we continue to expect that we'll have between $350 million and $550 million of loan payments come in over the next 12 months, along with approximately $150 million of investment securities cash flow during the same time period. This continues to give us opportunity and flexibility during the remainder of 2016 and into 2017. Our provision for loan losses decreased slightly to $750,000 in the third quarter of 2016, compared to $800,000 in the first and second quarter of 2016 and the third quarter of 2015. Asset quality and loan-loss reserve measures remain solid and improving over the second quarter of 2016 and the third quarter of 2015. As a result, we continue to expect a level of provision for our loan losses in 2016 and into 2017 will continue to reflect the improving credit quality of the portfolio and economic conditions in our geographic footprint and the ongoing efforts to resolve our existing problem loans. Noninterest income net of securities gains came in at $4.7 million for the third quarter, up compared to the $4.5 million in the second quarter of 2016 and $4.4 million in the same period last year. Included in other noninterest income in the third quarter of 2016 is a $469,000 gain from the sale of our Union Street branch location. One of the most significant reoccurring source of noninterest income is derived from our financial services division. Our financial services division had approximately $863 million of assets under management as of September 30, 2016. Now, on to noninterest expense. Total noninterest expense net of ORE expense came in at $22.2 million, down $1.4 million from the second quarter of 2016. During the third quarter of 2016, FDIC and other insurance expense was $1.1 million, a decrease of $822,000 compared to the second quarter of 2016. In regard to the FDIC insurance-related expense, as you know, under a rule adopted by the FDIC in 2011, regular assessment rates for all banks declined when the reserve ratio reached 1.15%. The FDIC reserve ratio did reach the required 1.15% as of June 30, 2016. As a result, banks with total assets of less than $10 billion will have substantially lower assessment rates under the 2011 rule. Therefore, we expect FDIC and other insurance expense remain at this level going forward. We continue to expect the estimated total annualized cost related to the agreement to remain elevated. The added costs continue to reflect the Company's ongoing investment in additional personnel and systems within the retail loan, deposit and regulatory compliance areas. The good news: these costs have leveled off as we complete the implementation of the requirements of the formal agreement. Overall, however, noninterest expenses will significantly decrease due to the decrease in FDIC insurance expense. ORE expense came in at $895,000 for the quarter, which is up from last quarter in large part due to the increased taxes paid on properties owned during the quarter. ORE expenses consistently stayed within our expectations for the last five quarters. We continue to expect ORE expenses to stay in the range of approximately $500,000 to $1 million per quarter going forward. All of the other categories of noninterest expense are in line with prior quarters and our expectations. Going forward, we will continue to expect total reoccurring noninterest expense, net of ORE expense, to decrease going forward and remain in the area of $22.5 million to $23 million per quarter. Our efficiency ratios saw a reduction during the quarter due to the decreased costs discussed earlier. As always, we will continue to focus on what we can control by working to identify opportunities to make the processes within the bank more efficient. Third quarter of 2016 came in at 54.11%, down from the second quarter's 57.7%. Even with the noted decrease in expenses, third-quarter numbers continue to be negatively affected by our decision to retain a large amount of overnight investments and increased costs associated with implementing the recommendations in the agreement. I would expect the fourth quarter's efficiency ratio to end in this range. And finally, the capital ratios continues to improve. Consolidated tangible equity and tangible assets ratio increased to 9.04% at the end of the third, quarter up from 8.71% compared to the same period in 2015. Now <UNK> will review the loan portfolio and nonperforming loans. Okay, thanks, <UNK>. Net loans for the third quarter increased by $44 million. This result included a $6 million decrease in commercial loans, with the residential portfolio increasing by $50 million. Year-over-year loans have increased by $106 million, or 3.2%, with the third quarter's increase equating to 1.3% growth. As previously discussed, we continue to be mindful with regard to commercial loans. We believe some may have become too aggressive in this area with regard to both loan pricing and terms. When the credit cycle eventually turns, we feel this cautious approach will hold us in good stead. Growth for the third quarter occurred in all our main market areas. Our Florida region continued its strong results and on a net basis accounted for approximately two-thirds of the residential loan growth. Rates have increased just slightly in recent days, and our current 30-year fixed rate is 3 5/8%, up from 3.5%. Our loan backlog was solid as of quarter-end. It is down slightly from the second quarter, which is normal given seasonal factors, and up approximately 15% from the prior year. Reflected in this year-over-year increase is an uptick in refinance activity versus last year's very low numbers. Nonperforming loans continue to show improvement on the quarter. As of September 30, nonperforming loans totaled $26 million versus $28.2 million in June. Net charge-offs were also down. And at 0.10%, the annualized net charge-off ratio for the third quarter was at the lowest level since the first quarter of 2008. The coverage ratio, or the allowance for loan losses to nonperforming loans, stands at $1.6 million versus $1.4 million a year ago. Rob. Thanks, <UNK>. We would be pleased to answer any questions any of you might have. We ---+ I said ---+ so what it is is that's total cash flows, Alex, on the mortgage portfolio, and that was $350 million to $550 million. That is correct. That is correct. Mortgage backs and corporates and agencies. You know, it really depends here ---+ there's a couple of things. One is obviously model that we have, and the model really drives the calculation. But the other side is really where the charge-offs are. You saw our charge-offs start to come down a little bit, so what we have provided came down a little bit. But we see a little bit of acceleration going forward potentially, but it really is dependent on those first two things. We've always been a conservative lender ---+ you know that, Alex ---+ and we've start to our knitting. And that's kind of our discussion with regard to some of the commercial lending. Some of the standards have dropped and some of the pricing has also dropped with it, and you can't give price and standards up. So we've just worked with our existing customers, people who know us and people we know. So hopefully, it serves us well in the next cycle. Thank you for your interest in our Company, and have a great week.

2016_TRST

2015

SPSC

SPSC #I think there is a whole host of different decisions. Staff turnover is one. The whole inflection of the industry as ---+ whatever I said is if you have a dozen or 20 retailers you are working with, and those retailers aren't changing and evolving and you're not adding new retailers, there's probably going to be ---+ that's going to be a tough sales cycle. We can talk about the 50% to 75% lower total cost of ownership, but it's working ---+ they've got other priorities. So, when their environment is changing, their retailers are asking for more. Oftentimes, we're moving in and taking a piece of the business, because they just can't onboard and make the changes for their retailers fast enough. So that's an opportunity. If they are changing ERP systems, so that's where channel is important, that's an automatic that you are going to re-look how you are doing that. And I think it is ---+ it's educating them on the alternatives, so when and if they are interested in making a move, that we're top of mind. So I think there's a whole host of reasons. Sure. So as it relates to EBITDA, we set what the expectations are for the year. And then we take the opportunity to ---+ if we are ahead, for example, we will take that opportunity to invest more back in the business, to keep on growing the business. And so really our philosophy has not changed. We hold ourselves to an EBITDA number for the year, and that has remained consistent. So the fact that we're slightly ahead in Q3 is why Q4 comes down slightly. We are remaining the same in what we have said all year, as it relates to the high end of EBITDA guidance. Yes, so, our acquisition strategy has remained relatively constant since 2010. We believe we can accomplish our long-term goals through organic growth, and so we are primarily focused on organic growth. Having said that, we have $135 million of cash and marketable securities, so we're always out looking. But what we're looking for are high-quality companies that fit right in our sweet spot. So all three of the acquisitions we've made since we became a public company, there was no change in the direction or the strategy of the business, and that we think that can help us accelerate or maintain our 20%-plus recurring revenue growth. So we're going to continue to be very focused on organic growth, and look for opportunity as it's out there. It's a very fragmented market. And we go after five primary markets, and they're all very meaningful to us. As we had mentioned, we have over 400 partners, and I think it's just a continual journey for channels. And they've executed in the past, and continue to execute as adding new partners and expanding the relationship with the existing partners. And I think you're going to see a long-term general trend of that. We have been very marginal on any price increases. And we'll continue to do small things here and there, but we don't see any drastic price changes in at least the coming few years. Again, we've done some things where we'll ---+ maybe a few percentage points and that, but nothing drastic at this time. We do think, long-term, as we become larger and larger and as we continue to add more value to our customers, I think that opportunity is out there. It's still less than 20% of retailers that are sharing that data. So that's also part of the reason why we believe this is a long-term opportunity for us, that we'll get the benefit from it for many years to come. But there has not been an inflection point as it relates to retailers sharing the data. Sure. So, it's been pretty consistent around about that year-and-a-half, on average, breakeven. We've been at that point for the last couple of years. It was a little bit longer, prior to that.

2015_SPSC

2016

KLAC

KLAC #It, <UNK>, it's <UNK>. So I mean, just following the math, to the point that if we think we're going to grow in line with the market into next year, and the market forecast that we laid out, you end up with that revenue level. I think that's fair. I think we're seeing some tailwinds in gross margin right now, that we've seen for several quarters. But I think as we start to transition into some of the newer products, some of the benefits we've seen around warranty and support costs, and efficient cycle times, and things like that, I think some of that goes away. Now I do think, and as I've said in the call a couple of weeks ago, I do believe that versus the model we published, that we're operating probably a solid 100 basis points above what we had put out there so, and I think that's sustainable. So I think some of what we're seeing today, it would be hard for me I think to replicate that type of gross margin profile into next year. So there might be a little bit of degradation there. So given at that revenue level, the range you mentioned probably feels a little bit hot, but I would say you're probably in that 35%-ish range, plus or minus 100 basis points or so. Now there's a lot of factors in that mix and so on, but that's how I would characterize it. The comparison will be tough. I mean, I don't really have that data. We are booking a lot of these new platforms, things that have come out in this last year, right so. And even in the more trailing edge businesses like in <UNK>a, they are buying the latest gen of tools, right, with the ability to try to use that capability as they ramp through this early development of new technology there. So I would say, the majority ---+ a pretty solid amount of the business is new products, but I don't have the actual percentage. I guess, I'm not sure exactly the question, sorry, <UNK>. But the ---+ . Oh, I see. Well, you know, <UNK> talked about the percent of our business that we have. If we look back, just to give you an idea of FY16 to finish, <UNK>a was the second biggest market for us, and that was partly because there was some underspending going on. But <UNK>a is pretty significant for KT. And I think as we go forward, you have the combination of this investment, even though it's in maybe [M minus 2] technology, we also have a very significant amount of penetration, and market share, and also that this is higher adoption, because it's foundry. So they are buying some of our newer tools, and we see a lot of interest in ramping these facilities quickly. They're spending a lot of money. They're trying to grab market share, in some cases, serve the domestic demand. So we feel pretty good about our position there. In fact, if there's an area where we're going to invest more heavily going forward, it's overall to support to the <UNK>a, <UNK>a investment cycle. This one is real. Only thing I would add, while I think that there is certainly some new development activity that's happening there, as they ramping these fabs from a greenfield state, that ultimately it's serving a global market. And so, I think you'll see some movement around in terms of who gets market share, but there will be an inflection in the short term. Probably some of it doesn't necessarily contribute to supply, but over time it eventually will. So I think the overall foundry dynamics in the long run, will stay pretty consistent. But there's certainly a commitment there, and there's a focus to <UNK>'s point, not only on the ramping of new technology, but also our market position there is very strong. I'll take the first part, and then let <UNK> talk about the second part. We're definitely seeing demands associated with multi-patterning, right, and also EUV. I would say the EUV work is in the reticle space, where we do have tools that are dedicated now to EUV, in terms of our 6xx, some of our newest 6xx capability, people are buying for EUV. So that's early days, of course, for that. In terms of overall challenges, customers, whether it be registration overlay, film thickness or optical CD, all of those things are potential areas for growth. We're doing well. We think there is more upside to them, and we feel good about our competitive position. Now whether or not, we see significant increases in the next 12 months, but I think over time, there is a potential to keep that business growing. And from an investor's standpoint, <UNK>, you can talk a little bit about how we thought about that. Yes, I mean, we've got a pretty active portfolio management process here in the company. And I think, given the strategic reorganization we did a year ago, we have the ability to move capital around much more freely than we did in the past. So we will continue to execute our process. We have been investing in those businesses. We'll continue to do so. I gave some guidance in the prepared remarks around what I expect OpEx levels to be overall, and there is a bit of an increase there, and we're trying to drive the focus of that to be mostly R&D, with an overall target of 60% of the R&D expenses, or the overall OpEx as R&D. I don't think that's really what we're seeing. I mean, right now, we do have some ability to flex the different tool capability people need. But a lot of these facilities don't think they're going to stay at 28. So there's a desire to have newer capability. And, of course, it doesn't hurt them to have it, when they're doing their 28 work, but they're hoping they're going to go obviously lower than that. So I think we're in pretty good shape regardless of where they buy in the portfolio. It's not quite the same, and I'll give you a very different example. If you think about some of the investment going on in the Internet of Things where people might be in automotive or they're in sensor technology, then we're talking about older tool sets, and maybe even some our [KT Pro] stuff, which is reconfigured or refurbished tools. That's not what we're seeing in our markets in <UNK>a for the most part. Maybe there will be an element of that later, but that's not what it looks like right now. So the way we're serving the EUV market is with the 6xx series that's has been out several years, and we have some additional capability to do that. So that's already part of the portfolio, and had nothing to do with any discussions we had with other companies. That's out there, and now we're seeing their demand, some demand for that. I can't really say at what point that's going to ramp, because for a long time, it was a part-time application for some customers. But we are seeing some dedicated purchase of those tools for that capability, and it really will depend on how many starts they have, in terms of different types of devices, how many masks they have. But whatever they have, with a adequate lead time, we're prepared to serve it. We don't ---+ it's not really about additional development beyond the capability that we have, and some software upgrades, and algo upgrades in that platform. We're not talking about a new platform, which we talked about several years ago. That's not what we're doing. We're not doing an actinic inspector, we're developing additional capability on our existing products to serve it. The only other thing on that is that we would add is, that they will do flop-down inspection to qualify reticles, certainly for re-qual capabilities, and incoming quality checks where they'll basically print the wafer, and do Gen 5 inspections on the wafer to qualify reticles, as another check point in terms of making sure reticles are good. It's not really an area we're focused on. I mean, it is possible that others might do that, but we feel pretty good about the products that we have, the range that we have, and our ability to satisfy the markets with our organic efforts in terms of process control. So not really something we're looking at. I think that just the fact that there, as customers are looking at the newer technology nodes. First of all, there are more customers trying to get in production. Second of all, as those already in production, are looking to new capability. Just the ability to have a better sense of debugging the process, in terms of, from the discovery phase, not really from in production. So it's really that. And in terms of their ability to see things they have never seen before, because if they had a e-beam solution, they could find small defects, but they couldn't get a wafer signature. And now they can do both. Now they can find small defects, and get a wafer level signature. Yes, the [NPI] process at KLA, which is new product introduction, where engineering is handing off to manufacturing, on a lot of the new platform transitions that we've had, has been really exceptional. So tools are being handed over to operations, where you have good design stability. Our marketing and sales teams are managing the transitions well with customers, so we're not getting stuck necessarily with a lot of extra inventory, as we move customers from one platform to the next. Because of design stability, you don't have retrofit programs, and other things, where you're out there, trying to fix tools as you're shipping them out. So it has been a huge factor, I think not only in the conversion but also been factor in the margin profile, A, because of the inventory issues. But also the fact that the service costs around the warranty costs to support the tools, and get them installed quickly has been fairly efficient, and so that's been a factor as well. So very impressed with the teams to being able to do this, and do this in a period of time, where there was a lot of work around integration planning, distraction, and so on. So really impressive work. I think, the one other thing is, we have taken more risk in terms of inventory risk. So one of the things we've done is provided more flexibility in the master schedule, to be able to react to market demands, especially most of our customers now have very short visibility into their cycle. So we're trying to be prepared, so that we don't get caught out, not having capacity when it's needed. Yes, obviously, given the relatively small numbers of players, I'm going to be careful about this. I would say the leaders feel good about ---+ the leader feels good about where they are, and I won't comment to that. There are other players getting in the market. And I would say that, we are seeing success, but it is ---+ if you think about a yield curve, I think there's a long flat part of that curve down around zero. And I think it took a while for people to debug the process. And frankly, one of the things, one of the areas for opportunity for us going forward, is there's not really a good defect discovery mode for 3D NAND, because there is really no tool capable of helping debug. And even, although ---+ we have made some attempts, when you do find defects, they are very hard to verify, because you have to essentially de-process or [fib] them to go find it. So I would say it's been slow, in terms of getting started. Now it's getting better. I think that there's ---+ some people are getting their process, but as they look at expanding to the next technical challenges, we anticipate yield is going to be a big part of the challenge. And I think there's a lot of interest in partnering with us, to come up with solutions to address that. Because obviously, there is a demand there, but that there's certainly getting very challenged by making the processes actually work. I think ---+ so <UNK>, this is <UNK>. I don't think our general view on the year is much different. I think there could be some growth at foundry, as we build it bottoms-up. But we think that we'll see continued momentum around, and my comments were orders. So you'll start to see those tools ship in the second half of the year, that we'll also see, a stronger foundry, shipments and revenue in the second half, related to 7 nanometer activity. So but, I don't know what, how they make up their forecast. But at the end of the day, as I said, I feel like we're not that far apart, generally in terms of how we look at it, how we look at the year overall. Yes, I do. Both for overall, and within foundry. I don't think it's really changed all that much. I mean, to <UNK>'s point earlier, I think we tried to be as flexible as we can. We've taken some risks. I think we're managing through transitions. And any time we have product transitions, and bring a new product with new capability to the market, there is a level of customer demand that goes with that. So I guess, in one way, on any time you have a transition, you do see some increase in visibility. But we are still reacting to, our customers are facing short lead times with their customers, and trying to expect us to follow suit with that. And we're doing all we can to try to be as flexible as we can to meet their needs. Maybe the one other thing, though, that is a little different, is the strength that out of <UNK>a is pretty different, and there are greenfields that are happening. There's big investment happening. So if you think about that part of our business, there's a much more committed, and maybe that could change, but they're more committed, than it was hard to see in the past. Well, our 5% to 7% of our through cycle multi-year target, right, and that was when we put that together, and said, hey, look from calendar 2015. And as we're sizing and run the business, we're going to position it, so we can deliver that level of revenue growth, and try to have operating leverage that's 2 times the growth rate. I mean, certainly, Gen 5 is a bigger piece, but there will be mix and matching that will happen within broadband plasma. So I think it's really, the strength ---+ I don't see a fundamental shift in overall mix, as we move into next year. To <UNK>'s point earlier, there could be more investment in reticle inspection, as customers being to prepare for more development activities around EUV, so that could be inflecting product a little bit into the year, year to year. But overall, I think, that the mix looks relatively consistent across the different product segments. Yes, <UNK>, we got that question earlier, but just to go over it again, really quickly is, yes, there is ---+ we've clearly been outperforming the model. I think some of that is due to some of the maturity of the platforms that are out there. We're transitioning to some new platforms. And so, I think we'll lose some of those tailwinds we've had. But to the point I've made earlier, I think we're operating probably 100 basis points or more over that model. And so, as you play that through, I think you'll see the same kind of performance in the operating margin line. Yes, here's the big difference, is, there is no real scaling going on right now. I mean, and until you hit the EUV, essentially with multi patterning, you're not really doing anything relative to defect size. So Gen 4, from lot of customers' perspective, serves that market. So it's really, people want more sensitivity, but it's more about discovery. Frankly, if they had to deal with those same defects on the earlier nodes, on the current nodes, that they wouldn't be able to be in large-scale production. So it really is hinged on, when you see advanced technologies going into production, a la EUV.

