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luisespinosa

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maec-2020

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2016

POWL

POWL #Thank you, <UNK>, and good morning, everyone. Thank you for joining us today to review our 2016 third-quarter results. I will make a few comments and then I will turn the call over to <UNK> and then <UNK> for more commentary before we take your questions. Solid operational performance, both project execution and manufacturing efficiencies drove our third-quarter earnings performance. Quarter over quarter performance in both our Houston and our UK operations resulted in improved gross margins, thank goodness. I am also pleased that our Canadian operation reported solid earnings again this quarter. Our business, like many others in the current environment, is facing the headwind of drastically reduced spending by our clients. Oil and gas capital spending has limited the number of opportunities for new work and competitive price pressures are sharply increased on the remaining projects. Believe me, we are turning over every stone. We are seeing fewer opportunities in all markets, not just oil and gas. As we work through these difficult market conditions, we will continue investing in our future. Cost initiatives continue to be a major focus of the operation. We are increasing our attention on research and development efforts to improve the cost of our existing products while continuing work on additional features, intelligence, and new products. We believe R&D is paramount investment in <UNK>'s future, and will have a positive and far-reaching impact on our business. Meanwhile, we are going to ensure our valued clients are supported by our best in class products, services and customer support. So at this point, I will turn it over to <UNK> to provide some additional color on the operations. Thank you, <UNK>, and good morning and thank you to everyone for joining on today's call. As <UNK> mentioned, our Canadian, UK and Houston electrical operations posted better than expected results. Over the past several months, we have taken solid steps to improve project execution and operational efficiencies. I would like to recognize and thank our employees for their flexibility and contributions as we work through these challenging market conditions. Employees have stepped up across the Company, training on new skills and cross-training across production lines to allow portability. Our engineers have engaged and developed processes and procedures to more effectively share workloads across division mines to better address the demands of our backlog. In addition, employees have supported various initiatives to take temporary assignments to assist in short-term needs and to capitalize on their unique manufacturing efficiency strengths. We truly appreciate their support. As we enter our fourth quarter, we will continue to improve our project efficiencies, ensuring that we are achieving delivery commitments, and in some cases accelerating our project schedules to meet changing customer needs. As <UNK> notes, we are increasing our focus on our product development activities to provide increased benefits, improve safety and enhanced communication features to our customers, and improve our cost position. We continue to experience softness in our orders and backlog. The decline of capital spending in our core oil, gas and petrochemical markets continues to be a headwind on new orders, especially associated with onshore and offshore production and pipeline projects. The number of large megaprojects has also declined as the number of new plants or large expansions are being delayed, primarily due to a lack of funding by our customers. Additionally, we are experiencing increased price pressure on new orders as competition continues to intensify. Even though our oil and gas markets are soft, we continue to make progress growing our markets where we have not had a strong presence historically. We have been successful in lining several contracts from new clients in various geographical regions and new market sectors. In addition, we are expanding our focus on opportunities that extend the strength of our electrical and integration solutions, as well as capitalize on <UNK>'s full breadth of service and product offerings. Before I turn it over to <UNK>, I want to stress that we believe successful outcomes require a disciplined and nimble decision-making process. While we cannot predict when order activity will begin to improve, we believe we have laid the groundwork to manage through this challenging period. Now let me turn the call over to <UNK>. Thank you, <UNK>. Revenues decreased by $44 million, or 25%, to $133 million in the third quarter compared to the third quarter of fiscal 2015. Domestic revenues decreased by $40 million, or 30%, to $94 million in the third quarter, and international revenues decreased by $4 million, or 8%, to $39 million due to fewer number of projects in our backlog. Gross profit as a percentage of revenues increased to 21% in the third quarter of fiscal 2016, compared to 19% in the third quarter of fiscal 2015 due to the improvements in international operations, driven by project improved execution, operational efficiencies and reduced costs in our Canadian operations. The increase in gross profit from our international operations was offset by a decline in gross profit from our domestic operations, as margins were negatively impacted by reduced volume and a cost overrun related to a large transit project. Selling, general and administrative expenses as a percentage of revenues increased to 15% in the third quarter compared to 10% a year ago due to the increased expenses and lower revenue. In the third quarter, we incurred $647,000 in restructuring and separation costs. In the third quarter of fiscal 2016, we reported net income of $4.9 million or $0.43 per diluted share. Excluding restructuring and separation costs, income in the third quarter of fiscal 2016 was $5.4 million, or $0.47 per share. For the nine months ended June 30, 2016, revenues decreased by 13% or $64 million to $435 million compared to the same period a year ago. Gross profit as a percentage of revenues was 19% compared to 16% in the first nine months of fiscal 2015 due to improvements in our international operations. Selling, general and administrative expenses decreased by $506,000 to $58 million compared to the first nine months of fiscal 2015. SG&A expenses as a percentage of revenues increased to 13% compared to 12% for the first nine months of fiscal 2015 due to reductions in year-over-year revenues. In the nine months ended June 30, 2016, we incurred approximately $7.7 million or $5.3 million net of tax in restructuring and separation costs, as we aligned our management, salary, and hourly workforces with anticipated production requirements. We recorded an income tax provision of $844,000 for the nine months ended June 30, 2016. The effective tax rate for the first nine months was 8%, which was favorably impacted by the mix of income from our Canadian operations and the utilization of net operating loss carryforwards in Canada that were fully reserved with a valuation allowance. Additionally, the effective tax rate was favorably impacted by $841,000 due to the retroactive restatement of the R&D tax credit. For the nine months ended June 30, 2016, we reported net income of $10 million or $0.87 per diluted share. Excluding restructuring and separation charges, net income for the first nine months was $15.3 million or $1.34 per share. New orders received during the quarter were $88 million, resulting in a backlog of $312 million compared to a backlog of $357 million at the beginning of the quarter and $518 million a year ago. At the end of our third quarter, we had cash of $89 million compared to $44 million at the beginning of the fiscal year. For the first nine months of fiscal 2016, cash provided by operating activities totaled $62 million. Investments in property, plant and equipment totaled approximately $2 million. Also during the same period, we paid dividends totaling $8.9 million and repurchased $3.7 million of Company stock to complete our share repurchase program. Long-term debt, including current maturities, totaled $2.4 million. Looking ahead, based on our backlog and current business conditions, we expect full-year fiscal 2016 revenues to range between $550 million and $565 million compared to our previous guidance of $520 million to $560 million. And we expect adjusted earnings to range between $1.30 and $1.45 per share compared to our previous guidance of $0.80 to $1.10 per diluted share. Our earnings guidance excludes restructuring and separation charges. We will continue to evaluate additional actions that may be needed to align our operating costs with market conditions. In closing, I would like to remind everyone of our strong financial position. At the end of the third quarter, working capital totaled $183 million, of which $89 million was cash. Over the coming quarters, we expect our cash balance to continue to increase as we complete many of the projects currently in process. We have virtually no debt and have nearly $60 million available under existing credit agreements. We are well prepared to manage the business through the depressed capital spending we are currently experiencing. At this point, we will be happy to answer your questions. Well, for the balance of the current year, we are looking at approximately $115 million to $130 million. Looking at beyond that, it's going to be something that we are going to have to manage on a month by month, quarter by quarter basis, because the market predictability today is very challenging. <UNK>, it's <UNK> <UNK>. Impossible to predict; conditions with our customers are ---+ we are engaged heavily day-to-day on all the projects; still a lot of pressure on the whole cost chain to get a project justified and even funded. And then of course the competitive pressures aren't getting any better, so it is a challenging environment. I think we are seeing probably a more balanced ---+ during the most recent weeks, months. We have seen some that have pulled in, but we are also seeing a couple of the projects that are being extended due to the client's construction schedule. So I would say today it's a little more balanced. We are having some success at filling in some of our production holes with short cycle business. We continue to pursue that and, like I say, with our current capacity situation, we are in a much better position to respond to the short cycle requests than we have been in the past, so that is a small positive in the current situation. Let me open that, and I will let <UNK> add some more color. The overall activity probably has not changed dramatically in the last 90 days. I think what we are seeing is the same thing that we've seen in the past with ---+ when we talked about the $40 million projects; they seem to slide to the right before their actual closing. Today, we are seeing that same phenomenon, but it's with the $8 million to $10 million projects. We are seeing them go through more and more rounds of iterations of trying to squeeze the cost out of the project, re-bidding it, and the whole process is moving the award further out than what we would have experienced on that same size order two years ago. The only thing I would add, first on the activity quoting has been relatively constant, again, quarter over quarter. The delays on not just getting the funding, also a challenge. And besides the price competition, I would say there is also increased requests on terms risk, that have created new challenges in the market. So it's definitely a buyer's market. I think the most significant impacts of what we need to do are behind us. It's something that we continue to manage and watch on a week by week, month by month basis. There will ---+ may be some minor adjustments that we'd have to take at individual facilities to make sure that we are properly aligned with our skill sets and the available backlog, but I don't see any major changes that are going to be needed going forward. For cash flow, it is expected to continue to be positive. We do expect our cash balance to increase between now and over the next one to two quarters as we roll through projects that are currently in process. From a utilization of cash, you've got the standard textbook type approaches, but internally, we have spent more time discussing what the right approach would be to growing the Company through potential acquisitions. So, that is something that is more keen to our mind today than it might have been with some of the operational challenges we had a year or so ago. <UNK>, we look ---+ we're looking more often at every opportunity to look at the risk profile for <UNK>. Not just the impact on the margin of the job, but the risks associated with it as we continue to execute better on the existing backlog. So, there are cases in the last quarter where some of the terms have gotten to the point of it just doesn't make sense. The risk for the benefit is just out of balance. And we have ---+ that has added to the competitive pressure. So it's not all price. There are some things in there that are a little strange and I don't think in the best interests of the Company. But there is considerable price pressure and we aren't just walking. We do look at them and I would say more closely today. <UNK>, let me weigh in here while these guys are giving me dirty stares (laughter). I would rather take work at no margin, no profit, to keep the pool of talented people we have in this organization. And I am going to do my ---+ we are going to do our very best to keep everybody that we have on board this organization, and that means we may take some jobs at no margin. Sure. So utility, both the generation and T&D have held pretty constant quarter over quarter. T&D as we noted in the last call was sort of an uptick that maintained this last quarter. The offshore market we talked about continues to be extremely challenged I think of all the market sectors geographically. We are still seeing ---+ I think, again, the last call we noted Middle East being the least depressed of the core oil and gas, and geographically Canada being one of the more tougher markets in oil and gas. But commercially we are still ---+ which we depend on our channels, some of our OEMs ---+ continues to be okay. So utility and commercial I would say holding pretty constant period over period. That is in part what happened in this past quarter. While it was still driven predominantly by operational efficiencies, there was nothing that was substantial as far as any one order. But as we moved towards the end of the project, you do tend to get favorable pickup. We are moving towards the end of projects in our backlog and I would expect that phenomenon to continue near-term. I think the best use ---+ this is me speaking, personally ---+ the best use of cash long-term is to find a way to grow the business through an acquisition. But on the table you can't rule out dividends and you can't rule out additional stock repurchases like we did a year ago. Okay. Gentlemen, rest assured, ladies, we have been focused on expanding our sales coverage, improving our operational efficiencies and cost structures. We are a strong organization in weak market conditions, but we will get where we need to get. I want to thank you for joining us today; look forward to speaking with you again next quarter. Have a good day.

2016_POWL

2016

ALE

ALE #No, nothing really new to report. We continue to see about the same level of activity that we saw in 2015. So we will see how the year progresses. So the acquisition costs were about $0.06 per share. Our earnings per share this year were $0.93 versus $0.85 last year. So if we adjusted for that $0.06 I guess it would be $0.93 versus $0.91 last year. Yes, I see. So you are correct. The acquisition costs of $3 million were in there last year. This year we have just more general corporate interest and taxes. So we have higher interest expense of right around $0.5 million, we also ---+ I am going to get in the weeds here a little bit. But if you look at some of our disclosures, we have a contingent purchase obligation for US Water that is discounted and then accreted over time through 2019 when that buyout happens. So there is accretion expense of about $600,000 related to that that is more than last year. And we have some period-to-period income tax allocations of probably another $0.5 million or so. So it is miscellaneous things like that. Yes. Well, it is a little difficult with both to do that, I guess, <UNK>. The PolyMet process we are very encouraged about at the moment. The fact that the EIS adequacy determination and decision by the agencies was not litigated in any way is very good news for PolyMet. It is somewhat unprecedented too in terms of mining in Minnesota at least with regards to that. The permit processes themselves have a bit more of a defined timeline both from the federal government side and also the state. So unlike the EIS, which had a much more sort of expansive process, if you will, and an undefined timeline, the permit processes are tighter. Of course there is financing that the Company needs to obtain as well. And so, I don't know that I can give you anything more than what PolyMet has expressed already that they would hope to be moving forward to permitting in the later part of 2016 here and into 2017. And then hopefully with construction and timing of finance and all the rest would be operating sometime in 2018 would be kind of, I would think, their commentary or what I see basically on their webpage with respect to their latest observations. SR, of course, is about $1 billion-plus done and SR continues to try to work on its financing, if you will, to put the rest of the project together. We are certainly not expecting any production from SR in the kind of early 2017 timeframe as they put their financing together and as construction has played out up there. So that is the best I can offer with respect to PolyMet and SR. So we are working through that right now. I have nothing really to announce on the specifics here today. As <UNK> mentioned, when we announce second-quarter results we will have more specifics on the timing amount and some of the other factors in a rate case. So we are still working through that. Yes. So, we are not a cash taxpayer right now because of all the factors you just indicated. I believe our current projections are that we will run through those net operating loss carry forwards in 2018 or 2019. Yes, that rule of thumb generally still holds. No, I don't think your math is quite accurate. So, our original guidance contemplated the midpoint contemplated taconite production of approximately 35 million tons. So the midpoint would have been $3.25. So that was the midpoint. So now we are expecting taconite production to be $0.30 to $0.32. So you've got to subtract that delta from that midpoint. And that is how we get in the lower half. We don't have the specific month yet that we are ready to disclose at this time. Some of the factors affecting rate case timing include decisions on our open depreciation docket, approval of our integrated resource plan which is expected in June, and really the outlook for industrial sales. But we do expect to have more specific information when we release second-quarter financial results. <UNK>, yes. So the way it works in Minnesota is once the filing is deemed complete, 60 days later interim rates would go into effect, of course subject to refund. We will certainly request and they will automatically go into effect. No, we are assuming nothing for that. Well, <UNK> and I thank you again for being with us this morning and we certainly thank you for your investment and interest in ALLETE. We hope to see some or all of you on our travels throughout the summer. Thank you very much. Thank you.