2016_KLAC

2018

SEE

SEE #Thank you, Shannon. Thank you, and good morning, everyone. Before we begin our call today, I would like to note that we have provided a slide presentation to help guide our discussion. This presentation can be found on today's webcast and can be downloaded from our IR website at sealedair.com. I'd like to remind you that statements made during this call stating management's outlook or predictions for the future periods are forward-looking statements. These statements are based solely on information that is now available to us. We encourage you to review the information on ---+ in the section entitled Forward-Looking Statements in our earnings release and slide presentation which applies to this call. Additionally, our future performance may differ due to a number of factors. Many of these factors are listed in our most recent annual report on Form 10-K and as revised and updated on our quarterly reports on Form 10-Q and current reports on Form 8-K, which you can also find on our website at sealedair.com or on the SEC's website at sec. gov. We also discuss financial measures that do not conform to U.S. GAA<UNK> You may find important information on our use of these measures and their reconciliation to U.S. GAAP in our earnings release. Included in the appendix of today's presentation, you will find U.S. GAAP financial results that correspond to some of the non-U. S. GAAP measures we reference throughout the presentation. Now I'll turn the call over to Ted <UNK>, our President and CEO. Ted. Thank you, <UNK>. I want to thank all of you for your interest in Sealed Air, and welcome to our 2018 first quarter conference call. Before Bill and I discuss our first quarter results, business trends and 2018 outlook, I'd like to note the change to our reporting structure. Starting this quarter, we allocated more expenses from our Corporate segment to our divisions. This change was implemented to accelerate productivity improvements, drive accountability and eliminate operational redundancies. For your convenience and modeling purposes, we provided 2017 results to reflect the revised allocation of these expenses. Please note that our decision to move expenses from the Corporate segment to the divisions has no impact on our total adjusted EBITDA. Now let's move to our first quarter results. We had a solid start to the year. Operating leverage improved. We reduced our fixed cost structure, and we invested in new innovations to drive profitable growth. Our first quarter net sales of $1.1 billion increased 10% over last year, and adjusted EBITDA of $205 million was up 13% over the same period. Operating leverage, or what we define as our profit-to-growth ratio, was 23%, tracking above our full year target of 20%. As a reminder, this ratio represents the year-over-year change in EBITDA over the change in sales. Earnings per share in the quarter was $0.51, a 19% increase over Q1 2017. Our performance in the first 3 months of the year, combined with favorable global business trends, gives us confidence in our 2018 outlook. We are on track to achieve our full year 2018 guidance for net sales, adjusted EBITDA and free cash flow. To account for the 9 million shares we repurchased in January, we raised our earnings per share forecast to be in the range of $2.45 to $2.55. We announced today that the board approved a new share repurchase program of $1 billion, replacing the prior authorizations. This represents an increase of approximately $500 million from what was remaining under our previous program. Keep in mind our guidance assumes no additional share repurchases. To deliver our objectives for 2018, we are focused on opportunities that will create the most value. First, accelerate profitable sales of our innovative solutions in high-growth markets and geographies. We want to be top-of-mind when our customers are trying to solve their most critical packaging and fulfillment challenges. Second, take our operational excellence on how we innovate, buy, make and sell materials, systems and solutions to world class. We have good systems in place, but there's room for improvement. And these improvements will expand margins and increase our return on invested capital. And third, reduce our cost structure and drive organizational productivity by operating as one Sealed Air. Our focus is to address stranded costs from the Diversey sale. But we are going beyond stranded cost with additional actions, some of which we're taking in the first quarter ---+ were taken in the first quarter. We delivered $10 million in incremental restructuring savings in Q1 primarily attributable to stranded cost reduction activities. For the full year, we expect restructuring savings to be approximately $30 million. Bill and I will discuss these actions and opportunities in more detail throughout the remainder of our prepared remarks. With that, let me now turn the call over to Bill. Thank you, Ted. Turning to Slide 4, let's start with a review of our net sales by region. In the first quarter, we delivered $1.1 billion on net sales with all regions develop ---+ delivering constant dollar sales growth. Excluding the acquisition of Fagerdala, Latin America was our fastest-growing region at 8%. Strength in Latin America was primarily driven by Brazil where we benefited from a stronger cattle market in addition to new customer wins. North America was up 5% with 8% growth in Product Care and 4% in Food Care. Growth in Europe, Middle East and Africa or EMEA of 4% was led by positive sales trends in the U.K., Germany, Spain and Russia. Asia Pacific increased 11%, including sales from Fagerdala. Excluding Fagerdala, Asia Pacific was down slightly primarily due to continued market weakness in Australia and New Zealand in Food Care. Turning to Slide 5. Let me walk you through our first quarter net sales and adjusted EBITDA on a year-over-year basis. Volume increased 2%, contributing $24 million to top line results. Price/mix was $18 million favorable or 2%. We delivered positive volume and price/mix trends in both Food Care and Product Care. Currency translation was favorable by $36 million. Adjusted EBITDA was $205 million or 18% of net sales. Growth in adjusted EBITDA was attributable to higher volumes, restructuring savings and operating discipline and favorable currency. This was partially offset by unfavorable mix and price/cost spread. Volume growth contributed $9 million. Restructuring savings were $10 million. Cost management and income from acquisitions contributed $2 million. Currency was favorable by $6 million. Unfavorable mix and price/cost spread of $4 million was due to higher input and freight cost as well as the timing of Food Care's contract pass-throughs. In addition, Product Care was also impacted by the timing of price realization. As Ted noted earlier, we made a change to our reporting structure beginning this quarter. While this change does not impact our total EBITDA, I do want to provide some color on what this is expected to look like going forward. Our 2018 guidance for the Corporate segment prior to this change was less than $100 million. We expect approximately $60 million of these expenses to be allocated to Food Care and $30 million of these expenses to be allocated to Product Care with the remaining reported as a new Corporate. Adjusted EPS was $0.51 on average diluted shares outstanding of 165 million. Our adjusted tax rate was 30% in the first quarter '18. We continue to estimate our tax rate for the full year 2018 to be approximately 29%. As we indicated on our last quarterly earnings call, we are currently evaluating opportunities to optimize our tax posture. Included in our GAAP earnings, we recorded a $290 million provisional tax expense related to the onetime mandatory tax on unpatriated foreign earnings as a part of the U.S. Tax Reform. Let's now turn to our free cash flow for the 3 months of the year on Slide 6. Free cash flow for the 3 months ended March 31 was an use of cash of $63 million, which included the onetime payment in lieu of certain future royalty payments for patents to an outside engineering firm. As you may recall, in December 2017, we entered into an agreement to pay $50 million, of which $5 million was paid in 2017 and the remainder was paid in January 2018. CapEx was $43 million. Interest payments net of interest income were $38 million, and cash tax payments were $19 million. For the year, we continue to expect CapEx to be $160 million. Interest payments net of interest income to be $175 million and cash tax payments to be $145 million. Let me now pass the call back to Ted for more details on our divisions and our outlook. Ted. Thank you, Bill. Turning to Slide 7, which highlights volume, price/mix trends by division and by region. On a global basis, volume trends were up 2% in Food Care with positive trends in all regions except Asia Pacific due to declines in Australia and New Zealand. We expect the protein and dairy market conditions in Australia and New Zealand to improve this year. Product Care, excluding the impact of Fagerdala ---+ impact of Fagerdala delivered 3% volume growth with 3% growth in North America, EMEA and Asia Pacific. Price/mix was favorable in Food Care and Product Care due to our announced price increases and continued shift to value added solutions, both of which partially offset higher input and freight cost. As we continue to work through our product portfolio and deliver new innovations, we're finding more ways to help our customers save money and solve their most critical packaging challenges. I want to highlight that we experienced a more favorable mix in our e-commerce and fulfillment business in the first quarter. This was a key contributor to the higher margins in Product Care. Let's turn to Slide 8 and review Food Care results. In the first quarter, Food Care delivered $696 million net sales or 3% constant dollar sales growth due to positive volume and price/mix trends. Adjusted EBITDA increased 8% in constant dollars to $135 million or 19.3% of sales. EBITDA results include $10 million of expenses previously allocated to Corporate. You can see in the sales and EBITDA bridge that despite favorable price/mix on the top line, our profitability was negatively impacted by an unfavorable mix and price/cost spread. This was due to timing of contract pass-throughs and higher input and freight cost. We expect this trend to improve for the remainder of the year. Food Care is also benefited from our efforts to reduce cost. You can see these efforts in restructuring savings and operating cost in the bridge, which combined contributed a positive $9 million to adjusted EBITDA. I want to highlight the trends that we experienced in Q1 we expect to continue throughout the year. Our case-ready platform continues to go globally at above-market rates. In North America, case-ready was up double digits. We are seeing strong customer acceptance and increased adoption with the seafood and convenience segments. Second, the momentum continued in high-growth geographies such as Brazil, Russia, China and Southeast Asia in the first quarter. We expect this trend to continue going forward as demand increases for packaged proteins and convenience meals. And third, in North America and EMEA, the ongoing shift to fresh foods, combined with our sustainable innovative packaging, is driving our above market growth across all proteins. We're also excited to see our penetration into the rigid container market with our flexible packaging systems for fluids such as condiments, sauces and soups. In Q1, North American beef production was muted due to weather and other factors. However, the industry forecast for the full year 2018 is still expected to be in the 2 to 3 ---+ 3% to 4% as demand for domestic and exports accelerate in Q2. Looking ahead, we're on track to achieve our 3% constant dollar sales growth for the full year 2018. We expect adjusted EBITDA to improve in the second half versus the first half primarily due to seasonality and the timing of contract pass-throughs. Moving to Slide 9, where we highlight results from our Product Care division. In the first quarter, Product Care delivered $435 million in net sales or 11% constant dollar growth. Excluding Fagerdala, Product Care delivered 6% growth on higher volumes and favorable price/mix. Adjusted EBITDA increased 19% in constant dollars to [$78 million] (corrected by company after the call) or 18% of net sales. EBITDA results include $6 million of expenses previously allocated to Corporate. You can see in Product Care's EBITDA bridge that the year-over-year increase was driven by profitable volume, restructuring savings and cost management. We're seeing a more profitable mix of business particularly in e-commerce and fulfillment section ---+ segment as the pricing actions are taking hold. Our mix and price/cost spread was negative due to the timing of price realization and other higher input and freight cost. We expect our mix and price/cost spread to improve for the remainder of the year. Our e-commerce and fulfillment business represents 30% to 35% of Product Care sales and is growing 15%. Our innovative portfolio, which includes the next generation inflatable Bubble Wrap, automated systems such as I-Pack and StealthWrap and our unique Korrvu packaging is delivering 15% plus growth as well. We also had high single-digit growth in Instapak due to an improved industrial environment. Overall, our businesses continue to gain momentum and our top priority going forward is to drive higher profitable sales from our innovations. The integration of Fagerdala is progressing well and has provided us with a platform for greater sales and cost synergies. For example, our specialty foam solutions increased 9% organically in the quarter, demonstrating the power of our enhanced offering and combined sales efforts. We're also leveraging their technical expertise to expand our portfolio of custom solutions targeting existing and adjacent markets. For the full year of 2018, we anticipate year-over-year constant dollar sales to increase approximately 7%. Fagerdala is on track to achieve nearly $100 million in sales, of which $70 million is incremental since we closed the acquisition in early October 2017. Under the new reporting structure, Product Care adjusted EBITDA margins are expected to expand over last year. Now turning to our total company 2018 outlook on Slide 10. Net sales are expected to be in the range of $4.75 billion to $4.8 billion with constant dollar growth of approximately 4.5%. Adjusted EBITDA is expected to be in the range of $890 million to $910 million, improving an EBITDA margin of 19%. As I noted earlier, we are increasing our range for adjusted earnings per share to $2.45 to $2.55, reflecting our year-to-date share repurchases. We forecast free cash flow from continuing operations to be approximately $400 million. To wrap up the call, I'd like to provide a brief discussion on our strategic directions, which you can see at a high level on Slide 11. In my first 100 days plus as CEO, I traveled around the world getting to know our people, operations, suppliers and customers. I've been working closely with our senior leadership team to refine and pivot our long-term profitable growth strategy while aggressively going after near-term opportunities to take Sealed Air's performance to the next level. We are focusing on growth opportunities from new innovations, driving operational excellence, recognizing and promoting talent and targeting strategic investments that will create value. We're building a solution model that starts with focusing on how we can save our customers ---+ solve our customers' most critical challenges and save them the most money. This is leading us to high-growth geographies, market adjacencies and next generation technologies, including digitalization and automation. We're using our market-leading brands and existing core competencies to penetrate these markets. We're accelerating our investments in proprietary and sustainable materials, including renewable and recycled content. We recently introduced new metrics to manage our portfolio. Our profit-to-growth ratio is designed to improve our operating leverage. It has helped us to manage our portfolio, drive operational excellence, move the needle in innovation and improve earnings quality. We're using ROIC as a guide to our investments and capital allocation strategy. We'll continue to focus on opportunities that are accretive to earnings and create long-term value for our shareholders. Our people around the world are making all of this happen. I'm excited to see our organization's high level of energy, integrity and passion for our business and customers. Before we open up the call for your questions, we ask that you please mark your calendars for Thursday, August 2, for our second quarter 2018 earnings call. Shannon, we'd like to begin the Q&A session. Okay. Looking at Asia Pacific, just as quickly though around the world, Asia Pacific is third in our volumes as we look specifically, you're talking about the Food Care business. We're still seeing Australia in the quarter down. We're still seeing New Zealand down, primarily driven by what's going on in the meat cycle and in dairy. We do see ---+ hope to see it return by the second half. But right now, we still see it down in the area. We have seen China up actually double-digit, but it's a very, very small piece of our business. Yes, this is Ted, and I will let Bill jump in as well. But if ---+ the focus is on price/cost mix, and let's just talk about cost and, obviously, resin with being a leading piece of our cost. We were anticipating, going in this year, that we may see the resins move down in the quarter. We didn't see that, which we talked in the last call. We were late behind some of that pricing efforts there, and our contracts on the Food Care could still take some time to catch up. Looking out to the second half of the year, we still see that choppy. We're seeing some of the forecasts that say that we should see a resin drop. But even in talking about some of our leading suppliers, we're anticipating they might be still trying to get a price increase out there. So overall, we see the puts and takes. We see it choppy, flat, but we don't see a drop until the second half and maybe even late in the second half of the year. Other input cost in there that really are hitting us in the quarter and hitting everyone is freight. So part of our price increases that we put out there and the most recent one on the Product Care, we didn't get that to take effect until April. So we think we'll be ahead of that in the second half of the year. That's what we're planning for. But the choppiness in our cost structure, our input price is still out there. We think we'll be ahead of it, though, in the second half of the year. So you have noted that the first quarter of '18, we were negative on mix and price/cost spread. We expect that to continue to improve as we move through 2018. We actually expect near the end of the second quarter of '18, that, that will actually turn positive and continue to improve and be positive throughout the balance of 2018 for both Food Care and Product Care. The first quarter, as we talked a little bit about what's going on, we're behind catching up on the contract pricing coming through. We think we'll be catching up that on the second half. The North America, looking at the first half, North America being very strong last year. We still are seeing, I'll say, muted or tepid growth in the first quarter on meat. We think we have opportunities, though, in Asia in the meat cycle in the back end of the year. I'm trying to think what else on the ---+ in Europe, actually, interesting because I was in Europe twice in the past quarter. We see some opportunities on the catch up on the price, and we also see some pickup on some of our new products, especially Darfresh, Darfresh On Tray. It was quite interesting actually seeing a supermarket in Italy and France and then Holland. Definitely, the pickup on some of our new products and innovations in Europe, I think we should see an opportunity for some volume growth in the second half in Europe and plus getting ahead or getting caught up on the pricing side. So see opportunities in the second half. The final piece going around the world, looking at Latin America. Latin America having fairly strong growth in the first quarter, we see that could continue, especially the comparables in Latin America should be helping us on the second half of the year. So as we've said, we don't model future share repurchases into our guidance. What we've said is we are going to be active in the market relative to share repurchases. But the guidance is basically calculating 162 million shares and would not contemplate any additional shares. Okay. Use of cash. Yes, we're not giving any guidance on the share repurchase. We are looking, though, on investments. As we've talked before on the strategic investments both internally ---+ well, first talk about internally, some of the investments in our facilities, investments in capacity. We're looking to ---+ we just have some opportunity to de-bottleneck some of our facilities. We're also looking at some of our investments in the sustainability area. We're looking at some ---+ we have some interesting opportunities with some renewable-type resins we're looking for investments this year in. And then on strategic investments, the M&A, we're still always comparing that with the share buyback. We now have some pretty good data on how we've been in the market. You saw how aggressive we were in the first quarter. We're comparing that investment to our acquisitions. We now have the data of what Fagerdala looks like. We put $100 million into Fagerdala. We're looking at the accretive power of that acquisition to buying the same $100 million worth of shares. And right now, Fagerdala is ahead of that on accretion, and we're being very disciplined. We're looking at the ROIC on potential acquisitions that are out there. And we're being very frugal and making sure that they meet our financial targets, so. Sure. So on the leverage ratio, you'll know that at the end of Q3 after we sold Diversey, the transaction closed in September of '17. We ended Q3 with a net debt to adjusted EBITDA ratio of 2.4x. It went up a little bit at the end of the year to 3.2, and now we're at 3.6x, and that's primarily because of our share repurchases. That's what's actually driving that. And relative to the restructuring savings, we continue to drive those costs out of the business. We're very comfortable with a 3.5x to 4x net debt to adjusted EBITDA ratio. We're confident that we've started the process of operational productivity and driving a lower level of stranded cost and realizing those savings. Yes. And I'll comment compared to my predecessor on the capital allocation strategy and the comfort level with that net debt-to-EBITDA ratio. As we stated early, the business has been comfortable at 3.5 to 4 and testing that and looking at ---+ we have pretty strong and stable markets that allow for us to do that. We generate strong cash. I believe we have even more opportunities to improve not only just on our cash flow but our cash conversion, so feel comfortable with that with what's out there. Also putting the targets into the organization, I think it really helped. We've seen that very quickly on the leverage ratio, managing what's coming into the business with our portfolio. I think we can pivot on that quickly as a guide. And that also leads in for us to look ---+ as we do look at potential M&A that it's got to be accretive to the ---+ to those metrics as well as accretive to the ROIC metric. That's really a great test. We already analyzed what our competitors have bought. We looked at where they accreted to their cost of capital. And so we're being very careful with that, and we want to be very opportunistic. And using the share buyback is our guide. If we can invest in the business and buy our own shares back and be opportunistic and generate and create value, that's what we'd like to do. With that guide of the 3.5 to 4, I think we have some pretty exciting opportunities with our capital allocation looking internally, looking externally and letting the numbers and letting these guides guide us to do the right thing. Yes. This is Ted. Everybody's got a backup. There must have been another call going on right now. The e-commerce is a tremendous opportunity for us. But as I'm using the language on the strategy of pivoting and refining our strategy, e-commerce is a key one to look at. Because when we look at e-commerce, who's not into e-commerce right now. If we're not ready for what's going on in e-commerce, we're not going to get this lift that's really out there for us in packaging. So if you look at the difference in the quarter, you saw a pretty sharp pivot, and that is managing what goes through that portfolio. And we have the right ---+ we have the ability to do that by we can look at the margin, the products that are going in, where we could add value. But also, it's really focusing on us to be in front of the customer and solving those problems. This past week, I was with one of the world's largest freight packaging companies and I was at their logistics headquarters. We are now fully embedded with them with our own innovation center into their facility. I was able to see, it's unbelievable, 416,000 packages an hour going through that facility. So that's touching all of our customers that are going through there, even the Food Care business. So we have to be prepared that our portfolio fits into this very high-growth market that we make money on it. So again, that's why those guides are there to do that. But it's forcing, asking ---+ I was there with my counterpart and got to ask very directly, what are your biggest problems that you're solving. It was quite interesting. Similar, freight. How do they manage the freight going back. What can we do on our packaging to make it lighter. And then his next one was damage. Great. What can we do to get in there. And with ---+ not only you, as the freight supply logistics expert, but the packages that are coming through. We can solve those problems. We have some really interesting innovations to do that. The other interesting piece in the data point in listening is in the e-commerce market was returns. What can we do to help returns. Just a huge percentage that people ---+ the home is becoming the new store. People are sending stuff to their homes. So the consumer experience, we have some pretty exciting innovations. We're working on some augmented reality that actually can tell you what's inside the package, tell you what you bought and how interesting it is. And so we can help that e-commerce market with some pretty exciting solutions. And behind that, though, use our financial metrics that guide us into a profitable growth in this market. Just as you said, it's not going away and it will be bigger part of our business, and we need to make it a bigger profitable part of our business. So we're excited what e-commerce can do. And not just Product Care, Food Care. Food Care is also extending the shelf life. But we are working with these same customers ---+ how do we extend it from shelf life to truck life to plane life. And we even had some interesting talks about drone life. So how do we ---+ we think the opportunity there is for us, but we're going to have to manage that. It's not ---+ won't be our existing portfolio. It's ---+ we've got to look at our portfolio that matches this new high-growth market. So it's an exciting opportunity for us. No, it was April 1. I apologize. You've got a bunch of questions in there. I'll try to see ---+ I'll go through the first one, and if I miss a couple of the other question, you have to remind me. First one was how our customers are reacting to price increases. Well, you can either probably answer that yourself, not well. So ---+ but it's an excuse for us to be at the table at all levels and figure out how do we handle this, and it's forcing us into the solutions conversation. Can we save you money in other places. But it's a question that the price increase will come. It's interesting on the price/cost spread, though, on the timing of the price increase, just to give a little bit of color, that was April 1. So we had pretty strong growth in Product Care in the first quarter. So one of the buying behaviors you get, because we announced early, so we're anticipating some of our bump in Product Care in the first quarter was to pull product forward before the price increase. So that's, I think, so a little bit of color to that first question. The second part, where do we think it's going forward. Well, our team internally, there is no question on that decision. We have to find a way to manage our portfolio and get price in the marketplace. But really as we're shifting that is how do we get value. So the same conversation is we have to look at our portfolio. One of our most ---+ this is another interesting anecdote, but meeting with customers in the e-commerce market, we have shifted our mailers. We do a ton of mailers in e-commerce. I think it's roughly around 1.2 billion mailers. So we're looking at to do more than mailers, and we have some pretty exciting new product. Well, before we even introduced the products, if we're dealing with the purchasing team, we had an interesting story that we introduced a brand-new product that I talked to you before about TVs. Well, the first comment back from the customers purchasing that our price was too high, and they haven't even seen the product. No one else has it. So again, to the story, pricing is very difficult. The only way we can get pricing through the market is if we find ways to help save them money. The TV saving opportunities that over 52% of those flat screens are now going through the Internet, their #1 issue is damage. We have a unique solution that dramatically reduces damage, is sustainable, doesn't have Styrofoam in it, significantly lower weight, doesn't have to be repackaged. And that's what we got to focus on ---+ what comes through is a better price/cost mix in the portfolio. Yes ---+ no, great questions. Lots in there. But let's try, we'll give you a 3-part answer. I'll open it up on the why. I'll turn it over to Bill so he can give you some historical precedents because I can't answer the history, Bill can. And then I want to close to where you left it, how we're doing it, the strategy of what we're trying to accomplish here. So the first piece on the restructuring in moving it, acting as one company, we did this to drive the productivity. Diversey was real. There was commitment out there. That's what I inherited. We are going to make the commitment. There was a dilution effect going and selling of Diversey. We had to cover $0.70, and to do that, we are going to buy back the shares or find an accretive acquisition. So our job is to create value for shareholders. But then the other piece was take out the Corporate cost when you're 3 divisions and 1 Corporate and now you don't have that division. So we said, let's take a look at the strategy of acting as one company, and let's not take out the stranded cost because you have to. How do we be more efficient acting as one company. And looking at some of the costs that were in there, the Corporate is not going to drive the engine. The Corporate is ---+ the divisions are driving the engine. The Corporate's there for guidance and, obviously, they don't want to pay Corporate expenses, so Corporate is going to have to justify the value. So it's a strategic piece in there. But I got to give Bill credit before I turn it over to Bill. Bill led this effort with the team and did a really nice job of getting this done with the team. And I will let him explain the details on where the actual money is going and how we're doing that. So first of all, on the cash restructuring spend itself, our free cash flow guidance of the $400 million includes cash restructuring payments for all of '18 of $20 million, and that's deducted to arrive at the free cash flow. Not included in that calculation is an additional $30 million that are going to be spent to address the stranded cost. So basically, $50 million this year. And basically, to answer your question, maybe another $20 million to $25 million in '19 to address those restructuring and stranded cost needs. But relative to the stranded costs themselves, as we said, we have $10 million of restructuring savings in first quarter 2018. We're anticipating $30 million for the full year. Ted and the leadership team are coming together, and we all own the issue of organizational productivity and the resulting reduction of stranded cost. We understand that driving those costs out earlier than what was originally planned and earlier than what we had said in the third quarter of '17's earnings release is very, very positive and will have a positive impact on our profit growth ratio. And we also, to your question about disbanding, the larger Corporate segment and rolling those costs in to our Food Care division and our Product Care division, what we said was $60 million of cost in full year '18 would go to Food Care, $30 million to Product Care. That is having a total leadership team ownership of the stranded cost reductions, and it contributes to a one Sealed Air focus that Ted continues to drive. Right. And let's talk about the strategy. Your comment, are we going to be a serial restructuring company. No. What we're going to do is we're going to be driving organizational productivity. So we actually have given definition on that. We're going to do more for less by investing and working smarter. And so we're going to put that speed into the organization to drive those returns. Second is we are focused on the long term, and that's what the Corporate ---+ and that's where we made the change in moving innovations. We are here for the long run, so we are going to invest in things that don't have a 3-year return. We are going to invest things that could fundamentally change the structure of the company. So that's a Corporate expense, Corporate function ---+ the divisions need to pay for that. We have some pretty exciting things, and if you come to our innovation center here ---+ in my 6 months, we have some exciting technology that we're working on that can change the game. We're not a private equity firm. A private equity firm has got a 3-year window. We're different. We can invest in that, and we want to be productive because we want to beat the private equity in the short term and we want to beat them in the long term. We think if we do those 2 things, we can beat the private equity because we're competing with them. And long term, we can add significant value for our shareholders, but we've got to incubate that. So that's part of the strategy that's behind this change. That's a great question because he is listening. The ---+ actually, what we shared and what I've been sharing with people who ask, I gave myself that I'd like to look at this for 6 months. We have a good guy. Our lead candidate I get to work with all the time, which is Bill. We have an outside search going on in looking at candidates in the marketplace. Since I've had 2 other companies and dealt with a lot of the banks, we've got a lot of candidates that we're looking at both formally and informally. But it's probably toughest on Bill listening right now to be asked the question. We're ---+ I owe it to the business, I owe it to our people that make sure that we look for the best candidate out there. With Bill listening right now, as I already gave a shout out on what he's doing to actually lead some of these changes. He's been a pleasure to work with in sending that message. So I don't want him to listen to his early assessment, but so far, I think this is an exciting company to be a part of. We're pivoting the strategy. This is a pretty cool place to work, so we have a lot of interest. So now that I'm saying this publicly, I'll probably get more, but that's where we are. I want to give myself 6 months to go get it done. I'll take the cattle, and I'll turn the second question over to Bill. If we look at cattle in the U.S., as I shared, U.S. has been somewhat muted. We think we have some opportunity. We have some weather-related issues, but the herd is, I'm learning this, is they're in ready, so there could be an opportunity in the second half. The one that's turned for us for 2 reasons, one, it's been down in Latin America and we've had some share gain there. So we feel good that we could have some continued upside opportunity in Latin America. The other one, though, in Asia Pacific, which is Australia and New Zealand, is still on the down cycle, but we're anticipating a second half. But that could be as late as the end of the year. So we do see that turning. Bill, you want to handle the second one. Relative to the class action settlement, it relates to urethane purchases. This particular settlement arises from a 2004 class action lawsuit that relates to urethane purchases in 2000 through 2003, so quite some time ago. The defendant in this case lost a jury trial and agreed to settle, so we have a share of the settlement income of $15 million. And we did record the $12.8 million in this quarter as a special item income. And we'll record the rest when the rest of the cash is received. Operator, that was our last question. Thank you, everybody, for joining our call today.

2018_SEE

2015

CFR

CFR #Good morning. Well, first of all, anybody that can predict the future and know everything that's going to happen is going to be wrong. Remember what I said, the provision was increased because of the formula. And it relates to classifications and all of the other stuff. So it's just consistent with that. I also said that I can't predict a surprise, because that's the definition of a surprise: it's something you don't know. And I don't think you can build for surprises because you don't know how ---+ what to build. About the time anybody thinks they do, they don't have enough or whatever. So it's going to work. It's working like it should. Let's remember what I said. I said that payoffs are running at a higher rate in the first quarter of 2015 than they ran in 2014. As I discussed earlier, they're really coming from companies selling, and that sort of thing. In our slides of projecting out where I said that I thought we'd have a run rate loan growth in the second quarter about where we're going, that takes into consideration historical payoffs. And so your guess is as good as mine, but I think we'll plug along and continue to ---+ we're going to work hard bringing in new customers, and it's harder because of competition, but we'll get our share. And I don't know whether more companies are going to sell or less companies, but we pretty much project it about what historical numbers have been. And I think that's about as good as you can get. I think it's about 70/30. That is correct. That is just energy, and all of the others were pretty stable. Other categories. Well, let me say this. Not so much redetermination. Certainly that's a factor. But what you're going to have is, as the hedges roll off and as you certainly see how much new production versus the other, and where price is, and all of those various factors, I think it will get a little tighter, but not serious problems. But that's what could increase these numbers somewhat. Let me kind of explain it this way. What you've got is, when you get a little over your borrowing base, you're going to increase these numbers. But then you could say to me, well then, does that mean loss or moving to a worse category. Not really, because then what you're looking at is the other assets of the borrower to help bridge. Are they going to put more capital. We see funds putting in new capital to bridge over this period of time, we see individuals that have substantial net worth in marketable securities, or those kinds of things. So this thing is going to bubble up a little bit as those factors start to happen, and then it will start to come down, probably in the fourth quarter. It is a net run rate all year. We'll have that additional $1.3 million in additional expense compared to the prior year for each of the four quarters. Thank you. Well, I expect it's going to be good growth. You're going to have obviously weakness in the energy side of it. But also remember this. Why did we buy WNB. We bought it because of the people, and their history of going through the downturns, and we're very pleased. It's proven out to be a great staff. And so the other thing that you got to remember that we're seeing happening from a loan growth standpoint, is bringing our leasing product, which they didn't have; our public finance, which we're seeing opportunities in schools and churches and hospitals, and those type of things in the public finance. And so leveraging this in a $25 billion company with all the products we have, gives us an opportunity to bring ability that they never had before. So I think there's a lot of opportunity in that regard. And one of the biggest opportunities is in the wealth business, which as you know, we've got this $30 billion-plus wealth advisory business, and starting to build that staff out there. And we see a lot of opportunities there because, as I said to you, right in the middle of that, they have the highest per capita income in the United States. And so there's a lot of wealth that has been created, and we see opportunity in that regard. We really don't give that level of detailed guidance, <UNK>. You're talking about what the profitability from increase in rates. <UNK>, say that question one more time. I want to make sure I understand it. Okay, I see what you're saying now. Yes, I'll just say that, for a long time, we've had in our disclosure for our sensitivity to interest rates as far as our net interest income sensitivity, that we're fairly aggressive and conservative, I'll say, in terms of the movement in interest paid on commercial demand deposits. Because again we want to be conservative, and if the market says that they're going to pay aggressively on there, we'll compete. We're in the marketplace. We're somewhat asset-sensitive in the 12-month period in that analysis. If that happens, if it's more of an administered rate, we're much more asset-sensitive. And I would say that our take on the market probably right now is, it's not going to be very aggressive pricing. I think there will be some movement, and we're planning in some movement up in rates, but either of the two, we're still asset-sensitive. We're much more asset-sensitive if you have more of an administered rate. Thank you for your interest and support of Cullen/Frost. This concludes our first quarter 2015 conference call.

2015_CFR

2015

XOM

XOM #Thank you, <UNK>. Good morning, <UNK>. Most of the information, as you know, has been digested in the media. Just broadly speaking, the original target was about 42 billion cubic meters in 2014. That's been originally reduced down to about 36 billion cubic meters, and then in the first half of 2015 down to 16.5. It's still a very dynamic issue. Our understanding is there will be further guidance from the government coming out in July. But broadly speaking, as I referred to previously, our production guidance has been incorporating the reduction production constraints that we ---+ that had been advertised externally. But it is having an impact, and I don't want to mislead anybody. Yes, so the capacity of that terminal is just over 200,000 barrels a day, 210,000 barrels to be exact. I'll emphasize a point I made earlier: that it's part of our integrated businesses. It's a key element for us to connect our upstream business to our refining and chemicals business throughout the Gulf Coast and the mid-continent. I'd say, just to your point, our gas activity has been fairly limited in the US. We have really transitioned a lot of our drilling activity in the lower 48 to liquids plays, obviously, because we see the value proposition is stronger. But I really back up and highlight the point that there is a real opportunity in the US to commercialize this gas if we were to remove some of the barriers that we've got before us. And we've got, as you all are aware, we've got an investment pending in Golden Pass to convert that terminal to an LNG export facility. We think we're very well positioned with infrastructure. We think it is a great opportunity for the United States if we could increase the export options for the US producers. It's going to create additional investment. It's going to create additional jobs, and bottom line, it's going to improve the economy. So I think the call to the government would be one of really taking advantage of the opportunity that the US has to really build energy security, not only in the US but more globally, by providing, if you will, free trade. You're welcome. Good morning, <UNK>. You there. Yes, I would tell you if you go back to the analyst presentation, we had assumed, just for the sake of the presentation itself, we had assumed a brent price of $55 per barrel. And of course, flowed that into our production sharing contracts to give you a sense for what we would expect in terms of volume, and that is our target of 4.1 million-barrels per day. Obviously, if price changes up or down, it's going to have an impact. It's really, I really don't have a rule of thumb for you when it comes down to entitlement impacts, which as you know, include many different factors included in the commercial structure, as well as expenditure levels and obviously price. But we had assumed a price forecast that's comparable to where we are right now. No, in fact I would ---+ the guidance I'd give you <UNK> is that we'll go to see further capture opportunities as we progress through the year. No, we have been able to capture savings in the first quarter, but as I alluded to, not all parts of our cost structure have responded in the same level. And we'll continue to progress those and we expect increased savings over time. Good morning, <UNK>. That's a hard one to really answer. I would step back and just think about the overall energy outlook that we publish annually. We're fairly confident, given the range of variables that we test, that we're looking at about a 35% growth in energy demand between 2010 and 2040. Fundamentally, that is how Exxon-Mobile sets its investment plans, and obviously, we continue to test that not only annually but periodically. In terms of how the business, more broadly speaking, is investing and whether that's going to be sufficient to meet that energy growth over time, there are a lot of variables in it, including, you may recall, that in our energy outlook it really does require a very healthy progress on energy conservation. But broadly speaking, it's hard for me to say whether the current level of investment will cause any shortages in the future. Not at all. Tanzania is, for the benefit of the people that are on the phone, Block 2 to date, we have participated in seven gas discoveries. We think total resource in place is in excess of 20 TCF now. There is a lot of work to do in a greenfield development like this. Statoil and Exxon-Mobile have been progressing development plans for the initial discoveries, and then there's a broader consortium that has been looking at the potential for an onshore LNG facility. We would tell you that the up-front planning is progressing. I do ---+ I will confirm that there was one well we did not participate in, but I wouldn't use that as an indication of our lack of commitment. I think what's important here as we go forward is we get better definition of the project, but equally important, you all know that LNG projects are capital intensive and what we need to ensure is that we have a stable fiscal regime with appropriate terms and conditions to underpin that type of an investment. Well I think broadly speaking, it's a good observation. Broadly speaking, I think when capital becomes constrained that by definition, that provides additional opportunities. I would say from our perspective, it's the value proposition that we bring that we hope that resource owners will look to, and that is our ---+ a strong balance sheet, our leading return on capital employed, our operational expertise, the technology that we bring to resource development. I'll say that we have we have one of the best, if not the best, project execution organizations. And then we've got a leading downstream and chemical business that's fully integrated with our upstream. And I'd say that as a package, those characteristics provide the, if you will, the winning proposition for resource owners. Thank you. Yes, I'd first say that triple A is really an outcome of our financial strategies. As you've heard us say previously, that operating cash flows are our primary source of funding for both our capital departments and shareholder distributions. We maintain a very strong focus and prudent approach to cash management throughout that cycle. We have, as you know, significant debt capacity, but we'll maintain our financial flexibility and we'll continue to be very disciplined in how we invest and what we choose to invest in. But we aren't going to forgo attractive opportunities, and I think that's a key differentiating factor for Exxon-Mobile is that we've got the capability to respond when we need to respond. And we're very mindful of our cash balances and how far we want to take our investment program. Yes, we're very ---+ we obviously we look at all of the variables when we talk about our cash management and our financing capability. We keep a very mindful look at what our commitments are in the future. But I'll tell you that we're very comfortable and we are very mindful about where we are in terms of our debt. But I'm just not going to quote any specific numbers. Well first and foremost, I want to say thank you for your questions, very good, very insightful, and I think it really brings more color to our business. So to conclude, I just want to thank you for your time and we very much do appreciate your interest in Exxon-Mobile. Thank you.

2015_XOM

2017

LRCX

LRCX #Thank you, <UNK> Good afternoon, everyone, and thank you for joining our call today and what I know is a busy earnings day We ended the calendar year was strong performance for the December quarter exceeding the midpoint of our guidance and all financial metrics We delivered record levels for shipments revenue, operating income dollars, and earnings per share both through the December quarter as well as for the calendar year 2016, again demonstrating the company’s ability to grow the business at a pace that is materially faster than WFE as a whole So we dive more deeply in December quarter, momentum in our shipments continued totaling $1,923 million, which was up approximately 13% compared to the September quarter and was at the high end of our guided range Shipments for the combined memory segment came in at 61% of system shipments, which was up from 56% in the September quarter Non-volatile memory shipments made up 37% of the system shipments, which was down a little bit from 43% in the prior quarter Customers are committed to their technology roadmaps investing in the vision of economically scaling the technology in step with increasing product performance As we share during our Analyst Day in November, this is an exciting time for the segment to the market, with 3D NAND possibly the largest growth driver in the industry We’re pleased with our leadership in 3D NAND, in particular with our strong position in the most critical applications like the channel whole edge, the mold stack and the word line fill DRAM shipments grew 24% of total system shipments compared to 13% in the prior quarter But the tightening of the supply demand balance in the DRAM segment, customers increase their investments in the December quarter Content growth in areas such as servers and smartphones, have contributed to a burn down of inventory and corresponding upward movement in DRAM prices The foundry segment remained strong at 31% of system shipments in the December quarter, which was down slightly in absolute dollars from the record level we saw in the September quarter Foundry spend was focused primarily on 10 nanometer As <UNK> mentioned, we’ve made some significant market share gains in the foundry and logic space as our customers are migrating to smaller geometries and implementing more challenging architectures And finally, the logic and other segment contributed 8% of system shipments, which was flat with the September quarter December quarter revenues were $1,882 million, which was up 15% compared to the prior quarter Gross margin improved to 46.4%, which was up 120 basis points from the 45.2% in the September quarter This was primarily due to business volumes, product and customer mix And as I always mentioned, you should expect to see some quarter-to-quarter variability in gross margin, the multiple factors such as product mix, customer concentration overall business volumes And I remind you that our financial model continues to be the right tool for you to use to build your own models, and to think about our ongoing financial performance Operating expenses came in at $384 million for the quarter, which was up from $372 million in the September quarter OpEx decreased to about 20% of revenue in the quarter compared to 23% in the prior quarter Spending allocated R&D was about 64% of total spending in the December quarter, up from 63% in September You should expect to see more variability in our quarterly spending in 2017 and historically as we’ve changed our methodology and how we record variable compensation to better align the expense with the quarterly profitability Operating profitability was very strong in the quarter; we generated operating income of $490 million, which was an increase of 34% compared to the $366 million that we generated in September quarter Operating margin increased to 26%, which was up from 22.4% in the prior quarter, driven by the higher revenue and then improvement in gross margin The December quarter tax rate came in at about 15%, which was higher than roughly 12% rate last quarter and in line with our expectations A rate in the middle teens would be a reasonable number for you to use in your modeling for the March quarter as well as 2017. Based on a share count of approximately 181 million shares earnings per share for the September quarter were $2.24. The share count includes dilution from both the 2018 and 2041 convertible notes with a total dilutive impact of about 16 million shares on a non-GAAP basis And I just remind you, dilution schedules for the remaining convertible notes are available on our Investor Relations website for your reference We returned $0.30 per share for a total of $48 million in dividend distributions to our shareholders in the quarter At our analyst meeting in November, we announced an increase in the dividend level to $0.45 per share The first distribution at the new level was paid out earlier in the month of January In addition, we initiated purchases under our $1 billion board authorized share repurchase program, which was also announced at our analyst event In the December quarter, we spent $65 million and took delivery of approximately 619,000 shares at an average share price of $105 per share Let me now take you through the balance sheet We ended the quarter with $6.089 billion in cash and cash equivalents on the balance sheet The cash remains approximately 40% onshore and 60% offshore During the quarter, we redeemed the $600 million 2023 senior notes and the $1 billion 2026 senior notes under the special mandatory redemption provision of those notes Cash generation for the company continues to be healthy In the December quarter, we generated $404 million in cash from operations In the December quarter, days sales outstanding improved to 69 days from 72 days Inventory turns also improved from 3.9 to 4.1 times We exited the December quarter with a deferred revenue balance of $673 million, down a little bit from $704 million in the September quarter That number excludes approximately $129 million from shipments to customers in Japan This number is up from $65 million last quarter I’d like to remind you that those Japanese shipments remained as inventory carried across on the balance sheet and will convert to revenue in future quarters I do expect to see deferred revenue grow again in the March quarter Company non-cash expenses during the quarter included the following: $32 million for equity compensation, $39 million for amortization, and $39 million for depreciation Capital expenditures were $37 million, which is down a little bit from the $42 million that we spent in the September quarter We exited the quarter with approximately 8,200 regular full-time employees Headcount additions were targeted at supporting increased business levels and customer ramps Let me now turn to our outlook for the March quarter I’d like to provide with our non-GAAP guidance We’re expecting record shipments of $2.350 billion plus or minus $75 million We expect record revenues of $2.125 billion plus or minus $75 million We expect gross margin of 45.5% plus or minus 1 percentage point Gross margin is down somewhat from the previous quarter due to business mix Forecasting operating margins of 25.5% plus or minus 1 percentage point Spending is up in the forecast due to profit depended expenses and payroll related taxes in addition to new R&D investments And finally, we forecast record earnings per share of $2.55 plus or minus $0.10 based on a share count of approximately 180 million shares So in closing, we’re very pleased with our performance in the December quarter, as well as calendar year 2016 and the milestones we achieved throughout the year Looking ahead, we remain committed to our objective of creating value for shareholders and to successfully executing on the growth opportunities ahead of us We continue to expect 2017 will be a first-half weighted year with shipments more first-half weighted than revenue Also, as we sit here today relative to the June quarter, we’re expecting June shipments that are roughly in line with what we’re seeing for March That concludes my prepared remarks Operator, <UNK> and I would now like to open up the call for questions Question-and-Answer Session Yes, it might, Tim, but as always remind you, keep in mind the financial model when you model things We’re right in the sweet-spot of where we should be relative to that financial model relative to operating income percentage, and gross margin and spending obviously both go into that number But we’re kind of where we should be is how I think about it There’ll always be puts and takes around it as you’ve seen over the last couple of years Thanks, Tim I’m not going to give you a dollar number, C , but I’ll remind you, the way to think about it is when you’ve got an accelerating shipment profile like we’ve had you always get revenue lags as it just takes time to get things into the fab and they accepted And when you’re seeing a guide in March where revenue again is lagging shipments and so I accept deferred revenue will build in March What happens when shipments level off or if they in one quarter might go down a little bit, then revenue will catch up Over time it all normalizes and it’s going to be the same numbers, right? It’s just a matter of the rate of change, a second derivative if you will of what’s going on there For calendar 2017. Thanks, <UNK> You think about all time, <UNK>, I mean the practical reality of it is until there is a definitive law out there that you can understand exactly what it requires and what are the laws you do, it’s hard to specifically answer the question Obviously, if we get accessibility to worldwide cash without having tax penalty that creates a whole lot more flexibility for us to access the cash to do a variety of different things Some of which might be capital return investment in the business, as <UNK> talked about adjacent M&A We haven’t had any definitive conversation, because just too early right now and too much uncertainty But stay tuned, we’re paying very close attention to it <UNK>, you heard <UNK> described kind of more first half weighted overall both WFE and shipments, and also describe NAND is maybe more first half weighted than the other stuff, so that’s a data point for you When we look at March as well as June, everything is pretty strong Everything investments are recurring at leading edge, it’s NAND, it’s DRAM, it’s foundry logic, it’s hitting on all cylinders from my perspective I don’t know, <UNK>, if you… There you go You got a follow-up, <UNK>? Yes, <UNK>, I mean, it grew consistent with our expectations I can’t remember off the top of my head whether it grew a little bit more in the equipment business or not But it was roughly in line It’s still roughly a quarter of the company’s overall business And you got it right, it’s very cash generative, very profitable business, very broad-based in terms of the number of engagements and number of customers And generally speaking that chart that Tim Archer showed you at the Analyst Day, we’re very much on track to deliver that, that growth that we had targeted and are targeting Thanks, <UNK> Thanks, Chris That’s probably a reasonable assumption, <UNK>, yeah, it’s - that’s not unreasonable I am not going to give you specificity is just investments we were making with an eye towards of penetration, two nodes from now that didn’t end up come into fruition And so we ended up with some assets that didn’t have a forward useful life, so that’s what that was, it was an investment that we decided we were no longer investing in I don’t know if it’s necessarily more profitable year on year, <UNK> It’s always been quite profitable It’s a great business, right? All the investment occurs in new equipment It gets leveraged in installed base It doesn’t require a whole lot of investment It’s just - it’s a very profitable part of the business But on a year-on-year basis I don’t think it’s really more profitable necessarily Thanks, <UNK> Okay, operator, that’s going to be our last question

2017_LRCX

2016

HE

HE #I just kind of add of course the other big driver is we ---+ there are some of the large projects that have to await PUC approval as well. So we did the implementation and go live at the end of June, it was June 22, on the consumer side, and sort of this individual proprietor small business group, that is over and well adopted by our consumers. We have the additional cut over on medium and larger businesses with some more of the higher-end commercial functionality that we didn't have in offering far before. So it's a nice upgrade of our capabilities and features for customers. We've brought new features into the market. So we're excited about that. We are going to be doing some advertising around that coming up soon. And yes, we do expect that the combination on consumer and commercial will give us savings at the operating cost line starting from the fourth quarter of this year. I'm sorry. It will be ---+ so by the fourth quarter, we will be completely cut over on the new ones and completely out of the old one. The termination charge that we took which was about a little over $1 million for the previous systems is the entire one. So, you won't see an additional charge related to that. Correct. Yes, we throw that out. So, in the terms of basis points, I think we were down ---+ it was about 5 basis points impact this quarter, last quarter, higher amortization last quarter, that's the quarter-over-quarter difference, about 5 basis points. Right. So, the number for overall growth for the year is a little more than that. We're ahead of our target. We're at the high end of the asset growth range that we set to at the mid-single digit growth. So, we think that ---+ as we look towards the end of the year with what we expect to be pay-offs, completions of certain projects, resolution of other projects that our asset growth in the second half will be less than in the first half. So, you won't see the need for that provision for growth and you'll ---+ we expect with the resolution of some of the other project exposures and criticized assets that we will get some benefit from those that help us stay in that range. No, it's all volume. Obviously, the market was very strong. I think all of our peers in the market showed very strong volume growth and as I mentioned, as we try to continue to bring down the relative concentration of the risk book in our book, we are ---+ things that are saleable are generally being sold and so that's contributed to the increase in (technical difficulty). It was strong. You're talking about the utility when you talk I believe about current ROE versus the allowed, so the ROACE guidance is approximately 8% against a consolidated utility network allowed ROE of about 9.8%. Yes, I'll offer an initial comment and then Tyane can pick up, so what would you can anticipate from us is some rate case filings now. As you've indicated, we're independent again, we were always independent, but now with no intentions to be married as it were and so you'll see a rate case filing on the Big Island or the Hawaii Electric Light Company and then on Oahu for Hawaiian Electric Company as we get further into this year. So that's one topic and I'll let <UNK> pick up from here. <UNK>, I don't have much to add to that because that is what we're doing with the next couple of rate cases that we have on tap there required under the decoupling mechanism. And we do have, like you said, the Hawaii Electric Light rate case test year 2016 followed by the Oahu Hawaiian Electric rate case using a 2017 test year, that's our opportunity to reset our cost. I would just to add, you probably recognize that we have to get back on track with the every three year rate case filing cycle that is required to enter a coupling mechanism and so the year for Hawaii Electric Light was actually this year, so had we been on our normal schedule we would have actually given notice that, that case would have been filed a summer ago and then we would be in the midst of that rate case now. So, HELCO will be on the 2016 cash year, but we will also be filing Oahu for the 2017 cash year, because that's their year to go in. And those two are depicted an appendix slide 28. So it's been quite some time I believe since you've seen that. It's important because Hawaii Electric Light has been six years because there was a deferred case in [2013]. And in the mean time we've been working with the trackers that are helping us there.

2016_HE

2015

PLUS

PLUS #Thank you, [Tyria], and thank you, everyone, for joining us today. With me today are <UNK> <UNK>, Chairman, President and CEO of ePlus, <UNK> <UNK>, our Chief Operating Officer and President of ePlus Technology, <UNK> <UNK>, Chief Financial Officer, and Erica Stoecker, General Counsel. I want to take a moment to remind you that the statements we make this afternoon that are not historical facts may be deemed to be forward-looking statements, and are based on Management's current plans, estimates, and projections. Actual and anticipated future results may vary materially due to certain risks and uncertainties detailed in the earnings release we issued this afternoon and our periodic filings with the Securities and Exchange Commission, including our Form 10-K for the year ended March 31, 2015, and our 10-Q for the quarter ended September 30, 2015, when filed. The Company undertakes no new responsibility to update any of these forward-looking statements in light of new information or future events. In addition, during the call, we may make reference to non-GAAP financial measures, and we have posted the GAAP financial reconciliation on our website at www.eplus.com. I'd now like to turn the call over to <UNK> <UNK>. <UNK>. Thank you, <UNK>. As a result, for the second quarter and first half of fiscal 2016 demonstrate the success of our go-to-market strategy. We are growing our customers count and expanding geographically, tapping into strong customer demand for our services-led advanced IT solutions. We are steadily taking market share and are well positioned for continued success. Results for the first half of fiscal 2016 included net sales growth of 6.4% and gross margin on products and services of 19.7%, which is a 70 basis point expansion from the first half of fiscal 2015. Revenue growth translated well into the bottom line, with earnings per diluted share increasing 21.8% as compared to non-GAAP diluted earnings per share in the first half of fiscal year 2015. Looking specifically at the results for the second quarter, we posted double-digit revenue growth and positive operating leverage. Net sales grew 13% to $336 million, and non-GAAP gross sales of products and services grew approximately 10%. Fully diluted earnings per share grew from $1.63 to $2.15. This acceleration in revenue performance has several components. First, we are continuing to sell wider and deeper into our existing client base, capturing wallet share. Second, we are adding new logos through focused demand generation activities. And third, we benefited from increased demand in the technology and healthcare sectors and a strong close from Cisco's year-end in July. We posted double-digit growth in key metrics, including gross profit, adjusted EBITDA, and earnings per diluted share in second quarter. While we maintain strong margins, we believe we are well positioned to continue to grow revenue at a higher rate than the overall IT market, and we will continue to make the necessary investments in customer-facing headcount, such as salespeople and engineers, and invest in emerging technologies to service our customers and meet their complex IT requirements. With that, I will turn the call over to <UNK> for a more detailed discussion of the business. Thank you, <UNK>. As <UNK> said, the second quarter and first half of fiscal 2016 was a period of continued focus and execution on our corporate objectives of expanding our customer base, investing in customer-facing sales and engineering personnel, capturing emerging technology trends, and increasing services penetration. Our ability to provide the advanced IT solutions our diverse customer base demands helped us deliver positive results across the critical metrics of revenue, adjusted EBITDA, operating income, and diluted earnings per share. We've spoken in the past of our strategy to outgrow the overall IT market and expand our gross margin by focusing on some of the highest growth areas of the industries, specifically security, converged and hyper-converged infrastructure, cloud, and mobility. This quarter's 13% revenue growth demonstrates that we are successfully creating and capturing these opportunities with existing, as well as new customers. Crucial to our growth is our ability to execute on our go-to-market strategies by going wider and deeper with our clients. We've successfully developed an effective cross-disciplined sales and engineering teams, which focus on business development for specific technologies or ePlus Solutions within our customer base. These themes are being supported by our subject matter experts that help sell and create solutions in the security, services, software, and financing areas. We are continuing to better utilize internal and external analytics to create focused demand generation activities within our more than 3,000 customers nationwide, and we're highly focused on adding new customers, as well, with targeted marketing campaigns focused on specific geographies, verticals, and solution areas. We've shown in the past that we can capture demand in the faster growing segments of the market, and we're confident in our ability to continue growing our client base. Today's customer is dealing with more IT complexity than ever before, and the range of vendor options continues to grow. Our focus on a comprehensive lifecycle services approach utilizing our plan, build, support, and optimize model provides business outcomes and measurable value rather than siloed IT solutions, and is proving to resonate with new as well as existing customers and partners. It's important to stress the role of our services business, both professional engineering services as well as annuity services, such as managed services and staffing, in this growth. We've invested heavily in building up the services business in recent years, including expanding headcount and increasing our managed service centers from one to three to provide redundant 24-hour nationwide coverage. We have built teams that focus on emerging technologies and bringing these solutions to market that leverage our overall lifecycle services model. This helps our customers from the assessment and design phases all the way through to optimizing their IT environments. In fiscal 2015, gross profit from our services business grew 14.8% from the prior year, and we comfortably exceeded that figure in the first half of fiscal 2016. In addition, our service business can act as the tip of the spear, establishing our expertise with clients and positioning us for future wins that integrate both products and services. In a recent analysis of our managed services client base, we found that the typical client increases their IT spending with ePlus by more than 20% within 12 months of their first managed service engagement, with a significant expansion in gross margin. I'm going to close by touching on security. This is one of the best examples of an area where clients are under increasing pressure to upgrade their capabilities and have a wide array of IT options. We identified this trend several years ago, built up our security capabilities, and have reaped the benefit in recent quarters. In the second quarter of fiscal 2016, security product services and solutions represented approximately 15.5% of non-GAAP gross sales of products and services, up from 15.2% in the first quarter. And we believe there's still room for future growth as we continue to invest in the security space and make it part of every solution we sell. A good example is, is a healthcare win we had recently. The driver for this project was a security audit that highlighted some vulnerabilities, followed by minor security breach. These factors made security the top priority for the organization. Management adjusted their IT budget to reflect this and engaged ePlus to provide a comprehensive security plan. By utilizing our Plan, Build, Support and Optimize, or PBS approach, and our project management office, our first priority was to identify and remedy critical security gaps. From there, we implemented an upgrade to their perimeter security, and we are now currently building out the remainder of the plan to provide a comprehensive and integrated security stack that will allow them to operate their IT infrastructure in a secure and regulatory compliant manner. This modular service strategy approach offers customers pervasive threat defense from the edge throughout the interior of their network, while providing the visibility and analytics needed to maintain a secure environment. In summary, we believe we have both the expertise and scale to meet our clients' needs and add value to their businesses and outpace the market. We have identified the key areas of growth, the clients with the greatest demand for our solutions, and the right people and methods to reach them. So, we believe we're well positioned to continue our track record of outgrowing the overall IT market. I'll now turn the call over to <UNK> for a closer look at our financials. Thank you, <UNK>, and good afternoon, everyone. Results for the second quarter of fiscal 2016 showed strong year-over-year comparisons in key metrics such as operating income, adjusted EBITDA, and earnings per diluted share. Our results were driven by our scale service-led business model, and our gross margins. Net sales for the quarter increased 13% to $336.3 million due to demand for our complex IT solutions across our customer base. As <UNK> mentioned, technology segment sales received some additional momentum from customers in the technology in healthcare sectors. Non-GAAP gross sales of products and services rose 9.9% to $431.1 million. Consolidated gross profit for the quarter was up 12.5% to $71.9 million. Consolidated gross margin and gross margin on products and services were both flat when compared to a year ago at 21.4% and 19.4%, respectively. Recently we began reporting adjusted EBITDA, a metric we believe gives insight into the operating performance of our business. We calculate this metric by taking net earnings and adding back any interest expense, depreciation, amortization for assets used internally, and the provision for income taxes, and subtracting other income. We consider the interest on notes payable from our financing segment, as well as depreciation on assets financed as operating leases, to be operating expenses. As such, they are not included in the amounts added back to net earnings in the adjusted EBITDA calculation. Adjusted EBITDA and operating income for the second quarter both grew significantly faster than revenue as we maintained a relatively flat cost structure in our technology segment. Adjusted EBITDA rose 30.3% to $27.9 million, while operating income was up 31.2% to $26.7 million. Net earnings for the quarter totaled $15.7 million, or $2.15 per diluted share for the second quarter of fiscal 2016, representing growth of 31.9% year-on-year. Now moving to our individual segment results, revenues in our technology segment, which accounts for 97% of net sales, grew 13% to $326 million. Our non-GAAP gross sales of products and services increased 9.9% to $431.1 million. We saw a lower proportion of sales derived from third-party maintenance and software assurance contracts when compared to a year earlier. These transactions are recorded on a net basis. In terms of the breakdown of our revenue by end markets, we maintained a balanced group of clients. For the trailing 12 months, SLED was our largest end market with 23% of the total, followed by technology with 21%. Telecom, media and entertainment represented 17% of the total, while financial services and healthcare each had 10%. This balanced client base is an important part of our strategy, and we see room for growth in all sectors. Gross profit in the technology segment increased 12.4% to $64.8 million. Operating expenses increased 5.3% from a year ago, well below the rate of revenue growth. The key factor in this was limited growth in salaries and benefits, which accounts for more than three-quarters of the technology segment operating expenses. Going forward, we expect this expense category to align more closely with our trailing 12 month metrics. G&A expenses were higher at $7.3 million, largely due to the amortization of intangible assets as a result of the acquisition of evolved technology in 2014. Technology segment earnings rose 28.5% to $22.6 million. Moving into the financing segment we saw revenues rise [to] 13.2% to $10.3 million from $9.1 million in the second quarter of fiscal 2015. As you know, results from the financing segment tend to be uneven. In this quarter, the increase in revenue was the result of higher transactional gains. Operating expenses declined 12.7% to $3.1 million due to a higher reserve credit losses in the year-ago quarter. Segment earnings totaled $4 million versus $2.7 million a year ago. Now, I will briefly address our consolidated year-to date-results. Net sales were up 6.4% to $606.2 million compared to $569.8 million a year ago. Non-GAAP gross sales of product and services were up 6.4% to $763.4 million. The strong sales performance was driven by our technology segment, which was up 6.5% to $587.5 million for the first half of fiscal 2016. Consolidated gross profit for the first six months of fiscal 2016 increased 8.9% to $131.1 million compared to $120.4 million in the same period last year. Consolidated gross margin was 21.6%, up from 21.1% in the first half of fiscal 2015, while gross margin on products and services was 19.7%, an increase of 70 basis points. Adjusted EBITDA rose 19.3% to $44.1 million, up from $37 million in the first half of fiscal 2015. Operating income rose 19% to $41.7 million, up from $35.1 million in the first half of fiscal 2015. We had earnings per diluted share of $3.35, up 17.1% from $2.86 a year ago. Excluding the gain resulting from the retirement of a liability in the first half of fiscal 2015, earnings per diluted share increased 21.8%. Turning now to the balance sheet, we ended the quarter with a cash position of $62.8 million compared to $76.2 million at the end of March. This reduced cash position was the result of working capital needs and the investment in our financing portfolio. While we saw an increase in the account receivable during the quarter, our cash conversion cycle in the technology segment remained consistent with last year at 12 days. As a result, we feel our balance sheet is very strong, with a cash position to support both organic and accretive acquisitions. I'll now turn the call over to <UNK> for closing remarks. Thanks, <UNK>. In closing, I would like to reiterate that we believe our long-term strategy is proving successful, as evidenced by our strong performance in the first half of fiscal 2016. The technology landscape continues to evolve and clients rely on a trusted partner to help them determine, identify, and implement the best IT solutions, both for today and for the future. The solid performance of our business, particularly in focus areas like services and security, highlight our competitive advantages. Again this quarter, we received several recognition awards from key partners, including Cisco and Palo Alto Networks, among others, as we continued to strengthen our relationships with established and emerging vendors. Additionally, our balance sheet remains strong, providing financial flexibility to take advantage of opportunities to build our business. We continue to evaluate strategic acquisitions to expand our business. We also seek to invest in new sales and engineering resources and expanded our human capital to better serve our clients. With that, Operator, please open the call to questions. Thanks, Al. So, I'll try to take a shot at that, Al. I don't have anything off the top of my head that I can give you exact percentages. But, as the market continues to evolve and move to more of a subscription model, a consumption model as a service model, we're moving the solutions that we deliver to our customers to accommodate what they're looking for. I think if you look at our ---+ if you're looking at our gross margins, we feel like we had a really good quarter for our gross margins. We feel that our gross margins are probably the highest in the industry. And if you noted what <UNK> and <UNK> had talked about, our gross margins were 21.14% for the quarter, which is some of the highest in the industry. And then, in terms of when we look at the gross margins as well, they were affected a little bit by a lower portion of gross sales that were classified as net. So, that's kind of the pieces that I think would tie back to what you asked there. Did that give what you were looking for, Al. So, no, I think on that you'd have to really look at our historical results for the operating margins. We're going to continue to invest in what I call customer-facing sales and services headcount to address what I call the four Ss that we're trying to tackle with our customer - services, security, software, and solutions. So, I think, going forward, with investing in net headcount, you'd have to look more at the historical trends as it relates to operating margins. Thank you. Thanks. Well, there's a couple of different things, as you know, <UNK>. Cisco was about 50% of our revenue for this quarter. What's nice about Cisco is they go across a lot of different areas, meaning compute, security, data center, and all the services that go with it. So, as that kind of continues to evolve with some of the converged infrastructure plays that are out there with FlexPod and Vblock and so forth, I think you'll continue to see that grow. We're also actively working with Cisco on building out our software capabilities. So, they're a big part of our strategy. They're about 50% of our revenue, and I think you'll continue to see that in the future based on historical trends. Yes, <UNK>. If you saw, we had 30 basis point bump from Q2 versus Q1, and it's a total of our gross product [of] services, product and services. It's one of the key focus areas. We believe it's a hot market. And with some of the regulatory and compliance issues that are out there for our customers, we think it's a big market that we can continue to grow in and outpace the market. Sure. I think from what we're seeing and what we're hearing from our customers, that the market is stable, there's a nice demand for services and security in the market. In this quarter, we had a nice uptick in some verticals, such as technology, that made a difference in our numbers for this quarter. And I think cloud is kind of the cooler, more flexible option, if you will, as it continues to involve. So, the hyper-converged and plays like that I think will continue to evolve, as well. And as it relates to storage, I think a lot of customers are taking a look at both the legacy players in terms of what they have in the flash space, as well as some of the emerging technologies, and trying to make those decisions as they move forward. Sure. In terms of our total accounts receivable, we have a near investment-grade portfolio of accounts receivable. I talked earlier about our cash conversion cycle this quarter was comparable to the same quarter last year at a 12-day cash conversion cycle, which is pretty good in the industry. In terms of the dollar amount, this particular quarter was a little bit back-ended in terms of the amount that we invoiced. So, I'm not expecting ---+ there's no issues in our AR. We're very pleased with the progress that we're making in the collections process in the AR. Thanks, <UNK>. Well, a couple different things, <UNK>. So, as it relates to the revenue side, we agree with you. We feel we had a very good quarter, and we're happy with the results. The sales and services team did a really nice job of executing on our overall plans as an organization, and we believe we'll continue to outpace the market as it relates to where the industry's going from an industry average standpoint. There were a couple of things that I think always happened in this quarter. You've got [Cisco's] fiscal year-end, which was in July. And has been noted a little bit earlier with <UNK>, in terms of the percentage of our business with Cisco, you have SLED, and then you had a few other verticals, if you will, that contributed to our numbers for this quarter. So, net-net, we're happy with the results. The team really executed well for the quarter, and we believe we'll continue to outpace the market as we move forward. So in terms of ---+ as you know, <UNK>, from our numerous meetings, we don't give forward-looking statements as it relates to that. So, I think, you're going to have to take a look at the historicals, and that's probably the best way for you to take a look at it. <UNK>, I think as I said in my comments, I think you really should look at our historical norms in order to look at the forward looking ---+ at the quarters to come in terms of our SG&A percentage and OpEx percentages, going forward. Well, in terms of the headcount, it's pretty simple. It's what we'd called customer-facing, both sales and services. So, on the sale side, it'd be in the security space, and folks that can sell services as well as software. And on the services side, it's continuing to add both presales, additional MS, managed services headcount, and things along those lines as we go forward. So, if I could fence it in for you a little bit, <UNK>, if you kind of think about the four Ss in terms of services, security, software, and solutions, those would be the areas that we're going to continue to invest in headcount to provide the solutions that our customers are looking for. As it relates to the SG&A, I think as <UNK> alluded, I think the easiest way is for you to look at the historicals. And as our variable comp, just so you understand, we just have standard comp plans where our reps are paid on gross profit. So, if that helps ---+ I don't know if that helps around your variable piece. Well, there's couple of things. As it relates to e-rate, you apply for e-rate. You're then accepted, and then, over time, you have to kind of pull that through to fruition. So, e-rate was a small part of that, if you will, but it was a part of it. Our SLED business in the higher education space, we're starting to see lot more opportunities as it relates to security and some other areas that's we're starting to see come to fruition based on the security plans that we built in the SLED space. As it relates to verticals, that we had a big uptick in our technology vertical compared to prior years, but ---+ and one other thing. We're ---+ continue to build out healthcare plans with a lot of the major vendors, and that includes some of the providers like Meditech and Epic. So, we're starting to see that come to fruition as it relates to healthcare. So, those would be the main ones. And quite honestly, our top five verticals are the same five verticals every time, so technology, telecom, SLED, healthcare, and finance. Well we don't do it for the quarter. As you know, we only do that on an annual basis. So, at the end of last ---+ fiscal 2015, we did not have any customers that were 10% of our revenues. No problem, <UNK>. We'll see you soon. Hey, <UNK>. Hi, <UNK>. Yes, I think ---+ hey, <UNK>, a lot of that has to do with how we're going to market and what we're trying to sell. So, part of our overall plans is getting a little tighter in our execution around how we're covering the accounts not only from a rep standpoint, but also from a marketing and social media and things along those lines. We also have more granular plans in terms of how we're trying to uncover net new accounts and how we expand those into bigger existing accounts, over time. So, those are some of the things that you're seeing. As we noted, we've got over 3,000 customers now that we can go back to and sell across a lot of different areas that's helping us both from a revenue standpoint, as well as from a GP standpoint, gross profit standpoint. All right, <UNK>. Just in case our competitors are listening, I won't talk about our pipeline or forecast. But, what I can tell you on the security side, it's pretty simple, is it's all about kind of keeping the bad guys out in terms of securing the perimeter. It's keeping ---+ once they're in, if they are in, is keeping the data secure from a secure data-data center standpoint. But, more importantly, it start with our security services, which is a combination of assessments and security health check. So, what happened with this customer was it was a security health check that we did for the customer and found that they had some unease on an audit that was done. And then from there, we were able to go in and kind of create . here's where the security gaps were. We solved that with the perimeter solution that we did. And then, on top of it, we then proposed our security stack, which was really more of a combination not only just on the end point, but also the analytics and intelligence they needed to kind of run their business, going forward. I think the other thing to note from a security that I wanted to go back to, I wanted to mention that I forgot one <UNK> has asked, as well, is what we're seeing in the security space. If you look at Cisco's acquisition of Lancope, right, there's a vendor that we're working with as it relates to Sourcefire. They're now expanding their capability into the networking analytics space, which is what we know very well from a networking standpoint. So, we're able to go back and sell security in that space back to our existing customers. The other thing that's probably important to note, we were just recently named Palo Alto's Growth Partner of the Year, as well. So, we're putting a lot of focus on the key vendors in each of those spaces, and then manning our sales and services teams with the tools they need to go in and sit with our customers, understand what their needs and issues are, and then build solutions to address it. And that's what happened with that customer. No problem. Thanks. Thank you. We'd like to thank you for joining us today, and we look forward to speaking with you again on the next quarter.