2016_ALE

2018

IRT

IRT #Thank you, <UNK>, and thank you for joining us this morning. The first quarter of 2018 produced positive results that were in line with our expectations and guidance provided on our last earnings call. The quarter was highlighted by successfully completing the integration and on-boarding of communities acquired in late 2017 and early 2018 as well as the initiation of the first phase of our value-add program. As of quarter-end, all 5 communities identified in Phase 1 of our program have renovations now underway. Starting with a brief overview of our financial performance and operating results, IRT reported core FFO per share of $0.18, in line with the first quarter of 2017 and adjusted EBITDA of $23 million of 18% year-over-year. Revenue growth was strong of 8% sequentially and 17% year-over-year. Same-store NOI for the quarter grew 2% year-over-year. Our same-store NOI growth was impacted by severe weather-related incidents across a number of our core markets that led to heightened operating costs and softened leasing traffic. With the seasonal first quarter weather trends now behind us, we have already started to see a notable uptick in leasing spreads and are on track to achieve our full year 2018 guidance. One of the critical components of our growth strategy is our value-add initiative. We have emphasized over the past few quarters that we are actively focused on identifying opportunities to make improvements that will increase rental rates and reduce operating costs, which together will generate strong returns on investment and increase value for our shareholders. Based on our belief that there are future opportunities within our portfolio, we have developed in-house capabilities that can oversee and execute on the value-add projects, providing a greater level of control and efficiency by eliminating the cost of third-party construction managers. We are happy to report that we have 5 communities underway and are on track to deliver units throughout 2018. So far, we are experiencing sizable rental growth in these 5 communities. But keep in mind, we've just started the value-add initiatives. While we expect this initiative to be beneficial later in the year as more renovated units are completed and leased at a premium, there may be some near-term volatility and occupancy at these properties. Additionally, remember that we will begin value-add projects at an additional 9 communities we identified as Phase 2 of our value-add initiative later this year. All in, over the next 1.5 years, these value-add projects are expected to generate approximately $9 million in incremental NOI annually and deliver material earnings accretion. We project that the completion of our value-add initiatives will positively impact our leverage levels by almost a full turn and allow us to take a meaningful step towards achieving our long-term target of mid-7x net debt to EBITDA. This powerful value-creation program for our shareholders demonstrates that our investment strategy goes far beyond owning the right assets. We know how to unlock value through operating and managing our communities as well. To that end, the performance of our recently acquired nine-community portfolio has exceeded our expectations. On a year-over-year basis, we've driven revenues by 6% and reigned in expenses by 2%, which has generated NOI growth of 12% for the portfolio. This outperformance underscores our investment thesis and can be attributed to the on-boarding of these communities on to our revenue management platform, the elimination of property management and efficiencies and investing in the people at these communities. We believe that there are additional value to unearth, specifically through the value-add initiative. Over half of the properties in this nine-property portfolio are included in Phase 2 of our value-add initiatives, set to start later this year. As always, we will continue to look for ways to expand margins and boost the NOI in this portfolio. We are being disciplined and judicious in our use of capital and currently believe that the greatest value is being derived from this value-add initiative. However, we continue to evaluate capital recycling opportunities. While we did not disclose of any communities in Q1 and we have not provided guidance around this initiative for the year, we will continue to monitor the markets and we will selectively and opportunistically recycle capital out of existing communities, including our Class A assets and into new communities that meet our investment criteria. Now I'll turn the call over to <UNK> for an in-depth discussion of our markets and value-add projects, and then to Jim to review our financial results. <UNK>. Thanks, <UNK>. We continue to drive rent growth and maintain high occupancy levels in the first quarter of 2018. Same-store revenue increased 2% year-over-year, while operating expenses were up 2.1%, driving year-over-year same-store NOI growth of 2% during the period. This quarter was unique for our market as the southeast of the United States experienced one of the harshest winters on record, and I want to recognize our teams on the ground for their effort. The weather caused a significant decrease in walk-in traffic at many of our impacted communities and increased several expense categories. The utilities were up 5.6% or $120,000 due to the unprecedented conditions, with markets like Atlanta, Baton Rouge, Jackson and Raleigh experiencing higher instances of freezing conditions and storms. Contract services were up primarily due to additional snow removal costs. And our causality expenses, we had none in Q1 of 2017, increased to $80,000 due to the repair of frozen water lines. Our same-store NOI growth was propelled by several of our core markets. We saw a strong top line performance in Atlanta, Columbus, Orlando, Asheville and Huntsville, all delivering same-store revenue growth north of 5%. Further, we saw double-digit NOI growth in Atlanta, Oklahoma City and Columbus. This outperformance shows the continued growth opportunity in our core markets. These increases were the result of a 50 basis point increase to our same-store occupancy, which was 94.4% at the end of the quarter. Focusing on our larger markets, Atlanta continues to outperform and is benefiting from a thriving job market population growth. Our same-store properties in this market had revenue growth of 6.5% and a reduction of expenses of 6.6%, generating NOI growth of 14%. As we mentioned, it appears Oklahoma City bottomed out 12 to 18 months ago and is now starting a slow rebound. To boost occupancy, we reduced rents slightly, and we're successful at increasing occupancy by 350 basis points over last year. The result was an increase in revenue of 2.6%. Expenses decreased significantly as we had less units to turn as compared to last year, producing NOI growth of almost 14%. Louisville saw a revenue increase of 0.5%, much of this can be attributed to the start of the value-add project at our <UNK>town community, where we took units offline for renovations ahead of leasing season. Expenses were down 2%, generating NOI growth of 2.5%. Memphis had revenue growth of 3%, but we experienced some large real estate tax reassessments, which increased operating expenses by 5.1%, resulting in NOI growth of 1.5%. In Raleigh, we increased rent per occupied unit by 1.7%, but this was offset by occupancy decline of 1% year-over-year, from 96% last year to 95% this year, resulting in flat revenue. Most of the occupancy impact can be attributed to the Aston community, which dropped 300 basis points from 97.4% to 94.3%, as there was a property and lease-up in the submarket as well as an overall decline in traffic across the market due to weather conditions. As we stated on our last call, community in Orlando, located in the Millenia submarket has delivered consistent results even with significant supply pressure. Later this year, a new community, directly adjacent to ours, will begin lease-up, and accordingly, we may see some softness as this community ---+ at this community in the second half of 2018. Similarly, Greenville and Charleston continue to be challenging markets. In Greenville, revenue fell 3.5% year-over-year, while revenue diminished 1.9% in Charleston. Our communities in these markets are Class A and are competing directly with new construction. Despite Q1 performance, we believe both these markets are still on track to deliver 1.5% revenue growth in 2018. Turning to investment activity. In addition to the closing of the last 2 communities in the nine-community portfolio acquisition, we purchased 2 communities in Columbus during the quarter, bringing our market exposure as a percentage of total units to 8.6%. While we updated you on 1 acquisition during our previous call, we subsequently acquired a 235-unit community on February 27 for approximately $23 million. This community is situated in the Great Hilltop submarket of Columbus and is conveniently located between several employment hubs, including the Rickenbacker International Airport in the business district in downtown Columbus. The community was 99.2% occupied at quarter-end with an average rent of $881. These 2 communities were purchased at a blended 5.9% economic cap rate. As we signaled in the past, we believe the Columbus market has strong fundamentals, evident by Q1 rent growth for the overall market of 3.1% and will continue to be opportunistic as we capitalize on the scale we have built there. Lastly, I want to share more details around the value-add initiatives. Echoing <UNK>'s statement our value-add projects are going as planned and yielding the returns we projected. As of March 31, we completed 236 units of 1,566 units in Phase 1 at an average cost of $9,276 per unit. We are re-leasing units with an average monthly rent premium of $154 per unit over the expiring lease, representing a 20% return. We expect to complete Phase 1 by the end of 2018 and are on track to begin our projects in Phase 2 pipeline of nine-communities aggregating a total of 2,752 units later this year. We expect to complete our Phase 2 projects by the end of 2019. With that, I'll turn the call over to Jim for an update on the financials. Thanks, <UNK>. For the first quarter of 2018, net income available to common shareholders was $3.4 million, down from $4.1 million in the first quarter of 2017. Core FFO grew by $2.6 million to $15.6 million for the quarter ended March 31. Core FFO per share was $0.18, flat year-over-year, primarily due to the timing of the acquisition of the nine-community portfolio and the related equity offering that occurred last September. Adjusted EBITDA for the quarter increased to $23 million, representing a 17% increase year-over-year. This shows that we are beginning to see the results of the portfolio transformation that we executed in 2017. We reported same-store NOI growth of 2% and revenue growth of 2%, with property level expenses increasing 2.1%. While this is not the growth we posted in previous quarters, it is in line with our projections and stated guidance for the quarter, and as both <UNK> and <UNK> mentioned, it was impacted by adverse weather conditions impacting leasing traffic, higher contract services for snow removal, higher utility expenses and casualty expenses resulting from repairs to frozen pipes. It's not too often that Jackson, Mississippi, has 10 degrees in the middle of January. Turning to our balance sheet. We closed Q1 with 56 properties and total gross assets of approximately $1.7 billion. This marked a 9% increase in gross assets sequentially and can be attributed to the close of the remaining properties in our nine-community portfolio acquisition as well as the acquisition of 2 additional communities in Columbus, Ohio. This increasing growth assets increased our total debt to $903 million, bringing our total debt to total gross assets to 53.5%. From a net debt-to-adjusted-EBITDA standpoint, our pro forma leverage was 9.4x after adjusting for timing of acquisitions and the start of the value-add project. As of quarter-end, our debt is approximately 96% fixed, with no significant debt maturing until 2021. Keeping our eyes on the longer term, we continue to believe that the incremental NOIs and the value-add initiatives will continue to propel our deleveraging efforts. We remain prudent and proactive in improving our capital structure, and we remain focused on organically growing our NOI. As <UNK> and <UNK> stated, our 14 value-add projects offer significant opportunity to unlock value and deliver return for shareholders. These projects remain on schedule to deliver the $9 million of incremental NOI and have a projected return of approximately 20%. As of March 31, our unencumbered assets as a percentage of our growth assets was 40.3%. From a total NOI basis, our unencumbered assets represent 39.2% of our portfolio. This information is now included in the debt summary page of our supplement. While this is slightly down sequentially due to acquisitions within the quarter, we remain committed to our long-term goal of increasing our unencumbered assets. With respect to guidance, we are reiterating our guidance for full year 2018. We expect core FFO per diluted share to be in the range of $0.74 to $0.79 and expect organic same-store NOI growth to be between 3% and 4%. So remember, we commenced value-add projects in the 5 communities this quarter. We believe we will see some quarterly operational fluctuation due to the occupancy impact from these renovations, but view these near-term impact is negligible compared to the long-term benefit of the projected rent premiums. We expect most of the impact from our value-add program to be realized in 2019 and beyond, subsequent to the completion of all 14 projects. To view our full set of guidance metrics, please review our first quarter supplement that can be found in the Investor Relations section of our website. With that, <UNK>, I'll turn the call back to you. Thank you, Jim. As Jim stated, while we may realize fluctuation in market fundamentals on a quarter-to-quarter basis, we believe our underlying investment thesis is validated by a positive rental demand trends. The affordability that renting provides, combined with the housing shortage throughout The United States, continues to benefit our apartment communities. Earlier this month, The Wall Street Journal reported that as a result of the housing shortage, price homes in The United States rose 6.2% in 2017, double the rate of income growth and 3x the rate of inflation growth. These fundamentals inherently make renting more cost effective, with 66% of renters claiming to rent for financial reasons according to Freddie Mac survey conducted this past January. As further evidence that we are strategically located in the right nongateway market, during the first quarter, our markets outperformed international average and the gateway market average, in both population and job growth, on a year-over-year basis. We are confident that the fundamental drivers of this growth will continue to provide the ability to increase rents and drive long-term shareholder value. We continue to invest in our communities, the technology and employees to make sure that IRT is taking advantage of these dynamics. I think, at this time, operator, we would like to open the call for questions. Just wanted to focus on the revenue growth guidance. Clearly, you suggested there were some softness due to the winter storms in the first quarter related to the traffic. But curious if you can give us some metric and help us understand the trends. Where is occupancy today versus quarter-end. And what have you seen in new lease rates since the first quarter as well to kind of give some comfort that the reacceleration, I guess, is underway. Yes, <UNK>, it's <UNK>. I mean, we're slightly better than where we ended the quarter, in terms of occupancy, and we're seeing a significant amount of new traffic that is converting into leasing. On a blended basis, our renewals are right around 3% for new and renewal leases. So we think that's positive. And at 94.4% quarter-end going into strong leasing season that we think there is pent-up demand, we're pretty optimistic. And we said ---+ you said new and renewals were 3%. What was that during the first quarter. About 1%, blended. On new. Blended. Okay. Yes. And then I wanted to touch on ---+ as you guys think about the priorities related to external growth, your value-add initiatives and managing the balance sheet, can you just help us understand how you'd rank those. Clearly, you were opportunistic with an acquisition this quarter, but ramped leverage fairly meaningfully, I guess, with the intention of bringing that down through disposition. But can you help us understand how you'd rank those priorities, and then can also touch on dispositions here in a minute as well. Sure. I would rank value-add first. I think if you think about $9 million of incremental NOI growth, if you cap that at a reasonable level, you're generating $150 million to $170 million of value for an initiative that's going to cost us something less than $50 million to complete. So there's real value creation within that program. It also goes hand-in-hand with the balance sheet because that additional NOI obviously helps to deleverage the net debt-to-EBITDA ratio or to bring that down. I would disagree with you a little bit that we ramped up leverage meaningfully. Leverage was reduced or lower, I should say, because of the equity that we raised in anticipation of acquiring these properties and that equity was used to paydown the debt in the interim until we closed on the assets. So leverage really has not increased that much. It's really just because of the timing and the benefit we got at year-end by having that equity used to retire the debt, again, while we were awaiting for the acquisitions to close. And then after that, I think, the third thing would be continued growth through acquisitions. As I stated, we have been disciplined. We're not going to go out and do dilutive equity offerings just to grow for growth sake. If we ---+ if there is a time when we can issue shares in an accretive price, and we can acquire assets that will then be accretive to our earnings, we will take advantage of that. But in the meantime, we're focused on increasing or improving the portfolio that we have, generating increased returns through that improvement and to continue to manage the balance sheet. Appreciate that, <UNK>. And I guess I was referencing more the quarter-to-quarter sequential change in leverage. Clearly, on a year-over-year basis, you're in line with where you were a year ago. So that's what I was referencing there in terms of the leverage change. Lastly, just on dispositions, clearly, you said you're evaluating the market. Can you just give us a little bit of an update on what you're seeing in the market. And how we should think about the timing of future dispositions as you think about the capital recycling initiatives you talked about in the past. The market for acquisitions is very competitive, as we all know, so that goes hand-in-hand with the sales. I mean, obviously, we would ---+ we're looking to take advantage of this aggressive market on the sales side, but at the same time, we want to be able to redeploy that capital in an accretive way. So we're ---+ we have an active pipeline that we are consistently updating and reviewing and working on. We have identified a number of markets at the right time when we can redeploy the capital. We've identified a number of markets that we would be willing to exit. But we wanted to do it where it goes hand-in-hand with the sale goes hand-in-hand, I should say, with the acquisition. Because we are focused on everything, not just the leverage but we're focused on our payout ratio. And we all know that one of our goals is to bring that payout ratio down. So I don't want to shrink the company at this time just by selling assets without having the ability to redeploy that capital. Yes. Some of it was ---+ it was really across the board. The majority on the expense side savings across the board. I mean, some of it was in turnover and repairs and maintenance, but it really was reality taxes and insurance, basically almost every operating expense item is down slightly. And then on the rent side, it's just a really ---+ it's been a really dynamic market for us. And that's why we're ---+ there's a ---+ we're starting to see the benefit of the value-add, and we'll continue to see that throughout 2018. No. I think just given what <UNK> said about how competitive the marketplace is, you're still seeing ---+ we haven't seen any movement in cap rates in those markets. Yes. That's exactly right. I mean, it's taking about 2 weeks to turn to completely renovate a unit versus 5 to 7 days when doing natural turn. In Louisville, <UNK>town and South Terrace, we just wanted to ---+ we're doing a pretty heavy marketing campaign, and we wanted to have units available that were renovated as the traffic came in to rent them. It's a managed process. I mean, we're looking at every property we're doing renovations in and managing how many units come up for renewals and how many we want to renovate and how deep the market is. Well, on the HPI portfolio, the nine-property portfolio we purchased, we were performing stabilized cap rate after value-add at 7% to 7.5%. The 2 properties in Columbus, we have in ---+ they were purchased based on the existing cash flow. And so ---+ like we said in the past, we'll get them on our platform. We think we can operate them better. I think we can find some more efficiencies. We mentioned one of the properties we bought was 99.2% occupied, which leaves us to believe it they really weren't focused on pushing rents. And then we will evaluate if there are good opportunities to add to the value-add pipeline. Yes, I mean, that's exactly where our focus is intending on going. It is to get into the kind of the rated bond market. We're not there just yet, but we're certainly continuing to push in that direction. And probably the first step will be doing something with rated insurance bond potentially before kind of doing a broad investment-grade kind of situation, but we're moving in that direction. Well, the pace is such we'll start picking up as we enter into the natural season in spring and summer where you have more leases rolling. Q2 is estimated around 300 to 350. Q3, we'll get up to 700 and then will scale back a little bit as the amount of leases expiring reduces towards the winter. And as previously guided, it does include obviously hitting that ---+ completing those units and then re-leasing them at that leasing spread that <UNK> mentioned of about $154 a unit or a 20% ROI. It wasn't a very ---+ it was factored in. It was relatively small impact. Obviously, it's in a nonsame-store category, so it doesn't obviously impact the same-store guidance. And for the year, until it's kind of on our platform and running for a period of time, it's a very small kind of earnings effect. No. No, I mean, clearly, as I've stated all along, we are focused on bringing leverage down, not increasing it. So we would not acquire an asset through the use of ---+ all leverage. And in fairness, with our stock trading at what we believe is a real discount to NAV, I'm not really looking forward to issuing equity. So we're focused on the value-add program. We think that, that adds a tremendous value to the company, and when the timing is right, we'll grow through new acquisitions. But again, if we see the ability to recycle out of something and to replace that capital accretively, we will do that. But not go out and issue equity to grow or to just use leverage to grow at this point. I think, it's twofold. One, it's not needing to do the repair this year; and two, just lower turns happening at the properties. Yes, well, we ---+ I mean, we always see on the slight uptick in repairs. Obviously, once the weather gets better, we always budget for that. But when you look at kind of Q1, there were some repairs last year that needed to be made, and they did not need to be made this year. Well, thank you, everyone, for joining us today, and we look forward to speaking with you next quarter. Have a good day.

2018_IRT

2018

ACOR

ACOR #Thank you, <UNK>. Morning, everyone. Diving right in, we achieved a number of key milestones in 2017. We reported AMPYRA net sales of $543 million, which was a 10% increase over 2016. This success reflects the health that AMPYRA is providing to tens of thousands of people with walking impairment associated multiple sclerosis, and it also highlights the strength of our neuro-specialty commercial organization, which has been recognized for its creative approaches to serving the needs in the MS community and also to risk-sharing and reimbursement. We continue to vigorously pursue our appeal of AMPYRA, with replied briefs filed in November 2017. The next step is the oral argument, which we believe most likely will be scheduled in the next few months. Our most important achievement of 2017 was the positive safety and efficacy data for INBRIJA, our Investigational Inhaled Levodopa Treatment for symptoms of OFF periods in people with Parkinson's disease. After we received a Refusal to File letter at the end of August, we refiled the NDA within approximate 3 months in early December. We took the time to respond to the 2 RTF issues and also to other questions that the FDA had indicated they otherwise would have asked during the standard review process. We expect the FDA response to the refiling any day. We ended the year in a strong financial position with $307 million on the balance sheet. Moving to INBRIJA. This is an inhaled levodopa for people with Parkinson's disease. It is self-administered to address systems of OFF periods, and it uses our proprietary ARCUS technology for inhaled delivery. More than 1,000 subjects were studied in multiple clinical settings across the development program, which included a positive Phase IIb study, a positive Phase III safety and efficacy study and quite encouraging long-term safety data. INBRIJA represents a significant commercial opportunity. It addresses a large unmet medical need, and we have a patent portfolio that goes into the early 2030s. In addition ---+ very importantly, in addition to the patent portfolio, we have a large body of trade secrets and know-how, which we believe gives a particularly long tail to the exclusivity on the technology. We believe that approximately 350,000 people in the U.S. have both Parkinson's and OFF periods, and based on our continued market research, we believe the market opportunity for INBRIJA in the U.S. is greater than $800 million, and that does not include ex U.S. projections. I'll now pass the call on to Dave, who will review the 2017 financials with you. Thanks, Dave. So we expect a number of key milestones, clinical and corporate, in 2018. They include the ones you see here. I won't read them all, but I will highlight that we are expecting the NDA acceptance for INBRIJA this month and really, any day now. We are also looking to file our MAA in Europe by the end of this quarter, the first quarter, and we would expect a PDUFA date also this year in the fourth quarter and looking to potential approval and commercialization of INBRIJA by the end of the year. Obviously, we're also looking for a decision in the AMPYRA patent appeal this year. In closing, our strategic priorities are to advance INBRIJA toward approval and commercialization, maximize the value of AMPYRA, which includes vigorous prosecution of the appeal and also, continued financial discipline to ensure that we remain well capitalized. We will now take your questions. Operator. Okay, great. Thanks, Mike. So with respect to the filing and hearing back, we have high confidence that we should get this accepted and we'll hear back. If the FDA keeps to the statutory timelines, then we should hear back any day now, literally. It's usually around 74 days after submission. So technically, I believe that would be this Saturday. So it would be somewhere before or after that. The ---+ we can't give any more particulars on that except to say, at this point, we have not heard from them already. Usually, if we had heard from them in advance, we would expect that, that would not be for ---+ usually, for the best reasons. So we're ---+ we have high confidence. And more than anything, we have high confidence in the quality of the NDA. And that's really the bottom line. With respect to the data you've referred to, I believe you're referring to the sublingual film technology. So first of all, let's just say, from the top, we don't comment on other people's data. We leave that to them. We think that's fair, other than in broad terms. I think what we can say is that nothing in those data changes any of our thesis that we've articulated for some time about these products for OFF periods in the market. We've said consistently that we believe we will take ---+ or that INBRIJA will take a majority share of the market. But that ---+ if the other product comes to market, we would expect it to take a significant minority share. And the greater-than $800 million projection for INBRIJA sales in the U.S. takes that into account. So that's ---+ $800 million is the INBRIJA share that we project, but it does take into account that there is another player in the market taking a significant minority share. You have to be very careful in comparing data across products and across studies and especially in Parkinson's disease. Parkinson's is notorious for major variability in the patients and studies and, more than anything, major variability in the placebo effect. So if you look ---+ even at our own program, if you look at our Phase IIb study, we showed a placebo ---+ which, by the way, that was a robust placebo-controlled, randomized, adequate study, which is being used as 1 of the 2 studies for the NDA ---+ main studies for NDA. If you look at that one, we showed an over 8-point placebo-adjusted change difference in the UPDRS Part III. If you then look at our Phase III, we showed about a 4-point placebo-adjusted difference. But the difference is, between the 2 studies, were almost all based on placebo effect. If you looked at the absolute changes in UPDRS, they were about the same in both studies. So you have to be very careful and especially now ---+ so these are the same product. When you're dealing with different products, different populations across studies, you really cannot make valid comparisons in that regard. Obviously, we need to see their detailed data, and we're looking forward to that whenever they choose to present that. But as an overall, I would caution everyone, we caution ourselves not to try to make those comparisons, because they're not valid. What I will say is that for INBRIJA, we had high statistical significance in both studies on primary outcome. We hit a number of secondary outcome measures that were important and are important. We like the fact that this is L-dopa. And in fact, if you look back on why Civitas, which was the company we acquired to get the ARCUS technology and INBRIJA, why they originally formulated L-dopa rather than apomorphine for OFF periods, which was a choice at the time, it's because the market research came back strongly saying that L-dopa is the gold-standard therapy that the prescribers in the Parkinson's space immediately gravitate toward L-dopa. They're comfortable with it. They understand it deeply. They've been using it for decades. So that drove the original decision, and I will tell you that our market research, ever since then and into today, continues to validate that assumption. Well, I would say, overall, that the optimal timing for getting a partner is when you get a partner with a deal that you think is excellent. So I ---+ obviously, you'd like to do it before approval so that you're ready to launch. We announced last year that we were exploring ex U.S. partnerships versus go-it-alone strategies in various parts of the world. We're continuing to have those conversations, and I think I'll leave it at that. We're ---+ that's continuing to develop. And we're not letting that wag ---+ that tail wag the dog. The most important thing is to get the MAA in, in a timely way. We have time on the rest of it. Yes. So obviously, the main imperative there is for us to win our appeal so that we don't have to deal with that. If we do have to deal with that, and we lose exclusivity by the end of July, we expect a pretty dramatic erosion curve. That's what you expect. We've got 10 or 11 generic filers, several of whom have gotten conditional approval already. So we would expect multiple entrants into the market and a pretty rapid erosion curve. We are taking whatever steps we can to mitigate that curve, because anything we do to mitigate it is worth a significant and meaningful revenue to the company. So we are taking steps to do that. And our year projections for AMPYRA this year take as a base case that we lose exclusivity at the end of July. And you can just extrapolate, based on what those numbers look like, how rapidly the curve will decline. Thanks, Phil. So yes, we're ready for an inspection. Let me just put that right out there. There was really only one ---+ there was really one manufacturing-related issue other than the inspection issue, which I'm going to submit was trivial. And it wasn't so much an issue of whether we were actually ready or had the right stuff going on in manufacturing. It was more about the way in which we presented certain data in the NDA, and the FDA preferred something else, and we gave that to them. And frankly, we were able to do that very rapidly. The only reason it took 3 months to resubmit was not that, because if we'd had to rectify only that, it would have been a matter of probably a couple weeks. The only reason it took 3 months was we took the time to answer all their other questions, which were ordinary review questions, so we got those out of the way ahead of resubmitting of the NDA. So we are as prepared as we believe it's possible to be at the manufacturing plant and all aspects around manufacturing. We have done our own mock inspections, mock PAI inspections with external experts, many of them ex-FDA people. So we're feeling as confident as we can about that, absent actually having had the PAI from the FDA. So we're doing everything, I think, you would reasonably or even unreasonably expect that we would do to ensure the integrity of the entire manufacturing chain. We are ---+ I don't want to get into the weeds too much on this. We are ---+ we will be stockpiling adequately this year for an expected launch. So the primary end point, if you will, was really safety in people who were experiencing acute relapses, given the fact that they are in an immune-charged state, if you will, and we're introducing an antibody. So we wanted to make sure that there was no untoward interaction there within an acute relapse state. But having said that, we are looking at various markers or indicators of myelination in the study. Probably, the most interesting one is the magnetization transfer ratio on MRI, which is felt to be one of the better ways to look at myelination in the CNS. So we'll be ---+ we are crunching all those data. And the difficulty here is because it was designed as a Phase I safety study, you have a relatively small number of participants in the study. Very highly variable conditions. So you take what you can get in this kind of a situation. If we have a signal of some kind, that'd be great. But it is a very small number of patients relative to the power you would need to really come home with a conclusion. We're very [familiar] with authorized generics. We did it, for example, with ZANAFLEX, after we lost exclusivity there. So we have experience with that. I guess, what I'll say, Phil, is we have explored every potential way of preserving a revenue stream and mitigating the tail on the loss of exclusivity. We have certainly explored authorized generic. I don't want to commit right now to what we ---+ which of those different ways we are choosing. But you should be comfortable that we have explored it thoroughly. Well, thanks for the question, <UNK>. So look, overall, let me just say, we were not happy to have gotten the Refuse to File; and that we have recovered from it, and that's great, and we hope never to repeat that. But having said that, your ---+ I do see your point, and it's something we've contemplated internally as well. We do have a drug-device combination, the pulmonary drug and things that people have pointed to as less usual and therefore often more complicated during an FDA review process. So anything you can do to mitigate that or make it more straightforward or easier for FDA in their review is a good thing. And it did give us ---+ the silver lining, which you point out is, it did give us the opportunity to respond to multiple questions that they came up with during their first couple of months of review of the original NDA. And in doing that, our hope is that, with the new NDA, they're starting from a point 2 months further ahead in their review, because we've already responded to the first couple of months\xe2\x80\x99 worth of questions. So hopefully, what we get now is going to be the questions that would come beyond that, which means it gives us a leg up on this new timeline. Now there's no way to project for sure how that works out, but I will say, we think it's a silver lining in that respect. Well, when we get the letter, it should indicate ---+ if they are contemplating a panel, we expect the letter would indicate that. We have not heard anything about that in any of our conversations with the FDA. It doesn't mean it won't happen. It's just that we have no insight into that, because they have never raised the possibility so far. From our own perspective and that of our consultants, we're not sure what it is they would be trying to accomplish with a panel. L-dopa is a well-known drug. The only difference here is the mode of delivery. And frankly, that comes down to usability and safety, more than anything. Our long-term safety data looked terrific, from our perspective on it. So it's not clear to us what they would be trying to accomplish if they were to want an AdCom. Now having said that, we have to wait and see. If they decide they want an AdCom, presumably we'll find out in the letter. Yes. So we've already looked at a triptan for migraine, an inhaled triptan for, hopefully, rapid release of migraine. That was CVT-427. We reported last year that we ran into a bump on that one with some bronchoconstriction, seen particularly in people with histories of asthma bronchoconstriction. So we felt that there was a need to tweak the formulation. Because of some of the issues elsewhere that we encountered last year that required the focus of the organization, like the RTF and the refiling, the MAA, and so on, we have not been able to accelerate that reformulation, but it is our plan ---+ that's a high priority, once we get a little bit further ahead in this year's priorities on INBRIJA, the patent appeal, and so on. It is our plan to accelerate that program as well as other programs involving the ARCUS technology. We reported at the JPMorgan conference this year that we have a couple of really interesting programs for orphan lung diseases that some of ---+ one of which is being funded by the Bill Gates ---+ Bill & Melinda Gates Foundation. So we're looking to continue to build on that. Yes, it's hard to answer that question. I will say that, yes, the FDA ---+ I think the FDA has acknowledged and realizes that they can be doing better with respect to the clarity that they ---+ with which they deal with drug-device combinations and the guidance they're giving to sponsors who have drug-device combinations. So we see that as a good thing. And we certainly hope and encourage them to accelerate that process. Sure. So the sales force, if we have a loss of exclusivity at the end of July, it would be a seamless transition. It's essentially one for one. It's the same-size sales force, the same sales force, same commercial organization, it just transitions over to the Parkinson's space. We've already got all the territories mapped out. There'll be some realignment of territories just to take into account areas where there wasn't overlap. There's a fair amount of overlap, but obviously not complete. But it would be the same sales force. I will say that our sales force is very excited about the prospect of launching a brand-new drug, important drug in the Parkinson's space. I'll also pitch for them and say that you can see what they've done with AMPYRA. It's just an outstanding, outstanding, neuro-specialty force out there. They're very well respected by the prescribers. And they take real ownership and real pride in delivering important medicines to these communities. So we're very excited for them and for us to have that happen. During the transition period, so if we have a loss of exclusivity, let's say, at the end of July, and we don't expect an approval until, let's say, the fourth quarter, they're still going to be out there working to mitigate the tail on AMPYRA. So they will be fully employed, as they are now, continuing to do the best possible job with AMPYRA, delivering it to [patients, delivering] the messages about the importance of it to people with MS and walking disabilities, and they are already being trained. They're being fully trained on Parkinson's disease, on INBRIJA. Obviously, once we get the label, they will complete the training. So they will be ready immediately. As soon as we're ready to launch, they will be making that transition. And until they make that transition, they will be maximizing the AMPYRA potential. Now if we win the appeal, which is every bit our intention, and we keep AMPYRA, that comes under the heading of very high-quality problem to have. We would expect in that case that we would increase the sales force. We would expand it by about 30%, 35%, something like that. We currently have, call it, around 100 people in the field. It depends on who you're counting. But ---+ so we would add another 35 people-or-so to that, realign the territories, and then we would have them promoting both AMPYRA and INBRIJA. Yes. So we have ---+ yes, we have had conversations with payers as part of our ongoing market and pricing research. We will be having many more conversations over the next several months into the approval and launch. We have developed, we think, a pretty robust sense of where the market is here, as I alluded to in my original remarks today. We're not prepared to talk about price as of now, and we will not ---+ I don't expect we will talk about price until we're right around launch, when we make a final determination. What I'll say overall is, we've been very encouraged by the trends we see in the overall movement disorder space, new entrants into the market, the market research on INBRIJA, in particular the payer research in terms of receptiveness to the value proposition of an OFF period drug. So putting it all together, I think the best statement I can make about it is point to our increase in projection on the market potential in the U.S. for INBRIJA, which is now, we're saying, over $800 million. And that is a reflection of the entire picture that we're getting from our market and reimbursement research. That ---+ it's really not possible for us to know that. It's entirely dependent on the judges and their docket and all the factors that go on their end. Typically, it would be months; you measure it in months, but how many months, we don't know. And it's worth, again, repeating that if the timing is such that we don't have a verdict prior to the July 30 end of exclusivity on the existing patent, we would request an injunction to prevent the generics from launching until we have the verdict. All right. Thank you, operator, and thank everyone for joining us. Look forward to updating you next quarter.