2015_PLUS

2015

CHSP

CHSP #How it would rank in ---+ from what perspective. Oh, from a growth perspective, how would it rank in the portfolio. Okay. Well, certainly in the first year, from an EBITDA growth perspective it's going to be at the top of the list. After that, I would still expect to be in the higher end of the range. Whether it's going to be our top hotel from a growth perspective or not, it's hard to say. As <UNK> said, initially a lot of the increased EBITDA is from cost reductions, as well as certainly there's ---+ we're expecting occupancy gains in particular in the shoulder seasons where, without a strong res system or brand, the hotel historically did not do particularly well. We do not expect initially out of the box in the first couple of quarters, we don. t expect significant ADR growth. But we certainly think over time that that will come. And currently, the hotel is roundly about 80% of market, from an overall RevPAR index perspective. We'll pick up some of that this year, but more of that will come over the next two to three years. So I can't give you an exact number, but it would be in the higher, it would be in the top portion of our portfolio for the next two years from a growth perspective. Well, like I said, <UNK>, we'll have roughly $100 million drawn without any further changes. So we think that that would be a good short-term use, and then obviously we'd determine whether there was more opportunities for us to grow. But that's a nice way to bring the leverage down a bit further than the levels we've already talked about. We're not talking debt to EBITDA, <UNK>. We're talking our leverage ratio as we calculate it under the revolving credit facility. So we would be at 31, 32-ish at the end of the year assuming that we paid down the amount of working capital that we've drawn on the facility. As I said earlier, we're about 150 drawn today on the facility. By the end of the year, we'll be back to about 100 drawn on the facility. That will get us to 31%, 32% leverage. When I refer to a three times number, that's our fixed cover charge. So as we look at fixed cover charge, that's really, factoring in all of our interest payments and all of our preferred dividend payments, we're covering at a very high rate. So that number is going to be at the 3.1, 3.2 level by the end of the year. We don't really quote debt to EBITDA. I mean you can calculate our debt to EBITDA if you use adjusted hotel EBITDA of close to 200 and we'll have close to $800 million drawn at the end of the year. We'll be at four times or lower as we move towards the end of the year. That's right. Well, let me ---+ yes, we've look at <UNK>t LA. So let me start with that and pricing in <UNK>t LA has been very aggressive and ultimately, there's one or two deals that over a couple of years, there's one or two deals that we probably came in second on. So certainly, I think <UNK>t LA is a very good market. That said, it's not only ---+ it's not just that we're in downtown LA. It's this specific venue that we have a lot of excitement about. So we've looked at the books, of course, in detail and we're looking at the activity and business levels in the theater and how that impacts the hotel. And we're pulling ---+ in our hotel now, it's ours as of today, so in our hotel, we are pulling business out of <UNK>t LA into our hotel. And so when you look at what that theater can generate, and there's no other venue like that, and you look at the redevelopment of downtown LA, I mean it's not to suggest I'm ready to go buy another different kind of hotel in downtown LA. But given this unique customer experience and asset in the venue, we're very comfortable. And like I said, we're very ---+ I'm very comfortable out of the box with an 8% EBITDA yield. And arguably, with the theater being valued separately, we're $400,000 a key for the hotel, including the restaurants and bars, but for the hotel structure, we think that's a compelling opportunity. So it's not so much a bet on all of downtown LA, though we feel comfortable there. It's certainly a bet on this specific venue and asset. Overall, in New Orleans, we're certainly comfortable with the market for the rest of the year. I would say specific to our hotels, our French Quarter hotel has done quite well and we expect it to continue to do well. It's 97 keys of course, but it isn't at the highest end of the market and despite having an average rate well above the market, it will continuing, able to drive rate in that hotel at a very reasonable growth level in the upper single digits. So we're comfortable there. And at La Meridien, I think somewhat similar to Lakeshore, but it's not as large a hotel. So it's not as significant of an issue. It just takes time to reintroduce the product to the customer. Group business in our hotel is picking up quickly. We like the group pace that we see for the rest of the year in that hotel and now it's a matter, which we're seeing, by the way, we are seeing in Lakeshore where the transient customer has now returned. And that's what we're pushing for in New Orleans. And we'll get there. It's just taking us a little bit of time. We do have additional resources, again, getting back to a previous question about Starwood, working with Starwood, we do have additional resources from Starwood focused on our conversion in New Orleans for us, and we expect things to continue to pick up the remainder of the year. All right. Thanks. All right. Well, listen, thanks everybody for being on the call today and as always, we will be here to answer any questions tonight and tomorrow. So again, appreciate the interest and good night. Thank you.

2015_CHSP

2016

TXN

TXN #Okay, <UNK>. The sector where we saw the weakness, as you were guessing, is mobile phones. And we did see that sector weaken late in the quarter, in the back half of the month of December. If I just take and look at, for the year, how our end markets did, I will put that into perspective. I'll start with an area of strength, in automotive. That grew in the mid-teens. Most of the sectors inside of that growing double digits. Industrial revenue was about even for the year, and we had ---+ about half of the sectors there were increasing, offset by the others. Personal electronics, as we've just talked about, grew single digits. I'll note that we had, certainly, growth in one customer that grew significantly that year, but that was up, primarily offset by declines in other. So therefore, our percentage of our revenue in personal electronics really didn't change too much. It went from 29% last year to 30% this year. Communications equipment was down 20%, and that was primarily driven by wireless infrastructure, and that was down around 30% for the year. And then finally, enterprise systems was down slightly, due to projectors. So with that said, <UNK>, I think, as we talked about earlier in our prepared remarks, outside of that one area of weakness, everything else came in about as we had expected. So that would be inclusive of PCs, and the other areas that you talked about. You have a follow-on. (multiple speakers) Go ahead, <UNK>. Yes, so our revenue profile inside of personal electronics, obviously, it will be more back-half weighted. As that customer did well in the marketplace, obviously, our revenues would be reflective of that. I could point out that we sell a very diverse set of products to that customer, and, in fact, hundreds of products to it, and products in every major platform. That said, I think that the revenues of that customer are reported to be, somewhere around two-thirds of it is in smartphones. And you'd expect since, we've got a pretty diverse position across that customer, our revenues would be very similar. So ---+ and certainly, I think that whenever you have a fairly significant change in demand of any customer, there is supply chain considerations, where you've got different pieces of inventory sitting inside of that supply chain. We happen to be on the beginning part of that supply chain, so I won't try to handicap where that is. It's where we think the demand will come in, in the first quarter, and we will see ---+ we'll make a prediction on second quarter later. I would just add, on that demand profile, we did discuss that we expect about $150 million year-over-year decline, attributable to this particular sector in personal electronics. The rest of it will be about even with last year. Right, good point. <UNK>, do you have a follow-up. Yes, <UNK>, I think that at the highest level, we think we continue to operate in a relatively weak macro-economy, as we have been for the last couple of years. So nothing terribly exciting in the economy as a whole. But to look at the compares that we're talking about, recall that a year ago, we were seeing sharp declines occurring in communications infrastructure. And we were also seeing some pretty stiff headwinds, in the form of foreign exchange, where the rate of exchange moving against us, from a US dollar strength standpoint. So despite that, when you take a look at all of that, we actually see, aside from this one sector of personal electronics, the balance of it is going to be about even, on a year-over-year basis. So again, the headlines that we are seeing on the macro front, and a lot of the angst that you mentioned, certainly sounds real. But actually, from a demand signal standpoint from our customers, it's consistent with what I just said. We continue to operate in a weak macro environment, with lots of cross currents going on. Again, last year's weakening in comms infrastructure, very strong auto, foreign exchange issues that we were dealing with. This year, we don't see where those things are coming into play right now. Yes, and I will just add that I think inside of that weak macro-economy, just the diversity of our products, and the business model, we continue to operate extremely well inside of that environment. Thank you, <UNK>, and we will go to the next caller, please. Hello, <UNK>. Yes, there's a lot of assumptions insider there, <UNK>. But let me remind you of some moving parts that are going on here, and you can spot it if you take a look at the release that we just put out there. I think the most apparent number you can see on there is the decline in depreciation begin to occur. And clearly, just from an accounting standpoint, that increases our gross profit margin, and falls through to EPS. That depreciation will continue its glide path down in 2016, consistent with the fact that a lot of those purchases we made five years ago are now reaching the end of their depreciable life. In addition to that, we're seeing a growing portion of our chips being produced in 300 millimeter capacity. And as you know, it costs us about 40% less per chip, or about 20% less per device, to manufacture on 300 millimeter versus 200 millimeter. So as that mix improves, that will also fall through to the bottom line. And then the third element that I would just point out is that we continue to see a mix shift in the source of revenue into industrial and automotive, which tend to have higher overall margins, and certainly stickier revenue and margin profiles, over time. So collectively, those should help our overall margin and earnings performance, notwithstanding whatever direction revenue takes us through, over the next 12 months. In addition to that, from an EPS standpoint, as we have been doing for 11 years now, as long as the intrinsic value of the company is higher than the market value, we will continue to be buyers of TI shares. We reduced our share count 3.4% this past year, and certainly, at current prices, it says we should continue to be active accumulators of TI shares. Though combined, we certainly would have momentum in our favor, notwithstanding a significant change in the revenue profile, we continue to help us with earnings per share. Great, okay. Thanks so much, <UNK>, and sorry about the difficulty there. And operator, we can go to the next caller, please. Yes, <UNK>, I guess the way I'd answer that is that there are no knobs on the horizon right now, of any measure that were similar to what you've seen in the last couple of years. As you pointed out, we had some restructuring actions that we took in Japan, and also in certain parts of Embedded Processing over the last two years. And those have removed quite a bit of OpEx cost. And those are about done now. They pretty much finished up in the middle of last year. As we look forward, what we would expect to see is what we've talked about in the past, is that our OpEx should operate somewhere between 20% and 30% of revenue. In a weak market, it might be pushing 30%. In reasonably strong markets, we might be pushing 20%. I think we're in the low 20%s right now, 23% for 2015. So again, as I look forward, I don't see any real material changes to the OpEx profile. I will just remind you that we do always have a seasonal pattern in our OpEx. Just like OpEx was down 3Q to 4Q, because of holidays such as Thanksgiving and <UNK>tmas, the OpEx will be up again in 1Q versus 4Q, because of the absence of those holidays. And also the annual pay and benefits increases that we institute across the company in the first quarter. And to give you some parameters on that, it is probably in the 4% to 5% range increase, 4Q to 1Q, on OpEx. Do you have a follow-on, <UNK>. Yes, I think if you look at that, sequentially, it was down around mid-teens, but ---+ from a year ago, it was down mid-teens, but actually did see some growth. That was the second quarter in a row that we had growth inside of there. So I think that business continues to be one that, over the last couple of decades, has been very, very choppy. That characteristic probably won't change, but we're on a position where we've got a couple of quarters of growth. I think that when we look at it longer-term, we do believe that carrier CapEx won't grow. It certainly won't drop to zero, either, but we do think that it will get smaller slightly, in time. Okay, thanks, <UNK>. And we will go to the next caller, please. Okay, first off, let me make sure we've got the score keeping going on correctly here. I think we were clocking about 130 basis points of improvement this past year. Don't want to miss out on an extra 10 there, <UNK>. (laughter) As I look into 2015, clearly, any meaningful revenue growth will incrementally have a much stronger impact than any other piece of the P&L, on improving overall gross margins. But independent of margin growth, I'd go back to what I talked about a few minutes ago, on <UNK>'s question. And that would be, really, the increasing mix improvement on 300 millimeter, the mix to industrial and auto, and then just the decline in depreciation, as we continue to march through 2016. It's pretty tough to handicap which one would be the biggest contributor, or how to sequence those. But I think that they will all collectively be quite meaningful, as we move into 2016. And I think we will probably pleasantly please ourselves again for another year. Yes, and I'll just add to that, <UNK>, that on essentially flat revenues, all of that came down to free cash flow growing by 6%, right. So there are some things going on with accounting rules of ---+ on the gross margin line. But really, we are focused on growing that gross margin ---+ or on the free cash flow growth specifically, and it clocked in pretty nicely, as well. So you have a follow-on. <UNK>e. And if you look for the year, it was down ---+ I'm not sure if your question was for the year or for the quarter ---+ it's actually the same reason. It's down primarily due to custom ASIC products. If you remember, those products have a very high exposure to wireless infrastructure, and that's where we saw the headwind. It was also down because DLP, and DLP had a very good year in 2014, so a very difficult compare on that. It had a good year because there was a strong World Cup demand pulling through DLP. Yes, so I think that if you look, last year, it was in the mid-teens. If you go back several years, it's actually been in that same range. Previous years were primarily driven from the exit of the wireless business. But as we go into next year, and as we look, essentially, that we've got some long-term growth potentials inside of DLP. I think calculators have been flat to slightly down, and we would continue to expect to see that. Growth in royalties, the royalties have been about 1% of our revenue, and we'd expect them to continue to run in that area. And then we've got ASIC, that will shift, over time, into our Embedded Processing, as we pick up that functionality. So we'd expect that mid-teens to slow somewhere in the mid- to low-single-digit declines, going forward. Okay, thank you, <UNK>. And we will go ahead and move on to the next caller, please. Yes, so I think when you look at the Embedded sector, if I look for the year, the increase was due to Connectivity and Micro-controllers. And both of those product lines, I would say, have a very diverse customer footprint. And so there's really not one sector or market that's driving it. Collectively, you are right. It's in industrial, as well as automotive, but probably has a bias to industrial, just because of the diversity of those customers, and where they are winning designs. So very, very broad-based, and that's part of the reason why we're encouraged with that business, and the growth. And I think that also, you see how that contributes to the bottom line and the profitability of that sector, or that business, for the year. You have a follow-on, <UNK>. Yes, so we don't really have our business so much lined up by catalog or not. I'd say that the majority of the products by number, certainly, are more catalog-based, as we've got tens of thousands of products. But we're not quite organized that way. We've got the four businesses of High Volume Analog & Logic, which will be more application-specific products. And even there, even though they are application-specific, many of those products are available to multiple customers, and even sometimes multiple markets, even though they are application-specific. Something like motor drivers, as an example, selling into multiple markets and multiple sectors. And we've got Power, and then High Performance Analog and SVA. So we just don't have a cut between that. Okay, thank you, <UNK>. And we will go to our next caller, please. <UNK>e. I think, <UNK>, as we look at our business, and as <UNK> mentioned before, we believe that we've been operating in a weaker environment, and that will continue for some time. We've had some people ask us if we think a semiconductor cycle is underlying what we are seeing, and we just haven't seen those signs of a traditional cycle. So there are things like, our lead times continue to remain short. Our cancellations remain very low, our distribution inventory continues to hold around four weeks. And we continue to deliver our products on time to our customers, when they are asking, at very, very high service levels. So those are some of the bigger ones that come to mind, that you would see some movement, if you were moving through a bottom or a top of the cycle. And we just haven't seen that, in quite some time. <UNK>e. Yes, and before I talk about industrial, I just want to remind those that may not be as familiar with us. When we talk about our industrial market, it's something that's very broad, and different than what a typical investor would look, from an industrial screen. So we've got 14 sectors that makes up industrial. And they'll include things like factory automation, medical and healthcare, building automation, grid infrastructure, test measurement, motor drives, electronic point-of-sale, space and avionics, display power delivery appliances, lighting, industrial transportation, and then a bucket of everything else that goes into it. So slightly ---+ or very different than what most people would think of in industrials. And you are right, it was ---+ it had a strong year the year before. I think when we started the year, we had expected it to be stronger than what it turned out. And typically, a lot of people ask us, hey, we hear the rumors in China, we see the stocks that they follow, maybe in the industrial segment, are seeing very, very weak demand. But we turned in revenue that was consistent with what we saw, after a very strong year. And fundamentally, what we think is going on inside of that is that there is more semiconductor content going into the industrial market, and we think we're in the very early stages of that. And if you look at the automotive market, I think it's much easier to see that content, because we know how many cars ship per year. It's much easier to see the difference between total SAR unit growth, and what semiconductors are shipping into it. Certainly impossible to be able to see inside of the industrial market, because it's very, very broad and very, very diverse. But that said, we believe that we've got a decade or more of runway of increasing content inside of the industrial market. So that's about all the insight I think I can share on that. Okay, thank you, <UNK>. And we will go on to the next caller, please. Yes, <UNK>, the fab in Greenock, Scotland, is one that came with us with the acquisition of National Semiconductor in 2011. Most of the parts that are manufactured in there are part of our Silicon Valley Analog business. We announced today that we are going to ---+ that we're putting together plans to wind down operations there, and move the production to other 200-millimeter fabs that we have in Germany, Japan, and Maine in the US. These are larger, more cost-effective, more technologically advanced factories, that can just give us a lot better economics with those chips that are produced there. It will take us about three years to wind down those operations, by our estimate right now, as it takes just that much time to re-qualify those parts into other factories. And at the end of that period, we will no longer have an operation in Greenock. We took a $17 million charge in the quarter, as we began planning for that activity. And we expect that we'll probably continue to incur roughly $2 million of charges per quarter, each quarter, through the end of 2018 as we wind it down, for total charges of about $40 million, over a three-year period. <UNK> and I are going to have to tag team that one. (laughter) I will finish up the Scottish fab one, the why not 300 millimeter. The short answer is, most of those processes are dual qual-ed already in other 200-millimeter factories, and it's just a whole lot easier to transfer into qualified processes that already exist in other factories. Not all, but enough of them. And so consequently, we will just go ahead and put those into open capacity in 200-millimeter factories, versus bringing them into 300 millimeter. And <UNK>, you want to take the ---+ Yes, <UNK>, your question on Connectivity, what's driving the growth there. There, we've got a very broad portfolio of products we support, about a dozen different standards, from a connectivity standpoint. So low-power Bluetooth, to Wi-Fi, to other sub-gigahertz standards. And so if somebody wants to connect something, we have a solution that we can offer them. And so we're just seeing really good uptake of the products that we've got there. I think you rolled in a question about, does it change our penchant for acquisition. Again, our belief is that when you acquire a company in the Embedded space, you're picking up additional architectures. And additional architectures doesn't make you stronger, it just makes you bigger. And so we'll continue to look for companies that have characteristics much like a National does, if we ---+ when we are interested, and that's the profile of the type of company. Let me just add, too, on the Greenock facility, that we do expect to save about $35 million, once we've completed all the transition. That's on an annualized basis, and once we do complete the transition of the products to the more cost-effective fabs. Okay, thanks, <UNK>. And we will move on to the next caller, please. <UNK>, I said the benefit is really happening right now, in the Analog portfolio, and it's happening across all four of the business units inside Analog. Because of it, the 300 millimeter factory we have in RFAB being highly automated, somewhat counter-intuitively, you don't have to have really high volume parts running through there. Because of the automation, we can actually run relatively low-volume parts through there, and still gain significant cost benefit. So what ---+ the way we been employing a 300-millimeter strategy is not so much to re-qual existing 200 millimeter into that factory, but instead to release new products into that factory, on already qualified processes. And that's really the focus that we have had, and that we will continue, going forward. And we'll give a further update, as to our progress, to date, on both the Renner fab, as well as the DMOS6 fab that we're converting that we announced last year, coming on February 9, in our capital management call. So stay tuned for that, and we'll give a new update on that, as well. (multiple speakers) Go ahead, <UNK>. Yes, I was just going to say that we've obviously competed with both of those companies for a couple of decades, and them combining together really doesn't change much, from a competitive landscape. And we believe that our four competitive attributes that make us unique, they are hard to replicate. We'll stay focused on those, and those are: our approach to manufacturing, the breadth of our product portfolio, the reach of the market channels that we've got, and our diverse and long-lived positions. And that's ---+ we will stay focused on those. And we think those have helped us gain share, and they will help us continue to gain share. Okay, we've got time for one more caller, please. Yes, <UNK>, we just won't provide color at that level, on a specific customer. I would just ---+ overall, I think if you look at how Apple has impacted our business with their success in the marketplace, personal electronics was about 30% of revenue in 2015. If you look at the market overall, I think that if you take memory out, personal electronics is probably around 60% of the market, and so we have about half of the exposure there. So we try to find places where we've got some differentiation, where we believe that those products will last more than one cycle. Perhaps they're products that we develop, that we can use in other customers, or even in other markets, in some cases. So that's really what we'll stay focused on, overall. So do you have a follow-on question. Yes, I don't think you're going to see a CapEx and depreciation crossover before the end of 2016. Depreciation will continue to run down during 2016. And really, the kind of gentle roll-over you saw beginning to occur in 2015 is your best proxy for how to model 2016. Okay. Thank you, <UNK>, and thank you all for joining us. Again, please plan to join us for our capital management call on February 9, at 10:00 AM Central Time. A replay of this call is available on our website. Good evening.

2016_TXN

2015

CHUY

CHUY #Thank you. Well, as far as labor, I think those are things that as you're opening newer stores, I was very hesitant obviously to protect everything to move down. But what we've learned is more mature stores were actually growing volumes quicker. So that's only made the initial move for a quicker reduction, as far as cross-training and so forth. So now, I don't think I am going to do it any faster than I am doing it at all. So I think I am very comfortable with the long term growth of where we are at and what we've developed over the last 6 months. Are you talking growth over Q4 to Q4. Yes. So if you look at our new guidance, I think that gives us on the upper side of that 23% growth. So we would continue on a long-term basis to look for that 20% growth going out. Thank you. Well, everybody thank you so much. Jon and I appreciate your continued interest in Chuy's. We will always be available to answer any and all questions. Again thank you and all have a good evening. Thanks everybody.

2015_CHUY

2016

WTR

WTR #Thanks, <UNK>, and welcome everyone. Thanks for joining us this morning. On today's agenda we'll start with some recent news about the Company and then I will comment on some of the highlights from the first quarter of the year including our customer growth updates. Then <UNK> is going to comment on the Company's financial results and rate activity and finally we'll end the formal portion of the discussion of the presentation recapping of our guidance for 2016. Then we will wrap-up with some questions and see if we can answer whatever is on your mind. So let's just start right in with the update on the Pennsylvania legislation. Many of you have already reported on this, but it's significant to our business and so I want to mention it again. You will recall that in mid-April house bill 1326 was passed in the Pennsylvania legislature which allows for fair market value to be used when acquiring municipal water and wastewater systems. We believe this could be game-changer for us. We have said this before, but we really are optimistic about the results of this legislation. We think it could be much like the impact that the DSIC, the DSIC language that passed in the 1990's had on infrastructure. We're quite excited to see the opportunities that might open in Pennsylvania and also across the country as other states adopt similar policies. As you may have seen in recent news as I come toward the end of my the first year as CEO we have rounded out our senior Management Team and just recently we announced that Sue Haindl was hired back in mid-March as our Chief Administrative Officer. She reports directly to <UNK> <UNK> and is responsible for information services, customer service, fleet and supply chain. Sue comes to us with extensive experience and a particular skill set in merger integration and she's held senior roles at Anexinet, The Pew Charitable Trust, and at Exelon. We also had Whitney Kellett join us in mid-April as our CIO, Chief Information Officer, and she reports directly to Susan and is responsible for the Company's technology systems and platforms. Whitney comes to us with great experience more than 20 years of IT and strategic integration experience and she was most recently a Vice President at the Atlas Energy Group, which is an $8 billion energy management company. Both Susan and Whitney will play key roles in continuing to develop our technology programs and to integrate what we hope is a large influx of new customers over time into our Company. I'm really excited to have both of them as members of our team. I wanted to take a minute to just talk about our market-based business a little bit. You already know this is a very small part of our business and we have talked about it is less than 4% of our revenue, but we are making some changes in this area that will impact our financial results and <UNK> will touch on them again in a few moments. But we mentioned during the Analyst Day back in January that we were in the process of evaluating our market-based activities and really resulting from that evaluation we have decided to exit several of those and we're in the process of exiting some of them right now. I will say that the one primary market-based activity that we'll continue to operate is the insurance product that protects service lines between our water mains and the customers' homes. You may recall that we received a royalty on these contracts and the work is really done by a company called Home Serve which we have a partnership with. We will also keep a very limited number of O&M contracts that will continue to contribute to earnings. The full year of our impact of our divestiture's could reduce revenue by as much as $30.5 million, but would correspondingly increase net income just slightly. So really no meaningful impact on our earnings-per-share. We're actively evaluating other market-based opportunities as we have discussed with you before, but we don't see this segment of the Company ever becoming more than say 15% to 20% of Aqua America as we continue to place our primary focus on the regulated piece of our business. Now, let's talk about the quarter for a couple minutes. The first quarter saw strong financial performance as we continued to pursue our three-prong growth strategy. We have talked about this before. The first prong is really around municipal acquisitions, second around strategic M&A, and the third prong really around the growth in our market-based activities as we move through the phase of the refinement and clean-up of what we have. Now, we'll continue to focus on opportunities that really leverage our core capabilities to provide long-term growth. I have also mentioned these three core capabilities to you before. These three are among many, but we tend to focus on these as we think about our growth and I will just mention it's our ability to make capital investments in infrastructure, our ability to then get regulatory relief and recovery of those investments, really our whole regulatory effort, and then third our ability to operate utilities at what I'll call optimal levels or with excellence. We are off to a good start with customer growth this year with acquisitions. Thus far we have added 5,250 customers, customer connections I should say. Half a percent in customer growth just from acquisitions so we're very pleased with that first quarter. Our quarterly revenues are up, increasing 1.2% to $192.6 million in the first quarter of 2016, from $190.3 million in the same quarter of last year. I just mentioned that through our refinement of market-based businesses we do expect to see a decline in revenue associated with our work there, but also a decline in the associated operating expenses as well. With that said earnings-per-share were up 7.4% to $0.29 compared to the $0.27 we reported in the first quarter of last year. The June 1st quarterly cash dividend of $0.1708 per share was announced on April 15th and we have now paid consecutive quarters quarterly dividends for now 71 years. We have increased the dividend 25 times in the last 24 years. Now if you look at growth, thus far in 2016, we have closed nine deals, seven water and two wastewater. This represents as I said about a percent and a half of growth just from acquisitions. We expect to see 2016 year-over-year customer growth in the range of about 1.5% to 2%, which includes any organic growth that we would experience. We're shifting our focus to acquiring larger systems that have over 2,500 connections. That's not to say that you might see a small one here or there as a tuck-in, but our focus is on more of these mid-sized opportunities. These deals as you know take time to come to fruition, but with the favorable legislation in Pennsylvania and several of the other states we're really excited about the opportunities in this area. We hope to see at least one of our municipal deals close this year so stay tuned. And with that, let me turn the call over to <UNK> who will talk about our financials this quarter. <UNK>. Thanks, <UNK>, and good morning, everyone. Today I'll review the first quarter financial results and some of the driving factors that affected the Company's performance and I will also provide a look at our rate activity for the year so far. First quarter 2016 our annual revenues increased 1.2% to $192.6 million, up from the $190.3 million in the same period last year. I'll show the water fall chart on these amounts in a moment but the bottom line is when you look at Q1 2015 versus Q1 2016 much of the increase in revenues from rates, surcharges and regulated growth was offset by reduced revenue from the market-based activities and lower consumption. O&M expenses were up about a half a percent to $73.5 million for the quarter compared to $73.2 million in Q1 of 2015. Again, I'll touch on this in the water fall chart, but new regulated acquisitions and employee-related costs were mostly offset by lower expenses tied to the market-based activities, decreased production cost and other factors. Other factors driving the Company's results included approximately $73 million in capital spending which had two-fold impact on our results. It generated $1.1 million increase in AFDC compared to the first quarter of 2015 and additionally through the tax deductions recognized in the qualifying infrastructure improvement projects in Aqua Pennsylvania the Company was able to reduce its effective take rate year-over-year. So in the end net income was $51.7 million for the quarter, up 6.6% compared to the $48.5 million the same period last year. Earnings-per-share at $0.29 were up 7.4% over the $0.27 reported in Q1 2015. As a result I'm sure you have noticed that our Q1 results beat the consensus estimates and while we're still comfortable with the full year projections and the guidance we provided that extra penny from Q1 may well result in a weaker Q2 than presently expected in order for us to hit those estimates as we have suggested. Looking at operating revenue water fall, look at the different components of the 1.2% revenue increase, as you see in the left side rate surcharges and customer growth in our regulated operations increased revenues by approximately $7.3 million and then the decline in consumption and also reduced market-based revenues offset that increase by about $5.1 million. On O&M expenses you see the water fall there operating and maintenance expenses were $73.5 million for the first quarter compared to the $73.2 million last year. As mentioned in the release regulated acquisitions and employee expenses were up for a combined $4.3 million reduced market-based activities expenses, lower production cost and other factors offset the increase by $3.9 million for a total increase of approximately $300,000 year-over-year O&M expenses for Q1. So earnings-per-share starting with the $0.27 we reported in the first quarter of 2015 we had incremental tax repair benefits, rates and surcharges increased AFDC and regulated growth which increased our earnings per share for the quarter by nearly $0.025. Expense increase and other factors offset that but only by about $0.005. Rate activity. Thus far in 2016 we completed rate cases or surcharges in five states with $4.5 million in additional revenue and that additional revenue includes about $1.1 million of revenues that were initially recognized under interim rates in 2015. We also have rate cases pending in New Jersey, Indiana and Virginia requesting an additional $5.1 million in revenue. The additional rate information can be found in the appendix of this presentation. With that, I would like to turn it back to <UNK> who will recap our 2016 guidance. <UNK>. Hey. Thanks, <UNK>. Let's just take you through the chart here. Our guidance is really unchanged through the first quarter of 2016 so we still expect full year earnings-per-share to be between $1.30 and $1.35. As <UNK> mentioned, there might be some adjustment, or I should say some movement of a penny between the first we were over consensus by a penny, and the second. So I will just point that out. But year-over-year customer growth will still be on track, 1.5% to 2% and we expect to invest more than $350 million in capital this year in 2016. And we remain on track to spend just over $1 billion through 2018. Ongoing rate-base growth will be, again, between 6% and 7% and same system O&M we don't expect to exceed 2%. It will be between 1% and 2% for the full year of 2016. Before we end the call I would like to open it up for any questions that you might have. Correct. It's really the divestiture of the Company. There's some smaller companies that will reduce that revenue. Yes. I would think that we'll have the first one done, our transportation company, should close in the next let's call it 30 days. And that is about a $5 million reduction in revenue. And then the others would come, I would say, between the third and the fourth quarter probably results impacting 2017. Yes. You know, Rich, we're hopeful, but it's very difficult as you know to predict closing of these kind of opportunities, especially when you talk about municipal which have moving parts to them. So I'm just going to have a very difficult time locking into a certain time period. But yes, we're very hopeful that we have that kind of achievement in customer growth. It's just difficult to give you timing. Well, you're right you're right, Rich. The assumption is still as it was last year. That this could be in 2017 or 2018 and rates in 2018 or 2019. And really those factors are based on a lot of things which is in fact why we have actually started this year to prepare what that rate case will look like because we know there are a lot of moving parts. The repair tax complicates it a bit. There's a new test year in Pennsylvania that's very favorable and more projection oriented than future test year oriented. So we have a lot of things going on there but overall yes, we still believe that the time frame is reasonably consistent and I think any changes to that time frame would likely be based more on how our expenses flow over the next 18 months and our abilities to install all the capital that we anticipate during that period as well. We're pretty active in the deregulatory circles and conferences. We've not seen that, frankly. I'll say this. We have actually seen expansion of the DSIC. Certainly the gas guys are now using it to replace their mains, and very successfully so. And I think in large part the results speak for themselves. Let's focus on our customers first. The DSIC has really allowed us to replace mains at a pace that is much more aligned with the life of that pipe. Think about it. 20 years ago when Nick first arrived at Aqua we were on a, call it an 800 year-plus replacement cycle for our water mains. And we have reduced that cycle down to a very reasonable level, let's call it under a hundred years, in that period of time. And that's really what we need do in this country is invest in the infrastructure. And we have done it if you look at it at still very reasonable rates. Now, I understand it is a quarterly adjustment in some cases depending on how the mechanism is put to use, but in large part we found regulators to be very supportive of the DSIC in each of the states where we are. So that's new news to me. I don't know. <UNK> do you have any other information on that. Yes. Sure. I'll just give you some thoughts that we have. We were part of the writing of the first DSIC rules in Pennsylvania 1996 and subsequent states as well. As you may remember there are a number of safeguards in the DSIC rules to protect customers so there is not abuse and it's fair for all parties. So for example, you can't file a DSIC when you're over earning you're authorized rate of return. That's watched very closely in Pennsylvanian and likely some other states as well. It's typically related to capital in excess of depreciation. We're not spending the depreciation dollars on capital and then getting returned. It's really capital far above that. The projects are clear, many of them are approved in advance by state Public Utility Commissions. And in the end these are projects that are obviously critical to the country, critical to our Company and result in improved water quality, less main breaks and better service for our customers so we're really convinced that it's still the win/win that we felt it was in 1996 when we started there process in Pennsylvania. Thanks, Rich. All right. Well, thank you all for joining us today. We appreciate your time and always available for follow-up if needed. Thank you.

2016_WTR

2015

CAMP

CAMP #Thank you. Well, thank you for your support and for joining us on today's call. We look forward to speaking with you again when we report our FY16 third-quarter results later this year.

2015_CAMP

2016

KN

KN #I think what's going to drive year-over-year increase as we look toward the back half of the year is going to be the Chinese OEMs. I think our share from our perspective looks pretty stable across the majority of the other market. I think there are a couple of other headwinds that we are dealing with like the laptop and tablet market, probably not as robust as we would like. You've got multi-mic adoption in the Chinese OEMs coupled with our share gains. And then I think, again, pretty stable, I would say, at the other large ---+ two large customers that make up a significant amount of our sales. So as far as ---+ <UNK>, as I mentioned in the guide, if you look sequentially, the MCE business is basically, at the midpoint, going to be flat sequentially and the growth sequentially is really coming from our specialty component business. In there it's pretty broad-based, both our hearing health business and our precision device end markets. Let me just take first mics, because I think it's a little bit simpler, we've talked about this. Our expectations are that we would say a relatively significant increase in ASPs over the average. And if you compare it, as an example, an analog microphone sold in a midrange China phone, it's pretty significant the increased possibility over that. As we get into digital mics and high-end mics, obviously it's going to be a little bit less in terms of the premium we get. But I think what I would say as far as just to close on the mic is that we are very comfortable that there's value here that people are willing to pay for incrementally over the microphone they were going to buy anyway. It could be anywhere from at the low end probably somewhere in the neighborhood of a 15%, 20% increase up to maybe even a 30% to 40% increase over a traditional analog microphone. Now, just take a step back, when we talk about products like Versant, which are new markets to us, there's really no ASP to compare to. It's more about the content per device. And this is the easiest one for me to ---+ I'm sure you guys all understand is when you think about, in a premium headset today, as I said, we would sell one microphone. Maybe it would be like $0.30, $0.40, maybe $0.45 for one microphone. And now we can put content in excess of $5.00 per premium headset. And so the opportunity really is not necessarily about ASPs, but the high (technical difficulty) level of content that we can get. Let me take this one. I think what we did in connection with the Q4 earnings call is we gave some expectations regarding certain financial metrics revenues, gross profit, expenses. And what I would say is we performed better than expected in Q1 and our revenues were slightly ahead of the midpoint. Our EPS came in almost $0.05 above the midpoint. I would say, Q2, we raised the guide $0.01 or $0.02 from what the consensus is. I don't see any change for the back half the year at this point. So you can from that kind of imply the full year. I don't have the split here, but what we are still expecting is modest growth for the full year. We're just (technical difficulty) the last call. I'm not sure (multiple speakers) (technical difficulty) there on the 10% growth. Again, we are reiterating ---+ A full year ---+ Just to reiterate, think of it this way. We were $5 million above the midpoint in Q1. We are actually a couple million below the guide in Q2, so there's a net call it $2 million or $3 million in the first half, and we are reiterating the back half of the year. So again, modest growth from a full-year standpoint. Yes, so just to put a little bit more color on it, we have multiple parties interested and we've received more than one letter of intent. So, we are in negotiation and in diligent discussions with a number of parties. And again, we remain committed, as we were at the beginning of the last call, to exit the business by the end of Q2. No, no write-downs there. But what I will say is ---+ I think the question the last call came up, what's the book value of the speaker receiver business. And if you looked at our 2015 10-K, the book value there was just under $400 million. It's important to note that more than $325 million of that book value relates to goodwill. And we analyze and record goodwill at the mobile consumer segment level. So what I'll call it is the tangible book value of that business is significantly less than that. You'd have to take at 12-31-2015 the $390 million, back out the $330 million of goodwill, so it was roughly $60 million in tangible book value at 12-31-2015. And that's how you get ---+ if you look at what's in our supplement here, the book value is right around $20 million, the difference being the losses in the quarter and some reductions in working capital. So hopefully that ratchets up. We really can't comment on any specific platform. I would sit there and say the majority of what we are projecting is we feel pretty comfortable that we've got the diamonds up. Obviously, some of the products, it depends on how their products sell in the end market, some of this. That's why we are kind of hedging between the $10 million and $20 million. But the range is $10 million to $20 million in the back half of the year, incremental. And so I would sit there and say if their products do better, maybe it's closer to $20 million, and maybe if we get a few more design wins that aren't secured closer to the $20 million, but we feel pretty comfortable about the $10 million, that's why we gave the range. I'm not going to comment about a specific customer, but I would just generally say, for those of you on the call who seen the demonstration, the reaction, generally speaking, is they don't believe it. So we have to do it live to show how it works. And again, what's very interesting about this, <UNK>, is that when we see the only way we could have presented a solution like this was by bringing our microphone, MEMS microphone capability, our balanced armature speaker from the hearing aid side capability, coupled with the algorithm and signal processing capability from ---+ that we acquired with Audience to come up with the solution. And we're hopeful we will have other ones to talk about, other markets, other products, in the quarters to come, but we're really excited about this opportunity. Yes, I think I would say we are kind of near getting near the tail end of it. We aren't signing up for any more with respect to the Audience integration. We'll always look at opportunities, whether it be footprint consolidation or other opportunities for cost take-out, but right now, I think we are kind of near the tail end of the cost take-out and the focus is really on the top line. Again, <UNK>, as <UNK> said, whether it be from a manufacturing footprint standpoint or an SG&A standpoint, we are constantly looking at this. But I think we've accomplished what we want to accomplish relative to the Audience integration on the cost side. <UNK>, think of it as roughly $4 million a quarter is kind of what we are trending at. We might've been a touch under that, I think $3.8 million, in Q1. But given our debt is floating for the most part with the exception of a $100 million that's fixed, I would say it's safe to assume $4 million a quarter. Thanks very much for joining us today. As always, we appreciate your interest in Knowles and look forward to speaking with you on our next earnings call. Thanks and goodbye.

2016_KN

2016

CAMP

CAMP #Thanks. We made kind of a cluster of announcements during CTIA but really centered around two themes. One was the CalAmp telematics cloud. We're very excited about our positioning with that platform. We made a couple announcements at the show. We continue to nurture some interesting opportunities who are considering moving over to our cloud service so that they can become more efficient and more agile as they roll out new applications and new services in their end markets. We think that's a great subscription growth opportunity. The other cluster of announcements was really around LotSmart and SureDrive which are our dealer lot management and consumer sell-through applications. As we talked about in the prepared remarks, LotSmart was developed very much with dealer input and really was quite a product marketing exercise that we embarked on right after the LoJack acquisition. I would say we've been quite efficient as relates to being able to roll out that application with really broad based North American auto dealer input. We think we're very much on a good track there and there's lots of interest on that application, in particular from some of the larger dealer groups, who have significant challenges in managing inventory and thereby the customer buying experience, when consumers come onto the lot looking for specific make or model of vehicle that they may have researched in advance online. Obviously, dealers are going to make investments in enterprise applications. They want to monetize those in whatever way they can. What makes SureDrive so compelling is it gives the dealer an opportunity to monetize that enterprise efficiency application, generate incremental revenues and profits, utilizing the LoJack brand, which is well recognized and accepted among consumers. It resonates very, very well. We're excited. We think that over the next couple of quarters we'll be able to make some more material announcements as it relates to customer wins and revenue contribution there. I can give you a little bit of color. We lumped our solar customer in with our energy segment, if you want to refer to it as that. Energy revenues for us, just to give sort of a historic benchmark, have ranged between $4 million and $6 million a quarter. And again, solar's part of that. Private radio, product sales to utilities, oil and gas customers is part of that. Ruggedized routers sold into other industrial energy applications are part of that. In the latest quarter, it was ---+ energy revenues were to the lower end of that $4 million to $6 million range. The prior quarter right about in the middle of that range. Going forward, I don't expect that range to vary much. It's a relatively slow growth or no growth market opportunity for us. As we focus on telematics and growth initiatives there, I would expect that over time, energy revenues will become much less material than they've historically been for us. I'd say it is a lumpy business and I would say we took our lumps in the second quarter, coming in just about $4 million of combined energy product revenues. Your other question was related to Positive Train Control product sales, I believe. In the quarter it was actually pretty strong, but we expected it to be relatively strong. We had a confluence of regional rail operators order products that we shipped within the quarter. Looking ahead, we expect it to be down a little bit but we're going to come off what has historically been pretty high number that we experienced in Q2. It was a little bit ---+ it was just under $8 million last year. I think the outlook for this year is generally in the neighborhood of your guidance there. Sort of a few items that I think give us confidence as it relates to the worst being behind us. Number one, entering Q3 we started at a higher backlog level than where we started last quarter, so that's clearly a positive. Obviously the two important customer wins that we talked about earlier on the call, that being OmniTRAX and the unmentioned one, they're both large and over time we expect the business to grow and be quite strong and sustainable, actually, for a long period of time. The last thing I think gives us sort of material confidence is the fact that our international business is so strong, even with the currency exchange challenges that we faced, in particular over the last quarter with the whole Brexit phenomenon and the devaluation of the pound versus the dollar. With a broader, more diverse customer base, with North America lagging a little bit but yet the outlook for North America improving if for no other reason than for the two new customer announcements that we just made, it gives us a lot of confidence that, again, the worst is behind us as it relates to MRM telematics product sales. Again, I'll try to take them in order. We haven't talked about Smart Driver Club, actually, in a couple of quarters but I'm glad you brought it up. The team there is making what I would term excellent progress. They launched their service and went public in April of this year and they've been engaging with all the major auto dealers across the UK. They had a lot of positive feedback initially, even before they announced the launch of their consumer application suite. I recently had an opportunity to catch up with them in face-to-face meetings and review their overall pipeline and I'm quite pleased with where they are today. I think the outlook for that business is very, very positive and I would expect that they're going to have a few interesting announcements over the next few months. Obviously, Smart Driver Club's not only focused on the traditional connected vehicle applications but also keenly focused on sort of an innovative, if not disruptive, approach to auto insurance underwriting, utilizing the core telematics platform, including our Instant Crash Notification service as enabler to understanding the risk factors associated with certain types of drivers. As relates to ICN, we talked about the independent industry certification and the resonance on our Instant Crash Notification service and our ability to deliver it through any number of platforms, whether it's direct through our fleet management platform, whether it's as a telematics cloud service like with CTC, or if it's delivered as an over-the-top service, we see broad-based interest, not just in the insurance industry, but with enterprise customers who are interested in managing and monitoring their assets and the human factors around the operation of those assets. We think that the ICN technology has broad-based appeal. We think it's a critical enabler into potentially disrupting the insurance marketplace in different ways. It obviously has a great bundling benefit to the SureDrive sell-through application that we're branding under the LoJack brand. As it relates to revenue contribution or material revenue contribution from LotSmart and SureDrive, we expect to see some modest revenues late in this year. I'm not willing to step out and give you a more formal forecast or outlook as to what the contribution might be when we get to some sort of run rate level, but I think it's safe to say that we think it's a growth catalyst for LoJack and LoJack branded products. In many ways the fact that we've offered these dealer lot management solutions and SureDrive as a consumer sell-through application branded LoJack, it's actually solidified, I think, the relationship that we've had with many of the larger dealer groups in the United States, because they now know and believe that the older legacy LoJack stolen vehicle recovery offering is not a dead end. So it's given us opportunities to reengage with those dealers and it's given them the opportunity to contemplate new and interesting consumer recognized branded solutions that allow us to get a larger share of the consumer's wallet. Sure. Great question, <UNK>. Telematics, married with the core LoJack stolen vehicle recovery product, allows us to almost instantaneously expand the serviceable market, without necessarily having to make the investment in the infrastructure to cover those regions that aren't covered with the legacy LoJack communications infrastructure. If we're able to communicate with the LoJack stolen vehicle device by a different communications pathway, which would be facilitated obviously by telematics, then we can avoid the infrastructure investment to expand that serviceable market, which is really an interesting opportunity. There are many dealer groups that operate outside of the 29 states that LoJack has traditionally covered. They've been eager to find a way to expand that service offering so they have a common offering throughout all of their store network. Telematics is going to give us that opportunity. As soon as LotSmart is completely released to market, we have in effect expanded the serviceable market for the LoJack core stolen vehicle recovery product offering. I'm not sure if that was focused on one segment or another or it was a consolidated ---+ (multiple speakers) I would say there is a deferral effect. If you listened to our last earnings call, we talked about this inventory overhang issue. In theory, once the slack is taken up in the supply chain there, then we would expect the flow business to come back. To a certain extent there's this disruption that's occurred and I do believe that the flow business from our key customers will get back to historic levels but just not as soon as we thought it would. Sure. Well, I think that may be a two-part question. What's our incremental fleet management service, incremental service opportunity there and then what ---+ how big is the opportunity with any one of our customers as relates to the CalAmp telematics cloud service. On this call and in fact last quarter, we talked about that sort of medium-term target of $100 million recurring revenue. We think most of that growth from where we are today to $100 million comes in the form of fleet management service revenue or in more generic CalAmp telematics cloud revenue growth. We think the near-term incremental opportunity for us is really amongst the LoJack licensees, beginning with LoJack Italy, which of course is a wholly owned entity in Europe. There are a number of the LoJack licensees that are keenly interested in moving over to a cloud service like CTC because it gives them ability to build an application suite very, very quickly. It gives them an opportunity to get to market with something scaled and secure much faster than they otherwise would, given the relative size of many of these licensee entities. We think there's still some. I mean, our guidance into Q3 didn't look like a hockey stick recovery. We don't expect one. We expect modest improvement into Q3 and further improvement from there. Sure. Great question. We've made a number of changes this year as relates to our overall sales organization and infrastructure. I would say our level of engagement with key customers, in fact, not only key, any customer, is much better today. I think you could actually call it an engagement. I think as it relates to visibility and interaction with our customers as it relates to their near- and medium-term outlook for product demand, it's probably better than it's ever been and shame on us for not having had that level of engagement in the not-too-distant past. Nonetheless, I think given how engaged we are, our sense of where our customers are, what their long-term outlook is as well as their short-term outlook, I think we're much better positioned today than perhaps we've ever been in history as relates to that level of engagement and visibility into our customers' business. You're welcome. Thank you again for joining us today and we look forward to speaking with you again next quarter.

2016_CAMP

2015

PLCE

PLCE #We started liquidation of our accelerated liquidation of inventory in the third quarter as we spoke about and we continued to do that through the fourth quarter of this year. Really pleased with our inventory positions down almost 8% which was below our guidance of mid-single digit. It's in excellent shape. We reduced our liability inventories ahead of the new systems coming onboard in the second half. And as Jane indicated the inventory which we consider a liability was down over 20% to where we were a year ago. So we'll continue to push our inventory levels. Our goals are obviously to improve turn. We've seen with the new systems that we're implementing that we've considerably cut back on our buys for both back-to-school and for fall. Sure, thanks. As far as the weather is concerned we started off the quarter strong and then as I'd mentioned midmonth we saw a pretty big change in the traffic and sales patterns with the cold and the storms that have hit. Certainly what is embedded in our guidance for the rest of the quarter is the assumption that we will start to return to more normalized weather which we have just begun to see in the last couple of days. So it's a little too early to predict. But as I said we're assuming that the weather will not be as onerous as it's been since mid-February. Regarding the port strike I can't say enough about our logistics team and the foresight they had and how they've managed inventories throughout this entire year. We've been ahead of this and have not seen any disruption not only to the current quarter but we did not see any disruption in the third quarter or fourth quarter as well. As we had mentioned I think on several calls why we had significant in-transits versus LY because we were ahead of that situation making sure that our goods would hit on time. We agree with you that on pre-Easter there is probably an advantage here as upcoming or two of the biggest weeks of the quarter that we'll see pre-Easter. What we're concerned about and what we've heard most of our competition say is that their receipts are delayed up to five, six, and in some cases more weeks than that. So what we're concerned about is that we're going to see these missed time floor sets start to hit post-Easter into April and May and then what that is going to potentially do to the promotional environment later in the quarter and into the beginning of second. So that's really what we're trying to call out. Sure, thanks, <UNK>. On the product side for the quarter we had very consistent performance. We saw positive comps in newborn, positive comps in baby, positive comps in big, positive comps in accessory and the only area where we saw negative comp was in shoes driven by boots. The incremental performance in Q4 versus Q3 in Canada I believe is a lot of the same reasons that we saw the performance improve in the US. We had a much more seasonable quarter weather-wise. We had a nice balance of wear-now product deliver late in the quarter which was well received by the customer. And we also put a focus on gift giving over the holiday time period not only in the stores but also through our marketing and I think the customer responded well to that. So I think we saw some of the same things in Canada merchandise-wise that we saw in the US. Thanks. Well as we look at the port situation we definitely think it's going to impact the back half of the first quarter and obviously we think that it could trickle over into the second quarter also. As we look at our systems implementations we've mentioned back on the previous call and on this call that we're seeing our buys be more controlled and we're seeing units down in the high single-digit range overall and in US Place actually even a little higher. So we believe that we have the opportunity to really when we look at AURs expect those AURs to be higher than where they were a year ago. Sure, thanks <UNK>. On the acquisition strategy we've done ---+ we're focused on acquisition retention and customer engagement. And as we mentioned on a couple of the last calls we've been really focused working with our outside partner and customer segmentation. And now that we've finished our segmentation work during the last quarter we're focused on working with our email service providers to work on a retention strategy that has more personalization components involved in it which we're starting to see some nice traction on. On the acquisition front the things I spoke about on the call, those tools we were able to advance through some systems work that we did and those are really focused in-store on capturing email addresses. We were not able to use some of the more sophisticated tools that other people have been using for quite some time. But we'll be able to have those tools live in our store during the back-to-school period which should help us with acquisition during that peak traffic period and then sales into the Q4 period. And <UNK>, from a wholesale perspective we're pretty pleased with the progress we're making there, albeit it's still relatively a small business. We added four accounts in the back half of 2015 so we're shipping to eight accounts currently and we think that those accounts will serve as pretty good building blocks as we move forward to grow this business over time. Where we're really focusing 2015 from a wholesale perspective is really investing in systems capabilities to allow us to better communicate with our partners, things such as EDI capabilities which we currently don't have and really looking to automate some of the processes that we have, processes that from a sales order flow through sourcing and logistics through the invoicing processes, a lot of those are manual and it's important that we automate those. And I'll just remind everyone that both the wholesale and the international businesses are accretive to our overall operating margin and as they continue to grow will have a nice impact on our bottom line and on our margins. From a merchandising strategy I think that we are going to continue to work on the newborn and baby business as we have been. We've seen some nice performance over the last couple of quarters with those businesses stabilizing. So I would say the merchandise strategy would revolve around making sure that those businesses continue to grow particularly as we hope to see a modest uptick in the birthrate trends as we go forward. As far as the rest of the merchandising strategy I really wouldn't share too much of that for competitive reasons. And regarding the additional 124 closures from a sales perspective they average less than $1 million per store and square footage is roughly in that $600,000 range. So they are not our most productive doors obviously and they average a little under $200 of sales per square foot. So you can imagine what the profitabilities are on those stores. Anurup had mentioned that we would be closing between 25 and 30 stores in 2015. For 2016 we'll be in that 35 store closure range with the residual in 2017. Well, it's going to affect the latter in terms of what you spoke about. It's all about from an initial pricing strategy all the way through the initial sellthroughs and then on a week-by-week basis dictates the overall promotional markdown cadence that we will take. Obviously we're helping ourselves before that markdown optimization tool is put into place by really looking tightly through our assortment planning tools, getting what we think right now is appropriate levels of inventory purchases. And when we begin to implement our allocation tool in the back half ahead of this markdown optimization by getting these goods in the right stores at the right time and being able to flow back inventory based on initial sales.

2015_PLCE

2017

TISI

TISI #Oh, sure. I think so. Well, I think demand bottomed in kind of the ---+ again, the winter months, the December-January time frame, is kind of the bottom of the normal seasonal cycle in kind of every year. So I think that demand overall, particularly relative to inspection activities, bottomed. I think I'm less confident, but ---+ on mechanical services because we just haven't seen ---+ we saw a big bottom in January. Again, as I indicated, TeamFurmanite revenues in the month of January were down year-over-year on a pro forma basis 30%. I mean, that was just ---+ I mean, that was extraordinary. In February and March, those revenues were down about 10% on a year-over-year basis. So we haven't seen TeamFurmanite revenues stabilize at this moment in time. So what we're seeing is, directionally, we're seeing growth, real organic growth in inspection activities, both in TeamQualspec and in Quest Integrity Group. But that has not ---+ we have not seen that yet in the mechanical service sector of TeamFurmanite. Yes, I think that's fair. I don't have the numbers in front of me. We have a variety of sources and we'll be happy to share the source of that. I'll let ---+ why don't you call ---+ get with <UNK>, and he can give you the ---+ he can share that information with you. Again, I think, on the margin, there may have been some of that. I don't think that would ---+ I wouldn't characterize that as being a significant component, although it's important. I mean, the leveraging of our full capabilities across our network is important for each of our business units. So I would tell you that Quest demand ---+ there is an element of Quest demand that is generated by being part of the Team global network, and ---+ but the same is also true in TeamQualspec and TeamFurmanite. Well, again, I would hope so because I don't see any ---+ there's a ---+ we don't see an element of major kind of individual projects within the ---+ in the quarter for Quest that ---+ as, frankly, we've seen from time to time in the past, there've been occasions where a really big project at Quest, because it's a relatively small business from a total revenue standpoint, can move the needle quite a bit. Again, as I mentioned, the encouraging thing, I think, about the quarter for Quest is there weren't any of those kind of projects. So it was broad based. Just generally stronger activity levels, stronger customer demand across our pipeline, process and advanced engineering services. Again, part of that, by the way, as I indicated, driven by kind of an investment within Quest of resources pertaining to business development in the advanced engineering side. Yes. Primarily inspection. So the ---+ well, probably the larger opportunity is inspection because as ---+ if you can appreciate, as piping systems are put together, if you will, assembled, there's ---+ are welding operations. Welding requires heat treating and inspection, typically. So the larger opportunity for us in new construction projects is typically in our inspection side of our business. Well, I really wouldn't want to do that. Let me just say that a new construction project, like an LNG facility or an ethylene plant, where we kind of have a prime role in either ---+ as an inspection contractor or heat treating or even mechanical services on the ---+ from a bolting or machining kind of standpoint, isolation test plugs being another example, typically, looks like a big turnaround for us. And so that ---+ so ---+ and typically, a big turnaround for Team would be a project that could be, let's say, $1 million to $5 million in revenues associated with an individual project. And that would be much ---+ so similar to that when it's a new construction opportunity. It looks and feels like a big turnaround to us. Well, I think it's just ---+ it has 2 effects. One is the just kind of the incremental, if you will. But again, not totally incremental in the sense that new construction projects have always been a significant piece of our revenue base. And in the aggregate, I think of it as probably 85% to 90% of our revenues are derived from an installed base. So inspection, maintenance of operating facilities, be it pipelines, petrochemical, power, refining. And then about 10% to 15% is always associated with new construction or expansion and ---+ kind of a ---+ in typical. I think the expansion opportunities are going to be a little broader, so maybe it's more like 15% rather than 10% of our revenue. So that's kind of the incremental opportunity. As importantly, particularly on the kind of the LNG, the petrochemical space, and it increases the kind of the capacity of installed base. And so any time there are new facilities, those have to be also maintained and inspected. And so it's not just the onetime opportunity associated with a new project. It's the opportunity associated with the continuing installed base opportunity. Yes, I ---+ my expectation is that it will. If it is, then we will have taken some other steps around that to more appropriately allocate resources. But again, for the same reasons that I've described, inspection, we've always seen in kind of ---+ in cyclical downturns that inspection activity ---+ improvement in inspection comes before improvement in mechanical services. And the broad-based improvements we've seen in all of our inspection-related activities in TeamQualspec, in Quest Integrity Group, again, broad based in both cases, not pertaining to simply a location, that's a good barometer for future results in mechanical services. And then two, the kind of customer commentary about expectations of kind of maintenance turnaround activity in the second half of 2017 and into 2018, all the industry data that I've pointed to, all of those things suggest that we should see a rebound, if you will, in the mechanical service side of our business sooner rather than later. Yes, I would expect Q2 to be up. Okay. Thank you. And again, thanks to all of you for your interest in Team and for your attention to today's call. And we will talk again in early August, I think. Have a good day.