2018_ACOR

2016

AVB

AVB #We did not, we did not. We just ---+ we really just spoke to the shortfall so far this year, which is about 50 basis points less than we had anticipated, that is nationally. And then if you look at our markets, I think it is probably roughly in line with that in terms of the overall shortfall so far this year. Yes, Vince, let me just ---+ maybe just speak to that. What happened in the first half year is what is really going to impact portfolio performance in the second half of the year. So that is why we are not really all that focused ---+ we aren't not as focused in terms of ---+ what happened in the second half of the year in terms of job growth will really play more into our 2017 outlook than the back half of 2016. You'll usually see about a two quarter lag impact in terms of what is happening in terms of the direction of job growth relative to the portfolio. It is in the arts district. Correct, yes, I am sorry. Well, yes, there is a <UNK>t Hollywood that is under construction, there is Hollywood which is a development, right, which is three quarters of a mile down Santa Monica. So Hollywood and the arts district, correct. Well, Alex, I mean as you know, I mean we do underwrite based upon current rents in place. So as long as rents are ---+ continue to rise at some level we would expect yields to continue to go up all other things being constant. Which, for the most part they are. We've generally been able to bring development in close to budget. So yes, you would expect that left to moderate as rents might moderate. Now the 30 basis points is a little misleading. If you took out the impact of Willoughby, well Willoughby's rents went up pretty significantly, so did the taxes as <UNK> had mentioned. So that actually muted the impact in terms of the yield impact. If you neutralize for Willoughby the other deals on average have gone up by 70 basis points. So almost a 10% lift in terms of ---+ about a 10% lift in terms of the projected yield. So you have got to look at the actual basket and some different things that may be happening with individual assets. Yes. Alex, this is Kevin. The $0.02 lift in expected core FFO per share coming from capital markets and transaction activity is as you would expect. It's a mix of things going on there. It is the impact of net acquisition and disposition activity both in terms of the amount and the timing, as well as some changes to JV income ---+I'm sorry, some changes to the debt assumptions that we have got. We did pay off a piece of debt in the second quarter. And we had some benefit from lower interest rate being woven into the mix here. It is timing of other activity, primarily acquisition and disposition activity, both amount and the timing of it. So, yes, we don't expect to be a significant user of our line of credit and we haven't been throughout the year. And, <UNK>, this is Kevin. Just to add to that. While treasury rates have certainly gone down, if you sort of look at our cost of debt for 10-year unsecured debt, last year we averaged around 3.4% or 3.5%. As you know, in our May offering we executed just under 3%. If we were to raise ---+ do a 10-year unsecured bond offering today we'd probably be around 3% because while treasuries have fallen spreads have widened, essentially neutralizing the treasury change. So, even over the last year there has only been maybe a 40 basis points or 50 basis point decrease in our overall cost of debt. So, when you weave that through on a blended basis, 30% leverage for what <UNK> alluded to in the underwriting, it is a pretty modest potential impact. I am not sure if I follow. We underwrite yields on an unlevered basis. And so, what we do is we ---+ in our yield matrix the component that <UNK> was alluding to that ties to our short-term cost of capital looks at our unlevered initial short-term cost of capital which ascribes 30% weighting to debt, 70% weighting to equity. So you end up with having essentially undelivered or neutralized number there from a leverage point of view. So we don't look at yields on a levered basis. Well, it has been driven mostly by labor, not by materials for sure. And that has been a mix I would imagine of both profitability and labor costs. If you look at the different sort of wage indices out there, construction labor is towards the top if not at the very top in terms of year-over-year wage growth. So it is an industry that has seen a lot of skilled labor leave over the last cycle or two. It is a challenge to get good skilled labor at a lot of these sites. And when you think about the production level not just of apartments but just housing and all real estate categories, the level of construction is still not that high and yet it is a real challenge for the industry right now. And I think a lot of that just has to do with the shortage of skilled labor. Well, we continue to ---+ whenever we look at new opportunities as well as existing opportunities, we continue to sort of re-underwrite them as we continue to best pursue cost of capital and make sure it is something we want to continue to do ---+ that is what we think is sort of the highest risk capital of any deal which is that entitlement and design ---+ that pursued cost capital, if you will. So the kind of yields that you see on the schedule in the release, they are consistent with the kind of yields we see in the development [right] pipeline. There is clearly ---+ I mean part of why we have been able to replenish our development right pipeline I think is connected to that. We are seeing more deal flow. I think there are ---+ if a developer has three or four deals they may be looking to lay off one of them in terms of land. And it is probably a function somewhat of the kind of reception they are getting with some of their key lending partners. But across the board you are definitely hearing from both banks, the suppliers of capital as well as the consumers of capital developers that construction financing is less plentiful. Well, thank you, Augusta. And thank you, everybody, for being on the call today and enjoy the rest of your summer and we will see you in the fall.

2016_AVB

2016

FLOW

FLOW #Sure. Good morning, <UNK>. Yes, you know, again, the nuclear ---+ the larger orders are difficult to define sometimes in other product lines. When you get into nuclear, sometimes it gets a little more challenging, based on all the requirements that are associated with gaining final approval and moving forward, given the capital expenditures and the regulatory requirements. So, we would hope to see some in the second half of the year, but there's a chance that they can slip into 2017, just based on the requirements that take place in order to get those orders out into the market. I'm not going to get ahead of the market. We need to go through the process here, so I'll be in New York and Boston today, and tomorrow meeting with investors, and likely price on Friday. What we've said is, we do expect it to be a lower blended coupon than our current 6 7/8, but I want to respect the market process, and I don't want to speculate at this point. Thanks, <UNK>. Yes, I'd say on the market front, <UNK>, it's still too early. We do pretty broad-based business in the UK. In addition to Food and Beverage, we do have Power and Energy product lines based there across the UK, both Clyde Union and our mixer business. We do some mixer business there, we do some valve business, filtration business that goes into Power and Energy. So overall, we do have an important base there for us, but we haven't seen any significant impacts thus far. Again, a little bit too difficult to predict at this stage. We would view it separately, and especially in this case, when we have customers that are doing upgrades or improving their current facilities in terms of safety performance. Some of the post- Fukushima activity that's going on that we see across the globe, and France being an area. And if you are going into Japan itself, it's where we see opportunities for these upgrades that are happening in our safety pumps. When we think about squid valves, we've again historically been tied to more new development in the market for nuclear plants in that area. Frankly, I don't really think about it that way, because the reality is, with the technical requirements in our credit facility, the absolute latest date of a refi is really May 1. Obviously, April is a quiet period, which we couldn't go to market, which leaves you from a next year window perspective. Two weeks in February and the month of <UNK>h, and so it's really depending on when you pick, when your required refinancing date [is], and it's really not, I would say, financially logical to assume the actual maturity date of those bonds. So again, we'll have more probably from a press release perspective later in the week on where the pricing lands. Right now I think, albeit it's earlier than absolutely necessary, I think that interest leakage ---+ the actual interest leakage that we will experience ---+ is very much worth it from a risk/reward perspective, over the hopefully blended nine-year term of the refinancing that we're going to market with. So I would expect the indenture to be pretty consistent with the existing bond. The covenant on the credit facility we announced that about a month ago now, early part of July, that we negotiated with our lending syndicate moved our net leverage covenant from 3 1/4 to 4 times, and so very pleased with the flexibility of the marketplace there for relatively nominal cost. Thanks, <UNK>. Thanks, <UNK>. This is <UNK> <UNK> again. This concludes our call for today. We thank everybody for joining us. I will be available on the phones all day, as normal, to answer any follow-up calls. Thanks again for joining us, and we'll talk to you next time.

2016_FLOW

2016

ESE

ESE #Thanks, <UNK>, and good afternoon. Before I give my perspective on the quarter, I'll turn it over to <UNK> for a few financial highlights. Thanks, <UNK>. As a reminder, at the start of the year we announced that certain restructuring actions were undertaken related to our lower margin international operations, primarily in the test business. We described and quantified these actions, as well as the annual cost savings anticipated once the process was completed. The detailed restructuring costs were excluded from our FY16 guidance provided in November, and we noted that we would be presenting our quarterly and annual financial results for FY16 on an EPS-as-adjusted basis. Our restructuring actions have been running ahead of schedule and are expected to come in below the original budgeted amount. Once these actions are completed, we will have eliminated a significant management distraction at the operating unit level, which will allow us to begin realizing the identified cost savings and operating benefits we anticipated. As described in the Q2 release and commensurate with the recent acquisitions of Fremont and Plastique, we've expanded the presentation of our reporting segments to reflect the operating results of our Technical Packaging Group. We feel this additional disclosure will further shareholders understanding of our underlying operations, as well as provide additional insight into our outlook. Turning to our Q2 and year-to-date results, I'm pleased with our operating performance, which exceeded expectations from several perspectives, including EPS, cash flow, and entered orders, which each significantly exceeded expectations. The early performance of Plastique is consistent with our acquisition forecast, and their potential growth opportunities continue to materialize. During Q2, we reported EPS as adjusted of $0.40 a share, which was 33% higher than Q2 of last year and 11% higher, or $0.04 above the top end of our February guidance range of $0.31 to $0.36 a share. Our six-month year-to-date EPS as adjusted was $0.87, and is above our original six-month expectations we set in November. Compared to our February guidance, our increased earnings came from every operating unit, with the exception of VACCO, whose sales were impacted by the timing on long lead items between the first and second half of the year. Doble, TEQ, and Test Q2 earnings each exceeded our previous expectations by a fair amount. Our Q2 and year-to-date cash flow is running several million dollars ahead of projections, and our cumulative entered orders at the six-month point but us in a comfortable backlog position at March 31st. The $273 million of orders year to date are supported by the continued strength of our commercial aerospace business and, in particular, the A350 program, coupled with the order strength generated in our Technical Packaging businesses. Our multi-segment strategy and our strong operational focus are key themes that we've communicated over the past few years, and these results demonstrate that our goals remain well defined and are clearly in focus throughout the organization. Here are a few highlights from the release to allow you to better understand the underlying results. Q2 consolidated sales increased 8%, or $10 million, compared to Q2 of the prior year. The increase was driven by Technical Packaging, where sales doubled from prior year, reflecting the strong performance of TEQ and the contributions from Fremont and Plastique. Doble sales increased as a result of higher software and service revenues. Test sales decreased due to project timing. And Filtration sales were up modestly as a result of VACCO's sales timing issues, partially offsetting the increase in commercial aerospace. Corporate costs were higher than last year, primarily due to the timing and volume of spending on professional fees primarily incurred supporting our M&A activities. On the balance sheet, we continue to maintain a very favorable debt level with $60 million of net debt outstanding at March 31st. We remain firmly committed to our capital allocation strategy, which includes share repurchases and dividends. And, as such, we repurchased 87,000 shares and spent $3 million during Q2. We expect to continue to opportunistically repurchase shares in the open market over the balance of 2016. After reviewing our sales growth and profit improvement opportunities over the balance of the year, we determined it was appropriate to raise our FY16 EPS as adjusted guidance to $1.95 to a dollar 202 (sic - $2.02 - see press release) per share from the previous range of $1.90 to $2 a share. Getting off to a solid start over the first half of the year and considering the strength of our current backlog, coupled with the contributions from Plastique, this provides additional comfort in our ability to achieve our increased EPS goals. Regarding our Q3 outlook, we're expecting EPS as adjusted to be in the range of $0.40 to $0.45 a share. Finally, commenting on our longer-term view, we continue to see meaningful sales, EBIT, and EPS growth across the business segments, consistent with our previous expectations and earlier communications. And I'll be happy to address any specific financial questions when we get to the Q&A. And now I'll turn it back over to <UNK>. Thanks, <UNK>. As noted in the release and as <UNK> discussed, we had a solid quarter and are well-positioned to hit our increased EPS outlook for the balance of the year. I'm pleased to see that we had good performance across the Company, both in Q2 and year to date. While I won't say we're immune from the economic headwinds many industrial markets are currently facing, I do believe the breadth and diversity of our end markets and the specific niches we operate in provide us the protection to mitigate their impact. <UNK> and I visited all of our major operating locations in April, and we came away encouraged by what we saw. Again, we're not without challenges. But the issues we are facing appear manageable. And to offset these issues, we have identified some solid upside opportunities that we can capitalize on as we head into next year. Also in April, we visited two of Plastique's operations in Europe, their engineering and design center in the UK and their manufacturing facility in Poland. During this trip, we had the opportunity to meet more of the management team and were able to do a deeper dive into their market opportunities. I can say I'm even more excited about this business and its future. <UNK> and I came away impressed with the strength of the management team, as everyone we met appeared very dedicated to the company and excited about their opportunities as a part of TEQ and ESCO. The core business is very solid with some real upside as a result of their filter pack ---+ fiber pack capabilities. More and more customers want the option of using a sustainable fiber-based product or a combination of fiber and plastic packaging, and the desire for more environmentally friendly packaging is driving the demand for these alternatives. Our combined Technical Packaging Group now has scale and market leadership positions across several growth markets where we are providing highly engineered products to customers in the medical, pharmaceutical, and consumer markets. I'm confident these opportunities we're seeing set us up nicely for the future. Moving on to filtration, our aerospace business continues to perform above expectations, and our year-to-date earnings, cash flow, orders, and outlook for the balance of the year remain strong. A key driver of the continued success and confidence in our commercial aerospace business is that we're well ahead of our near-term order and production plan on several platforms, led by the A350, which continues to run better than expected. Doble reported another solid quarter with operating performance in Q2 delivering adjusted EBIT margins of 25%. As utilities continue to rationalize their capital budgets and we better understand the potential impact in our legacy hardware sales, we continue to see additional opportunities in our service and software applications. Additionally, to mitigate the impact of CapEx constraints, we see tangible opportunities with our new products such as the M series, doblePRIME, and our DUC-E offerings. Overall, the combination of our offerings and the breadth of our solutions bodes well for our outlook. I recently attended the 83rd Annual Doble Conference and was thrilled to see another year of record attendance as we hosted over 1,500 customers for the weeklong event. The restructuring activities in Test and at Doble are progressing ahead of schedule and below our projected cost. These activities have taken place without any negative impact on the rest of the business. And, most importantly, we're seeing a cost savings materialize as anticipated. I feel good about the growth opportunities we see ahead of us across the business, which gives me confidence over the balance of this year and for additional growth in 2017 and beyond. I'm pleased we were able to supplement our outlook with some non-organic growth during the past six months. As we've discussed previously, acquisitions are a key component of our ability to meet our longer-term growth targets. We are currently reviewing some additional opportunities which we find interesting, and we will continue to work diligently to make some of these happen. We certainly have the balance sheet capacity and management bandwidth to handle this additional growth within our current operating infrastructure. So wrapping up, we had a strong first half of the year and our outlook for the balance of the year remains strong. Our actions to reduce our cost structure are paying off, and we're on track for bringing in a strong 2016, as we are well-positioned for profitable growth in all three segments. Our focus remains constant, to improve our operational performance and execute on growth opportunities both organically and through acquisitions. So now I'd be glad to answer any questions you have. There's always going to be some ups and downs from quarter to quarter depending on the mix. But certainly, we see that business as being over 20% going forward. Go ahead. And then again, I mean, I think the question's going to be, as we get more business if we're able to grow that, which we think we'll be able to, we should be able to leverage that and get a higher margin. Yes. Right, especially, as <UNK> alluded to, the benefit of the mix working favorably. As you get more software and services through, those tend to pull through higher incremental margins. So as that mix moves forward, we get a nice, sequential dollar-for-dollar pop to the EBIT line that's higher than in the legacy hardware stuff would come through at the same revenue volumes. Yes. And again, you have to remember we did take some cost out of that business as well, both in Brazil and then some domestically as well. Right. I would agree with that. Go ahead, <UNK>, you go first. I mean, I think there's good opportunity for growth of the business. I think the underlying businesses, honestly, this year's grown a little bit better than we thought it was going to, as I mentioned earlier, because we didn't have some of the attrition we typically would encounter in that business. And then, so the question is, with the addition of Fremont and the addition of Plastique, it's really, we're still getting our arms around how much they were going to grow organically. But having just been over there, it feels really good because they have great opportunity, particularly in the fiber pack piece of it. And so I think the real question, how quickly we can take advantage of being in two different continents and a number of different end markets now. So I'm not ready to commit to a long-term growth number. But I do think there's a lot of really good upside opportunity as we, again, take some of the medical product to Europe and bring some of the consumer product back here. And we're in the process of even expanding the fiber pack capacity now because we have won some opportunities there that require us to continue to do that. So it's going to take us a quarter or two to really understand how quickly we're going to be able to grow that business, but there's a lot of opportunity there. And, <UNK>, I'll put some numbers around that. Just one of the nice parts of the timing of when we purchased Plastique, they do have seasonality. And their strongest period of revenue historically when we were diligencing the company, let's go back four to five years, the period where they get the majority of their revenue is our fourth quarter. So a lot of their products get delivered to their customers in time for the fourth calendar quarter, okay. So what that means is, our quarters when we're producing and selling to those customers who then distribute it to the medical field or the consumer field or the Gillettes of the world and things like that. So as we move to the third quarter, and, again, this kind of goes back to <UNK>'s question, keep in mind we had them for two months in Q2 and now we get three months in Q3. So that inherently adds $2.5 million or $3 million of revenue in Q3, sequentially. Then you take the commentary on our fourth quarter, which is their highest revenue quarter, it would not be unusual to see an extraordinarily high quarter at Plastique with north of $11 million or $12 million, okay. And again, that's the restocking and pushing through things that are going to be in the ultimate end customers' hands for the October to December 31st period. So that rationalizes this year on why we have a steep ramp. And again, I mentioned the VACCO thing in detail. And if you put the Plastique thing in there, let's call it $12 million in that quarter and you're pulling through 13%, 14% EBIT, that's an incremental add. That's net of purchase accounting. So a short answer on the growth is, for 2017, we're going to have an unusual looking growth curve because you're going to have 12 months versus 8 months. So it's going to look extraordinary in 2017. Just the calendar works in your favor. But if you just neutralized everything and if you had the advantage of seeing the last three years, this would be kind of a 5% to 6% grower on a normalized basis. And that's setting aside what fiber pack can add to the upside. So relative to how we valued the company when we purchased it, we were looking at kind of a 5% or 6% normalized year-over-year growth rate with the ability to accelerate that both on the top line and the bottom line [by] the contributions that can come from this fiber pack product that's really just hitting the market here. So looks good for the rest of this year, and we're going to have this extraordinary pop in Q4, and then, obviously, you'll see a drop down little bit in our Q1 of 2017, but then ramp back up. So 2017 will look great compared to that. So hopefully that long answer helped answer your question. Yes. The domestic business, I would say, is kind of playing out like we anticipated. The medical business is solid. It's not up. It's not down. I mean, it's kind of hitting the numbers we've seen historically. The acoustics business is a little soft right now, and that's not surprising. If you look at the rest of the domestic business, I say we're seeing good opportunity, as the wireless business remains good had strong. Moving outside of the US, Europe's tough. I mean, it's tough for everybody right now. We've got some opportunities, but it's been very competitive because a lot of our competitors are headquartered there, so that that makes that more difficult. But the place we're really seeing great opportunities is in Asia still, and particularly in China. We won a nice job with a electric vehicle manufacturer in China. There's a number of additional opportunities in that specific space out there right now, because China came out with one of their five-year plans, and that's a specific area that they identified involving the electrical vehicles that they want to put a lot of investment in. And so that's resulting in a lot of opportunities for us, which we're taking advantage of. Additionally, you see a lot more, particularly in China, but throughout Asia, where historically our primary customers had been the government or government agencies. And we're seeing a lot more commercial companies in test companies, if you think ---+ that are increasing their activity. So we're seeing really good opportunities there. So US is solid, Europe's a little weak, but Asia's been good and strong for us. And again, if you think about that business, particularly on the EMC side, a lot of it goes to direct, to customers, but a lot of it does go to test facilities as well, so they're both customers for us. And the good thing about it is that maybe a customer will go to a test facility and get their products tested that what way, but then when they get enough business it makes more sense for them to have their own facility. And so they've been used to using our equipment in a large test company, and so they'll come to us and we'll build a facility for them. So I'd say that the overall market for the Test business has been pretty solid. We've got a good position with Apple and they continue to grow significantly, and we're a preferred vendor for them. Well, you know they've got that new facility underway, and so that's what's driving a lot of that. Yes. What we said in the release is we've spent, or at least expensed about $5.5 million, and then we have about $2 million yet to spend. So let's call that $7.5'ish million, and round it to $8 million. And so that's kind of how the math is laid out in the press release. So it feels like it's running about $1 million under budget at the pretax line. Again, remind you it's a zero-sum [game]. So whatever happens to the positive and negative goes in and out. So we're reporting on as-adjusted. So I don't want to give you the impression that that means that's why we raised earnings, because it's whatever hits the P&L gets backed out dollar-for-dollar to net to zero. So by under running it, it's great from an economic perspective of cash, but from a reporting-as-adjusted basis, it's neutral. Yes. I think because the sales are going to be so extraordinary relative to the monthly average if you just took their year divided by 12, I don't think it'd be fair to anticipate a high book-to-bill in Q4 because of the sales impact. But I think if you look at it on a year-over-year basis, carrying a one-to-one relationship probably is okay. But again, then you'd keep the KAZ business in mind because you get a big order and then you run it off for two years, then you get another big order. So those are really the only two things I think you have to kind of keep set aside in your model is quarterly seasonality and then the one-off big things. It's not unusual to get an $8 million or $9 million KAZ order and then burn through it over the next 12 months. So obviously, you have an awkward book-to-bill in that program as you go over three quarters. But I think you'll be pleased with, on an annual basis, what the book-to-bill looks like. It's not one of these things where because these production runs are so long, you get the order on Monday and ship it on Tuesday so backlog flips real quick. It's not something like that. So I think you'll be able to model out three and six months of comfort relative to how the order book lays in front of that, which is what you see now when you look at what the order book for Q2 was in Technical Packaging, and then that kind of supports the commentary I made on what's going to happen over the next two quarters here relative to the sales as that converts itself to revenue. Yes, you bet. Well, I certainly don't see us strapping on another leg, if you will, if that was the second half of your question. And the other thing is, very happy with the four businesses we have now. I think they're performing well. We've made some changes this year to get our cost structure in place. And as we've talked about before, selling a business that's making good money to pay off debt at 1% just doesn't make sense. And so we're happy with where we're at now. You know we're always open-minded about looking at the business. We were just with our Board last week and spent a day and a half talking about strategic planning, those type of things. And so, obviously, our job is to look at all the options, and we always do that. [But I would say] today, as I mentioned at the end of my prepared remarks, what we're really focused on is performing on the business that we have and looking for good growth opportunities both organically and through acquisition. So we're pretty happy with where we're at now. We think we've done the things we needed to to get the cost structure in place, and now ready to leverage that as we grow the business. Okay. I think we're done. So appreciate everybody's attention today, and we'll talk to you next quarter.