2017_TISI

2016

CIR

CIR #Yes. So if you think about it ---+ let me put it in the context of what's upstream. So overall all of CIRCOR, about one third is upstream. Of that two-thirds is engineered valves. Welcome. Morning, <UNK>. Sure. It is. You know, clearly when we talked about ---+ at the end of the year, if you'll recall, we talked about the fact that top line is going to matter here. But we are clearly focused on that objective, <UNK>, that to drive flat margins for the full year-over-year year. We came in a little over 12% in the first quarter, which implies, you know, higher than 14% later in the year. So there's several things going on here. Essentially you're going to see a lot of the cost actions that we took middle to late last year and earlier this year going to start cutting in and you'll see an expansion in margin as a result of that. There's still some unknowns in the top line. We see further deterioration than we expect from here, it's going to be hard for us to get to the 14%. But we still have 14% as a target for the year. Yeah. We watch that as well. So we saw a little bit of deterioration sequentially coming into Q1. We're expecting a little bit more deterioration as we go into Q2. But these numbers are much lower in terms of deterioration from where we were last year. So we think we're very close to the bottom, if not at the bottom. So if you were to look at our forecast for our distributed valve business for the remainder of the year, you'd see it bouncing around the numbers we're at right now. So, in the 5% down from where we were this year is about what we're expecting for the rest of the year. Sure. <UNK> let me take that. Yeah, so it is shut down. It's closed. There are no manufacturing operations, no manufacturing personnel there. We're left with a couple of folks to, wind up the rest of the business there. With respect to the quarter, we did have an incremental charge of about $1.9 million associated with the the inventory, that when we walked into the year, I thought we could sell. We had to write that down to salvage value. But that's really the big delta between what we talked about earlier on and today. And with respect to the rest of the year, that assumption is still current. That's the big piece of it. We did have a little bit with respect to some industrial-related type of orders out of our business in Europe. That was a little softer, you know, we do sell some valves on some skids that go into the industrial applications. That was a little softer. But really the defense programs was the bigger driver. Sure. Happy to do so. The three big ones, the first one is the SM3 Missile, with Honeywell. The second one is the Joint Strike Fighter and I'll give some color on that. We had anticipated signing up the low rate initial production lot number nine at the end of 2015. That actually shifted into 2016. And the long-range initial production, the LRIP 10 that we expected to sign up here in 2016 has shifted into 2017. So overall it's falling into this quarter here. So the joint strike fighter is a nice big one. We love that program. And the third one is the multi-mission Maritime aircraft. We have quite a bit of content on that as well. And both the JSF and the MMA, our customer is Harris. So those are the three big ones that we expect to sign up here in the quarter. No problem. Good morning, <UNK>. So why are we winning. So we are ---+ so it is competitive. We are exercising a lot of discipline on price, when we lose, it is almost always because we run out of room on the margin that we're willing to give up. We've been pretty good about offsetting and planning for offsets with lower commodity prices and other productivity initiatives associated with these projects. So the margin deterioration that you see now, we don't expect to be incremental going forward for the rest of the year. We're expecting ---+ we look at the margins in our backlog right now, with the orders that we have won they're more or less in line with the margins we delivered in Q1. So there was some deterioration in Q1 that we aren't able to fully offset the pressure on price that we're seeing. But it's not ---+ there's not a lot of drama here. The margins are still pretty good. So that's mostly where we're benefiting from our competitors issues right now is in North America, as you're well aware, one of our big competitors is in the process of being acquired and integrated. And so we're benefiting from that. There's some operational issues that they're dealing with right now. I would guess a lot of the team there is distracted with the integration as well. We're not exactly sure. We do know that they're having delivery issues and lead-time issues. We've been able to take some customers and some projects that we might not have otherwise won if we weren't able to deliver quickly. Just to add to that, I think once you sign up a distributor, it does get a bit stickier. So, I think clearly obviously distributors can change who they buy from as often as they want. But it is ---+ there is an element of switching costs and effort there. So there is an element of stickiness to that as well. Yeah. We're eagerly awaiting for the day that this is going to stop, like everyone else. What I can tell you is that you really have to break our distributors into two buckets. The large distributors that we sold to that have many different sites around the country, those distributors continue to destock. the smaller, single site or a few sites, the regional distributors, they are for the most part at the bottom. We think we're getting demand from them that is more or less in line with the demand that they see. So it's really driven by our larger distributors right now. I hope we're near the bottom. We've been asking about that. But we hope we aren't seeing that at all with the large distributors. They're still certainly destocking. They're expecting to us hold inventory on their behalf and have a very short lead time. By the way, <UNK>, welcome aboard. Appreciate having you. Hi, <UNK>. Welcome back. So, yeah. I'm glad you asked. Things overall are going very well with the integration. So we're one year in. We've done a lot on the operational side to improve their operations, to improve their working capital performance, their delivery. So we feel pretty good about that. We also spent a lot of time on the growth angle as well as, as you know with the business with this kind of margins, the real way to turn this into a home run acquisition is to drive the growth. We have spent a lot of time on both sides. So with the Schroedahl commercial team, as well as the CIRCOR commercial team in cross training, making sure we're representing the full breadth of the product line that we have in control valves including Schroedahl on both sides. Schroedahl has been helping us sell Leslie product in China. They had a better presence there than we did. We're having a good success, but early success in North America. So one of the opportunities we had with the acquisition was to bring Schroedahl into North America, where essentially they had no presence. We have a very large pipeline of quoted projects for Schroedahl in North America. In fact, North America has more open quotes than any other region for Schroedahl right now. So we're not at a point where we're seeing that turn into revenue yet. But we feel like we're seeing early signs of momentum here and we'll hope to see the revenue piece of that in the back half. It's coming on very close to zero. It was small. There was a little bit. But it was very close to zero. That's true. So right now the manufacturing piece of our China business is shut down. We still have a procurement team that is managing the supply base there. So they still receive material there, they still check it for quality and then ship it on from there. So we still have some logistics support in China. We could spin China back up. We're evaluating China and its role in the CIRCOR footprint right now is probably the best way to say it. Thank you, <UNK>. Good morning, <UNK>. Sure, <UNK>. If you recall when we talk about the overall revenue pie for CIRCOR, the midstream, downstream and power is probably between 20% and 25% of the total revenue. And then within that, power is still small at this stage. But it's really more bias toward the downstream. So you could probably break that in half between mid and down. I would ---+ we're seeing pricing pressure now as we mention in distributed valve, which really wasn't so intense last year. So that's relatively recent development here while we're floating around what we believe is the bottom of the market. I would speculate that when the stocking orders start to come and the market starts to come back, that we will see ongoing pricing pressure, I don't know that it will be more intense than what we're seeing right now. The ask is very big right now for the orders that we do get now. But I think when those large stocking orders start to come out, we are going to see a lot of pressure. Just to add to that, <UNK>, because that's the way we look at it, it's imperative for us to take the structural cost out of the business. That's why you see us spending a lot of time and effort doing just that. So we're not going to sit here and anticipate that an increase in stocking orders giving us price leverage. We want to take the structural cost out and be ready for that and drive good margins as well. Thanks, <UNK>.

2016_CIR

2015

TGT

TGT #So <UNK>, I'm not going to go through the details of our plans. We'll kind of maintain that powder for the fourth quarter. But we are certainly looking at newness in electronics. We're looking at categories where we think we are uniquely positioned to win. So working very closely with our suppliers, to ensure that we have the right newness, that we're ready with the right presentation. I think there's a lot of exciting things in the pipeline. We certainly think, as we continue to focus on wellness, that wearable technology is a space where we can and will win. But we also recognize right now that many of those categories are waiting for new innovation. And we're working closely with our key suppliers to make sure that we are going to be bringing that innovation to the guest and featuring it throughout the fourth quarter. I'll take the second one first, and then let <UNK> comment on the growth. I think on our supply chain for the digital channel, we actually have six dedicated fulfillment centers. And we think the combination of fulfillment centers with our existing regional distribution centers, and along with the stores, gives us all the capability we need. And then you'll see us continue to grow the store channel, our regional distribution channel, all three of those channels, as ways to fulfill, depending on the product and how quickly the guest wants it. Yes. And <UNK>, I'll step back and just talk about some of the fundamentals. We've got to continue to make sure we build awareness. We've got to make sure that as our guest engages with us digitally, we make it really easy. We make it easy to find product, an easy checkout experience. We believe that Available-to-Promise, which will roll out this fall, will give our guest the confidence that they know where the product is and when it will arrive for them. Either in a store for them to pick up or being available directly to their home. So we are focused on making sure that we provide, not only a great in-store, but a great digital experience. And we've got to make sure that we continue to make our site easy to work with. And more and more that's the mobile interchange that we've got to make sure is easy for our guest to find product and check out. We want to give them the confidence that when they order, they know it's available to promise. And we're going to have it there for them when they need it. And to the point <UNK> made, we don't need to be building upstream DCs. We're going to continue to convert more of our stores and as we go into the fourth quarter, close to 450. That will act as flexible fulfillment centers to make sure that we can quickly and efficiently get product to the guest. So those fundamentals are critically important as we think about driving industry-leading growth. Yes. So we're right on track with savings. We've got programs identified to deliver the entirety of the [$2 billion], the $1.5 billion in SG&A, plus the cost of goods savings. So we feel really good about that. We're on track for our commitment this year as well. One of the things we talked about when we first announced this, and we've talked about it in a great detail in the Company, is the stores are already productive. And if we're going to take hours out of the store, it will be because we eliminate work, or to the point <UNK> made earlier, move work upstream into the distribution centers. And so we're not focused on taking hours out of the store. We are focused on taking work out and we haven't ---+ we're in the process of working through that. That's a little bit longer lead process than some of the other things we've done. But we are very focused on, essentially, freeing up those hours in the store. And then we'll decide, do we need them for improved guest service or how we'll utilize them. But in fact, there's a couple areas where we have invested hours back into the store. As we put in the whole merchandising sets and as we put in manikins, we've realized the need for dedicated store team members who can merchandise those displays and make them look great all the time. So that's an area where we've invested back into the store. Thanks. All right, we have time for one more question this morning. Yes. Good questions. On the credit side, the benefit, it was up, but not meaningful. And it was less than, I'd say, less than half a penny of improvement versus last year. So very, very small. We are pleased it was up given that the, as we said, payment rates continue to go up. And so we're seeing the portfolio continue to shrink. So clearly, a portion of where the gas dollars are going, at least from our perspective. SG&A through time, we'd expect to lever SG&A, go up, over the long term here, go up modestly, slower than sales growth. I think we've said we're going to continue to take expense out. But we also said that the majority of that expense will likely get reinvested. So I wouldn't count on big reductions in our SG&A over time. There will be places where we have to add back expense to meet the needs of our guests I just talked about in the stores. So modestly slower than sales growth over the long term would be what I'd say. Well, great. Thank you. And for all of you, that concludes our second-quarter earnings conference call. And I really appreciate you joining us today, so thank you.

2015_TGT

2016

CCMP

CCMP #Thanks, <UNK>. Thanks, <UNK>. So let me start it, it's probably parts of both. So if you look at how we're positioned in China, we've historically had a very strong position in that region both with the domestic and international players. So for the folks as you mentioned that the Intel, the Samsung, TSMCs, SK Hynix, in many cases what they'll do is when they build a fab in China, they'll transfer existing processes to the facilities in China, so to the extent that we're ---+ the incumbent, we get transferred over. And that's for the domestic players like the SMICs. We also had very strong relationship with them because I think they really appreciate the support that we provide the experience that we bring and for them, really it's knowing that we're bringing proven technology and products that are proven in HVM or high-volume manufacturing, so it reduces the risk for them. So when we talk about China growth, it was really broad-based and across all of our segments, and as we mentioned ---+ and I know as you're following, there is a lot of developments happening in China, so we definitely think this is a growth opportunity for us and we look forward to continue to grow in China. I think if you look at ---+ I mean if you look at our value proposition for our pads, it's not to go in at a lower price point versus the incumbent. What we've demonstrated our customers as we have a very significant deep activity advantage; in some cases that translates to improved yield and then for our customers, what they're showing is that the technology since it's also thermoset is much easier to qualify. So as we mention six months, we're seeing qualifications complete in the six months versus 18. And then, from a cost of ownership perspective, we're competitive. So I would say that in general we're going ---+ and again back to the reason, why we really found the NexPlanar technology so appealing is that it's very complementary to how we position ourselves with slurry, which is really on value and performance rather than on price. So we're seeing that validated in the market today. Thanks. Thank you. Yes, so our gross margin this quarter was 48.1% and then if you exclude NexPlanar amortization expense 49.2%. Since the NexPlanar acquisition ---+ NexPlanar has been your gross margin headwind and we've said that from the start that adds gross margins are lower than the Company average. So it could be ---+ it would be somewhat dilutive, but it's a large adjacent market and a lot of growth opportunities, so a lot of growth margin dollars available, even if it's at a lower gross margin percentage. So that was one factor, and that'll continue to be a factor I think. In addition, we mentioned higher material cost based on some contracts we're absorbing some higher prices in abrasive particle, a legacy abrasive particle we use and we'll continue to see that as a headwind. But we did see the benefit of higher sales volume quarter-to-quarter with the higher revenue, higher sales volume, there is some better absorption of fixed costs. One other factor like I mentioned in the comments on operating expense was lower incentive compensation cost also had an effect on gross margin. But as you look going forward, three important initiatives for the Company are growing pads, Tungsten growth with 3D NAND and FinFet and then dielectrics our transformation from older lower-performing products to new higher-performing colloidal silica and ceria-based products. Now two out of three of those would be beneficial to gross margin, so Tungsten will be positive. The transformation of the dielectric would be positive and then like I mentioned, pads is likely lower gross margin product. Even within pads though, we have a lot of opportunities for operational improvements, efficiencies and in fact, right now, we're investing in additional capabilities in supply chain quality systems, things like that to improve yields and performance in the pad business. So I think we would expect to see improving yields within pads and then the benefits of Tungsten growth and the dielectrics transformation providing some additional tailwinds. Overall, for the full fiscal year, we set guidance now at around 49% and then next quarter, we would give some update on outlook for fiscal 2017. Yes, thanks. So when we talked about both the colloidal and ceria, this is our efforts to transform our portfolio over an extended period of time and so for example, for ceria, we've had products in the market for a while. The colloidal-based products are newer family of products that we introduced in the last summer. And what we talked about in the past is just for the colloidal-based products we think they can target up to a $100 million of business opportunity and we're just getting started, so we're seeing a lot of traction, a lot of qualifications ongoing and we are certainly seeing revenue from that. From a ceria perspective, we've had products in the market for a while. These are primarily for memory manufacturers. And so, we've had products with commercial sales for a while, but what we're really encouraged by is the overall progress on transforming the portfolio, one that was really based on a lower margin, older fumed silica-based technology into these two new particles and technologies that we've developed, and customer adoption seems to be going very well.

2016_CCMP

2017

SYY

SYY #Thank you Bill, and good morning everyone Fiscal 2017 was a successful year for Sysco and I'm proud of the results our associates have accomplished this year They are executing at a high level as we continue to achieve the key strategies levers of our current three-year plan, including delivering accelerated case growth through a focus on local customers, growing gross profit dollars and managing overall expenses Fiscal 2017 was marked not only by our strong performance in which we continued our relentless focus on the customer, but also because of the some important highlights that include the addition of the Brakes business in Europe, a completion of the successful transition of 12 operating companies from SAP through enhanced version of our legacy ERP system, and validation of our customer-centric approach to our business as reinforced by the improvement in our customer loyalty scores An example is our approach to giving customers a choice in how they want to interact with us, whether it’s through our best-in-class sales force, via our mobile platform or through a phone call I would now like to discuss our segment results starting with U.S Foodservice Operations including some highlights of key strategic initiatives that are helping to differentiate Sysco in the marketplace In addition, I will speak to the performance of our International Foodservice Operations Foodservice segment had a solid year with fiscal 2017 results on a comparable 52 week basis of sales growth of 1.5% and gross profit growth of 4%, while adjusted operating expenses grew 1.7% resulting in adjusted operating income growth of 7.8% We once again experienced strong growth in our local business, up 2.4% in U.S This was partially offset by declines in case volume for our multi-unit business due to our efforts to deliver disciplined profitable growth This resulted in approximately 1% total case growth overall As we progress through the next year, we expect to see those trends around our multi-unit business begin to improve Importantly, as we strive to provide value for our local customers through innovative product offerings and value-added services, along with e-commerce capabilities, we are seeing them reward us with growth for the 13th quarter in a row Looking at gross profit growth for U.S Foodservice Operations, on a comparable 52 week basis, we delivered growth of 4% and gross margin expansion of 48 basis points, as we manage the deflationary environment in the first part of the year very well and are now working our way through an inflationary environment Poultry, produce, seafood and dairy are driving the current inflation and we expect inflation to continue for the balance of the calendar year Our strategic focus on accelerating growth of local customers is working It all starts with an insight-based customer-centric approach that permeates everything we do For example, we have improved the capabilities of our sales force through investments made in training, technology and targeted specialized resources and as a result our marketing associates are spending more time working with our customers on value-added activities and consultative services such as menu analysis, inventory management and business reviews These services foster a deeper relationship with our customers and further enforces the importance of sales force play in helping our customers succeed From a cost perspective, within U.S Foodservice Operations our expense management was solid as we limited growth to 1.7% on an adjusted 52 week comparable basis for the year Looking at U.S Broadline, cost-per-case for fiscal 2017 improved by approximately $0.01 compared to the prior year And on a fuel price neutral basis, cost-per-case increased by one penny The consistent performance we have been to achieve is driven by key strategic initiatives which are supported by the expansive network of dedicated hard working front line associates in the warehouse and those team members delivering our products; through their efforts we have consistently been able to deliver a high level of service to our customers Looking at the overall performance for the U.S foodservice operations on a 52 week comparable basis, I'm pleased with how all of our associates executed our plan; as our adjusted operating income performed well and we were able to improve adjusted operating margins by 45 basis points for the full-year Moving to international foodservice operations; on a 52 week comparable basis sales and adjusted operating income nearly doubled both largely driven by our recent acquisition of the Brakes Group During the year Brakes performed reasonably well in midst of challenging environment in the UK as they exceed our expectation for EPS accretion contributing $0.14 per share They are also making good progress in their supply chain transformational efforts as they move to multi-temp capability across the UK Growth in France remains steady and Sweden continues to produce favorable results We also continue to see long-term opportunities for growth across our new European business Additionally we are in the process of integrating our Ireland businesses and things are progressing well; we expect to achieve modest benefits from these activities Looking forward, we are excited about the long-term opportunities to create value for our customers in the European business Over the next few years we will invest capital and resources to build on the existing foundation of the business as we continue to work on key strategic initiatives that will position us well for the future We remain pleased with our performance in Canada despite the continued softness in Alberta which has been driven primarily by the energy market decline Our Canadian business has seen positive momentum in the growth of its local business driven by improved sales execution and implementation of our customer focused initiatives such as category management and revenue management In addition we are effectively managing costs by streamlining administrative expenses to improve productivity As a result, we expect the Canadian business to continue to deliver positive performance Turning to Latin America we are excited about the new facilities in both Costa Rica and Panama Specifically in Costa Rica, we recently opened a 180,000 square foot state-of-the-art facility with the test kitchen and training facilities This new space is enabling new products and full product lines to be available to our customers and we are excited about the accelerated growth potential those offerings will deliver As we enter the new fiscal year, we do so with strong momentum and I believe fiscal 2018 will bring opportunities for Sysco Our ongoing focus on customer insights and delivering against their needs for innovative products and consultative services will enable our sales force to continue to add significant value and deliver growth with those local customers We will need to effectively manage the ongoing transition to an inflationary environment with our customers while staying focused on gross profit growth and we will continue to focus on driving efficiency from our supply chain through our expansive network that is built to provide a high level of service to our customers In summary, fiscal 2017 showed important progress against our customer-centric strategy for Sysco Our customer and operational strategies are firmly aligned around improving our customers' experience, engaging our associates at the highest level to improve execution and delivering on our financial objectives Finally, as I work through the leadership transition with Bill, I'm personally honored to be given the opportunity to lead this amazing Company and I'm incredibly excited about the future for Sysco Now, I'd like to turn the call over to <UNK> <UNK> for further details Hey, <UNK> Good morning, it’s Tom I think we continue to feel that the independent segment is well positioned to continue to perform at a decent level Obviously as we talked, there is been some I would say some softness in restaurants in general, but I think we still feel like the independents are well positioned whether it’s the product offering that they have, their ability to be flexible to meet the changing consumer needs I think the other thing just as always a reminder is because of our - whether it’s our current share of the market or the fragmentation that exists generally in foodservice, we continue to believe that there is lots of opportunity for us to grow and whether that’s in independent restaurant segment or other segments of our business Good morning, <UNK> What I think specifically to those areas we are fortunate at Sysco, we have got an organization and a business structure that is exists around specialty meat and produce that positions us well And so, I think we continue to believe that center of the plate is an important category and I think we look at that and say whether it’s the way we have structured ourselves now or the fact that we have got those capabilities that we are well positioned to grow And so, whether or not that’s going to be a significant acceleration or not probably has much to do with what is going on broadly in the marketplace, but I think we feel like we are well positioned and we continue to work on improving even our current position in those areas And then regarding just generally how we are feeling about it, as I mentioned the UK market certainly had some choppiness in it, but I think we are feeling good about where we can be positioned there We had good movement in growth in France and we feel good about our business in Sweden and obviously with what we are doing in Ireland we continue to feel pretty good about that as well So, I think overall we feel like we remain pretty well positioned and I think we are just obviously going to have to keep an eye on what is going on from a market perspective, but I think we are positioned how we are performing we feel pretty good We do have some investments we need to make over the next year there and we feel like that’s an important part of us continuing to build on the work they had started pre-acquisition and we shared and talked a little bit about that earlier Yes So, a couple of things, as we talked, we had consistent improvement in the local growth over the last 13 quarters quite honestly, but we talked about the 2.7% in the fourth quarter for local; the contract business or the CNU we talked about it was in fact negative for the quarter and that's consistent with what we have talked about as we have looked at our portfolio and as Bill mentioned earlier we had certain customers we made some decisions on and there are customers who had made some decisions around doing business with us But we continue to feel really good about the overall number that 1% comes from a combination of the contract business declining and the local business continuing to be strong; and my comment about improving is we do see some lapping of that happening in fiscal year 2018 and we also have some new business, will be coming on later in the year I think the only thing I would just add, just lot of the questions that we get - questions on minimum wage loss and this and that and the other thing and that’s an impact on our customers in terms of the things they are dealing with that doesn’t necessarily or doesn’t really impact us at all and that most of our labors as well double or wage rates I don’t know if we can help you with that one today, Chris Andy this is Tom, I think the first thing I'd start with is when we talk we talk a lot about this, it remains very competitive out there We have lots of competitors in general and from a market perspective I think we continue to look at leveraging all of the capabilities we have whether it’s things like the category management we talked about to make sure we have got the best cost on products or its revenue management tool, so we make sure that we are pricing products appropriately in the marketplace and making sure we are taking care of our customers We still feel really good about obviously our ability to grow and our ability to do it in the right way and I think that’s really what you are seeing I don’t think there is any specific thing that’s happened in addition to that This is really about a balanced approach, making sure we are focused the right levers of the business that starts with that local customer where we can incremental value and doing the things that help basically get recognized and rewarded by them for providing the right products and the right services in a right way So I don’t think there is anything beyond that that you should read into it So on the contract side, as I said earlier, I think you will see us showing some improvement in those numbers as we get into fiscal year 2018, because of the both lapping some of the decision were made last year and also we have some new business that will be coming on So, I think you should feel like there will be some improvement there Regarding the local business, I mean we continue to feel really good about how we are positioned and as we talked about why we feel like we are able to succeed in that space has really more to do with how we are focused on delivering the value for those customers I did say in my prepared comments about our loyalty score is going up And I think one of the things as we think about what drove that, we talk to our customers a lot and what we have heard was everything from they are feeling about our marketing associates and continuing to add a lot of value through our selling resources and that means we are accomplishing the things we said, which is making them much more capable on and be more consultative and how they are working with our customers We also heard good things around our technology platform, so I think we feel really good about the types of strides we are making the strategic initiatives we have been talking about And so I think to us that’s confirmation that the things we are trying to do for these customers is working

2017_SYY

2017

OMC

OMC #I will take the first one. On Accuen, Julian, the growth number for the fourth quarter was $33 million In terms of the contribution, which brings the full year to (technical contribution) in terms of revenue growth from that business. And as we said before, the programmatic business continues to evolve beyond just the original core group of advertisers who were focused primarily on achieving in ROI. And overall we expect the programmatic business to continue to grow, whether it is through the bundled offering we have or the more traditional model. We're happy to take the business growth either way, whatever our clients would prefer. But we wouldn't be surprised if we continue to see reduction in the share of programmatic that is executed on a bundled basis and growth in programmatic that is executed on the traditional basis. And to answer your second question Julian, I have anticipated the consulting firms attempting to pick up some aspects of what we do for at least (technical difficulties) seriously for the last 20 months. We have not run into them, though, in terms in pitches or serious pieces of business as of yet but it's something that we are very vigilant about. And we also have plans to start to hire, and we have been hiring people with similar skills to the ones that they have to supplement the normal work that we do. So we have a lot of competitors, but so far our batting average has been very good, but we are very vigilant on the topic. I'm not sure I've got your question completely, but our business has changed completely over the last five years. And I expect it's going to - that pace is just to continue. We make significant internal investments in mass data, data analytics and that as we go into 2017, those are only increasing, also the type of people and the type of skills that we have. One major advantage that Omnicom has that we are able to capitalize on is, we have built most of what we win on internally or we have hired and incorporated these people into the Omnicom DNA. When a company starts trying to gather these skills through acquisitions, it doesn't normally play very well within groups when you go in, and clients don't want to see people who are just meeting each other for the very first time or have different cultures. We capitalized on that quite a bit. I know that eventually when I'm gone it will been remembered as a strategy. I don't know if it was a strategy or just good luck, but that's what I believe. So we are going to continue on the pace. That's where I spend my time, looking, talking, learning, both from clients from their needs and from where we think the marketplace is going. I won't pretend to speak for Marc, but I will tell you what I believe he was saying because I've heard it not only publicly in Marc's comments but I have heard it in any one of a number of places. The amount of spending that is being done on digital is increasing and has been, and will continue. But we have to be able to measure the effectiveness of the media. And we have to be able to have a standardized, or get close to a standardized add verification strategy to track and to measure, and to eventually value what we are willing to pay for, or what our clients are willing to pay for. The other challenge is the varying devices in which you can receive messages. And it's I think most people's guess that mobile will be the largest platform because it is the most mobile platform for people to get their content. In terms of what we do, we've personally installed integral add science verification to make sure that our client has default protection. We've been doing that for several years now. On the margin front, we certainly expect ---+ first on the dispositions. As far as the dispositions that we've completed to date, we expect they will have a small positive impact on margins. But the vast majority of the margin improvement that we expect, that <UNK> talked about in his prepared remarks, are not based on assuming acquisitions. We are going to incur it, but it's largely going to be continue to be driven by our efficiency initiatives. To the extent that we are able to dispose of a couple of businesses that we go through in our evaluations which will start in a couple of weeks, incremental dispositions in 2017, they are largely going to be businesses that have margins on average because of performance issues, largely. The type of businesses they are, the revenues may come down more as <UNK> had referred to, and there maybe some margin improvement as a result of that. That is not really factored into a significant portion of the margin improvement that we expect that <UNK> referred to in his earlier remarks. I don't know if I speak about what happens in my Board meeting, but we had concluded one last week. I have my own wish list within we're interested in growth and we are interested in profit. I made a prediction about how fast I could move. <UNK> just sat there very politely and grinned, and said that you may not be that lucky. But it's a serious earnest review, and we still think there is value in the companies that we are targeting, but I'm of a firm belief that 36 months from now that value will be greatly depleted from where it is today. So it's time to act. We are trying to grow as fast as we can, is the answer. There's elements that we speak about on these calls and that you see that make up organic growth. The first one and the most obvious one is when we win new business, obviously, because that can be calculated and other people speak about it and reporters report on it. What also comes out of that is where clients have a decline or change their spending habits a little bit. We have a lot of clients so a little bit of amount of money can drag that down a bit. So it's a net number that you are seeing, not a gross number. But we been doing very well and our clients, I think especially the US clients, and they tend to be multinational, they are bullish. They are hopeful. There is confidence out there. So as long as something geopolitically doesn't get screwed up, or ---+ India didn't have the greatest quarter for the Indian economy because of the change in currencies. There are some decisions which get made which impact other parts of the business from time to time, quarter to quarter. It's very difficult to look at it on a 90-day basis. In terms of the wins themselves, though, the more important part of the wins of say P&G, AT&T and Volkswagen, were how we have been able to establish or significantly enhance the platforms we have for growth Within PHD in the case of Volkswagen and Hearts & Science newly created in the case of P&G and AT&T. So we think those platforms provide us with some significant growth opportunities. The actual amounts of revenue on the initial win, while very helpful and certainly very helpful to the businesses that won the work, they are not in and of themselves material to our overall results. There's certainly a lot of other factors that add and some that detract from our organic growth profile. <UNK> touched on them, certainly. So we are more bullish about the benefits that we got from those wins on what our future growth profile can be going forward. But we've got to look at the overall portfolio, which is pretty diverse and hopefully balanced. And not everything is always going to be hitting on all cylinders. Sitting here today, and the platforms and the agility that we have brought into our ability to go to market, changes all the time. You can ever get too comfortable with it. But it's working today and we continue to evolve. We certainly have, two things we have. We have some of the greatest agencies in the world in our major European markets. So they are very attractive to clients. We also, if we dissected our client base, we don't have large banks and things that are highly regulated that some of these recent changes will probably impact going forward. So we are not going backwards, we are going forwards for the most part. And we have to see what is going to happen with the elections that are coming up in Europe. This time last year I would have never predicted the day before Brexit we were in Cannes. I didn't predict that vote. I certainly didn't predict the presidential outcome. God knows what is going to happen in France and in a lot of other key markets in Europe. So all we can do is make sure we maintain the quality of our agencies, continue to be agile as hell, and fight for every single dollar of revenue we get. And that is what we are doing. Operator, I think we have time for one more call, one more question. Sure. We do go to market differently, and the one client you point out is one where we certainly have. We have brought people in from different skills, we are working differently. Some of our media scientists are the people briefing creative people as to what audiences we should be attacking as opposed to traditional type of account people that you would have had in the past. Everything is a bit more bespoke in some of the larger wins. They're working much more closely in fewer silos than ever before. And it wasn't so much the Googles and the Facebooks, although they are very supportive of Omnicom. It was more like other vendors that the client had selected and used, like In some cases Adobe, in some cases it is salesforce or CRM. To date we have been able to draw lines in figure out this is what your role is, this is what our role is; by the way, here is your desk because I need to speak to you every day and we want to improve communications. We've just gotten better at it. We were always pretty good partners, but I believe not just top management, but also upper middle management and middle management has gained confidence in the way that we can interface and work with some of these people. So we are just building it for the client, with the client's interest in mind, not necessarily the traditional, and I've been around a long time, silos, or particular agency brand. It is morphing, it is changing because the marketplace has. You're welcome. Thank you all for joining the call today. We appreciate it. And we will talk to after the first quarter is over. Thanks. Thank you.