2016_ESE

2017

PLUS

PLUS #Thank you for joining us today. On the call is <UNK> <UNK>, CEO and President; <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, 2016, and our 10-K for the year ended March 31, 2017, when filed. The company undertakes no responsibility to update any of these forward-looking statements in light of new information or future events. In addition, during the call, we may make reference to non-GAAP financial measures, and we have posted a GAAP financial reconciliation on the shareholder information section of our website at www.eplus.com. Please note, reclassifications of prior period amounts related to numbers of shares and per share amounts have been made to conform to the current period presentation due to the March 31, 2017, stock split. The effect of the stock split was recognized retroactively in the shareholders' equity and in all share data. The financial statements include the effect of the stock split on per share amounts and weighted average common shares outstanding for each of the 3-month periods and fiscal years ended March 31, 2017 and 2016. I'd now like to turn the call over to <UNK> <UNK>. <UNK>. Thanks, Kley, and thank you, everyone, for participating in today's call to go over our fourth quarter and full fiscal year 2017 results. As we noted in today's earnings release, the fourth quarter represented a solid finish to the year for ePlus. We achieved double-digit growth in sales and EPS in both periods, with operating income increasing faster than revenue. <UNK> will review our financial results in depth later during this call, so I will direct my remarks to what we consider the key takeaways from our fourth quarter and full year performance and the trends we are seeing in the ---+ on the horizon. First, sales growth in both the fourth quarter and full year of 11.1% and 10.4%, respectively, demonstrate that ePlus is well-positioned in the higher growth areas of IT spending like security, cloud, digital infrastructure and managed and professional services. Our investments in security paid off again in fiscal 2017, with sales of security products and services accounting for 16.1% of the company's adjusted gross product and services billings. Second, organic growth accounted for most of the year-on-year sales increases, reflecting our ability to provide complex solutions to mid-market and enterprise clients as well as the success of our land and expand program designed to gain a foothold with larger enterprise clients. Third, we have a large and diversified client base of over 3,200 mid-market enterprise, SLED and healthcare clients, which gives us the ability to increase sales of products and services to our existing client base as well as to leverage our presence in new geographies. ePlus' complex technology solution offerings are well-positioned for mid-market clients and also scaled to the largest of enterprise clients. We believe that this balance, along with our vendor and geographic diversification, provides us with growth opportunities. And fourth, we have a solid track record of acquisitions, thanks to proven identification, due diligence and integration processes, with the capital resources to execute on developing acquisition opportunities. We also find that our culture appeals to those companies that have a client-first approach and empower their sales and engineering personnel to develop the best business outcomes for their clients. One point specific to the fourth quarter was that our financing segment was a significant contributor to our strong margins of 23%, thanks to an increase in sales of financing transactions originated during the quarter. As you know, results from this segment tend to be lumpy, but this is an illustration of the benefits of our diversified revenue sources. Full year diluted EPS growth of 18% exceeded revenue growth, which is noteworthy when you factor in that at the end of the fiscal year, our headcount was up 9%. This increase in headcount was in part a result of our December acquisition of CCI's IT services business and in part due to our continued investment in highly technical engineering and sales personnel. ePlus investments in recruiting and retaining people who can understand our clients' needs and implement the best outcomes have given us the deep technical expertise required to provide customized end-to-end solutions and services. One example of this is the work we have done on a global data center redesign for a mid-market educational services client. There were basically 3 phases to this project: there was the discovery phase, which included network, compute, storage, security and cloud readiness assessments, which allowed ePlus to gain detailed information about their existing environment; the second phase was the design phase involved in the analysis of the top 3 network, compute and storage OEMs in which we map business processes and operational requirements to the ideal solution for this client; and then the third phase was the implementation phase, which included project and program management, professional services, staging facility services and enhanced maintenance support. This multi-phased approach that leverages our full life cycle of services allowed us to provide the best solution, enabling the client to significantly increase efficiency and accommodate future growth. As you know, our strategic acquisition program is designed to complement ePlus organic growth by bringing in companies that can strengthen our technical knowledge, expand our client base and geographical footprint and increase our ability to provide meaningful cross-selling opportunities. The December acquisition of the IT services business of Minneapolis-based Consolidated Communication opened the upper Midwest to ePlus. The OneCloud acquisition, which we completed last week, has expanded our hybrid IT capabilities. OneCloud brings a stellar team of IT professionals who can address the diverse needs of our clients from a well-rounded portfolio of consulting, professional services, software development and technical education. They provide a specialized focus in key areas such as public, private and hybrid cloud, open source technologies, software-defined networking, DevOps, infrastructure automation and orchestration, converged and hyperconverged infrastructure and container technologies and micro services. These capabilities will further enable us to help our clients with cloud adoption, IT modernization, DevOps enablement and cloud automation, design and deployment, migration, management and support. OneCloud strengthens our ability to become a trusted leader in the enablement of our clients' cloud plans and navigation toward IT monetization, giving ePlus the ability to provide a complete end-to-end solution for IT organizations looking to modernize from the ground up or transform their legacy infrastructure into our private, public or hybrid platform. OneCloud has been a partner of ours for many years, and we have worked together on many successful joint client projects, so we know firsthand how we can effectively cross-sell together. We believe that having the financial flexibility to make these opportunistic acquisitions is an important competitive advantage for ePlus and one that will continue to serve us well in the future. Another noteworthy development is the addition of <UNK> Kelly to our management team as Chief Strategy Officer. In this newly created position, <UNK> will be responsible for directing ePlus go-to-market and execution strategies around our integrated offerings in the cloud, security and digital infrastructure. <UNK> comes to ePlus with over 20 years of experience, and we are very pleased to have him on board. And then finally, on March 31, 2017, we effected the first stock split in the company's history, a 2 for 1 split that has increased the liquidity of our shares. With that, I would like to ask our CFO, <UNK> <UNK>, to review our fourth quarter and full year fiscal 2017 results. <UNK>. Thank you, <UNK>, and thank you, everyone, for joining our call. The fourth quarter marked another solid period and year for ePlus due to strong revenue and earnings growth. In addition, our consolidated gross margin improved for the quarter and full year as well. The full year results illustrate successful execution of our plan to grow revenue ahead of the market and do it profitably. The forecast for the overall IT spending growth remains in the low single digits, but we continue to outpace the general market, given our emphasis on higher growth segments and services such as cloud and security. We also continue to look for acquisitions as a way to boost our growth further by expanding our footprint and customer base and enhancing our solutions and technical capabilities. Shifting to our results. In the fourth quarter of fiscal 2017, our net sales grew 11.1% to $332.8 million year-over-year. Our gross profit increased at a faster pace of 14.1% to $76.4 million. Our gross margin of 23% was up 60 basis points. The upside was primarily the result of an increase in sales of financing transactions in our financing segment and stable margin trends in our technology segment. Operating expenses increased 14% to $57.6 million. The increase was due to higher salaries and benefits relating to the increased headcount as well as the increased variable compensation due to the improved gross profit showing in both business segments. Our headcount was up 9% to 1,173 from 1,074 at fiscal 2016 year-end. As a reminder, the acquisition of the IT equipment and services business of Consolidated Communications in December 2016 added 48 employees, accounting for nearly half of the headcount growth. In addition, the fourth quarter produced the first full quarter of SG&A from this acquisition. The bulk of the total headcount additions were sales and engineering professionals. Operating income of $18.7 million increased 14.4% year-to-year as compared to $16.4 million. The higher gross profit from both the technology and financing segment contributed to the upside. Fully diluted earnings per share were $0.75, up 10.3% from last year's $0.68 showing. Our estimated tax rate for the quarter increased 44%. This increase was due to an adjustment for foreign income earned and passive income, taxed at the statutory U.S. federal rate, which equated to a decrease in EPS of $0.03 per share. Non-GAAP diluted EPS were $0.79, up 8.2% year-to-year. This metric excludes acquisition-related amortization expense and other income on a tax adjusted basis. Our weighted average diluted share count was $14 million for the quarter ended March 31, 2017, down 4% from the prior year's fourth quarter share count of $14.6 million. All per share amounts and shares were retroactively restated for the effect of the 2 for 1 stock split in the form of a dividend on March 31, 2017. Adjusted EBITDA of $20.6 million was up 13.2% year-to-year, and our adjusted EBITDA margin of 6.2% increased 10 basis points. I will now move on to the quarterly results from our technology segment, which is our largest segment, accounting for 97% of revenue. Technology net sales of $322.5 million were up 10.4% over last year. The net sales increase was the result of customer demand as well as acquisition contribution from consolidated IT equipment and services business. Adjusted gross billings of products and services of $458.5 million were up 14.9%. Adjusted gross billings are sales and products and services adjusted to exclude costs incurred for applicable third-party software assurance, maintenance and services. The gross margin on sales of products and services of 20.5% held relatively stable year-to-year, down 10 basis points from last year. This was due to some low margin sales to several of our larger customers. Technology segment operating expenses of $54.1 million increased 13.9% from $47.5 million in the prior year. This was due primarily to higher salaries and benefits, which were up $5.6 million or 14.6%. Embedded in this increase was incremental variable compensation due to higher gross profit. The result of the step-up in cost was due in large part to increased headcount year-over-year, including a full quarter of expenses from the acquisition of Consolidated's IT equipment and services business. Technology segment adjusted EBITDA was $14.8 million, down 2.6% in the fourth quarter, due largely to the increase in compensation expense, with variable compensation playing a large role, as I mentioned before as well as an increase in healthcare expenses. As for the end markets, technology and SLED continue to be our largest on a year-over-year basis, accounting for 23% and 21% of the technology segment net sales, respectively. Telecom, media and entertainment made up 15% of the net sales and financial services, 13%. The remainder was comprised of healthcare at 11% and the final 17% from a few smaller client types we categorized as other. Shifting to financing. We had a strong fourth quarter with net sales of $10.3 million, up 43.4% year-to-year. Gross profit improved $3.2 million or 53% to $9.3 million year-to-year. The increase was the result of higher revenue and an increase in sales of financing transactions originated in the quarter. In the past, we've discussed the variability of the results from the financing segment, stemming primarily from transactional gains from the sale of financing assets and post-contract earnings. While we sell financing assets in the normal course of our business, primarily to mitigate risk in our portfolio and generate capital, an increase in the sale of financing transactions can result in an inconsistent result. Operating expenses of $3.5 million were up $400,000 due to higher variable compensation as a result of increased gross profit. Adjusted EBITDA of $5.8 million was up 92%, primarily due to an increase in sales of financing transactions I mentioned earlier. For the full year, net sales of $1.33 billion increased 10.4% year-to-year from $1.2 billion for fiscal 2016. Technology net sales increased 10.8% to $1.29 billion, while financing net sales declined 2% to $34.5 million from $35.1 million. The modest decline was due to lower portfolio earnings. However, gross profit in the financing segment increased 21.1% to $30 million due to lower direct lease costs related to lower depreciation of operating leases. Adjusted gross billings of products and services increased 14.1% year-to-year to $1.78 billion, and consolidated gross profit increased 14.4% to $299.8 million. Our consolidated gross margin widened 70 basis points to 22.5%, and our gross margin on product and services expanded 60 basis points to 20.5%. Our net earnings grew 13% to $50.6 million, and our adjusted EBITDA increased 14.4% to $93 million. For fiscal year 2017, earnings per diluted share of $3.60 and non-GAAP earnings per diluted share of $3.74 both increased 18%. Our effective tax rate was 41.3%, an increase over the prior year of 40.9%, primarily due to changes in state apportionment factors. Shifting to the balance sheet. We ended the year with cash and cash equivalents of $109.8 million compared to $94.8 million at the end of fiscal 2016, primarily due to cash from operations. Inventory increased $60.2 million to $93.6 million, and deferred revenue increased $47 million to $65.3 million. Both the increase in inventory and deferred revenue was related to large projects for high credit quality customer, where we are holding equipment that has been paid for in advance of final delivery. We expect the majority of this inventory to ship in the first half of fiscal 2018. During the year, we paid $26.8 million to repurchase shares and also used $9.1 million for the purchase of consolidated IT equipment and services business. Our cash conversion cycle increased to 38 days at the end of fiscal 2017, up from 18 days at the end of fiscal 2016 and up 11 days sequentially. The increase was due to a large step-up in inventory that I previously mentioned. For fiscal 2018, we anticipate growth ahead of the overall IT market. We will achieve this by focusing on high-growth areas such as security, the cloud and digital infrastructure. And with additional hiring and acquisition, we will continue to develop IT solutions for our diversified client base and grow our services offering. Our strategy is to grow our relationships with our existing customers and win new ones in an effort to boost our market share and capture additional IT spending. We also look to identify emerging trends and offer creative solutions to our clients. Our balance sheet offers financial flexibilities for strategic capital allocation, with acquisitions front of mind. Thank you for your time today. I will now turn the call back to <UNK>. Thanks, <UNK>. Looking ahead into our fiscal 2018, we are confident that ePlus is positioned to continue to achieve revenue growth that outpaces overall IT spending, thanks to our focus on the higher growth markets of security, cloud and digital infrastructure and building out our services offerings and capabilities to support our clients. The favorable gross margin associated with our business model and our ongoing focus on cost discipline should enable us to continue to achieve operating leverage while maintaining our strategy of investing in technology and people that will support future growth. Operator, I would now like to open the call to questions. <UNK>, so as you know, part of our strategy ---+ overall strategy is expanding our footprint, both nationally and on an international perspective. For Q4, our organic growth was approximately 70% of adjusted gross billings. And for the year, it was approximately 90% of adjusted gross billings. <UNK>, it's a little tougher on that only because we're talking about the future. So as we discussed on previous calls, one of the things we look at is both the organic as well as acquisitions that can kind of complement what we're doing as a company in our go-to-market, both from a coverage as well as from a technical expertise, a little tough to kind of predict what will happen next year. The intent, as we always talked about, is we're going to continue to evolve our solution portfolio to provide what our customers are looking for, both now and in the future, and would hope to continue to see organic growth, but it's hard to give you a percentage without knowing what M&A may or may not pop in during the year. Thanks, <UNK>. So yes, in terms of ---+ we'll continue to look at opportunities. One thing that's nice is, as I know you know, we're financially stable. We've got an unlevered balance sheet, if you will. So we'll continue to look at M&A that can build out, whether it be a territory coverage, whether it gives us some technical expertise like we gained with the OneCloud expert ---+ acquisition that's going to expand what we're doing in that space. The market is still ripe for acquisitions, I think. As the market continues to evolve, you're seeing some of the smaller potential resellers that are out there looking to be acquired or they're going to have to make investments to kind of grow their business. So the pipeline is still the same as it's always been, and we'll continue to look at what's right for ePlus, both from a coverage technical expertise and from a people perspective. Well, Matt, a couple different things there. One, it was relatively flat for the quarter, but for the year, our gross margins are actually up. So we ---+ at least for myself, is I never look at a quarter as a trend. It takes multiple quarters before you get to a trend. The other thing that we've seen is, at least from what we can see from other public companies out there, is our gross margins are at the higher levels, if you will. We're going to continue to build out our service offerings. As we discussed on previous calls, they tend to have higher margins, and a lot of customers are looking for those types of services, optimized services that we're providing. And over time, we hope that will help as it relates to gross margins. As it relates to the quarter, there's always a couple maybe large deals or 2 that maybe are at lower margins that could affect that. We've talked about our land and expand program, which is basically we'll go into the some of the bigger enterprise accounts, we'll let them know about our capabilities. And based on what they're looking for, we'll ---+ maybe that we take the first deal at a lower margin, and then over time, we'll hopefully look to expand those margins up. Yes. So in terms of whether down or not, Matt, it's always tough because our finance business tends to be lumpy. We had a nice ---+ a few transactions that contributed to that this quarter. We are seeing some things in the government financing space and some other areas. We do see that as the market shifts somewhat to a software versus a hardware market, that there's opportunities there for our financing team. So we feel good about what they did for the year and what they did for the quarter, but it tends to be lumpy. Yes. Matt, this one's more a little outside of what we normally do. This is more of a transformational acquisition for us. So this was a pure, what I'd call, almost a consulting/technology play for us. What it does is it kind of enhances and expands what we're doing in the cloud. So they bring consulting, professional services, software development. They've also got a training curriculum that seems very well received by a lot of our ---+ both partners as well as customers. We ---+ the purchase price was approximately $13.3 million, $13.5 million. Which includes an earn-out, yes. Which includes an earn-out. And then what that really brings to us is it's going to help ---+ continue to help us help our customers on their journey, both to and from the cloud. It's going to help with DevOps enablement. It's going to help with infrastructure automation and orchestration. If you think about the software-defined, like, for example, SDN, software-defined networking, it's going to help us expand our capabilities in that space and then the training that I mentioned. So this one is more of a transformational play and leveraging what they have on top of what we've already had at ePlus to provide more to customers. What we've seen with it, which has been nice since we've worked with them over the years now, is, for example, we've done a deal, I think we talked a little bit about it last quarter, where we went in and did an envisioning session, a cloud envisioning session that then led to about 90k worth of services, almost kind of a proof of concept that then led to a $2 million opportunity at very good margins. And it looks like there's more opportunities to go as it relates to that customer. So we're very much aware of their capabilities. We've worked with them over the years and feel pretty good about what they add to our capabilities going forward. Yes, well, Matt, what I look at it is it's an add-on to stuff that we're already doing. Their software development capabilities really add to what we're offering to our customers. So we think we have the ability to go back to our existing base as well as bring on net new customers, both with their training capabilities. In fact, some of their training curriculum, we think we can go back to our 3,200-plus customers with what they do there as a foot in the door to potentially do more. They are mainly a services play, as I mentioned, upfront right now. So we bring the ---+ I guess, the product knowledge side of it, and they're adding some consultative services and software development on top of some of the services we bring to the table. For the fiscal year, we ended at 47% of net sales for Cisco. I don't have the quarter handy with me, unfortunately. Yes, it's ---+ may have been a percent more for the quarter. Well, in this scenario, it wasn't hotly contested. I'd love to tell you it was a 2-day sale, Matt, but unfortunately, that's not the case. The big thing we're trying to highlight with that deal was it involved the full life cycle of all of our services that we bring to the table. So it started off with assessments across ---+ from a compute, storage, security, networking and cloud readiness. So we did the assessments for the customers and got a real detailed information on their environment. The next step to that was we have what we call an executive services portfolio, and this is basically where we have CIO-like capabilities that will go in and work with the customer to kind of build out a road map of the things that they have to think through. The second thing we did for them was being vendor-agnostic, if you will. We did a detailed analysis of all the compute, storage and networking vendors, just the top ones, if you will, and kind of mapped what they were looking for to the ideal solution. And then the last piece, that was nice. It included our staging facility services, our project management, our professional services, our enhanced maintenance services support that we provide for customers. And we think there's more add-on sales as we go forward with managed services and other things. So it was a real nice, what I'd call, consultative sale, where we understood what the customer was looking for, we understood their environment, we sent in the consultants that could actually help them build a solution that addressed what they were looking for and then helped them across, one, reducing their number of vendors, we standardized their IT footprint, I think there was operational cost savings. So there were multiple things that went into it that made it a win-win for both us as well as that customer. That's a hard one, Matt. Here's a couple different factors that may answer your question: One, a lot of people are doing what I call data center redesign, just trying to figure out how to automate and orchestrate their existing legacy systems or potentially move to the cloud. As we've talked about in previous calls, we've really gone to an assessment-led selling model as much as possible. What was nice about this was this was 5 assessments that were done upfront, where once you get that information and you put the right people in front of the customer, you should be able to figure out what the solution is. So I think the big takeaways here is: One, these sales take some time; two, I do believe there's more than a few out there where customers are looking for this type of help from an ePlus-like company; and then three, there's real upside in savings for those customers as we go forward. Okay. Thank you, operator, and thank you, everyone, for joining us today. We look forward to speaking with you on future calls and road shows. Have a good day, and thanks for your time. Take care.

2017_PLUS

2016

BXP

BXP #So it's a very fair question, <UNK>. I think that if we go around our portfolio and look at the amount of repositioning we have already done, the vast majority has been completed. There are a few 300,000 plus square foot buildings in Washington DC. One of them is undergoing a renovation right now and the other one will likely start in 2019 or 2020. That's the building over on New Hampshire Avenue, right. Yes. And then there's a suburban office building in Boston that we actually are about to undergo a renovation on, but we actually have a signed lease for that building and that tenant would like to be ---+ sorry, not a signed lease, a signed letter of intent ---+ and that tenant would like to be in that space in the third quarter of 2017, so that one is going to happen really fast. Our CBD portfolio by and large in New York City, and in Boston and in Washington DC, aside from that one building I just described, have really gone through a pretty significant restoration and refurbishment. And then we are going to be doing some work at Embarcadero Center probably over the next two or three years to really upgrade and improve the experiences there, but not in anticipation of any lease expirations, just in the form of making sure we are maintaining our competitiveness with the marketplace. We are looking at opportunities in the District, in Northern Virginia and in suburban Maryland and certainly as we have described, pre-leasing is critical for us to launch projects and even more critical if we are going to do it in the suburbs. If we have a development that is fully or materially pre-leased at an attractive yield, it's something we are certainly going to launch. Oh, yes. <UNK>, just to give you perspective. Three of the things we are looking at in DC are 100% leased and one of them there will likely be a lease of at least 60% or 70%. We have not changed our pricing from the deals that we were doing a year ago, so we have not raised our pricing, but we haven't lowered our pricing and the tenants are very similar. They are in what I guess <UNK> refers to as small financial firms, private equity firms, alternative asset management firms, consultants to the asset management business, some, quote/unquote, I guess hedge funds (multiple speakers). We call them very attractive tenants. <UNK>, I think the only difference might be that we thought we might have to have pre-built some of the space and try to attract 5,000 to 10,000 square foot users and as <UNK> described, what we are really talking to is 20,000 to 40,000 square foot users. So that's a half a floor to a full floor, so that's not really doing the pre-built activity. But we will end up doing some pre-building on those floors to fill out the space. So you are never going to hear us describing what the rent is or what the sales are for any of our tenants on a particular basis because I just don't think that's appropriate. So the number I gave you was a revenue base for all of the retail at the building, which includes a multitude of tenants, even some banks, but they don't give us percentage rent. (multiple speakers). And I guess my point is is that we are well off what the peak sales were in terms of our expectations for the percentage rent and we haven't assumed any growth. So we said let's look at what the least exciting sales might be and use that as our baseline and everything that we get on top of that will be gravy. I'm not going to give you a number because you've got to understand the sales for these properties are different than they are for anything else that you would probably see in a retail portfolio. <UNK>, would you like to describe that one. It's had zero impact on leasing and we are not worried about the building falling over. That's the short answer. I think they pressure grout and stop the building from sinking. I think it's going to continue to sink until they come up with a solution. <UNK>, well, we have taken advantage of the sale market this cycle. We did several billion dollars worth of asset sales and joint ventures over the last several years and made significant special dividends to shareholders. We also ---+ a lot of those decisions also were driven by the need we had for capital to fund our development pipeline, in which we've been employing. We will certainly consider selling additional assets in the future if we need the capital for a new investment that we make or for additional development. But what we are not doing is just selling assets when we don't have a need for capital. As you know, our debt is lower than where it has traditionally been and we have still substantial capital to invest in our current development pipeline. Okay. That concludes all the questions and our remarks. Thank you for your attention. That concludes the call.

2016_BXP

2017

APEI

APEI #Thank you, operator. Good evening, and welcome to the American Public Education conference call to discuss financial and operating results for the first quarter of 2017. Please note that statements made in this conference call regarding American Public Education or its subsidiaries that are not historical facts are forward-looking statements based on current expectations, assumptions, estimates and projections about American Public Education and the industry. These forward-looking statements are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Forward-looking statements can be identified by words, such as anticipate, believe, seek, could, estimate, expect, intend, may, should, will and would. These forward-looking statements include, without limitation, statements regarding expected growth, expected registrations and enrollments, expected revenues, and expected earnings and plans with respect to recent and future initiatives, investments and partnerships. Actual results could differ materially from those expressed or implied by these forward-looking statements, as a result of various factors, including the risk factors described in the risk factor section and elsewhere in the company's annual report on Form 10-K filed with the SEC, quarterly report on Form 10-Q filed with the SEC and the company's other SEC filings. The company undertakes no obligation to update publicly any forward-looking statements for any reason, unless required by law even if new information becomes available or other events occur in the future. This evening, it's my pleasure to introduce Dr. <UNK> <UNK>, our President and CEO; and Rick <UNK>, our Executive Vice President and Chief Financial Officer. Now at this time, I'll turn the call over to Dr. <UNK>. Thank you, Chris. Starting off with Slide 3, recent results and highlights. Thank you, everybody, for joining us. We're pleased to conduct today's earnings call from Salt Lake City, the location of this year's ASU GSV Summit. The annual conference is a gathering of some of the most successful creative and innovative organizations within the e-learning community. We feel that American Public Education's dedication to affordability and intense focus on student outcomes, closely aligns with the goals of those gathered here, and is reflected by our recent progress in improving student persistence at APUS and by continued new student enrollment growth at Hondros College of Nursing or HCN. For the 3 months ending February 28, 2017, which is our most recent available information, the first course pass and completion rate of undergraduate students using Federal Student Aid or FSA at APUS increased approximately 19% compared to the same period last year. We believe the improvement in this persistence indicator suggests that efforts to attract and retain students with greater college readiness, are continuing to produce positive results. In the first quarter of 2017, net course registrations at APUS declined 9% compared to the prior year period. Although net course registrations by new students declined 16% year-over-year, net course registrations by returning students decreased 8% compared to the prior year period. We believe that the difference in the rate of decline of registrations by new students, and that of returning students, relates at least in part to improvements in persistence and the quality mix of students. The overall decline in net course registrations by new students at APUS was primarily driven by a [26%] year-over-year decrease in net course registrations by new students using FSA and an 18% year-over-year decrease in net course registrations by new students using Military Tuition Assistance or TA. We believe the decline in net course registrations by new students using FSA was due to several factors, including our efforts to improve our quality mix of students through changes to our admissions processes and adjustments to our marketing activities that may have adversely impacted enrollment in our programs and to increasing competition for online students. However, we are encouraged to see that the rate of decline lessened in the first quarter of 2017 compared to the fourth quarter of 2016. We believe that the decline in new students using TA is primarily the result of changes in the administration of the TA program by the Department of Defense or DoD, and by various DoD rules that impeded our ability to support both enrolled and prospective students on military installations. Net course registrations by new students using veterans benefits decreased 13% year-over-year and net course registrations by new students using cash and other sources, increased 8% compared to the prior year period. For the 3 months ending March 31, 2017, or the winter term of 2017, total enrollment at HCN declined approximately 8% year-over-year. However, new student enrollment increased to approximately 22% compared to the prior year period. For 3 months ending June 30, 2017, or the spring term of 2017, new student enrollment at HCN increased 31% and total student enrollment decreased by only 3% year-over-year. Although HCN continues to be confronted with certain regulatory and compliance risks, which are more fully described in APEI's 10-Q filed earlier today, we are pleased with the continued turnaround in student enrollment at HCN. In addition to improving student enrollment, the management team at HCN remains focused on further improving the institution's NCLEX pass rates, increasing placement rates, pursuing initial accreditation by the Accrediting Bureau of Higher Education Schools (sic) [Accrediting Bureau of Health Education Schools], known as ABHES, and implementing its long-term strategy to offer new degree programs and open new campuses to serve the nursing and public health community. Moving on to Slide #4. Stabilizing enrollment at APUS is our top priority, and we believe it is critical to increasing the value of our overall enterprise. To that end, we are expanding several promising initiatives and deploying new strategies as part of our overall approach to improve conversion rates and increase enrollment of new college-ready students. The blueprint for this plan includes adding new lead scoring and predictive modeling capabilities as well as improving resource allocation to the most productive marketing channels. In the second quarter of 2017, we intend to further adjust our marketing expenditures in favor of the channel partners we believe are becoming better and more efficient at reaching our optimal online target audiences. To help APUS admissions representatives better serve the needs of prospective students, we plan to develop a more robust engagement model that starts with the request for information that are tailored to the varied interests of incoming students. This personalization will be supported by a greater understanding of prospect behaviors through improved information flow, to enhance the effectiveness of advising and outreach. In short, we hope to improve the decision journey of prospective students through new data-driven processes, personalized content and a more nurturing approach to improve the likelihood of conversion. Furthermore, we are currently reengineering our enrollment management processes to better integrate front-end systems and adjust processes to better facilitate efficient student onboarding and customer service. Lastly, we aim to sharpen our digital marketing campaigns to leverage relationships with military, public service and other high-value student populations, especially in segments where we have built a strong presence. At the same time, we anticipate launching new certificate and degree programs to support future enrollment growth, especially in areas where demand is growing and employers struggle to find talent to fill job vacancies. Our product development plan includes the future launch of doctoral programs, pending HLC approval, that will also serve to enhance our reputation as an institution of higher learning. To further enhance the value of our new programs, we frequently seek additional programmatic accreditation. For example, the International Fire Service Accreditation Congress, IFSAC, recently accredited 5 of our degree programs in the School of Security and Global Studies. They were our Associates of Science in Fire Science; Bachelor of Science in Fire Science (sic) [Bachelor of Science in Fire Science Management]; Bachelor of Arts in Emergency Management (sic) [Bachelor of Arts in Emergency and Disaster Management]; Master of Arts in Emergency Management (sic) [Master of Arts in Emergency and Disaster Management]; and Master of Arts in Emergency and Management and Homeland Security (sic) [Master of Arts in Emergency and Disaster Management & Homeland Security]. In addition, our Bachelor of Arts in Entrepreneurship and Master of Arts in Entrepreneurship have been approved for accreditation by the Accreditation Council of Business Schools and Programs, also known as ACBSP. These recent developments in accreditation resulted from 4 years of preparation and hard work that included exhaustive self-study and accreditation site visits. I'm pleased by the recent launch of our competency-based initiative, called Momentum, and by our ongoing outreach to strategic partners. We expect minimal enrollment in Momentum until we are able to offer the programs with Federal Student Aid. We are currently in the process of applying with the Department of Education for approval. APUS recently announced the expansion of our partnership with the Transportation Security Administration, or TSA, to provide career-relevant education to nearly 20,000 TSA employees at 147 airports nationwide. We believe APUS is well positioned with affordability and quality, to help employers advance the capabilities of their workforce and lower the cost of human capital, in addition to helping job seekers close significant skills gaps to find employment and advancement. As indicated by our outlook, we expect to the decline in net course registrations by new students at APUS to ease in the second quarter of 2017. We believe this modest improvement is driven by easier comparisons with the prior year period and to a lesser extent, a strengthening in our military channels. We also cannot rule out the possibility that our initial efforts to stabilize enrollment may be having an impact on enrollment. It is important to note that several of the initiatives we outlined today have only recently been implemented and the remaining items are expected to be applied later this year. Thus, it's still too early for us to estimate the impact that these efforts may have on conversion rates and enrollment of new students. In closing, this is an exciting and busy week for us, as we will be soon be departing the AS GSV (sic) [ASU GSV] Summit for Washington, D. C. to participate in the graduation ceremonies for nearly 11,000 AMU and APU students. For me, it's an honor of the highest order to congratulate, in person, many of the graduates and their families who attend our commencement ceremonies this weekend. We expect more than 1,100 graduates to be present ---+ the youngest graduate this year is 18 years old, earning an associate's degree, and the oldest is 80 years young, earning a master's degree. Congratulations to all of these highly successful professionals, who will now join the ranks of over 80,000 AMU APU alumni representing more than 34 countries. Additionally, I'd like to thank the faculty and staff at APUS and HCN for their hard work and efforts to support our students and advance our respective institutional missions. At this time, I will turn the call over to our CFO Rick <UNK>. Rick. Thank you, Wally. American Public Education's first quarter 2017 consolidated financial results include a 9.9% decline in revenue to $75.5 million (sic) [$75.7 million] compared to $84.0 million in the prior year period. Both our APEI segment and our Hondros segment reported declines in revenue when compared to the prior year. In the first quarter, our APEI segment revenue decreased 10.7% to $68.1 million, compared to $76.3 million in the prior year period. Decline in APEI segment revenue is primarily attributable to a decrease in net course registrations. Hondros segment revenue decreased 1.8% to $7.6 million in the first quarter of 2017, compared to $7.7 million in the same period of 2016. The decline in Hondros segment revenue is primarily due to a decline in total enrollment at Hondros. On a consolidated basis, cost and expenses decreased 0.9% to $67.4 million, compared to $68.0 million in the prior year period. For the first quarter, consolidated instructional costs and services expense or ICS, as a percentage of revenue, increased to 38.3% compared to 35.4% in the prior year period. Our ICS expenses for the 3 months ended March 31, 2017, were $29.0 million representing a decrease of 2.5% from $29.7 million for the 3 months ended March 31, 2016, as a result of a decrease in employee compensation expenses in our APEI segment. The increase, as a percentage of revenue, was primarily due to our consolidated revenue decreasing at a rate greater than the decrease in our instructional costs and services expenses. Selling and promotional expense, or S&P, as a percentage of revenue, increased to 20.4% of revenue compared to 19.6% in the prior year period. Year-over-year, S&P costs decreased 6.3% to $15.4 million compared to $16.5 million in the prior year. The increase as a percentage of revenue was due to our consolidated revenue decreasing at a rate greater than the decrease in our S&P expenses. General and administrative expense, or G&A, as a percentage of revenue, increased to 23.4% from 19.9% in the prior year period. Our G&A expenses increased 6.5% to $17.8 million compared to $16.7 million in the prior year. The increase, as a percentage of revenue, was due to the increase in G&A expenses during a period when consolidated revenue decreased. For the 3 months ended March 31, 2017, bad debt expense decreased to $1.4 million or 1.9% of revenue, compared to $2.1 million or 2.5% of revenue in the first quarter of 2016. We believe the improvement in bad debt expense is a result of our ongoing efforts to attract students with greater college readiness and the change in our quality mix of students. In the first quarter of 2017, we reported income from operations, before interest income and income taxes, of $8.3 million compared to $16.0 million in the prior year period. Our effective tax rate during the quarter was 46.1% compared to 37.7% in the prior year period. Please note that the adoption of ASU Number 2016-09, also known as Improvements to Employee Share Based Payment Accounting, increased our income tax expense by approximately $500,000 in the first quarter of 2017, as a result of the expiration of stock options during the period. In the first quarter, we reported net income of $4.5 million or $0.28 per diluted share, compared to net income of $10.3 million or $0.64 per diluted share, in the prior year period. Total cash and cash equivalents as of March 31, 2017, were approximately $147.8 million compared to $120.0 million as of March 31, 2016, with no long-term debt. Capital expenditures were approximately $1.7 million for the 3 months ended March 31, 2017, compared to $3.1 million for the prior year period. Depreciation and amortization was $4.7 million for the 3 months ended March 31, 2017, compared to $4.9 million for the same period of 2016. Going on to Slide 6, second quarter 2017 outlook. Our outlook for the second quarter of 2017 is as follows. APUS net course registrations by new students in the second quarter of 2017 are expected to decrease between 11% and 7% year-over-year. Total net course registrations are expected to decrease between 9% and 6% year-over-year. We believe that easy prior year comparisons and the recent strengthening of certain military channels at APUS, are the primary contributors to the modest sequential improvement and the decline of net course registrations by new students. Although a positive impact of our initial efforts to stabilize enrollment may also be a contributor. Excluding net course registrations by new students using ---+ utilizing Federal Student Aid, year-over-year growth in net course registrations by new students is anticipated to be approximately flat to slightly positive in the second quarter of 2017. This would represent the first time since the fourth quarter of 2012, excluding the quarter impacted by the government shutdown in 2013, that APUS will have realized year-over-year growth in net course registrations by new non-FSA students. In the second quarter of 2017, new student enrollment at Hondros increased by approximately 31% year-over-year; and total student enrollment decreased by approximately 3% year-over-year. As Wally indicated earlier, we are pleased to see the turnaround in new student enrollment growth and the resulting improvement in total student enrollment at Hondros College of Nursing. Hondros new student enrollment clearly benefited from the opening of a new campus in Toledo, Ohio. However, on a same campus basis, new student enrollment increased 6% compared to the prior year period. For the second quarter of 2017, we anticipate consolidated revenue to decrease between 10% and 7% year-over-year. Net income for the second quarter of 2017 is expected to be in the range of $0.19 to $0.24 per fully diluted share. As we execute on our plan to stabilize enrollment, we expect operating margins to be challenged, possibly to the point where total enrollment stabilizes, as we will likely continue to invest in marketing, product development and student support services. In closing, APUS is focused on enrollment stabilization as an institutional goal that is beneficial to our students, alumni and other key stakeholders. We're encouraged by the smaller-than-expected decline in net course registrations by new students at APUS. As indicated by our outlook, we currently anticipate this trend will continue into the second quarter of 2017. We are also optimistic about the turnaround in new student enrollment at Hondros. However, we still have work to do and we've outlined the ongoing steps we are taking to improve enrollment, increase conversion rates and achieve other operational goals. Now we would like to take questions from the audience. Operator, please open the line for questions. I would say that we really are unable to predict that, <UNK>. It was somewhat seasonal. I think, in the first quarter, the month of February was up and the other 2 months were down. And we're seeing a projected improvement in the second quarter. I don't know that I can ---+ technically, the $25 billion extra that was approved for the military in the defense budget isn't going to improve the number of soldiers we have on duty for probably another 18 months, based on my estimate. So maybe it's just some people who had been looking at the estimated time that they'll end their enlistment and saying that they'd rather have their education paid for by TA before they become be a VA student. Really, unable to make a prediction at this point in time. Well in fact, the base access issues that we've spoken about, really haven't ended because the new administration doesn't have their appointees in place yet. So it's definitely not better access to bases. No, we're looking at hard at G&A. I wouldn't take that as a new run rate number. Broadly, there were some professional fees we incurred in the first quarter which drove that year-over-year increase. But I would not project that as the new run rate. Sure. We had issued [a Q] talking about a Show-Cause that we had gotten from their current accreditor, ACICS. And on the good news perspective, we pointed out to ACICS that there were some placements that ---+ the Show-Cause was related to the placement rate. There were some placements that had not been accounted. They allowed us to open up the data file that they keep and insert those placements in, and then it took a month or so before they reviewed them and then they vacated the Show-Cause last Friday. It's in process. We've had some interim meetings. I believe that we will have our visit in November. So we're anticipating, based on our preliminary visits with the liaison we've been assigned, that all is in order there. It's a good line of communications. And we're certainly hopeful that the visit happens in November, and we have a good result, and they inform us of a successful outcome in January or February. They're improving, <UNK>. We've put in a new curriculum, primarily because the types of questions that were asked on the NCLEX ---+ we hired a nationally-renowned consultant who said, one of your reasons for your pass rates is they've changed the type of questions, more didactic and less rote memorization. So we changed our curriculum to be much more reflective of that. The curriculum was put in place last January. And so from the RN program, our first graduates test in the second quarter, but everything looks good and we've gotten ---+ otherwise, we hired also somebody with experience in just improving NCLEX test rates, in general, without even changing the curriculum. And in the latter part of last year, those test results started improving. And so far in the first quarter, they're improving. But the ones that we really expect to improve, will start taking the test in the second quarter. I think to give you really granular specifics is probably a little too soon to tell on that. But we've implemented ---+ part of the issues we had, we were not satisfied with the first course pass rate of many of our FSA students. And it's been a slow and arduous process. We put in an admissions assessment ---+ was the first thing that we did. After that admissions assessment, we looked at the test results. We altered the test results. We had a mandatory essay. We made some adjustments to that. And slowly, but surely, we've improved our quality, but we've reduced the number of FSA students, but as you can see, the pass rate has improved dramatically quarter-by-quarter. So we're doing the right thing in screening candidates to make sure that we accept students who are capable of completing our college courses and earning a degree in general. As far as non-FSA, the VA market has been pretty good for us and still continues to be pretty good. But it's what I would call a market that is tough to predict because of the fact that the housing allowance for distance education students is only 50% versus a 100% for students who attend on-ground or face-to-face education. I think the slight improvement that we've seen with cash-paying students is just due to a renewed focus on corporate ---+ partnerships with corporations and relationships with those corporations, and one of which we announced recently was our new relationship with the TSA. Yes, cash is pretty much related to corporate relationships. I mean, we have a few overseas students who ---+ you may know, that overseas students are not eligible for federal aid. But I think that ---+ they're not as material as our students who get reimbursed for their tuition from employers. Well, I would like to think that maybe it's because there's a new attitude in Washington, but that's ---+ I can't tell you that I've got any algebraic or magic formula that tells me that. Thank you, operator. That will conclude our call for today. We wish to thank you for participating and for your interest in American Public Education. Have a great evening.