2017_OMC

2017

FL

FL #Thank you, <UNK> Good morning to all of you and thank you for your interest in Foot Locker As <UNK> mentioned, third quarter comparable sales declined 3.7%, within the down 3% to 4% guidance we provided on our prior call and, as expected, an improvement over the decline we experienced in the second quarter Our comp was negatively affected by hurricanes Harvey, Irma, and Maria Overall, we had almost 450 stores closed at some point during the third quarter, as a result of these storms Although for the most part, sales recovered in Texas and Florida within the quarter The primary impact on us was actually from Hurricane Maria, which shut down all 56 of our stores in Puerto Rico and the Virgin Islands And most of these stores remain closed for a month or more after that devastating storm hit in mid-September Our thoughts are with the people in the Caribbean and elsewhere, including hundreds of our own associates who are continuing to cope bravely with the devastation left behind by this season's hurricanes We estimate that the net sales loss primarily due to Maria, lowered our overall comp by 20 basis points to 40 basis points The hurricanes also led to significant inventory losses which I'll get to when I talk about SG&A In terms of Cadence, comp results were steady throughout the period, with results in August, September, and October all within the quarterly guidance Let's now review the details of our performance starting with our families of business As expected, Footwear remains challenged and decreased mid single-digits Apparel, on the other hand, was strong, producing a mid single-digit comparable sales gain, with increases across men's, women's and kids Accessories, such as socks and hats, comps down double digits Within Footwear, sales of men's shoes were down low single-digits; kids decreased mid single-digits; and women's posted a double digit decline Running remains the strongest category in men's footwear, finishing with a high single-digit comp gain, which was driven by VaporMax, Tuned Air [Air Tuned] and Air Max 97 from Nike and, NMD, Tubular Shadow, EQT, and Ultra Boost from Adidas Although the men's basketball category decreased mid single-digits, this trend improvement over the double digit decline in Q2 was driven by stronger sell-throughs of select Jordan Retro releases compared to Q2 and other casual basketball styles such as Air Force 1s from Nike Finally, within men's, casual styles posted a double digit drop, as strong demand for Vans, especially old school and skate high styles, was more than offset by a decline in Converse and a slower start to our Timberland business compared to last year Decline in children's footwear sales was driven by the shifts away from signature basketball and casual court style However, the overall downtrend in the kids business did improve versus Q2, due to the higher sell-throughs for the Jordan Retro releases I just mentioned, a solid running category led by Tubular Shadow and Xplorer, and positive results for the LeBron 15, and LeBron Soldier On top of the ongoing slow sell throughs of Superstars and Stan Smiths, trends in our women's footwear softened further during the quarter, due to a lack of new on trend offerings to offset last year's strong demand for PUMA Fenty styles The weaker footwear sales had the biggest impact at SIX:02 and led to a double digit comp decline for that banner Turning to our apparel business, we were quite pleased that it was up mid single-digits with strong gains across most of our geographies and banners Branded fleece and wind wear assortments from Nike, Adidas and Champion were the key on trend items during the quarter Our branded T-shirt business also had a strong quarter Overall, ASPs in apparel were up high single-digits, reflecting the more premium assortments in our inventory, while units were down low single-digits Our children's apparel business was up high single-digits Men's apparel posted a solid mid single-digit gain, while women's was up double digits, however, the gain in women's apparel was largely mark-down driven Breaking out the comparable sales results by segment, direct-to-customer posted a 6.1% increase, while our stores were down 5.1% Starting with the direct-to-customer segment, Eastbay generated a high single-digit top line increase Our store banner dot-com businesses in the U.S and Europe were both up mid single-digits, while our digital sales in Canada increased at a strong double-digit rate Overall, direct-to-customer sales increased to 13.8% of total sales, up from 12.8% a year ago Within our store divisions, Foot Locker Canada and Footaction posted solid results, both generating low single-digit comp increases, led by double digit gains in apparel and mid single-digit gains in men's footwear The other store divisions posted comparable sales decline In the U.S , Foot Locker was down low single-digits, while Kids Foot Locker and Champs Sports were each down mid single-digits Overall, traffic at our U.S stores declined mid single-digits Internationally, traffic also declined mid single-digits Comparable sales at Foot Locker Asia Pacific and Sidestep were down mid singles, while Foot Locker Europe and Runners Point were both down low double-digits Sales at Foot Locker Europe, which has a relatively high penetration of Adidas, were pressured by further declines of Superstars and Stan Smiths, and lower than expected sell-throughs of some other Adidas styles Moving on to the rest of the income statement, gross margin decreased 290 basis points to 31% of sales The lower rate was driven by a 190 basis point decrease in our merchandise margin, a 10 basis point increase in shipping expense, and 90 basis points of deleverage on our occupancy and buyers compensation expenses The lower merchandise rate, both year over year and compared to last quarter's guidance, was the result of higher markdowns, both in store and online The higher markdowns reflect our ongoing efforts to drive traffic and clear slow-moving inventory in the current promotional retail environment Despite this even greater than anticipated markdown pressure, average selling prices in footwear were actually up low single-digits, while units were down high single-digits Our SG&A expense rate rose in the quarter by 30 basis points to 19.7% of sales Included in SG&A were $7 million of hurricane-related expenses, including lost inventory, damage to fixed assets, and repair and maintenance expenses Although we did not adjust our non-GAAP results for these costs, which total about $0.03 per share, SG&A would have levered by 10 basis points during the quarter, had these hopefully one-time costs not been incurred The expense rate performance was driven by the team's consistently strong expense management, which helped offset some of the pressures from minimum wage increases and higher health care costs The $13 million reduction in force and reorganization charge that <UNK> mentioned was part of an overall strategy to address the challenges we are facing in today's fast-changing retail environment The vast majority of the charge relates to severance The changes, while difficult, position us to create a more agile, flexible organization that will concentrate on those strategies that we believe will most effectively drive our long-term earnings growth Dick will comment further about these initiatives in a few minutes Depreciation expense increased to $44 million from $40 million in the prior year The increase reflects the investments we have made and continue to make in our store fleet, digital capabilities, and logistics network On a GAAP basis, our tax rate came in at 34.7%, 380 basis points higher than last year As you may recall, the lower rate in the third quarter last year reflected the benefit from an intellectual property valuation reassessment in Europe On a non-GAAP basis, our tax rate was 34.8% Inventory ended the quarter down 3.4% from a year ago compared to an overall sales decrease of 0.8% On a constant currency basis, inventory decreased 4.9% compared to a 2.3% total sales decrease Our proactive markdown actions during the quarter helped ensure that we are headed into the holidays with the ability to flow in good quantities of our improving product assortments We ended the quarter with $890 million of cash and cash equivalents, an increase of $25 million from the end of Q3 last year We mentioned on our last call that we and our board are fully confident in the ability of our business to reaccelerate over time, and that we would consider a full range of share repurchase alternative Given that, and in light of the value we saw in the price of the company's stock, we significantly accelerated our buyback program, spending $304 million to repurchase 8.7 million shares during the quarter In addition, we returned $38 million to our shareholders through our quarterly dividends In total, we have returned $482 million to shareholders year-to-date Capital expenditures in the quarter were $54 million, bringing our total through the first nine months of the year to $204 million We are on track to spend almost all of the $277 million we planned for 2017. Turning to real estate We ended the third quarter with 3,349 company-owned stores, a decrease of 10 from the end of the second quarter For the year, we currently expect to close 150 stores, up from the 135 we mentioned on the last call We'll open about 90 stores and relocate or remodel 180 stores Before I turn the call over to Dick, let me make some comments about how we see Q4 unfolding We now expect comparable sales to decline 2% to 4%, slightly better than the previous guidance of down 3% to 4% Gross margin is likely to decrease 220 basis points to 240 basis points in Q4 on a 13-week basis This decline is steeper than our guidance in August due to the anticipated need to maintain relatively high markdowns in Q4 to move through slow-moving inventory to position ourselves for a stronger 2018. SG&A is likely to increase by 60 basis points to 80 basis points as a rate of sales This is improved from the guidance we gave on the last call due in large measure to the recent reduction in force I mentioned, and a timing shift of certain projects into early 2018. In total, EPS is likely to decrease between 15% to 25% in the fourth quarter Please remember that this guidance does not include the 53rd week, which we still estimate will be worth an incremental $0.12 per share With that, let me turn the call over to Dick to discuss our initiatives that we believe will reposition the company for long-term growth Dick? Well, we described, I think, fairly thoroughly the reorganization and the positioning of ourselves to get out to those long-term growth opportunities to make sure that the organization is set up to do that But as we evidenced in the third quarter, we really have very strong expense management culture, and we look for the opportunities to lever at lower comps That leverage point has been mid-single digit comps for our structure this year But we look to manage cost sales per payroll hour That's the biggest function within SG&A, selling wages So we look to make sure that we have got the very best salespeople in the store at the peak hours, that management of scheduling is very important And then we look to make sure that the marketing money that we spend is driving what we want it to, increased traffic and increased conversion But, <UNK>, we look at every lever We manage our electricity through using things like LED bulbs because they're much more cost effective Yeah, so every lever, but SPH and sales per square foot are obviously very meaningful Thank you for calling out what we have done on the inventory for the last couple of quarters because that is really the thought process to make sure that we are keeping the inventory fresh and that we have got capacity to bring in those improving assortments So I – and I'm not going to get into expectations around 2018 at this point It's a little bit premature But we do believe that the actions that we're taking, we continue to take through the fourth quarter, will set us up well to come into 2018 with strong inventory And certainly the speed initiatives that our suppliers are working on and that we are partnering with them on are helpful to that formula and that expectation Yes, Sam, I'm not going to go into the detail of what those percentages look like Just suffice to say that we have standards that we have in place at this organization, runs the business by to make sure that the inventory is in a good place So, that has been a discipline that has served us well for years and we are sticking to that But the connection of apps, releases by app, there's store connection as well And this is an advantage for us, that we have a store fleet that can complement that experience And our vendor partners appreciate that asset that we have Yes, on the share buyback, we ended the third quarter with the remaining $863 million of our original $1.2 billion authorization So, the share buyback is not a formulaic, it is – our number one priority is investing in the business, but a very important objective is meaningful returns cash to the shareholders and certainly, we've demonstrated that this year But where we see value, we act appropriately

2017_FL

2017

UVE

UVE #Thank you, Carmen, and good morning, everyone. Welcome to the Third Quarter 2017 Earnings Conference Call for Universal Insurance Holdings, Inc. My name is <UNK> <UNK>. I am the VP of Investor Relations here at Universal. With me in the room today are Chairman and Chief Executive Officer, <UNK> <UNK>; President and Chief Risk Officer, <UNK> <UNK>; and Chief Financial Officer, <UNK> <UNK>. Following <UNK>'s opening remarks, <UNK> will provide an update on several important current topics, and <UNK> will review financial results. The call will then be reopened for questions. Yesterday afternoon, we issued our earnings release, which is available under the Press Releases section of website at www.universalinsuranceholdings.com. A replay of this presentation will be available on the homepage of our website until November 24, 2017. Before we begin, please note that this presentation may contain forward-looking statements about our business and financial results. Forward-looking statements reflect our current view of future events and are typically associated with words such as believe, expect and anticipate or similar expressions. We caution those listening, including investors, not to rely solely on forward-looking statements as they imply risks and uncertainties, some of which cannot be predicted or quantified, and future results can differ materially from our expectations. We encourage you to carefully consider the risks described in our filings with the Securities and Exchange Commission, which are available on the SEC's website or the SEC Filings section of our website. We do not undertake any obligation to update or correct any forward-looking statements. With that, I'd like to turn the presentation over to our Chairman and Chief Executive Officer, <UNK> <UNK>. Thank you, <UNK>. And thank you, everyone, for joining us today. As usual, I will begin by providing some highlights from the quarter and will then review our growth initiatives and strategy. <UNK> will cover several important current topics and <UNK> will conclude by discussing financial results. With that, let's turn to our results for the quarter. We're pleased to have reported a positive net income in a quarter that included the most costly hurricane to make landfall in Florida in the past decade, Hurricane Irma. Hurricane Irma produced approximately 57,000 claims to date. We are pleased to report that we've already closed more than 80% of them. This is a result of direct testament to our outstanding claims infrastructure and more importantly, our exceptional employees. This storm has also highlighted fundamental strength of our business model, including the benefits of our vertically integrated structure, our conservative reinsurance program, our focus on maintaining high underwriting standards, our superior claims handling abilities and our catastrophe response team. We also reported excellent top line growth during the third quarter with a 10.3% increase in total revenues and a 9.4% increase in net earned premiums, with direct written premium growth reaching double digits in both our Florida book and our Other States book. Overall, we reported net income of the $10 million and diluted EPS of $0.28 for the third quarter of 2017, which equates to an ROE of 9.2% for the quarter. Through the first 9 months of 2017, we've generated 23% ROE. We built Universal in a conservative manner so as to withstand events like Hurricane Irma. And as our third quarter results show, this strategy is proving to be sound. Additionally, we believe, we have positioned Universal well for the future by pursuing various organic growth avenues. These include further growth in our home state of Florida, expanding our footprint into new states, strategic initiatives such as Universal Direct and new business lines such as a Commercial Residential product. These initiatives have resulted in a more stable, diversified and balanced business that is well positioned to drive growth and long-term shareholder value. Our core Florida book continues to produce solid top line growth with direct written premiums growing 10.5% in the third quarter versus the prior year's quarter. We continue to believe that we have the opportunity to profitably grow within Florida on an organic basis, given our tremendous agency network and the growth of our unique direct-to-consumer platform, Universal Direct. In June, we filed with the Florida OIR for an overall average rate increase across our entire Florida homeowners book of 3.4%. According to the OIR, we have satisfactorily answered all of his questions with the emergency order issued by the commissioner on September 13, 2017, remains in effect until December 3. As a result, we do not expect to get any formal notice about the state ---+ status of our rate filing until December 4. Geographic expansion remains a key element of our growth strategy. And we continue to see an increase in policy count, premiums in force and total insured value for states outside of Florida in the third quarter. In October, we wrote our first policy in New York and also rolled our Universal Direct in the state. Universal is currently writing business in 16 states and is licensed in additional 3 states. Universal Direct, our direct-to-consumer online platform for homeowners insurance, is now available in all of our active states and continues to demonstrate a strong growth trajectory. Since launch, we have over 7,000 policies in force for more than $8.6 million in premium. We continue to receive positive feedback from customers who appreciate the flexibility and convenience of purchasing homeowners insurance online. We remain confident that our multipart organic growth strategy, coupled with our commitment to provide best-in-class product offerings and service to our policyholders, positions Universal for profitable growth in the remainder of 2017 and beyond. With that, I will turn the call over to <UNK> <UNK>. Thank you, <UNK>. I would like to start with some more color around our loss from Hurricane Irma and then talk a little bit of our reinsurance program. In total, our third quarter results included gross losses related to Hurricane Irma of $452 million, although the net impact on our financial results was held to $37 million due to our comprehensive reinsurance program. At UPCIC, we've taken a conservative approach and booked our initial loss picked for Irma at the top end of our preannounced range of $350 million to $450 million of gross losses. UPCIC will incur a $35 million net retention loss for the event. In addition, to the extent UPCIC experiences any additional reinsurance recoveries from its supplemental non-Florida reinsurance program, those recoveries would serve to further reduce its $35 million retention. At APPCIC, we also took a conservative approach and booked losses at the top end of our preannounced range of $1 million to $2 million gross losses, which will be entirely retained by APPCI<UNK> <UNK> date, we have had over 57,000 reported claims with current paid loss, loss adjustment expense and case reserves of $285 million. At present, 97% of these reported claims have been inspected and as <UNK> mentioned, over 80% are already closed. From a severity perspective, on the over 45,000 closed claims to date, we are averaging $3,740 of loss and loss adjustment expense per claim. These numbers include 21,000 claims that have been adjusted, reviewed and closed with no indemnity payment, primarily due to the loss falling below the policy's hurricane deductible. Turning now to our UPCIC reinsurance program. We're pleased to report that the program has responded exactly as planned. As a reminder, our reinsurance is 100% placed traditionally with reinsurance partners that all carry an A or higher rating from A. M. Best. As importantly, these partners understand the business we're in and the loss potential that exists. Our loss recoveries to date, on average, have been paid within 3 business days of submittal, a testament to our reissuance business relationship and our partners' commitment to service. As we have described in detail in the past, a loss involving any of our non-FHCF reinsurance layers result in the reinsurance catastrophe used being reinstated. So following Hurricane Irma, the impact of reinsurance layers were reinstated, and we immediately had our full catastrophe reinsurance tower of $2.7 billion available for any subsequent events. Thankfully, there have been no meaningful additional events, but had there been or should there be, UPCIC is well positioned to respond with the exact certainty of its catastrophe reinsurance coverage. As we begin to look forward to next year's reinsurance renewal, there is some developing uncertainty around how catastrophe pricing levels will change. One thing we know for sure is that we have significant capacity with predetermined pricing already secured. Specifically, 35% of our total open market catastrophe capacity has pricing fixed at 2017 or prior pricing levels. More importantly, nearly 60% of the capacity in the layers estimated to be impacted by loss has pricing levels fixed at 2017 or prior pricing levels. If market pricing moves upward at renewal, this capacity will be the area most likely to see pricing changes. This multiyear strategy will significantly minimize the financial impact of any upward pressure on catastrophe reinsurance pricing. When you consider that the multiyear capacity reference represents 29% of our overall premiums spent on reinsurance and 39% of our spend was recovered from the state-run FHCF, we will have just 32% of our reinsurance premium budget subject to the effect of open market catastrophe reinsurance pricing changes next year. With that, I will now turn the discussion over to <UNK> <UNK> for our financial highlight. Think you, <UNK>. For the third quarter of 2017, net income totaled $10 million, a decrease of 62.9% compared to 2016, primarily reflecting the impact of Hurricane Irma. Diluted EPS was $0.28, down from $0.75 for the third quarter of 2016 due to the decrease in net income. Despite the decline in net income and diluted EPS resulting from Hurricane Irma, we continue to experience top line growth with increases in every major category of revenue compared to the prior year's quarter. Direct premiums earned of $254.8 million offset by ceded premiums earned of $80.3 million generated $174.5 million of net earned premiums for the third quarter of 2017 compared to $159.5 million in the third quarter of '16. The increase was the result of organic growth from both Florida and Other State growth initiatives. Ceded premiums earned as a percent of direct premiums earned was 31.5% during the third quarter of '17 compared to 32% in the third quarter of '16. Commission revenue of $5.3 million for the quarter grew 15.2% compared to the same quarter in 2016, reflecting the differences in our reinsurance programs in effect during those periods, including an increase in our exposures covered by reinsurance. Policy fees of $4.9 million for the quarter grew 15% year-over-year from an increase in the number of policies written during the third quarter of '17 compared to the prior-year quarter. Other revenues were $1.7 million, flat with the prior year's quarter. This line item is comprised primarily of financing fees and charges and despite the high single-digit top line growth in the quarter, has remained relatively flat, reflecting a shift in consumer behavior and our expansion outside of the Florida market, which tends to produce a higher level of financing fees and charges than our Other States portfolio. Net investment income for the third quarter was $3.1 million, growth of 33.9% from the third quarter of '16. This reflects actions taken to maximize yield, while maintaining high credit quality as securities mature as well as the growing size of our investment portfolio and the beneficial impact of rising interest rates. We realized $800,000 in gains in during the quarter compared to $100,000 in realized gains in the third quarter of '16. We generated a net combined ratio of 99.5% in the third quarter compared to 80.4% in the third quarter of '16. The net loss and LAE ratio was 66.7% compared to 46.1% in the prior year's quarter. The primary driver for the higher loss ratio in the third quarter of '17 was net loss and loss adjustment expenses related to Hurricane Irma of $37 million or 21.2 points on the quarter's loss ratio. The prior year's quarter included $11 million or 6.9 points of weather losses above plan. The third quarter of '17 included $100,000 or 0.1 points of unfavorable prior-year reserve development, while the third quarter of '16 included $0.2 million or $200,000, which is 0.1 points of favorable prior-year reserve development. Lastly, our underlying net loss ratio increased last year's quarter due to continued growth in Other States book and current marketplace dynamics. Our net expense ratio is 32.8% in the third quarter of '17 compared to 34.3% in the third quarter of '16. Our net policy acquisition cost ratio remain flat at 20.2% in both the third quarter of '17 and '16. Our other operating expense ratio was 12.5% in the third quarter of 2017 versus 14.1% in the prior year's quarter, reflecting a reduction in variable executive compensation and reductions in legal consulting fees as well as continued benefits from economies of scale. The effective income tax rate for the third quarter of 2017 was 40%, modestly above the third quarter of 2016 effective rate of 39.1%. This reflected $200,000 of discrete items in the current quarter, which were amplified by a lower level of pretax income in the quarter. We continue to expect an effective tax rate in the range of 38% to 39% going forward. Our balance sheet remains strong and conservatively positioned. <UNK>tal unrestricted cash and invested assets grew to $1,017,000,000 million as of September 30, 2017, from $880.4 million at June 30, 2017. Unrestricted cash and cash equivalents as of September 30, 2017, increased by $120.7 million compared to June 30, 2017, primarily related to payments received from reinsurers in advance of claim payments for Hurricane Irma. We continue to maintain a high-quality investment portfolio comprised primarily of fixed maturity securities which are 98.7% investment grade, and we take a conservative approach to managing our investments. The weighted average duration of the fixed maturity investments in our available-for-sale portfolio at September 30, 2017, was 2.9 years, while the book yield of this portfolio was 1.76% for the third quarter of '17 versus 1.50% in the third quarter of '16. Stockholders' equity was $420.6 million at September 30, 2017, a slight decline from $421.1 million at June 30, 2017, as the net income we generated during the quarter was offset by share repurchase activity and dividend payments. Combined surplus for our insurance subsidiaries was $336 million at September 30, 2017. Book value per common share was $12.21 as of September 30, 2017, up 1% from the $12.09 as of June 30, 2017, despite the modest decline in the stockholders' equity as a result of a reduction in shares outstanding. We remain committed to actively managing our capital position and continue to take actions on that front during the quarter. We repurchased 406,266 shares for $9 million or an average cost of $22.07 per share. These repurchases nearly exhausted our prior share repurchase authorization, and our Board of Directors has approved a new share repurchase program under which Universal may repurchase up to $20 million of its outstanding shares of common stock through December 31, 2018. We declared a dividend of $0.14 per share in the third quarter, equating to annualized dividend yield of 2.4% at current share price levels. Return on average common equity was 9.2% for the third quarter of 2017 and 23% for the first 9 months of 2017. We remain dedicated to providing value to our shareholders and believe this level of return on equity, particularly during a quarter that saw substantial hurricane make landfall in our home state, to be an excellent result. At this point, I'd like to turn the call back to the operator. Sure, thanks, <UNK>. This is <UNK>. I'll take the reinsurance part. Obviously, reinsurers have incurred significant losses when you factor in not only Hurricane Irma that we've been talking about, but also hurricanes Harvey and Maria. There still is a considerable amount of time before we get to the negotiation of reinsurance for next June 1. We will, of course, expect that reinsurers would attempt to increase prices on loss affected layers. But very importantly, as I said in my opening remarks, nearly 60% of the capacity in those layers for us already has pricing levels fixed at 2017 or prior. And in fact, overall, only 32% of our reinsurance spend is up for pricing changes. So we'll see how things play out here in the coming weeks and months in terms of reinsurance. But we feel like we've insulated ourselves quite well. I'll turn it to <UNK> to talk about the rate filing. As far as the primary rates and how we envision that going forward, getting back to what <UNK> said, it's a little too early right now to determine. We think there will be some hardening in the market and of course, that will translate to primary rates at a later time. But I think it is a little too early right now to try to quantify what that number would be. Yes, so going forward, we expect that our underlying non-cat loss ratio will remain at 30.8% on a gross basis. And this covers both the adjustments that's ---+ that covers weather activity above what we had booking our plan in addition to the strength that we've seen lately on some of the benefits. So I would look at 30.8% going forward. No. We're constantly evaluating our capital needs. Obviously, we mentioned that we've ---+ the board just recently approved another share buyback. We have a small amount left from the first one that we will go ahead and close out here very shortly. And then, as it relates to the capital needs of the company, the board and ourselves are constantly evaluating that, determining dividends, determining buybacks. So we'll continue that process. Late notice of claims as it relates to Irma. No, I don't ---+ there's nothing that we've seen. Obviously, we are vetting every claim that comes to the door, making sure that it is a traditional non-cat claim as of now compared to a catastrophe claim. That's something that we do routinely. Obviously, we're matching these losses up to determine when we think the date of loss was. So as far as late reported claims are concerned, you're going to have that as it relates to the loss assessment portion of the policy. But from a regular claim, we're vetting all those to make sure that they are traditional cat claims and not non-cat claims. Yes, I don't think that makes sense for us to do that right now, <UNK>. I mean, obviously, you know the work that goes into doing, getting the rate increases, and going through the whole process. So I think right now if our rate increase of 3.4% is in fact, approved, which we believe it will be, it makes sense to go ahead to receive that rate increase now. And then to reassess later on after insurance pricing is set. Again, I don't think that this is going to be as large of an issue with some other folks have stated in their calls. Like I said, we purchase a lot about reinsurance multiyear, specifically in those layers where Irma was applicable. So I don't ---+ again, right now, it's too early to determine what we think that rate increase could be directly attributed to reinsurance cost. But that we won't withdraw this rate filing. Well, to the extent that they were not already incorporated, but a portion of that is already incorporated into the rate filing, we had expected loss. So yes, there would be some mobility to recuperate, but it's not a straight line item. It's a traditional box that most companies use when it reaches a certain parallel. Obviously, we, at that point, obviously, shut down and close down depending on where the storm is going to be affecting a specific area. So that's something that we've always done and most companies do, the department does, et cetera. So we follow that logic. But I think because there were so many storms coming around during that time frame, I think you saw some folks who maybe self-insure themselves, who are looking to go ahead to get some relief in the event that a storm was going to make landfall where they reside and get some insurance. Again, that's one piece. As I said before, the other piece, I believe, is the trajectory that we're seeing in a positive manner as it relates to Universal Direct. We are in excess of 7,000 policies right now for approximately $8.6 million in premium. Yes, this is (technical difficulty) go back to Hurricane Andrew, this is a direct result of, obviously, the other hurricanes that were taking place prior to specifically one in Texas and then the one afterwards in Puerto Rico. But the demand for adjusters was significant. One thing that separates us from a lot of our competitors is that our ability that we have such a large claim staff [that we were] to utilize a lot of our internal folks to handle our claims. As I said earlier, we closed over 80% of our claims, we've inspected every claim that has come in up till of this weekend, last weekend. And so bottom line is there definitely was an increase in demand for adjusters. There was a lot of money being thrown at adjusting ---+ adjustment companies, many individual adjusters to get them onboard, specifically for desk adjusters. But this is kind of something that we prepare for on a consistent basis and have done so for many years. So I think that experience led us to be ahead of the curve, if you will. <UNK>, I just like to add, I mentioned in my opening remarks that on our closed claims, we're averaging $3,740. So we're making every effort to try to keep the severity of those claims down as low as possible. Nothing, minimal. We received a few, but nothing we're talking about. Not at this time. Statutory surplus at the end of 9/30 was $336 million. On an interim basis, we don't disclose cash held at the holdco. We will be publishing financial statements at the end of the year that will appear on our 10-K filing, including cash the balance. No. Not at this time. As always in closing, I would personally like to thank all of our shareholders, employees, Board of Directors, policyholders and my management team for their hard work and loyalty to Universal. This concludes the call. Thank you.

2017_UVE

2016

RMAX

RMAX #Thank you, <UNK>, and thanks to everyone for joining our call. It is a pleasure to be with you here today as we share our second-quarter results. We had a solid quarter, one which continued the momentum we saw in the first quarter, both in our business and in the housing market, and positions us for further success in the back half of the year. Our ongoing focus on the three pillars of value creation, organic growth, reinvestment and acquisition catalyst and returning capital to shareholders continues to deliver positive results. Before I discuss our second-quarter highlights on slide 3, I want to briefly discuss our approach to organic growth in more detail. Our organic growth is fueled by our 43-year focus on selling franchises and attracting and retaining the best agents, and we had notable achievements on both fronts during this past quarter. I am pleased to announce that we obtained the necessary approval to begin selling franchises in New York, and we've already made our first sales. The New York region, which we acquired in the first quarter, represents a multi-year above-average organic growth opportunity. As we have previously discussed, we will likely sell only a handful of franchises in New York this year. After selling a franchise, it generally takes the new owner four to six months to open their office and then another few months before they see agent count growth. That's why we don't expect any incremental agent growth from New York this year, but we do anticipate ramping up slightly in 2017 and thereafter. We are pleased with the good work our New York team is doing and the positive reaction we're receiving from our franchisees in the state, and we are excited about the long-term organic growth opportunities in the region. On the agent front, real estate agents affiliated with RE/MAX have once again dominated the 2016 Real Trends America's Best real estate agents ranking. RE/MAX agents accounted for 22% of those listed in the industry's largest agent ranking based on homes sold in 2015, the most of any national brand. RE/MAX agents are often recognized for their outstanding service and dedication to their clients. With RE/MAX agents representing more than one in five of America's best real estate agents, consumers understand that RE/MAX agents have the experience to get the job done in today's market. Now looking at slide 3, our quarterly results included the best quarterly agent count increase in over a decade. We were particularly pleased with this quarter by growth in the United States and Canada, markets where revenue per agent is the highest in our global network. We added over 3,200 agents during the second quarter and over 8,000 agents since the second quarter of last year. Combined agent count growth in the US and Canada was at the high end of our expectations, while international agent count growth exceeded our estimates. Turning to slide 4, we ended the second quarter with 109,960 agents in our global network. Growth accelerated as we grew our total agent network by almost 8% compared to the second quarter of 2015. Importantly, combined agent count growth in the US and Canada was 4.5%, at the high end of our expected range. Agent count growth outside the United States and Canada increased just over 4,500 agents, or about 19%, since second quarter 2015. About two-thirds of that growth came from Europe with the bulk of the rest coming from South American countries, evidence that the RE/MAX brand and agent-centric model has broad appeal in and outside of North America's borders. Slide 5 shows agent count growth within the United States and Canada broken down by Company-owned versus independent regions. The graph on the left highlights our agent growth of 4.7% and 3.7%, respectively, in our US Company-owned and independent regions after adjusting for the acquisitions of New York and Alaska. The graph on the right shows agent growth in Canada. Canadian agent count grew almost 5% since last year, more than we expected due to the strength of our brand, a robust housing market, and the conversion of a very large competing brokerage. Western Canada, which is Company-owned, increased by 261 agents, or 4.1%, compared to the prior-year quarter. Eastern Canada, which is comprised of two independent regions, added 643 agents, or 4.9%, compared to the second quarter of 2015. The increase was driven by the conversion of a large competing brokerage mentioned earlier. Although the housing market in Canada is still strong, we continue to watch for growth to moderate in certain markets like Vancouver and Ontario. Additionally, we represent approximately 18%, a very healthy percentage, of the total realtor population in Canada. So we expect relatively flat to low growth there compared to other countries and regions in our network. Slide 6 shows our year-to-date agent growth through June 30. We have added over 5,000 agents, increasing our total agent count almost 5% since year end. Combined agent count growth in the United States and Canada was 3% year to date. Our recruiting success is the direct result of the growth mindset of our franchisees and the overall strength of our network and our brand. We continue to provide the most productive agents and those aspiring to be the most productive agents in the business with world class tools, technology, and training to enable and promote their success. Whether it is our Momentum broker and agent development program or connecting consumers with agents through remax.com, we continue to reinvest in our business with the goal of increasing the value proposition we offer our franchisees and agents. With that, I will turn the call over to our CFO, <UNK> <UNK>. Thank you, <UNK>. Turning to slide 7 you will find a breakdown of our revenue streams. Overall second-quarter 2016 revenue decreased 2% to $43.4 million, primarily due to the sale of the Company-owned brokerages. Revenue would have increased 5.3% after adjusting for the sale of the Company-owned brokerages. Organic growth increased revenue 4%, and the acquisitions of New York and Alaska combined added 1%. These increases were more than offset by the sale of the brokerages, which negatively impacted revenue by 7% year over year as well as FX which reduced revenue a nominal amount. Recurring revenue, which includes continuing franchise fees and annual dues, increased $1.7 million, or 6.7%, over Q2 of last year. Recurring revenue accounted for 64.3% of total revenue in the second quarter of 2016, up from 59% last year, primarily due to the sale of our Company-owned brokerages. Revenue from continuing franchise fees was $19.8 million, an increase of $1.6 million, or 8.6%, compared to second quarter 2015, primarily due to agent count growth and the acquisitions of the New York and Alaska regions. Revenue from annual dues was $8 million, up $200,000, or 2.2%, due to agent count growth, partially offset by the impact of the strong US dollar against the Canadian dollar. Revenue from broker fees was $10.4 million, an increase of approximately $1.1 million, or 12.3%, over last year, driven primarily by higher agent count and by increased sales volume. Franchise sales and other franchise revenue was $5.1 million, down $400,000, or 6.5%, compared to the prior-year quarter, primarily due to a decrease in global subregional franchise sales. International franchise sales were unusually strong during the second quarter of 2015. We have continued to successfully execute on domestic franchise sales during 2016, and we expect that performance to continue. However, last year was a banner year for overall franchise sales, driven by global franchise sales. Consequently we should see modest declines in franchise sales and other franchise revenue year over year in both the third quarter and the full year. Looking at slide 8, selling, operating, and administrative expenses were $18.8 million for the second quarter of 2016, down $0.9 million or 4.5% compared to the second quarter of 2015, primarily due to the sale of the Company-owned brokerages and decreased severance costs, partially offset by investment in our New York region as well as increased employee and legal costs. On slide 9, you will see in the graph on the left that adjusted EBITDA decreased 2.8% to $24.9 million for the second quarter, compared to the same period in 2015. The decrease was primarily due to the sale of the Company-owned brokerages, adverse FX impacts, and the strong global subregional sales in the second quarter of 2015, partially offset by agent count growth. Additionally our adjusted EBITDA margin decreased slightly from 57.9% in Q2 last year to 57.4% in Q2 of this year. Turning to slide 10, the graph on the left shows adjusted net income of $14 million for the second quarter, a decrease of approximately $300,000, or 1.9%, over the prior-year period. Adjusted basic and diluted earnings per share were both $0.46 for the second quarter of 2016, compared to $0.48 and $0.47, respectively, for the second quarter of 2015. Turning to slide 11, our cash position as of June 30, 2016, was $97.6 million, and our free cash flow through the first six months of the year was $24.9 million. We remain in a great position to act opportunistically from a leverage perspective with a debt to adjusted EBITDA ratio of 2 times and a net debt to adjusted EBITDA ratio of 1 times. We continue to deploy our capital thoughtfully in accordance with our strategic priorities. We are focused primarily on reinvesting in the business, reacquiring independent regions, and other M&A opportunities close to our core competencies of franchising and real estate and returning capital to shareholders. Earlier this week, our Board of Directors approved a quarterly dividend of $0.15 per share. The quarterly dividend is payable on August 31, 2016, to shareholders of record at the close of business on August 17, 2016. Now, I'd like to turn it back over to <UNK> to discuss the housing market. Thanks, <UNK>. Turning to slide 12, the housing market continues to exhibit solid fundamentals and still has room for improvement. It's been five years since the worst part of the housing crisis occurred, and the landscape is set up for the industry to remain positive. Many of the underpinning dynamics in our industry are improving. Job growth has been generally steady, wages are rising but not increasing at the rate of house prices. Household formations are better than they've been for several years, but first-time buyers have had a tough time getting into their initial purchase. However, we finally saw some encouraging news on that front in June. The National Association of Realtors recently reported the share of first-time buyers purchasing homes in June 2016 was the highest recorded since July of 2012. Housing starts are trending up, but remain off of their historic pre-recession levels. Overall mortgage availability has been improving, and rates recently hit a record low and look to remain at low levels. Inventory continues to be the biggest challenge, and it's a real constraint, most notably on the West Coast. Affordability is a concern in some regions, especially for first-time buyers. The good thing is demand is very strong. We believe the supply equation will eventually be solved as more homebuilders return to building homes across all price points instead of focusing on apartment buildings. Although our network of professional agents still succeeds in a market such as this, a market with improved inventory offers even greater opportunities. Now, I'll turn it back to <UNK> to walk through our financial outlook. Thanks, <UNK>. Turning to slide 13, the Company's third-quarter and full-year 2016 outlook reflects the sale of the Company-owned brokerages, the acquisitions of the New York and Alaska regions, an estimated exchange rate of $0.74 US for every Canadian dollar, and assumes no further acquisitions or divestitures. For the third quarter of 2016, RE/MAX expects agent count to increase 5.5% to 6% over third quarter 2015, driven by strong agent growth outside the US and Canada. Revenue in a range of $43.5 million to $44.5 million, selling, operating, and administrative expenses in a range of 46.5% to 47.5% of Q3 2016 revenue, with project-related operating expenses in a range of $750,000 to $1 million. Adjusted EBITDA margin in a range of 54% to 55% and capital expenditures in a range of $1 million to $1 million, which includes estimated project-related capital expenditures of $750,000 to $1 million. Turning to slide 14, we are reiterating our full-year 2016 outlook and increasing our agent count guidance. We expect agent count to increase by 5.5% to 6.5% over 2015, up from 4% to 5%, driven by strong agent growth outside the US and Canada. Revenue in a range of $169.8 million to $171.6 million. Selling, operating, and administrative expenses in a range of 48% to 49% of 2016 revenue. Included in selling, operating, and administrative expenses are project-related operating expenditures in a range of $3.5 million to $4 million, down from $4 million to $4.5 million. Adjusted EBITDA margin in a range of 51.5% to 53%. We are currently trending above the midpoints of both our revenue and adjusted EBITDA margin ranges. And total capital expenditures in a range of $3.5 million to $4 million including project-related CapEx of $2 million to $2.5 million. One final housekeeping note, we are now expressing our revenue guidance as a range of absolute dollars instead of as a percentage change relative to the prior-year's results. This is purely a change in format and not a change to our full-year guidance. Now I'll turn it back over to <UNK>. Turning to slide 15, that concludes a successful first half of 2016. RE/MAX is performing as we had planned, with our core business fundamentals and growth pillars firmly intact. Agent count growth is healthy, particularly in the United States and Canadian markets. We have commenced selling franchises in the recently acquired New York region, and we are laying the foundation there for success in the years to come. Finally, we continue to prudently reinvest in our business to enhance our value proposition and to support future growth. With that, operator, <UNK> and Geoff have joined <UNK> and me and we would like to open it up for questions. We continue to prudently manage the business and have the same capital allocation philosophy that we have had historically. So really looking at reinvesting in the business, the acquisition of independent regions, other potential of growth opportunities around real estate and franchising, and then return of capital to shareholders. So we've consistently executed on that, actively meet quarterly and discuss it and we'll follow that same philosophy and process going forward. Well, <UNK>, the luxury market, the high-end market has slowed a little bit, but fortunately for RE/MAX we're diversified across all income brackets. And so it has not affected our profitability at all. There's concern whether prices are too high, places like San Jose or San Francisco, whether that will adjust or not, but we don't see anything disastrous in the future. And what was the last question you wanted to know. We're now at a 50-year low. I think that is going to reverse itself fairly quickly. New ---+ first time buyers are starting to buy again. Traditionally it's 40% of the business. Right now it's 33% of the business, so it's upticking. The problem for most people is finding the affordable housing in the lower price ranges to get their foot in the door. Yes. Our best regions in the US this year, Florida has grown 378 agents, California 332, Texas 262. And we've got lots of opportunities to continue to grow in those markets. So I think those are our best markets right now. We really don't see any markets that are not having any success. We've seen pretty much gains across every region. It isn't harder for us to retain our people. We've got such a strong brand and a pretty loyal group of people with us. The competition started increasing when RE/MAX started into business 43 years ago, and it's just gotten more and more competitive all along the way. It's a fairly inexpensive business with low barriers to entry; for a small boutique firm to get started it's not a great deal of investment. So every time the market gets better, lots of smaller companies pop up. Every time the market goes the other way, they disappear. So we're holding our own; we're actually doing very good on our agent growth and on our franchise sales, so we're excited about this market. <UNK>, it's <UNK>. I'll address the second part of your question and then turn it over to <UNK>. With respect to project-related investments, we're expecting about $3.5 million to $4 million this year, expect to be a low 50% margin company this year and for the foreseeable future. So from that perspective, that's what the P&L looks like. I'll turn it over to <UNK> to talk through the priorities. There's a couple things to think about from that perspective. The agent count guidance that we raised is really driven primarily by agents outside of the US and Canada, which really contribute a nominal amount to our top line revenue growth. Agent count in the US is really right in line with our expectations of 4% to 4.5%, and that's driving 85% of our revenue. From that perspective we feel really comfortable with the core business. 65% of our revenue is recurring in nature. The upside and downside as well is really driven by the nonrecurring revenues, so franchise sales and broker fee primarily. As you look at last year, we did have some significant franchise sales in our global operations that we don't expect to recur. So you're right, expect franchise sales to be down a little bit this year. But still driving to, on an apples-to-apples basis without the brokerages, low to mid-level revenue growth for 2016. We're always continuously talking to the independent regional owners. I think they've been encouraged because of being able to pay a bit higher ratios for New York and Alaska, and so the conversation continues. At the time of the IPO I said I thought we would get two to three regions in our first five years. Alaska was very small. New York was significant. I still think there's two or three of them out there in the same time period, so we're optimistic. In every one that we've negotiated we've offered to let them stay in for parts of the business, exchanging RE/MAX stock for whatever. In almost every case the people are retiring and they want to diversify their income. They're going to have to pay capital gains, and so nobody has taken us up on a stock swap of any kind. If it would come up, we would certainly entertain it. <UNK>, our mix has stayed pretty consistent over the years. We certainly get a large percentage of our agents from competitors. They look at our brand, the power of the brand, and the opportunity to make more deals. Our Momentum program that we started a couple years ago is interesting. The averages still says the average agent that joins us is about eight years experience. However, in the Momentum program, about half of the agents coming in have less than a year's experience. Definitely millennials, and that's encouraging to us. We have a very small part of our people are really young and not very well trained yet, and so our brand helps them a lot. But if you look at the other half, they average about 13 or 14 years experience. So the averages are staying the same, but we need to keep bringing the younger generation in, because there's so many people in the real estate industry who are older. Yes. We have traditionally sold franchises almost completely to start-ups; a manager of a competitor who wants to own their own business, a top-producing agent or a team that says we'd like to strike out on other own. So conversions haven't been much of an impact on us. Almost everything is a start-up. It's really interesting for me, we do a franchise training program for all new franchisees for a week every month, and over the last two or three years I've been surprised to see how diverse the buyers are and how the ages are trending down pretty dramatically. Oh, there's lots of runway. We have about 5%, 5.5% of the National Association of Realtors membership in the United States. In Canada we are at 18%, and so the Canadian market is going to be very slow. We've saturated. However, in the United States we're less than halfway to reaching our goals, which is 10% of the membership of NAR. In a market like Denver, we really can't sell any more franchises. We have great market share, there's no room, and we'd rather have all of our offices full and prosperous than sell 50 new franchises and have them all half full and nobody making any money. Most of our markets are wide open to continue to sell franchises. <UNK>, we started ramping up when we started negotiating the contract at the end of last year. And so we put a team together that was perfectly set up for them. And so our expenses are not going to change dramatically. Bear in mind though as far as income, our income is not going to go up very quick because we sell a franchise, they're a start-up, it takes them three or four months to open, and then they start recruiting agents, one or two a month. We'll make a handful of franchise sales this year, and those sales will impact agent growth next year and we'll start to sell even more franchises. When we look at agent count we're really doing a bottoms-up approach and looking at all the factors that are impacting the business. So we feel confident that US is performing really consistent with our expectation. The real unknown is global just because of the strong performance that we've had outside of the US and Canada. There's a couple of things. New York and Alaska are contributing to that outperformance, and then there's one other small piece that's impacting that, just with respect to some of the revenue that previously was recorded in our brokerage line item, it's now being reflected in broker fee. But we're really pleased with how transactions and volumes have performed across the network, so up especially in certain markets like the northeast, California, and the Pacific northwest. So broker fee provides continued upside to us, and we saw the effects of that in the second quarter. It's pretty universal across the United States. We try to measure our market share as percentages of agents of NAR. Do bear in mind that our agents outproduce the competition between 2 and 2.5, 3 to 1. When we pick up 2,000 agents in the United States, that's the equivalent of picking up 6,000 of the typical agents across the market. So that just gives us a continued upward trend, and we just keep growing market share as far as agents go. That is the case. We did implement that fee increase on July 1, so we'll see that potential impact just in the Company-owned regions. That's $5 per agent per month in the Company-owned region. So we'll see that impact throughout the rest of the year, impacting the US. Bear in mind that the Momentum program has now been in place for almost two years, and we waived some fees for the agents underneath Momentum for three months. Now we've got a steady stream of people that are joining under the Momentum program. So the initial hit that we took of the first group that joined is now just a recurring thing, so it doesn't ramp up, it doesn't continue to accelerate.

2016_RMAX

2018

EQT

EQT #Thank you, Pat, and I'm certainly happy that you're able to get through all those required disclosures before we have to end the call. The only topic that I would like to discuss today portends to my ---+ pertains to my new role as interim CEO. Approximately 1 year ago, I retired as CEO and transitioned to the role of Executive Chairman. As you know my replacement resigned in mid-March, and I assumed the role of CEO to give the board a chance to decide upon a replacement. That search has begun, and we expect to have a new CEO in place by the time of separation, which is still scheduled for the third quarter. If you have any input you would like to provide, please let Pat <UNK> or me know. Just as I have committed to relay investor input about board composition and other governance matters to the full board, I also commit to you that I'll ensure that the whole board receives any input on this topic that you wish to provide. Until our next CEO is hired, I will be spending most of my time overseeing the separation. We are fortunate that the upstream and midstream businesses have strong leaders. And as you can see in the first quarter results, the operations of both units are solid. The separation process is well underway. At the board level, we are determining which board members will go with each company. As the board works towards completing that task, we are also evaluating each company's board composition to determine if we need to add members; and if so, what expertise those new people should have. On the management side, we are identifying who would fill the various key roles at each company; and in a couple of cases, external searches have begun. We have also identified the nature of transition, service agreements that might be needed to assure a smooth operational transition for both companies. As you can imagine, while we would prefer to not have any transition service agreements, we cannot allow the lack of certain personnel or fully functioning systems at one or the other entity to get in the way of separation timing, hence, the preparation of TSAs. On the finance side, we announced the terms of the midstream streamlining transactions and have started to prepare the required SEC filings, which Rob will speak to in a minute. I am pleased that Rob and his team were able to [cross] agreements that appear to be value-accretive for all 4 entities. In my view, that was a noteworthy accomplishment. In short, we're on schedule with all aspects of the separation. I thank you for your continued support as shareholders. And with that, I will turn the call over to Rob. Thanks, Dave, and good morning, everyone. Before reviewing the first quarter results, I would like to give a brief update on several items that appeared in this morning's press releases. This morning, EQM, EQGP and RMP announced in a separate news release a streamlining transaction. This transaction includes the sale of EQT's Ohio gathering assets acquired in the Rice Energy transaction to EQM for approximately $1.5 billion in cash and EQM common units. EQM will also purchase Gulfport Energy's 25% ownership in the Strike Force Gathering System for $175 million in cash. Second, the merger of EQM and RMP in a unit-for-unit transaction at an exchange ratio of 0.3319, which implies a transaction value of about $2.4 billion, including approximately $325 million of assumed RMP debt. And third, the sale of RMP's IDRs to EQGP for approximately $940 million in EQGP common units. The transactions are immediately accretive to both EQM and EQGP's distributable cash flow per unit. Relative to EQT, the cash proceeds from the sale of the Ohio gathering assets bring the E&P company's leverage closer to the target of 1.5x net debt-to-EBITDA. EQM and EQGP have provided a forecast through 2020. And based on this forecast, we expect NewCo cash flows of approximately $540 million in 2019 and approximately $670 million in 2020. During the same period, we expect cash taxes to be between 0 and 3% of these cash flows. Regarding the announced separation, we're pleased with the progress we've made and remain on track with our time line of a separation by September 30. EQM intends to file the S-4 related to the EQM-RMP merger in mid-May, and we anticipate that the Form 10 for the separation will be filed in July. Now moving on to the quarterly results. During the quarter, we ran a process to sell our noncore Permian asset and this morning announced the sale of those assets for $64 million. Because of this divestiture, we are adjusting our full year production guidance to 1.52 Tcfe to 1.55 Tcfe. Additionally, we recorded an impairment charge of approximately $2.3 billion associated with noncore proved and unproved properties and related pipeline assets in the Huron and Permian plays in the first quarter. Adjusting for this impairment and other items, EQT announced adjusted earnings per diluted share of $1 ---+ $1.01 compared to $0.44 in the first quarter of 2017. Adjusted operating cash flow attributable to EQT was $718.4 million for the quarter compared to $332.4 million for the first quarter of 2017. As a reminder, EQT Midstream Partners, EQT GP Holdings and Rice Midstream Partners are consolidated into EQT Corporation's results. EQT recorded $141 million of net income attributable to noncontrolling interest in the first quarter of 2018 compared to $86.7 million in the first quarter of 2017. The $54.3 million increase was primarily a result of increased income at EQM and the inclusion of RMP and Strike Force Midstream LLC. Now we'll move on to the segment results. Starting with EQT Production. First quarter production sales volumes of 357 Bcfe were 88% higher than the first quarter of 2017, primarily due to the Rice merger and fell within the stated guidance range of 350 to 360 Bcfe. The average realized price, including cash-settled derivatives, was $3.33 per Mcfe, a 5% decrease compared to the first quarter of last year. Average differential for the quarter came in 85% better than the first quarter of 2017 but was below our guidance range of positive $0.15 to $0.25. When we gave differential guidance for the first quarter, it was the coldest point in the winter and the forward curve was at its highest. The actual price settlements were lower, resulting in a lower-than-forecasted average differential. Operating revenues totaled $1.3 billion for the first quarter of 2018, $520 million higher than the first quarter of 2017 primarily due to increased production associated with the Rice merger. Total operating expenses, excluding the $2.3 billion of asset impairments and $10.4 million of amortization, were $903 million or 58% higher year-over-year. DD&A, gathering, transmission, processing and lease operating expenses were all higher year-over-year, consistent with increases in production volumes due to the Rice merger. Importantly, cash operating costs per Mcfe were 26% lower than last year. And moving on to midstream results. EQM Gathering income for the first quarter was $99 million, $25 million higher than the first quarter of 2017. Operating revenues were $24 million higher than the first quarter of 2017, primarily due to higher contracted capacity and increased gathered volumes. Operating expenses for EQM Gathering were $27 million, $1.6 million lower than the first quarter of 2017, primarily due to lower SG&A costs. EQM Transmission income for the first quarter was $79 million, $8 million higher than the first quarter of 2017. Operating revenues were $9 million higher than the first quarter of 2017. Operating expenses for EQM Gathering were $27 million, $1.3 million higher than the first quarter of 2017. Now briefly moving on to RMP Gathering and RMP Water. RMP Gathering reported an operating income of $44.1 million while RMP Water reported an operating income of $11.4 million. To conclude, I'd like to discuss our cash flow and liquidity position. As of March 31, 2018, EQT had $1.3 billion of borrowings and no letters of credit outstanding under the $2.5 billion credit facility. We closed the quarter with approximately $155 million of cash in the balance sheet excluding EQM, EQGP and RMP. We anticipate the drop will add approximately $1.2 billion of cash to EQT's balance sheet, further improving our liquidity position. We currently forecast $2.75 billion to $2.85 billion of adjusted operating cash flow for 2018 at EQT, which includes approximately $350 million to $400 million from EQT's interest in EQM, EQGP and RMP. With our forecasted adjusted operating cash flow and cash on hand, we expect to fully fund our forecasted 2018 capital expenditure plan of $2.4 billion. With that, I'll turn the call over to <UNK>. Thanks, Rob, and good morning, everyone. Let me start by providing a quick update on 2018 sales volume. As Rob mentioned, Q1 volume was at the high end of guidance at 357 Bcfe. We still expect sequential quarterly growth for the remainder of the year and are guiding a moderate increase for Q2 at 360 to 370 Bcfe, followed by a larger increase in Q3 as new midstream infrastructure comes online in Pennsylvania this summer. Moving on to operations. During the last year, our drilling and engineering group has been developing an idea to manage our horizontal drilling operations in real-time from our offices at EQT Plaza located in downtown Pittsburgh. The thought behind this project was to improve collaboration amongst our technical teams, provide more consistent well results and improve our drilling efficiency. The team tested this idea in the second half of 2017, and we have now fully implemented the process. All of our directional drilling, geosteering and drilling engineering is now done at our real-time operations center, or RTOC, in Pittsburgh. Although in its early stages of implementation, this concept is already showing significant returns. Since implementing the RTOC, we have seen a 14% increase in lateral feet drilled per day, and we have increased our percent of formation drilled in target from 93% to 97%. We have also set EQT records for 48-hour footage drilled and a world record bottom hole assembly run. In addition, on April 12, we set a new record for the longest lateral drilled to date in the Marcellus on our Harbison [H10] well in Washington County, PA. This lateral will have a completed length of 18,670 feet and is scheduled for completion in May. Based on the success of the RTOC for drilling, we have also implemented real-time centers for gas operations and water hauling and will pilot real-time centers for completions, construction and field logistics later this year. These real-time control centers are a great example of EQT's manufacturing operating model that we believe will result in efficiency gains and cost reductions by streamlining our processes. And lastly, I want to provide a little color on well performance as it relates to these ultra-long laterals. Currently, our longest producing lateral is the Haywood [H19] well located in Washington County, PA. This well has a completed lateral length of 17,400 feet and will stack with 97 stages. The well has been online for 120 days, has produced over 4.6 Bcfe and is currently producing at our standard type curve of 2.4 Bcfe per 1,000 feet of lateral. Our expectation for this well is an ultimate recovery of close to 42 Bcfe. Based on drilling, completion and production results to date, our current estimate of the lateral length technical limit in the Marcellus is approximately 20,000 feet. I will now turn the call over to Pat. Sure, <UNK>. This is Rob. So on the G&A side, it's pretty straightforward. You can look at the G&A numbers that are reported, and what we had estimated prior to the merger was that the present value of the next 10 years' worth of G&A savings would be worth $600 million. We now think we're going to exceed that number by maybe as much as $100 million. So that's gone well. And as a proxy for the capital savings on drilling and completion, probably the best proxy is at lateral lengths. And what we thought when we announced the transaction was that we would see lateral lengths improve from approximately 8,000 foot in Greene and Washington Counties to 12,000. Now our current estimates are that we'll be at 13,600 feet for 2018, and it will improve beyond that. And so we expect that we're going to exceed the $1.9 billion of capital and PV-ed synergies by a reasonable amount, several hundred million dollars. So I'd say that we're well on track to deliver and exceed those synergies. And so <UNK>, the next step is going to be the spin of NewCo. And when we spin NewCo, it will still have this structure. We'll have EQGP with EQM underneath, and the IDR is still in place. So the ultimate decision on what happens with the IDR simplification will be up to the NewCo Board of Directors and management team. I would give you my opinion that, that structure is probably not viable long term in this market. And so I think it's something that we'll start putting our minds to. But again, I would emphasize that, that is going to be a NewCo board and management decision on the timing of any potential simplification. This is Dave. Just to add to what Rob had to say, I completely agree. I think in Rob's earlier comments, he's talked about a shelf life of IDRs, and that's going to be one of our first priorities with NewCo and the management team and board to see what that timing is. This is <UNK>. I don't think going longer changes our spacing assumptions, but I just think, in general, we're leaning towards increasing spacing over time because that's where the technology is pointing. I think we're becoming more efficient with our fracturing technique, and we sort of know the boundaries of them. And I think, over time, you'll see our spacing probably increasing, which we think will ultimately result in lower development costs. So that's why we would do it ---+ or development cost per Mcf. So that will be drive ---+ that will be forefront in our thinking on that. We're (inaudible) but we don't unfortunately. But the ---+ I would say that we are in the 750- to 800-foot spacing range right now. I think you'll see the industry and us going more in the 1,000-foot range over time. Just hoping you can maybe just talk through any potential changes to the timing of that pretty material free cash flow inflection and priorities of use of free cash flow post the spin. And with that ---+ does that include the ongoing acre spend that you have. Yes. Okay. Yes, that is actually a pretty [low] number. Could you just refresh us on priorities for use of free cash flow. Well, I mean, the ---+ so in the immediate future, with the separation, we're going to realign the balance sheets of both EQT and EQM. Our ---+ we have moderated growth projections. But in the projections that you guys have seen over the past 6 months from upper teens and low 20s now to low teens and ---+ but that I think ---+ that is subject to move based on what the market does, what gas pricing does, what transportation does out in the industry. And then clearly, returning cash to shareholders is a priority. So I think it's going to be a mix of moderate growth and returning cash to shareholders once we have used some of the proceeds from the streamlining transactions to realign the balance sheets. Drew, the bias is always to return money to shareholders. Everything else is going to be viewed against that standard. Any type of the growth, et cetera, it's always going to be viewed against the possibility of giving ---+ returning capital to shareholders. Okay. That's very clear. One last one, just a follow-up on the comment about aligning the balance sheets. Do we ---+ do you think there's some potential for any debt that's currently recoursed to the parent to go to EQM. You guys talked about, I think, the RMP debt will be transferred over and be recoursed now to EQM. Is there any potential additional debt that would go to the midstream. Well, no. The RMP debt ---+ is the revolver that we will take out. So it won't become recoursed to EQM, but EQM will just take that out. We are taking about $1.2 billion up to EQT in the drop transaction, and that cash will be used to pay down the EQT revolver. There are not bonds at EQT that will become recoursed at EQM. But we do have some relatively near-term maturities, some in 2019. And so we will use additional funds to pay down some of that debt. But effectively, we will move well over $1 billion of debt that was at the EQT level to EQM, which will put us more in line with both EQT and EQM's leverage targets, so somewhere below 2x at EQT and moving towards 1.5x; and for EQM in that 3 to 4x range, which will leave both businesses comfortably investment grade and, I think, fits their cash flow profile very well. Yes. So I think that, that $130 million number was ---+ that was guidance that we gave about a year ago or about at the time of the Rice merger. And so the '18 number is bigger. I can't remember if the $130 million was a next 12 months or if it was a '17 number, but it was one of the 2. The $150 million, $160 million is a good number for '18 and then you're pushing on towards $250 million to $260 million in 2019. So the growth profile is pretty steep, but that's what allowed the valuation that we were able to negotiate for that asset. <UNK>, we're not going to comment on any M&A or divestitures or acquisitions. We just as a matter of course don't do it. No, I think we were just ---+ we were fairly light on our 2019 hedge book compared to where we historically would be given the proximity of 2019 to where we are. So it's just normal course. There's ---+ don't read anything more than that into it. It's certainly a consideration. It's something that we think about here internally and talk to the board about and will obviously be ongoing.

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