2017_APEI

2017

DEA

DEA #Thanks, <UNK>, and thanks, everyone, for joining us this morning. First, I would like to discuss the properties we acquired over the course of the fourth quarter. I'm very pleased to report the acquisition of the fourth and final property we had previously announced as part of Easterly's first portfolio acquisition since the IPO. This property, an FBI field office in Albany, New York, serves an incredibly important mission for the US federal government. This field office is one of 56 field offices throughout the entire country and we are delighted Easterly now owns 6 of these facilities. These field offices service as central hubs throughout the United States and help keep Americans safe from threats, both foreign and domestic. We also acquired a federal bankruptcy courthouse located in South Bend, Indiana in the fourth-quarter of 2016. This courthouse serves the northern district of Indiana and is responsible for handling bankruptcy cases throughout 11 counties. Courts such as these act as specialists within the US district courts and have subject matter jurisdiction over all bankruptcy cases throughout the United States. Both of these buildings meet Easterly's target criteria of owning Class A build-to-suit properties with enduring missions that are critical to the lawful operation of our country. Turning to development, we are pleased with the strong progress being made at the previously announced FDA laboratory in Alameda, California. Easterly has been working hand-in-hand with the General Services Administration and the US Food and Drug Administration through the design process and we continue to expect this approximately 66,000 square foot building to be completed and delivered by mid-2018. I would like to reiterate that when we engage in federal development opportunities, there is all ready a signed lease in place that typically guarantees an initial lease term of at least 15 to 20 years. Easterly is not engaged in speculative development. Further, we enter into a design build contract with experienced general contractors so as to insulate ourselves from any risk of cost overruns. These risk-mitigating factors, coupled with the opportunity for premium returns, make the opportunities for federal government development quite appealing. Development remains an attractive source of growth for Easterly. One major opportunity where we expect to see the strong potential for build-to-suit development and acquisition activity is with the Department of Veterans Affairs, or the VA. The VA is the second-largest department in terms of total appropriations and staffing, employing nearly 350,000 people, which in turn provides vital services to the approximately 22 million US military veterans living today. In order to provide health coverage for these 22 million deserving veterans, the VA has over 1,700 healthcare sites, which include both hospitals and outpatient clinics. In recent years, the VA has begun to undertake a transformation in their healthcare facilities that serve these veterans. Rather than providing healthcare to veterans in hospital-centered inpatient care facilities, the VA has taken on a roughly estimated $63 billion project to provide new state-of-the-art outpatient care facilities located throughout the country. These facilities are typically located near major hospital centers and offer a wide range of outpatient services ranging from primary care, specialized care, mental health care and related medical and social support services for veterans in need. There is now greater alliance on the private sector to develop and own the VA facilities on behalf of the US government. Leases on these new facilities are very attractive. They are typically 15 to 20 years in initial length, backed by the full faith and credit of the United States government and can even offer greater flexibility in the lease terms than we typically see in our GSA leases. Examples of this include greater cost reimbursements and periodic bumps in rent over the term of the lease. Easterly has been a strong partner with the GSA and we are looking forward to the opportunity to expand that relationship to the VA. Overall, the VA outpatient facilities are a very exciting prospect for Easterly to expand our bullseye of strategic opportunities and you can fully expect the Easterly team to diligently pursue these types of accretive acquisitions and development projects. The acquisition team continues to seek real estate opportunities that will provide earnings growth to our shareholders, while also maintaining strict adherence to the set of values we hold ourselves to when sourcing and underwriting buildings. We pride ourselves on our high standards and we will only acquire buildings that we believe will maintain or elevate that standard. I am pleased to report that the acquisition pipeline remains robust as we review single facilities as well as multi-facility portfolios as a means of future growth. To reiterate our stated building requirements, we look for properties that are leased to a single tenant of the US federal government, are build-to-suit and mission critical for that current tenant and are usually over 40,000 square feet in size. Because the missions being performed in our facilities are so inherently critical to the overall safety, well-being and strength of our country, we believe there is an understanding across party lines that the missions are enduring. For example, the FBI, having doubled in size since 9/11, has expanded its mission to include cyber terrorism, counter terrorism, all in addition to its primary focus to investigate federal crimes. We do not see their scope of the mission decreasing. As a reminder, these buildings were new on average 94% of the time and we will continue to focus our acquisition and development efforts on these mission-critical properties located in the center of our bullseye. Our acquisition activities are an important component of our earnings growth strategy, delivering properties to both elevate the portfolio, while also providing immediate accretion to earnings as our mission. To give you some visibility of the depth and discipline of this effort, we are defined by the attractive deals we do, but we are also defined by the deals we don't do. In the fourth quarter, we passed on $100 million of opportunities of seemingly reasonable candidates for acquisition. However, upon further review, those opportunities fell short of our stated acquisition criteria. As we have matured as a company in experience and resources, I am pleased with the opportunity the acquisition growth initiative will to deliver to shareholders over time. Turning to our existing portfolio, our asset management team currently has 15 active projects to improve the everyday performance and functionality of our properties for the government tenants. An example of such a project can be found at the FBI field office in Richmond, Virginia, which is currently working with our asset management team to build a brand-new emergency operations center located within our building. This center, once complete, will allow multiple law enforcement agencies to collaborate in a highly technical 24/7 facility, which will provide around-the-clock emergency preparedness and response to high profile incidents that require the partnership and support from various arms of the law enforcement community. A facility of this type is extremely important to the mission of the FBI and directly contributes to the overall safety and well-being of the American people. Not only does a project like this create tremendous value for our shareholders by ensuring continued satisfaction, mission support and strong relationships for years and decades to come, but as a Company, we feel extremely gratified that we are in a position to help deliver a project that will ultimately contribute to the increased security and well-being of our country. With that, I will now turn it over to <UNK> for a discussion of the quarterly and annual results as well as our 2017 earnings guide. Thank you, <UNK>. Today, I will touch upon our current portfolio, discuss our fourth-quarter and full-year 2016 results, provide an update on our balance sheet, and review our 2017 guidance. Additional details regarding our fourth-quarter and full-year 2016 results can be found in the Company's fourth-quarter earnings release and supplemental information package, which is on the Easterly website at ir. easterlyreit.com. As of December 31, we owned 43 operating properties comprising nearly 3.1 million square feet of commercial real estate. The weighted average lease term for the portfolio was 5.9 years, the average age of our portfolio was 12.7 years, and our portfolio occupancy remained at 100%. In addition, 97% of our annualized leased income was backed by the full faith and credit of the United States government. For the fourth quarter, FFO per share on a fully diluted basis was $0.31, up 19% year over year. FFO as adjusted per share on the fully diluted basis was $0.30 and our cash available for distributions was $11.7 million. For the full year, FFO per share on a fully diluted basis was $1.21, up 16.5% year over year. FFO as adjusted per share on a fully diluted basis was $1.17 and our cash available for distribution was $43.7 million. Descriptions of these non-GAAP measures and reconciliations to GAAP measures have been provided in our supplemental information package. Turning to the balance sheet. At year end, we had total debt of $292.5 million and leverage was 23.8% in terms of net debt to total enterprise value or 4.5 times annualized fourth-quarter EBITDA. Despite material acquisition growth in 2016, our leverage is measured by net debt to total enterprise value compared favorably to a year ago. We continue to be capitalized well to pursue our stated acquisition goals. Recall that at the end of the third quarter, the Company entered into a $100 million seven-year unsecured term loan facility with a 180-day delay-draw period. Early in the fourth quarter, we subsequently entered into forward-starting interest rate flush to effectively fix the interest rate on future drawdowns under the term loan facility at a rate of 3.12% annually based on the Company's current leverage ratio. As of December 31, 2016 on a pro forma basis, fully drawing the term loan and using all of the proceeds to repay a portion of the borrowings on the Company's revolving credit facility, the Company's weighted average debt maturity would be six years, in line with its weighted average remaining lease terms and the Company's percentage of fixed-rate debt would be 56%. Additionally, the Company would have $288 million of availability on its $400 million revolving line of credit. This is ample capacity for the Company to exceed is accretive acquisition program for 2017 and support the following guidance. For the 12 months ending December 31, 2017, the Company is establishing guidance for FFO per share on a fully diluted basis of $1.24 to $1.28 per share. This guidance assumes our previously stated range of $150 million to $200 million of acquisitions in 2017, including the recently announced OSHA Sandy acquisition and does not contemplate any dispositions. And not to leave out the obvious, we remain confident in our team's ability to renew the portfolio of leases which roll in 2017. Our asset management and government teams are continually focused on ensuring that we remain a partner of choice to the US government as we manage the properties we own and performing diligence on newly acquired properties to ensure they're part of the enduring mission of the US federal government. Finally, as previously announced this week, our Board of Directors declared a dividend related to our fourth-quarter of operations of $0.24 per share. This dividend will be paid on March 22 to shareholders of record on March 7. I will now turn the call back to the operator for questions. Sure, <UNK>. And I want to be careful, but I think in one case, we did not see a second renewal for the building. We are not only are looking towards the next renewal of the property, but as you know, our buildings are basically 12 years old and our competitors are north of 24 to 25 years old. But, we like to see two lease roles at least going into the future before we are going to feel confident to buy that property. That's a great question. As you know, we really do stay in touch with them and that's a big part of my job day in and day out and I would say that I think sellers we're seeing, one of the reasons we gave prior guidance for the size of our pipeline that we were going to act on this year is because we are seeing more opportunities from sellers. I don't think that necessarily has to do as much with the recent election as with the fact that I think that they feel that they can realize some terrific value here and, interestingly, they are also seeing, with the uptick in interest rates, a lot of the prepayment on some of their long-term debt is more attractive at this point to pay down, so we are actually seeing an expansion in our pipeline. I will start off with saying that we are obviously actively involved on a large portion of our portfolio. We feel externally confident in the renewal of every single one of those leases in 2017 and 2018 and we are actively working on a number of them right now. Obviously, depending on the particular building and the mission criticality, the build-to-suit features that will, and the length of the initial lease term, that will have an effect on the lease renewal spread. But I think were feeling very confident across-the-board. I think that when we started this firm in [a private] world back in 2009, we were very focused on buying buildings that, whether there was a Republican or a Democrat in office, that these were mission-critical facilities that I think we would all agree both parties that they had a long-term mission within the federal government. So, I guess I'm very glad that we did take that tack at that point and over 62% of our properties right now are leased to, what we call, gun toting agencies in the federal courts. I think we're going to see an expansion in probably some of the projects in our immigrations and customs enforcement, customs and border patrol, US federal courts on the border. I could go on and on, but I think from our standpoint, we're beginning to see a nice tailwind in some of those opportunities. <UNK>, as you know, our long-term goals are obviously to build a portfolio that is 100% focus on the US federal government. So the triple net price at these tenant properties, while there's nothing to disclose, are always potential opportunities for ways to recycle capital. I think that certainly since we have been in the market and defined an institutional asset class, there were more people aware of the properties today than there were certainly in 2009 and 2010. Having said that, in the market that we are in, the middle market, we are not seeing a great increase in competition, either from public or private players at this time. That is a straight acquisition number, <UNK>. No. So, we have announced FDA, Alameda, and that project, as we said, is expected to deliver in 2018. Construction will be underway throughout the back half of this year and the beginning of next year and that is taken into consideration. But, I would say, <UNK>, today more than ever, we feel like the development opportunity is a robust opportunity for growth for our business. As these agencies continue to re-adjust missions and as we have spoken over the last eight to nine years, we have not seen significant development projects coming out of the US government. You can see renewed focus on the Veterans Administration and some of these other gun toting agencies. There will be needs for additional housing to support mission and we think we are always positioning ourselves to be the partner of choice to the United States government in helping them satisfy those missions. Well, I think one thing, <UNK>, that's interesting is that GAO reported in 2015 that the federal new construct VA projects. So, these are the ones that they did themselves. We are seeing cost overruns from 66% to 427% and delays of 18 to 86 months. And I think what you are seeing there is a realization, like they had in the GSA sector, that the private sector is the most cost-efficient, most effective and preferred way to house these particular missions. The VA, which is now, I think under terrific leadership, has bipartisan support, has now really figured out they understand what they need and how they are going to serve the veterans going forward and it is really the focus on the outpatient side of things. I think the answer is yes, it is a department that has, I think, gotten its act together. It understands what it's mission is and I would say that the same message would've been in the Obama administration as the Trump. In fact, they have the same person running the veterans today. So, I think there is more opportunity going forward.

2017_DEA

2017

TRIP

TRIP #Thank you, <UNK>. Good morning, everyone, and thank you for joining our call. As we discussed in our prepared remarks last night, we continued to make progress on our long-term growth initiatives and to building more durable direct relationships with hotel shoppers on our platform. Reallocating marketing dollars to brand-building channels has contributed to softer top line results but we believe this is the best path towards driving profitable revenue growth over the long term. In Non-Hotel's, strong momentum continues, particularly in Attractions and Restaurants, products that deepen traveler engagement with our platform. We are investing to further broaden our marketplace, to grow bookable supply and to improve the product experience, helping more travelers throughout more moments of every trip. In both segments, we have a lot more work to do but we play the long game and remain focused on building for the long term. <UNK>. Thanks, Steve, and good morning, everyone. Reigniting our near-term hotel revenue growth has proven more challenging than we expected this quarter and this year, but our product and marketing initiatives continued to deliver early positive signs and we're optimizing our marketing mix for maximum long-term benefit. Our television advertising investment was the primary driver of Q3 operating expense growth year-over-year. The prudent expense management as well as continued strength in our Non-Hotel segment has enabled us to maintain our 2017 adjusted EBITDA expectations. Across our business, we will continue to strike an appropriate balance between growth and profitability as we aim for long-term shareholder value creation. With that, we'll open it up for your questions. <UNK>, the mobile question. Yes, we did see deceleration. Actually throughout Q3 and in October, we saw flattish overall shopper growth. It is a continuation of relative outperformance of mobile shopper growth and underperformance of desktop shopper growth. So that's a trend that continues and is underlying that overall trend. In terms of your second question and cost structure between Hotel and Non-Hotel, so what we see is that the cost structure is quite comparable in terms of the line items of sales and marketing, tech and content and general admin in terms of the structure of the P&L. So not that much different. What we've seen this year is scale benefits in the Non-Hotel business. We're particularly growing faster on our TripAdvisor platforms for Attractions, for instance, but also for Vacation Rentals, which has allowed us to be more efficient with our marketing spend this year compared to other years, and its overall scale benefits actually that is driving most of the margin expansion in that segment this year. Yes, <UNK>. The other lines see a continuation of trends more or less. The Non-Hotel sees into Q4 a very similar growth trends as we've seen throughout the year. Early in the year, we said we would expect similar growth in '17 as we did in '16. That still holds. So not much movement in other lines from Q3 to Q4 in terms of relative growth rate. It's really the click-based and transaction that's the big difference. Yes. So we've seen in the other Hotel revenue, we've seen deceleration, negative growth rates in the first half. We're happy to see that turn around again in Q3 again and, the trend into Q4 will likely not be too dissimilar from Q3. Yes. As we think about 2018, clearly on the top line side, as we highlighted in our prepared remarks, we'll enter 2018 with the headwinds that we've seen on the top line in our core auction that we have described. So that will be a headwind moving into the New Year. We continue to think about our marketing budget as an increase of TV spend but a gradual increase of TV spend is next year but a reallocation of less efficient paid marketing spend as well. So all in all, we're going to balance the two aspects of our marketing mix. And then overall, we'll take a very prudent look at our other expenses as well in the Hotel segment. In Non-Hotel, we expect to continue progress on both the top and bottom and we'll continue to grow that business as we have over the last quarters and years. Yes, <UNK>. To start with the mobile monetization, indeed, again, year-on-year RPS growth on mobile monetization. The partner bid downs did have an impact on mobile as well but we were still able to grow revenue per shopper year-over-year. And the cause of that is the continued focus from our product teams on mobile and mobile monetization. It's been a big push for us in parallel to all the other initiatives that we have going on. Particularly on mobile web, we've seen very impressive wins. As you know, in Q2, we kicked off a new site experience, which was a cross desktop and mobile, and we were happy to have seen very nice wins on the mobile side. On the marketing budget and how we have seen it evolve. Can you please restate the question. I don't have the full question. Yes. Thank you. Thanks for specifying. It's across a number of different channels. So it's not a specific channel that we have identified. We have become a little bit more sophisticated in the attribution of our different channels to the downstream booking. We have, as you know, managed the whole portfolio of performance-based marketing more or less to breakeven. But if you dig deeper, there is some less efficient spend across multiple channels. And so we've been pulling back on that versus what we had planned initially in the year, which is a further impact on our revenue growth. We do believe there is more scope for efficiency optimization in our paid marketing. We are continuing to do that in Q4. And going into the next year, we do see further scope for more efficiency on the performance-based channel. I had a couple of questions. Just wanted to clarify this but the fact that you have pulled back on some of the performance ad channels, is that having a more pronounced effect on desktop traffic versus mobile. And then I had a follow-up. Yes, <UNK>. It indeed has had a disproportionate effect on desktop. Our ability to spend on performance-based marketing is a direct function of the revenue per shopper that we can achieve. And as we discussed, we saw pressure on revenue per shopper in desktop but we were able to increase revenue per shopper on mobile. So the relative impact has been more significant on desktop. Okay. And then can you just comment on the dynamics between the fact that your partners might be looking for higher ROI or they might have moved their ROA targets when they advertise with you. And at the same time you are able to improve some of the monetization on mobile hotel shopper. What's the interplay between the 2 in terms of when advertisers are bidding a bit different targets and when you're also solving for increasing monetization. Yes. Being able to improve monetization is, of course, a plus. It allows us to lean into paid marketing, be more competitive either on Google or with retargeting. And so despite partner bid downs, our improvements there allow us to expand marketing spend on mobile. <UNK>, this is Steve. With regard to the bid downs, we've run this auction for so many years. There's always a fair amount of volatility month-to-month or quarter-to-quarter. In this particular case, I think you've seen some of our partners comment on increasing marketing efficiencies and they don't seem to be publicly commenting on an ever-declining direction, but rather, they've tightened their efficiency to afford to do some other things which presumably makes sense for their business model. So as we have always done, we take into account the new landscape and we forecast our future plans based upon a status quo of the current bid levels. To your second question, <UNK>, revenue per shopper and the impacts on marketing, broadly defined. Two things I'd like to highlight. Our revenue per shopper year-on-year was negative 11%. We bid separately for traffic on desktop and on mobile. The total was down 11%. Mobile RPS was up. Desktop was down but actually less down than the 11%. So the 11% is, to a significant degree, also driven by the mix shift between the lower monetizing mobile traffic. So in the meantime, we are improving our product quite significantly. One of the things that we called out is that if you look at in the quarter, the year on year performance of the economic value the underlying leads bring that we provide to our partners, that has been improving. So the decline that we've seen on desktop revenue per shopper has been largely driven by these partner bid downs. So while these partner bid downs have happened, we've also made significant strides in positive development. And as we think about our marketing budget ---+ the performance-based marketing budget and, to some extent, the TV budget as well, as we look at ROAS, ROAS is going to be impacted by our projections for revenue per shopper. And our projections for revenue per shopper are a function of what we expect the external environment to do, obviously, how our partners behave but also what we believe we can improve over time in terms of the underlying economic value of our shoppers. Sure, Mike. Thanks. This is Steve. I would not lump all of our partners into the ones that are currently looking for higher ROI, and the partners that I've had the chance to speak to are all quite appreciative and interested in buying more and more traffic on the part of TripAdvisor. So I think we are an excellent partner for our hotel and OTA clients. We provide a very flexible bid mechanism, a flexible downstream kind of conversion funnel for them. And when we are able to measure the lead, the quality of the clicks that we send down to our partners, they have become more effective. In other words, they convert better than they did before, and that's direct work on our side to better qualify the traveler to be ready to book this hotel before we send them downstream to a hotel or an OTA. So we're kind of doing all the things that we can on our side to make ourselves a better partner. And I don't detect any reluctance on the part of partner hotels or OTAs to invest in the meta channel in general. And so again, you should, of course, be asking them. But when it comes to the overall health of meta as a channel, it still serves a very important function for travelers, and OTAs and hotels still recognize that. It's a very important channel for them to tap into the type of demand that we bring to the table. <UNK>, this is <UNK>. Indeed, year-on-year in the third quarter, our expenses in Hotel were flat other than for the additional TV expenditure. We're striking a balance between, on the one hand, investing enough for growth, on the other hand, adjust to the headwinds that we are encountering. So we're actively striking that balance between revenue growth and EBITDA. We don't believe we're underinvesting in tech and content. If you look at what we've been doing over the last year, we've made some substantial investments in the product, both on desktop and on mobile to get ready for our brand campaign and our focus on price comparison as a key value proposition for our users, and on mobile just to make sure that we keep improving that monetization. So we believe we have an appropriate level of investment there, and we're balancing future expense growth against our bottom line objectives as well And then this is Steve. I'll take the second question on Vacation Rentals. So from our perspective, we're really aiming to make sure that, that alternative lodging category is well represented on TripAdvisor. So we have about 800,000 properties. That's a pretty darn good mix. Having said that, of course, we're open to change as well. We'd love to have even more than that and more different types available globally. To the question of why not a meta, I'm not sure that consumers are looking for the price comparison feature within a particular property more than the ability to find the widest range of properties, and that's why we do continue to grow our supply while making sure everything that's on our site is of high quality. So again, I think it's fair to say that it's important for our travelers. It doesn't have to be and we're making no claims that we will become bigger than some of the other guys but it does aid, clearly, our travelers' desire to have that alternative lodging choice on our site. Sure. This is Steve. I mean the best things we see from the TV ad relate to how many people are searching for TripAdvisor, when they come to TripAdvisor, how we see their behavior being more what we're looking for than kind of our on average customer. So when they come and they've seen the TV ad, they're more likely to book. They're more likely to go through the hotel shopping experience and actually consummate the transaction either on TripAdvisor or downstream on our client sites. So the goal, to remind folks, about TV was really to present TripAdvisor as a place where not only can you read reviews, but you can do your price comparison research and understand how TripAdvisor can save you money, not, to the specifics of your question, to help us generate more Instant Bookings whereby we might be able to have a credit card but to really change the perception. So I couldn't honestly tell you right now whether we are generating more saved credit cards from the TV campaign because it really wasn't the target of our branding exercise. Sure. This is Steve, Nat. We run an auction. There's 2 big players up there. With the 2 big players, of course, there's several brands within them when any one player feeds down, by mathematical definition, share shifts to the other players in the auction. I can't be telling you anything we don't know. You'd have to look kind of market by market. When a single player changes their bids, it's in aggregate. So it's somewhat difficult for another partner to know exactly what they can and cannot do in response. So you should think of it as share shift, yes, but I wouldn't think of necessarily a big corresponding change on the part of the other client. Yes. I appreciate the question, but we really aren't able to talk about specific brands in our discussions. Yes. In terms of growth rates, clearly, the faster growers are Attractions and Restaurants. So in terms of growth, they are driving the growth in the segment. In terms of relative sizes, I don't want to be too specific in breaking it out because we haven't broken it out, but Attractions is the largest of the 3 components, with the other 2 smaller. But that's the order of magnitude but I'm not going to go in more detail in breaking out as a percentage. Thanks, <UNK>. This is Steve. The TV campaign is very much focused around educating folks on price comparison around hotels. Looking at a conversion lift in the Non-Hotel category from the initial brand awareness, next to impossible for us to tell in part because those components on TripAdvisor are growing so strong all by themselves. So we just have a lot of goodness happening in that Attraction, Restaurant category. In terms of Non-Hotel inventory trends, we continue to grow both on Restaurants and Attractions in particular. And Attractions, the bookable products, up 30-plus-percent year-on-year. The overall Attractions listing, growing as well. And when you look back a couple of years, the bookable supply is up 5x. So the marketplace concept has really worked for us. We continue to grow in all regions of the world and we love it. It's the classic marketplace model where as we had more to the supply match to the TripAdvisor demand that we already have, it continues to grow. I think our TripAdvisor sourced bookings for the Attraction category was up 100% year-on-year in Q3. So we're just seeing really nice signs of that whole trip life cycle coming together, and you see that in the numbers, in that other Hotel business growth. So <UNK>, do you want to add anything. I think we're good there. Thanks. All right. Well, thanks, everyone, for joining the call. I want to thank our employees around the globe for their continued hard work and we look forward to updating everyone next quarter. Thank you very much.

2017_TRIP

2016

VMI

VMI #<UNK>, this is <UNK>. The first quarter operating cash flows actually were pretty strong ---+ I think were around $80 million, which historically has been pretty strong for us. The second quarter is not as strong, and sequentially we had an interest payment on our debt which was $20 million. Sequentially, sales were up between first and second quarter, which drove some increase in receivables. And our inventories are higher in part because of inventory we took on hand to help protect ourselves against rising steel prices. So if you take all that into consideration, our cash flows on a quarter-by-quarter basis do fluctuate somewhat, but we expect good cash flows the second half of the year. Okay. Let's start with the last part of your question. We expect to realize very little in 2016 because a lot of the expenses are spread also into the fourth quarter. We expect all of it to see that in 2017, so it is less than a year, or about a year payback. We are probably going to end up within access system and galvanizing to lower our number of facilities by four: three in the access system side of the business and one in galvanizing, where we are consolidating into other facilities. So I think over the last year or so, we have probably reduced our footprint in Australia from a number of facilities by more than 10 facilities, and we will end up with about 30 ---+ we will end up at 26 facilities at the end of it. A lot of those are small facilities and we have been able to consolidate some of those without giving up the ability to serve the customer bases that we have in those businesses. In the Utility segment, we actually expect the operating margin to remain about where it is now. So a good solid improvement over last year's levels. In ESS ---+ yes, we just talked about that and I think for certain in the third quarter we're going to have an unfavorable comparison in earnings in ESS, and hopefully that will turn around in the fourth quarter. Irrigation is more a question of seasonality than it is quality of earnings as a result of pricing. In the third quarter, which is the weakest quarter, we're going to have less factory absorption and that's going to translate into lower margins like we had last year in the third quarter and the years before that. And in the Coatings business, we expect to continue to see margins about where they are now, with low margins in Asia-Pacific and higher margins in North America. Well probably part of it was the acquisition of American Galvanizing. Otherwise I don't see anything particular. You'll see a slight increase in custom revenue and a slight decrease in internal revenues, but nothing out of the ordinary. I'll turn it over to <UNK>. But just in general, he addressed the pricing issue and how steel is less of an effect in price [range] margins in the Utility business because of the escalators or de-escalators that are inherent in how we do contracts in the Utility business. But otherwise, I will have <UNK> talk about it. Hello, <UNK>. The affect of competitive pressure is still pretty marked out in the marketplace right now. So we do see the ability to continue to raise price as being fairly limited until the market becomes even more robust or there is more capacity taken offline. We don't believe in our forecasting that, that will happen anytime soon. So we are just working on what we control, and what we control is our operating performance, our pricing discipline. And as you mentioned with new products, we have introduced a number of new products over the past number of quarters. But the life cycle of products in the utility industry is pretty long, and so it takes a while to get traction. But those products have gained good market acceptance over the past couple of quarters. Good morning, <UNK>. No. There is not really a change in behavior that we see from rising or declining steel price to any major degree. On some of the very small structures, there may be some stocking programs that they may time, but it is very small part of the business. From the project base business, with the timelines and again with our overall structures only being about 10% to 15% of the project cost for Utility, the bigger movers are in construction and right of way issues and not really our product costs. So it tends to be minimal. <UNK>, this is <UNK>. I don't think it has changed very much. I can't give you the exact numbers, but over time we have been one-third new development, one-third conversion, and one-third replacement. And when corn and other commodities were very high, the new market portion of it approached 50%, but I think it is settling down to the more traditional combination. Internationally, as I said, the international market has actually been performing better than what I would have expected. We have good activity levels throughout the world, and we have actually seen good ---+ surprisingly good ---+ activity in Brazil, which is a country that is dealing with lots of both economic and political headwinds. But FINAME financing and the general robustness of agriculture there has performed better than I would have expected. Hey, <UNK>. We have had very good relationships with virtually all of the major utilities that are in North America, and so we have also noticed how the mergers and acquisitions pipeline has really kicked in. What we tend to see is very different each merger by merger. One may leave a unit to operate independently, and so therefore we see no change in behavior. In other cases, they will consolidate the purchasing groups, and in some cases we may have to re-bid an alliance contract. But we have been successful in maintaining all of those through this process, and we have been competitive and be able to keep those customers. So it does vary, and we will just keep an eye on it. We know that we can be competitive, and if there really is a push to try and get new prices we feel we are capable of handling that. I think the answer is yes. The answer is yes. I think that the Irrigation business over decades, because they have always been cyclical and they have been very good at adjusting cost to market conditions without cutting off investments in the future. And I don't see us having any major restructuring as a result of a continued weakness in that market. We are actually surviving through this downturn in much better shape than I have expressed my concerns about on previous calls. Because even though pricing is competitive, we have been able to offset some of that competitiveness with better productivity, better supply chain management, and until now, also lower steel costs. So I think we will continue to probably do a good job in doing that, and I don't see, apart from constantly looking for cost takeout through operations, I don't see any major restructuring coming. Yes, <UNK>, we have seen a couple of the RFQs already come out. So we have already bid a number of those. There is expectations of awards later in the quarters, the third and fourth quarter. Then there is a couple of projects that are later in 2017, and we have not yet seen those RFQs come out. Although there is a lot of discussion with those customers at this point. As was mentioned on some earlier calls, one way to take out capacity is to adjust your shifts and the number of stands that you man. And so the combination of taking out the facilities last year as well as then adjusting shiftwork, really allowed us to tune in our capacity to match demand. And we continue to do that now as we add capacity back in to meet this increased production. It is really being done in the existing facilities by just changing shifts and adding people to stands. From a competitive perspective, we have heard a number of our competitors basically doing the same thing, albeit it lagged a little bit to our own activities. It is really just along the historical trend line. We always were successful in capturing a certain percentage of those large projects, and then a certain percentage in the bid market as well. And so they are nice to have projects because you can tend to tune your capacity and your engineering and drafting resources towards those, so you get some efficiencies. But from a revenue perspective, if it is really at the historical trend, it would most likely be relatively flat. Okay. I will just answer it on a general pattern. FERC 1000 was intended to create a competitive market within the utility transmission industry. And to that end, I believe it has been successful and really is now baked into the mentality of almost all of our customers. So even if a customer has not had a FERC project, their Boards would have challenged them to go out and analyze their costs, benchmark it across the industry to make sure that if there was one in their service territory or they wanted to go out and get it, that they have the ability to do that. So you saw all of the customers really take a hard look at cost, their engineering specifications, what kind of selection of product meant for construction costs. And so part of our broad array of products is to help address that market in any which way that, that customer believes they can be competitive in the marketplace. There was at least an initial movement towards lower voltage classes as people work through the idea of having to get competitive before going into some big projects. But I think what you see now is really a settling down in the market and a new normal that is just going to be a competitive marketplace, and you're going to have to provide value and good costs. And I think we are in a good position to do that.

2016_VMI

2017

ILG

ILG #Thank you. Thanks, operator. I want to thank everyone for participating on today's call and for your continued interest in ILG. Operator, please conclude the call.

2017_ILG

2016

AKAM

AKAM #I will start with the last question. We don't see really do-it-yourself outside the US. It's really only in literally a handful of giant US Media companies. So it's really not an issue there. In fact, it probably gets even harder outside the US to try to attempt that. Our international business, our EMEA business and APJ business are growing at very strong clips. Of course, that is where we get the most impact from the strengthened dollar, so you don't see either a percentage of our overall revenue growing as fast as it would otherwise. Yes, our international business grew 27%, so it is growing in the mid 20s%. So we are very, very pleased with performance in both the European markets and our Asian markets. I think, as we shared before, the Media business tends to have variability based on traffic volumes and pushing traffic at price points. So I would say we had a huge Q4 of 2014. We had a record number of gaming releases, software downloads. And so the fact that we grew 10% over that we are very, very pleased. There are some quarters where it does grow more than that, but that's when you have notably more gaming releases and notably more software downloads. But I would say was a very, very good quarter for Q4 outside of those two customers. And what was your second question. So, pricing. The pricing dynamic, as we said, with Media for some time is it remains a very competitive market, which means you have to offer competitive price points. But the rate and pace of pricing ---+ so pricing declines do happen. They happen annually. We track them religiously, and kind of the rate pace of pricing declines has been very consistent over the last several years. Yes, we were very pleased with the ---+ we had, like I mentioned, we had a very good online commerce season. Seasonally, if you have a good online commerce season, the weather acceleration will do well. So ---+ and we had a good online commerce season, which is why it grew 11%. That business admittedly in years past has grown faster than that. That business has the potential to accelerate and grow faster. But because it's a subscription-oriented business, effectively deals you book this year tend to be revenue next year. And so, I don't think you're going to expect any kind of a significant reacceleration in that business anytime soon. I do think that there is a significant opportunity. I think that there is work being done by the engineering teams to increase the pace of innovation and start to offer adjacent products and also improve the existing products. So I think there's a lot of potential in that business, but that business has been growing in kind of the lower double digits, and it has been decelerating slightly. It is true that when you have an offering like security that has been growing 50%, it was relatively new to the salesforce. It has gotten significant mine share. We have gotten significant traction. It has taken a little bit away from the web performance business. But I think there is still good opportunity for that business to grow, and I think it is up to us to execute now. <UNK>, I don't know what normal is at the time for the Media business. Well, the Media business declined last year, kind of Q4 to Q1 sequentially. So we are certainly ---+ we are implying from this guidance it is going to sequentially decline this year. There have been years past, so the Q4 to Q1 Media business has grown. So that is why said I can't state that there is more seasonality patterns in the non-Media business than there are in the Media business where those businesses do tend to show sequential declines, I am talking about organically, largely because of the online commerce season that I mentioned, that you don't have that in the first quarter. But I would say for Media, what you saw in the guide is, as we mentioned, that these top two accounts are going to weigh on growth rates here in the near-term. But I would say outside of those two customers, if there is something that is normal, it is going to behave more like it did last year. We are going to see a step down in volumes in these top two accounts as well from Q4 to Q1. Are they going to be the same magnitude that they were from Q3 to Q4. We will see. But, again, you will see a similar step down in revenue volume from Q4 to Q1 in these large accounts. I would view this as probably stabilizing. Hard to really predict into 2017. I think there's plenty of potential for actually upside there, especially if there is real progress in video over the top with these customers. So, what I would say, there is more upside than downside. And the very worst possible case, it's only 6% of revenue. So we are very diversified, and I like that position because now you have some giants, and only a total 6% of revenue could really grow from there and help reaccelerate the business going forward. I will take the server count. I mean obviously when you look at network CapEx and as you can imagine we are doing deployment in the US, outside the US, and as we talked about 2015, we did begin to forward build for what we thought was going to be the potential of an over-the-top offering. And so you can think of it as that network ---+ if you build a network out three to six months in advance, and so we built that out. It is fair to say we have not monetized that here in the near-term, and you will grow into that here in 2016. So we spent a little bit more as a percent of revenue in 2015 than we normally do. We normally spend kind of ---+ call it 8%, 8.5% of revenue on network CapEx, and we spend about 10% of revenue on network CapEx. But that is above our model. We think the model is more in that 8%, 8.5% range, and we will probably be back at those levels in 2016. And as <UNK> mentioned around what is going to accelerate Media, I think we talked about what those things are. I think there is significant opportunity for growth in Media outside these two accounts, and we do believe one catalyst for growth in the Media business is that as more and more premium content moves online, it is poised to push a lot more traffic online. We believe that we are in a good position to benefit from that when that happens. Yes, in terms of the visibility question, I think we probably have as good visibility as it is possible to have. And that said, but it is hard to predict the future. I think things that happen or don't happen that are even beyond the industry to really know for sure. We got caught a little bit last year with that. We and a lot of other folks had very good reason to believe that there was going to be good possibility of a large influx in OTT traffic. That did not take place. So generally, I would say our visibility is very good. We are very well connected with all the major players, but it is not perfect. No, as we mentioned, so the 13% is kind of, call it, what is average over the last few years. It has been coming down. So in Q4, it was not ---+ if it was lower than 13%, and as <UNK> mentioned that we think that you're going to see it come down probably through the middle part of 2016, and then we will have to see our expectation is that we think it may stabilize from there. Yes, we saw very similar statistics. I think our statistics were just a little bit less. That could be with our customer mix. We do carry almost all the major commerce sites on our platform, but mobile is certainly increasing its penetration. We are putting a lot of effort into improving mobile performance. Mobile performance is more challenged, obviously, than desktop performance, especially if you are using a cellular network. And there is a lot of interest in our commerce customers and our customer base as a whole in mobile site performance and mobile app performance. I think there's a lot of folks interested in the Security business. There is giant security companies that license software or sell you hardware. We come at it from really a different approach where we have built a fantastic platform that we can use in a multitenant way to provide excellent security with excellent performance in a very easy to consume manner. And there the big folks don't know how to do that. So we have got a great headstart there, and we've got 15 years of experience operating in that kind of platform. So there are just lots of customers for us to go and sign up, and it's up to us to execute there. Plenty of competition all around, but in Cloud Security, we have a very good value proposition. I think you will find it to be similar to past years, so I don't think you will see any fundamental differences. (multiple speakers) I think whenever you bring the customer closer to the developer, you get a better result. You make better products. You make them faster. Innovation gets into customers' hands faster. You are more efficient. And that is what we are trying to accomplish here. We are getting the folks that work day-to-day with customers lined up right next to the developers that make the products for them. As you can imagine, there is a very high correlation between the revenue we get from Media customers and the revenue we get from our Media products. And on the other side of the house, a very strong correlation from the revenue we get from banks and commerce sites as customers and the revenue we get from our application acceleration and web security products. So, by bringing those teams together, I think we will be more responsive to our customers and more efficient overall. And I think it helps us accelerate growth. That's right. I think if you want to view this as cost control, we weren't doing this in terms of absolute saving dollars. We are not doing a big layoff here. But I do expect us to be a lot more efficient, and I do expect that to help us ultimately on the bottom line for the Company. No and that is important. We put a lot of effort into that as we planned this realignment. I think we have less than 0.5% of our customers that will have any change in their account teams. I think 96% of the reps still have exactly the same territory, and that is probably more than you might even see in a typical year. So there is not really any disruption on the customer side. It's just that those teams will have their management change now side-by-side with developer management change. And so I think you'll see us be more effective as a result. Correct. Not really. We've got dozens of competitors in the Media space. We always have. We always will. There is so much potential in that space that you are going to have a lot of competitors. I think we compete very effectively. I am not aware of any significant share loss there. I think the only fundamental shift there really has been with the big carriers, and basically I would say the shift has been more towards standardizing Akamai. I think if you look back four or five years ago, most of the world's major carriers have some kind of DIY effort to build their own CDN and compete with Akamai. Maybe they bought a lot of equipment from one of the big box manufacturers, and today most of the world's major carriers are pretty much standardizing on Akamai. Obviously Verizon, an exception there having purchased EdgeCast, would compete with that. As said, Verizon is still a very large reseller for us. Level 3, of course, competes, always has, but the list is not long in terms of the carriers. The cloud providers, some of them partner with us; some of them have competing services. But we are not seeing erosion due to competition. We've got two large customers that have built out more of their own internal effort. We have not lost business to competitors there. So I think we are in a very good position on the competitive front.

2016_AKAM

2016

OMC

OMC #Sure. First of all, we're not ready to talk about what our objectives are for 2017. We're very pleased with these wins, but they'll only be a component part of how the whole Company performs. And we have to go through a very bottoms-up profit planning process between now and the end of the year, that is traditional in the Company. But you would always rather win a client, a new piece of business, because that makes that process easier as you move forward. With respect to McDonald's, the McDonald's contract, which I won't go into in detail, will be profitable. And whatever a competitor says, they have said. Our goals and objectives in that contract, which get us paid, are perfectly aligned with how we can impact the business and with their management's goals and objectives. So we have a high degree in confidence about what we'll be able to achieve. Yes, I think one other comment on the wins. So while we do have some work to do in terms of our planning process, to get a better handle on the actual numbers, in terms of the impact as we look at 2017, certainly we look at the wins as bigger in the perspective that Hearts & Science really has a big strong base now, in addition to P&G. And PHD as a network, with the global Volkswagen win, certainly has more heft than many of the markets where they were a smaller player in the past. So as far as our media networks go, we feel really good that we've got three very strong platforms to grow off. And I think the other comment, <UNK> had touched on this earlier, the investments we made in our data analytics business, you're really seeing them come to bear some fruit, especially when you look at some of these more recent wins. So we think the benefits to the foundation for growth in the future are as important, if not more important, than the actual revenues that the first few client wins here that we've had will give us in 2017. Just echoing that for a second, during the quarter we didn't speak about it, Hearts & Science, in addition to the US and Canada, they launched in the UK. They're currently pitching for business in Germany. And with the AT&T win, Hearts & Science was opened in Mexico. So there you have a network that really is a year old, that's won the one and two largest ---+ the first and second largest advertisers in the US, as a base. And we're starting to expand and win business in other markets. And what <UNK> said about PHD is important. We've had PHD for a very long time, and it was pretty much Anglo-based in Northern Europe and the US. With the Volkswagen win, that allows us to compete in many more markets and fills out ---+ that was the one thing that company actually needed. And so we're expecting more opportunities to win business through both of those vehicles as we move forward. The other thing, which is an intangible but a terribly important one, is the way that we've won businesses, these accounts that we've won. The level of collaboration and coordination was second to none. And I can't say that enough. We work very hard at that, culturally, within Omnicom, and always have. But this was, I'd have to say, the first time where I saw it payout in big, tangible, real wins. So I'm very bullish with regard to all these positive signs, and what we might expect as we move forward as a result of the strength that we've built. Sure. Well, the programmatic business, as you know, is continuing to evolve, and has been evolving pretty rapidly for the last, I'd say, two years, maybe a little bit more. It's all based upon ROI at the end of the day, and effective targeting of audiences through programmatic. What we've done is, we can offer clients a bundled product which has certain guarantees, and they know the price that they're going to pay and what they're expecting to get out of it. And we also, through the three media groups that you talked about, are quite able to offer them unbundled products, where they do have a level of transparency. It depends upon what the client's objectives are, and how well ---+ what their preference really is. But we're capable and willing and able to offer both solutions, or either solution, to the brands that we serve. And the clients, they all have different objectives. So one model might meet certain clients' objectives and a more disclosed model, other clients. So I think there's a lot more choice associated than the headlines would lead you to believe. And the biggest question, I think, is one that was alluded to earlier, which is really, ultimately, what measurement is going to be used, and is the client getting the value that they've signed up for. And what is true and it's always been true is, if you're providing the service, you can't grade your own homework. Yes, I'll start. I think that is certainly our expectation, yes. I think from a timing perspective, we're probably close. The group has been operating now ---+ it's still relatively young, a couple quarters, in reality. What helped in the third quarter was, last year in 2015, the relative comp was pretty easy for PR. So we're happy that they showed some organic growth this quarter. We certainly think that having the group together, in addition to taking advantage of some operational efficiencies and back-office efficiencies, they're going to be able to use the group as a growth driver going forward. And I think we expect that to continue on into the future. Is the third quarter a trend. We certainly expect that the business will continue to perform well. What the growth rate will be, we'll see, but we're pretty optimistic and happy with things so far. Sure. And I'd only echo, in the near term, we're very happy with the management. We know what we're trying to accomplish, and we think we have the right people to do it. And all that's been very positive. When we look at our PR profile throughout the world, we are going to make, in some of the small markets where we have operations, be making changes which might in any one quarter effect that quarter's revenue. But we'll become stronger in those markets as a result of the moves that we make. So as you look to 2017 and beyond, we're very happy with our PR assets, and very, very pleased with them. I think we have time for one more call, operator. We're certainly pleased with the performance in the third quarter. I think we do keep in mind, though, that the third quarter is a relatively small quarter. So in any one particular quarter, 10 basis points isn't all that large. The drivers for this quarter, we continue to see some benefits from the work we've been doing to leverage scale and efficiency throughout the organization. We also saw a decline in our use of freelance labor and, frankly, some better performance at some of our underperforming agencies in the quarter, year on year. So I think when you look at the relative year-to-date margin, most of the benefit is coming from our leverage and scale efficiency initiatives, which we expect we'll continue to push, and we expect we're going to be able to sustain. As we look at the fourth quarter, we're still somewhat conservative, given a little bit less visibility than we traditionally have in our other quarters ---+ so similar to prior years. We're not ready yet to change our expectations of 30 basis points of improvement in Q4, but certainly we're going to continue to push the initiatives we been working on. And we always re-evaluate the portfolio and we're going to continue to look at the portfolio strategically. And where there are some situations that it might make sense to do some pruning, we may do that as we head into 2017. So overall, we're pleased with the performance, but we're still a little bit conservative as we head into Q4. No, we're in the process of doing that. We're hiring quite a number of people every week. But we're probably two months away from being completely staffed up for the business that we have in-house today. So that's a process that continues. Okay, thank you, everybody, for listening in.

2016_OMC

2016

ETFC

ETFC #Thank you. Well, <UNK>, as <UNK> has said, we've been doing a lot of analysis and furrowing our brows a bit about what's the right way to talk about this. But as <UNK> said, we could go over it today organically. <UNK>, I don't know if you want to add anything to that, because it's difficult to forecast the way exactly <UNK> is describing it, particularly given the impact if there's a potential rate rise or a potential [rate reduction]. Yes, I think you're thinking about it in the correct way. As rates move higher, the spread earned on that balance sheet will be larger. So, we will need less balance to earn that compelling return. At a lower rate environment, we're going to need more balance. Look at the relative earnings on that relative to a reasonable equity cost, and then, therefore, a return on equity that you want to achieve as a target, and I think you can back into a number. The guidance we gave holds some of those volatile components constant. So, we are holding the margin balance constant at a rate that's level there. We are holding stock loan contribution constant throughout that calculation. And then essentially running a constant balance sheet at $49.5 billion to give you that spread guidance in the 270- to 275-basis-point range. It also assumes no additional movements in federal funds. The run rate expense guidance does not include any step up in fees. The step-up in fees is out there as an issue. We expect it to get closure sometime in 2016. We've incorporated it into our planning and, therefore, it is incorporated into the operating margin guidance that we've given you. But the run rate ---+ because we don't know the form that charge is going to take; it could be a one-time charge, it could be an ongoing assessment, it could actually be an element of both. Because of that, we have not factored it into the dollar guidance, but we have taken it into consideration in the calculation of the operating margin. Thanks, <UNK>. Well, <UNK>, as you can well expect, and Mr. <UNK> will talk more about this in a bit, we're subject to the same quiet period requirements as a corporation as we would as an individual. And so, that has some issues with regard to what we can or can't do in accelerating or decelerating during this period of time. But, <UNK>, do you want to ---+ . Yes, I think, as you probably understand, we are operating under a plan, and that's with regard to the amount that we've done thus far this year, as we entered a quiet period late in December. With that, that's been a consistent amount of purchases. With the movement in prices and the volatility of the market, it's an item of active discussion between <UNK> and I as to what the appropriate set of actions will be when we exit this period in a couple of days. From what I understand, most of our major competitors have now passed through that increase; some delayed it a little bit. And we're not really seeing much in the way of any movement really, but it's been largely passed through. The 175 basis points is the marginal rate of reinvestment. So, in terms of where we are effectively buying duration match securities in today's market. Please keep in mind, yields have been exceptionally volatile, as have spreads. So, that number is bouncing around; we could think of it as a range of about 175 basis points to 2% right now. We haven't historically disclosed our cost of equity, but it's actually a fairly straightforward calculation from a [CAPM] model; so, in terms of where we're coming out. But I think from that, you're going to get around a 10%-ish type range cost. Yes, so, if you move deposits back on the balance sheet, and you are buying in the 175 basis points to 2% range, you are giving up the fees that you're earning on the off-balance-sheet portion. It's about 23 basis points. If you go back and look, you'll see that comp and [ben] is always the highest in the first quarter. That is really related to all of the tax items and resets that go on. So, that will be occurring, as well as the ramp up in marketing, and then some of the full-year headcount really continuing. But that's really more for the full year, not just for the first quarter. Look, I think that, one, I'd say there's really no decision to cross at this point. We are working on a plan, but a plan is not a decision point. I think at some point, yes, with the growth in cash, it will become a more and more likely decision. But at what point that is, is a little bit off into the future. How the rules work ---+ some of the CCAR rules, you have five quarters to come into compliance with. So, that gives you an operating window of time. But obviously you want to have a very detailed and well thought out plan put in place before you start down that road because you have a fixed window to get it in place. Other rules actually kick in; this is the heightened expectation rules. They kick in day one when you cross $50 billion. So, that work has to be done almost immediately, but some of that's a bit more structural and a bit easier to put in place. So, as we step back from it, you don't have ---+ it's not going to take a full two years in terms of the expense period to go over [$50 million]. But there is going to be a period of ramp-up time as you're building out the plan, and as you're beginning on the execution of the first phases of the plan, particularly personnel to get some of this work done. I can probably give you a little bit of color on that. I think the gross charge-offs for the period were $21 million. That will be coming out in our 10-K when we file it, and we are seeing an elevated level of recoveries that are driving the net charge-off number to $0. That we expect that recovery stream to continue somewhat, but it has been exceptionally strong, and we are coming up on increased conversion balances. So, that really squares to how we get to the loss modeling that's, of course, the $353 million allowance. <UNK>, we're considering a number of things across three dimensions, which we've talked about on a couple calls now. And let's remember the reason we brought this up is because we were in [purdah] for a period of time and couldn't entertain these at all. So, as the music has changed here, we wanted to make sure that we were very clear with the street, with the sell side, with our investors that we are now in a different spot and we can entertain these things. As we said today, two of those three categories have emerged as having more potential attractive opportunities; and I say potential. One is certainly trying to find ways to add scale in the brokerage business because the operating leverage is so attractive. The second is in banking, finding a way to monetize the value of our customer deposits to a greater degree than we do today. And that would imply acquiring an institution that has strong capabilities in traditional intermediary activities. That's a good question, <UNK>. We look at partnerships all the time. We recently got involved with a partnership in our back office that we think not only provides customers a better service level, but provides us better economics. So, we look at those all the time, particularly as people produce new products. And if you think about the introduction of TipRanks today, that's very much a partnership, and that's providing some additional valued, educational and investing knowledge to our customers through a partnership. So, we think about those all the time. Well, <UNK>, we're clearly continuing to invest in, for example, ETRADE Pro, which unquestionably signals the fact that we are absolutely committed to serving the needs of those valued customers. And much of what you're introducing on the mobile devices is also aimed at serving that valuable client base, because they like to stay in touch and like to be able to take action when they want to take action. So, our dedication to that area is very important. Our modeling on that metric that you just described is influenced by a number of factors. And including the impact of our corporate services business, and a change in buying behavior somewhat in the fourth quarter, as people repositioned and a few more mutual fund type purchases as opposed to just straight DARTs, straight equity trades. So, there's a number of moving factors, <UNK>. My pleasure. If I could just make one correction to an earlier comment to <UNK>'s question. I gave the gross revenue number on the off-balance-sheet sweep deposits. There are fees paid in that arrangement. So, when I gave the number of 23 basis points, we are actually in the 10- to 15-basis-point range because we have to pay the administrator fees. So, it's not quite as high as that. We also expect that to go up with the full quarter now of the ---+ post the Federal Reserve increase into the 25- to 30-basis-point range. I'll take the second, first. <UNK>, we just got permission to take it down to 8%. So, you'll forgive us for wanting to catch our breath a bit. And I appreciate your impatience, but we're going to catch our breath a bit. We do think, as the loan portfolio continues to cure, that there's some more opportunity to take that down to a level ---+ towards the 7% handle. But that's something that we want to carefully work through with our regulators, and make sure that all the right people are conformable before we even start entertaining that idea. The dust has just begun to settle on the trophy of getting that done, so we're going to be patient and approach it in the same careful way we did in getting down to 8%. And then <UNK> is going to take the other question. Yes, on the 2 times debt service, and please keep in mind the 2 times debt service is actually a covenant in our revolver at this point in time. So, we will not go below the $100 million number. We view corporate cash as the ultimate free source of liquidity if we needed to use it between our legal entities, and it is also a source of capital. So, therefore, we are not going to operate at a thinner margin than that 2 times level. Well, within the NIM guidance, we are keeping it constant. Now, constant doesn't mean the constant yield there. It means it's a constant overall contribution. Keep in mind that the hard to borrow component that is essentially the rebate earned on the stock lending is put up to the borrowing line, and the borrowing balance is driven by customer activity. So, there's going to be a lot of volatility in the yield that's posted there. But from a dollar perspective, we expect it to be relatively flat. That includes provision, and our guidance on provision for the year is zero. Well, as you'd expect, we have to react to that when it occurs. If the provisions come in above what we anticipate, we'll have to look at where we may be able to reduce other costs. Those numbers come in big and chunky though, so our ability to move the other numbers is not quite the flexibility you might have otherwise. And if it comes in better, we'll again take a look and see. We've oftentimes on these calls said we like to flex our marketing budget. And when times are good, invest in driving future customer growth. And when times are bad, being as responsible as we can. So, that's a bit something we have to handle day to day as we see what happens. Why don't you take the metrics one first. Sure. Anything we're looking at is going to have to have an extremely compelling return in terms of the investment that we are making in terms of either ROE or its return on invested capital. We would also expect accretion commensurate to the deal size, and the risk in the deal. So, we would expect higher metrics for deals that are going to be ---+ that have higher complexity or higher risk to them in terms of what we can achieve. I guess the only thing that I would carve out of that is probably anything that's around a capability or a product. We haven't talked much about that; they would largely be on the smaller side. But any larger amount or use of capital is going to have to have an extremely compelling return profile and accretion. On RIA, we've been pretty consistent in our thinking on this, which is not really all that intrigued by that opportunity right now, for two main reasons. One, we really want to see how the Department of Labor regulations that are mooted might turn out. That could have quite a significant impact in that business. And secondly, if you're going to go into that business, I believe you need to enter that business with scale. And so that would also make us think twice about that. And so, for right now, that's not quite at the top of our mind. I think we'll take ---+ what do we have, two more maybe we'll take. Two more calls, please, Edison. Well, let me just repeat that we've talked about potential acquisitions ---+ thinking about ---+ not even potential ---+ thinking about potential acquisitions across three fronts. And I think, considering the type of credit risk that we have been managing over the past several years, and how it came on the books, is not exactly what I would consider traditional banking business. I think you'll want to look at if ---+ when we think about things, we think about things that are going to complement our existing business, our business model, on how we go about things, the type of customers we have, will it have any resonance in with the ETRADE corporate services business. And so, those are the type of applications of our thinking and the direction we're taking. The guidance includes our projected headcount. But it's not ---+ the headcount projection is not ---+ the continued growth rate is going to slow from what it has been. So, you don't necessarily ---+ you're not necessarily going to see offsets. The hiring in the fourth quarter is very much around staffing up for the tax season and financial season that we enter this time of year. Well, we're working through that right now in terms of the actual conversions that are under way. You'll notice that assets that are off balance sheet came down as we brought some on our balance sheet. We have additional conversions that are going to occur this quarter, and that's going to be a live process, bringing us to our target level of $49.5 billion by sometime in the second quarter. The additional $2 billion amount is really part of the same process. If we wanted to bring it on, we could. The remaining amount, for various reasons ---+ it's either in money funds that the customer has chosen to be in a tax exempt product. It is money above the FDIC insurance threshold, so to be insured it has to be held at a different bank, therefore, it cannot be brought back onto our balance sheet. So, of that $7 billion, $5 billion of it cannot be brought back; $2 billion can be brought back. That's what we gave in the prepared remarks. And then as we grow accounts and grow our Business over time, we expect that, too, to grow. Thank you. I'd just like to thank all of you again for spending this last hour with us. We appreciate your interest, and hope you all have a really great evening. Goodbye.

2016_ETFC

2017

FCPT

FCPT #The real ---+ that's a great question, <UNK>. The real constraint on ATM issuance is the number of days that you're allowed to be in the market. There are a lot of blackout dates around earnings and in other factors. But we've only really been active for a very short period of time before the end of the year when and we decided to put ourselves in a blackout period, so we don't know yet. All the advice we've gotten from our advisors is it would be very meaningful and a way to finance our business in a steady state. Obviously, if we had a larger transaction that acquired significant equity, we think we could access the equity markets in a more normal way, but for our steady state of acquisitions, we think as long as we're not in blackout, it's a great methodology. Very fluid as far as matching the sources and uses of cash and very reasonably priced when it comes to underwriters' discount and fees. I think it's ---+ I can make two comments. We tend to be in the mid-twos on the transactions we're looking at and then we try to factor in judgment. A pro forma adjusted coverage ratio that assumes rent growth and margin increases on a new operator has less credibility in our mind than an existing operator who has a long track record and very consistent sales. We try to build in a cushion, but we try to be in the mid-twos. We think that is the right ratio. It's the market ratio that the people tend to focus on, but I also think it's the right ratio. Many other property types have market coverage ratios that have been set over time that are not sensible, in my view, but mid-twos in the restaurant space seems to be a good number. Great. Thanks. Operator, we're approaching our longest conference call to date, so if there's any other questions we'd love to take them. Operator. I think we'll look at it. We look at it at every Board meeting and intra-Board meeting on a percentage of AFFO basis. We've said 80% is sort of the range. Obviously, as we acquire assets and our AFFO grows, it'll hover around that number. It's certainly something that we'll think about in 2017. Just wanted to say thank you for all your support in 2016. It's been a great year. We're very happy with how the business is operating and look forward to 2017. Thank you, everyone.

2017_FCPT

2016

ABT

ABT #Yes, again I don't feel unreasonably constrained at all. I think that we're always conscious of capital allocation, we're always conscious of return, we're always conscious of where our debt is and what our debt rating is and so forth. We want to be all in the right balance here, but for the things that I think would be on my radar screen I think we're in good shape here. Operator, we'll take one more question. Well on the last part it hasn't yet but it could. And we're prepared for that if it does. So that remains. It's still working its way through the Indian courts. But maybe <UNK> has got more detail on that right now than I do but it hasn't yet. Yes, and I would also add just on the quarter there is some timing, to Mile's point there is always some tender timing in various countries. If you take the first quarter and the second quarter you're looking at a first half of the year that will be a high single-digit operational growth for EPD. And that's strong growth. It's kind of too early to tell. I think you kind of hope so but to call it sustainable I'd like to see some more data and I'd like to see a little more time. Because generally speaking in the Nutrition business in the United States share might blip up and down a little bit but over time remains relatively static. It's pretty difficult to move share sustainably and meaningfully over time in the US. And your ability to grow the adult Nutrition business is to grow the market for the most part. And as you know we are the leader in that market. And pediatric, share may move a couple of points here and there but it always seems to snap back to wherever its median point was. So we're always pushing on share gain and about the time you think you've gotten somewhere with it something happens, competitive response or whatever, it moves back the other way. So I think to call current momentum sustainable I think I'd say let me see another quarter. Thank you, operator, and thank you for all your questions and that concludes Abbott's conference call. A replay of this call will be available after 11 a. m. Central Time today on Abbott's investor relations website at www.abbottinvestor.com and after 11 a. Central Time via telephone at 402-220-5335, passcode 1726. The audio replay will be available until 4 p. Central Time on Wednesday, May 4. Thank you for joining us today.

2016_ABT

2018

NSP

NSP #Thank you. We appreciate you joining us this morning. Let me begin by outlining our plan for this morning's call. First, I'm going to discuss the details of our fourth quarter and full year 2017 financial results. <UNK> will then recap the 2017 year and discuss the major initiatives of our 2018 plan. I will return to provide our financial guidance for the first quarter and full year 2018. We will then end the call with a question-and-answer session where <UNK>, <UNK> and I will be available. Now, before we begin, I would like to remind you that Mr. <UNK>, Mr. <UNK> or myself may make forward-looking statements during today's call which are subject to risks, uncertainties and assumptions. In addition, some of our discussion may include non-GAAP financial measures. For more detailed discussions of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements and reconciliations of non-GAAP financial measures, please see the company's public filings, including the Form 8-K filed today, which are available on our website. Now, let me begin today's call by discussing our record-setting fourth quarter bottom line results as we executed our plan for continued double-digit worksite employee growth, pricing strength and direct cost management. Adjusted EBITDA increased 67% over Q4 of 2016 to $38.5 million. Adjusted EPS totaled $0.55 after taking into account the recent two-for-one stock split. This is an increase of 90% over the fourth quarter of 2016 and above the high end of our guidance of $0.46 to $0.48 per share. As to the details, average paid worksite employees increased by 10% over Q4 of 2016. Client retention remains strong, again averaging over 99% for the quarter. And as <UNK> will discuss in detail in a few minutes, we experienced a successful fall sales and retention campaign. These results will be reflected in our first quarter 2018 guidance as worksite employees sold in Q4 are typically enrolled and paid in January of the following year. Net hiring by the client base was once again minimal as the net loss during the first month of the quarter was followed by slight gains in each of the following 2 months. Gross profit increased by 29% over Q4 of 2016 on the 10% worksite employee growth, continued pricing strength and favorable outcomes in our payroll tax, benefit and workers' compensation programs. Our fourth quarter adjusted operating expenses increased 23% to $118 million and included a 16% increase in the total number of Business Performance Advisors over Q4 of 2016 and additional sales commissions associated with higher Q4 sales volume. Q4 operating expenses also included an additional accrual for our cash and stock incentive compensation plans tied to our outperformance. Lastly, we incurred additional stock-based compensation related to the acceleration of the vesting of restricted shares from Q1 2018 into Q4 2017 in order to maximize our tax deductions. Our Q4 effective tax rate of 35% was impacted by a write-down of deferred tax assets to a new corporate tax rate of 21%, largely offset by a tax benefit associated with the acceleration of the vesting of the restricted shares from Q1 of '18 to Q4 of 2017. Now before I turn the call over to <UNK>, let me summarize our record high full year 2017 operating results. Adjusted EPS on a post stock split basis increased 37% to $2.45 and adjusted EBITDA increased 26% over 2016 to $178 million, both significantly above our 2017 budget. Gross profit increased 17% on 10% worksite employee growth as we effectively managed changes in client mix, pricing and direct cost trends. In the payroll tax area, we benefited from the recently passed Small Business Efficiency Act. Effective management of our health plan resulted in an increase in benefit costs per covered employee of only 1.2% over 2016 net of planned migration. Workers' compensation cost as a percentage of non-bonus payroll declined slightly from 2016 due to continued discipline around our client selections and safety and claims management. Adjusted operating expenses increased 14.5% over 2016. When excluding additional costs related to our incentive compensation plan for our outperformance, adjusted operating expenses increased by 11%, which was in line with our budget at the outset of the year. Putting all the pieces together, our key profitability metric, adjusted EBITDA per worksite employee per month, increased 14% from $71 in 2016 to a record high of $81 in 2017. Now with our strong balance sheet and cash flow, we are in a position to return $105 million to shareholders during the year in the form of dividends and share repurchases. We paid a $1 special dividend in December of 2017, increased our regular quarterly dividend by 20% in May and repurchased 900,000 shares over the course of the year. We also completed a two-for-one stock split, which is a reflection of increasing shareholder value and serves to enhance liquidity of our shares and build an attractive share price. Our balance sheet remained strong as we ended the year with $61 million of adjusted cash and $245 million available under our recently expanded credit facility. This level of liquidity and credit availability, combined with the continued forecast for strong cash flow, should allow us to continue to provide excellent returns to our shareholders in 2018. Now, at this time, I'd like to turn the call over to <UNK>. Thank you, Doug. Good morning, everybody. My comments today will cover 3 areas, including highlights that drove our outstanding results for the third year in a row in 2017, our successful fall selling and retention campaign just completed and our game plan for another record-setting year in 2018. Our excellent results in 2017 demonstrated the strength of our business model as we executed our plan for double-digit unit growth, optimized pricing, management of direct cost and risk and continued operating leverage. This recipe for success was repeated over the last 3 years in a row resulting in year-over-year growth in adjusted EBITDA of 31%, 28% and 26%, while more than doubling over this period from $84 million to $178 million. There are 6 major highlights worth noting from 2017 that demonstrate this strong execution of our plan across the company. First, we validated our sales system for consistent predictable growth by successfully increasing the average number of trained Business Performance Advisors by 13% while maintaining nearly the same level of sales efficiency as the prior year. This resulted in total new sales for the full year at 99% of our aggressive budget. The key sales funnel metrics proved our competence in training BPAs to reach targeted levels of sales efficiency. Discovery calls increased 12% and business profiles increased 11% and our closing rate of sales to business profiles was constant at 23% in both of the last 2 years. Our marketing results were also a key highlight validating our capability to provide a sufficient number of qualified leads to support this BPA growth rate. Total corporate leads increased 58% and resulted in 56% of the worksite employees sold in 2017, up from 45% in 2016. Another major achievement in 2017 was our 85% client retention rate, which was our second best year ever in this key metric. This follows 86% in 2016 and 84% in 2015, validating a systemic change from historical annual retention rates of approximately 80%. This trend is key to continuing both growth and profitability going forward. Another highlight last year was the major move forward for Insperity deploying leading technology in both traditional and co-employment offerings. Insperity Premier has been a tremendous success as the only true HCM system designed for the co-employment relationship and service model. All clients have been moved to the upgraded platform on schedule, along with over 300,000 user accounts. 2017 was also critical in laying the groundwork for expansion into the traditional employment solutions space through our new Workforce Administration bundle. During the year, we upgraded technology, formed a new division and redesigned the offering and price point to meet our objectives. I\ Thanks, <UNK>. Now, let me provide our 2018 guidance, beginning with the full year. As <UNK> just mentioned, we are forecasting an 11.5% to 13.5% increase in average paid worksite employees over 2017, resulting in a range of 203,700 to 207,400 for 2018. Our forecast is based upon a January starting point of paid worksite employees, followed by accelerated growth over the remainder of the year in line with the increasing number of trained Business Performance Advisors. For the full year 2018, we are forecasting client retention and net hiring in our client base consistent with 2017. As for our gross profit area, we have gone through our usual budget process of analyzing client mix, pricing and direct costs, including health care and workers' compensation claim trends. Our budget process is intended to begin the year with a conservative forecast for direct cost trends and leave the upside to favorable developments as we manage pricing and direct costs over the course of the year. Our operating plan includes further investment in our growth, including the hiring of Business Performance Advisors, opening of 5 new sales offices and additional channel and marketing programs. Also, as we execute our long-term growth plan, we will continue to invest in our high-touch, high-tech service model with personnel and technology infrastructure, security and development. Our operating plan also includes investment in the new Workforce Administration bundle, our traditional employment offering. The combination of improved worksite employee growth, stable gross profit and continued investment in operating leverage leads to our forecast of an 11% to 15% increase in adjusted EBITDA from $178 million in 2017 to a range of $197 million to $204 million for 2018. We are forecasting a 21% to 26% increase in adjusted EPS from $2.45 in 2017 to a range of $2.96 to $3.08. This forecast assumes 42 million average outstanding shares and a full year effective tax rate of 27% after considering the impact of tax reform. Both our full year 2018 and first quarter guidance for adjusted EPS and adjusted EBITDA excludes the recently announced onetime tax reform bonuses to be paid to our nonmanagement personnel. Now, as to the first quarter, we are forecasting an 11% to 12% increase in average paid worksite employees over Q1 of 2017, resulting in a range of 193,500 to 195,300. We are forecasting Q1 adjusted EBITDA in the range of $69 million to $71 million, an increase of 10% to 13% over Q1 of 2017, and forecasting Q1 adjusted EPS from $1.12 to $1.16, an increase of 22% to 26%. Our Q1 adjusted EPS guidance includes an effective tax rate of 25%, which is lower than our forecasted full year tax rate due to the tax benefit associated with divesting our performance-based shares, which occur during the first quarter of each year. As for our quarterly earnings pattern, keep in mind that our Q1 earnings results are typically higher than subsequent quarters. And in particular, we are on a higher level of payroll tax surplus prior to worksite employees reaching their taxable wage limits and benefit costs are lower in Q1 and step up over the remainder of the year as deductibles are met. In conclusion, we are pleased with our strong top line and bottom line growth in 2017 and are expecting another great year in 2018. Now, at this time, I'd like to open up the call for questions. Sure. We ended the year right at our number ---+ close to our number of 500 that we kind of accelerated the plan in the last half of the year. We ended the year at 16% increase over the year prior. We're looking at over the course of the year, since we're kind of ahead, we don't really feel we have to add that many new. Training will continue on and we're kind of looking at about a 14% average trained number year-over-year over the course of the year. So that's the game plan. Sure. Yes, Jim. We ---+ obviously, our fourth quarter's results were the best quarter of the year in terms of the trend. It was down to about 0.5% in Q4. And for the full year, it was ---+ it ended up on the total benefits, which includes just all the medical, dental, vision, disability, all that other stuff was about 1.2% for the year. And what we're seeing this year is we're seeing a really good trend on the medical side, but the pharmacy trend is actually going to be up. And so when we put all that together, along with the ---+ there's some more ACA taxes that are going to ---+ that went away in '17 that are coming back in '18. So when we put it all together, we're looking in that kind of a low 3% range for 2018. Yes, sure. We ---+ I've mentioned just a minute ago that we had excellent trend for the year 2017. It was well below 2%. And what we're seeing is a little bit of a step up, including planned migration and mix of business for 2018, but we're seeing something in the 3% to ---+ 3% to 3.5% kind of worst-case scenario right now. We think that there's enough going on in the marketplace that ---+ with the ACA taxes, one of the big factors that are driving some of that this year. So we still think a 3% trend would be great in the marketplace, but we'll just have to see how it works out as we go through the year. It's definitely up from what we budgeted for 2017. Yes, absolutely. Yes. Yes, absolutely. We spent the whole year last year testing a variety of elements that are important to a rollout strategy. And the last one that we tested, in the fall, we created a new, what we call discovery call brochure that kind of revised some of the top track and some of the dialogue and then, literally on a fold out page, puts Workforce Optimization and Workforce Administration side-by-side and right upfront. I'm meaning side-by-side, so you can compare the 2 and right upfront in the sales process on the discovery call. And what we have found there is just really exciting because of how it puts our BPA in such a consultative role to describe the differences. Of course, most prospects we're calling on are already in traditional employment and our Workforce Administration is a great step-up in having a comprehensive, cohesive solution to upgrade a traditional employment solution, but we're able to discuss traditional employment right next to co-employment and really hone in and describe the advantages, the group buying advantage of being in co-employment, the lowering of the risk of being an employer that comes along with it. So many advantages of co-employment, we're able to really identify side-by-side and have contrast. Of course, in selling it's always true you're better off if you're offering a prospect options. And we have found that when you have the 2 options there, you're able to discuss both of them more fully without trying to force somebody into one solution. And we just think that's going to be awesome in 2 ways. We think we'll get every Workforce Optimization customer that we've ever gotten plus some that, for now, we're able to have a more full discussion about it without kind of the fear of co-employment and some of the myths that go along with that. And then, we're also going to, we believe, be able to bring customers into our family, if you will, in Workforce Administration if they opt to ---+ for an upgrade in their traditional employment world as opposed to co-employment. We're so confident about that, we've actually built that into budgets and for our Business Performance Advisors and their management to shoot for, for this year, more of a balanced scorecard among all of our business performance solutions. And that kind of ties in with this whole concept of moving forward as one Insperity. So the other thing we did is we did a lot of work with the marketplace and customer base to determine what is the best comprehensive traditional employment services bundle that meets the need of the target market and also can be priced at a price point that puts us in a really strong competitive position to bracket our competition between our co-employment solutions offering, which is the premium service in the marketplace, and then our traditional employment services offering that comes in typically just underneath competitive co-employment offerings. And many of those, we would actually think are more traditional employment solutions because of how limited [their] co-employment structure is. So we think we've also created a nice competitive advantage out in the marketplace and we're excited about getting out there and executing this plan. Yes. It's a good question. We obviously are watching that closely and some of the changes from a regulatory standpoint have kind of opened up some opportunities there. Kind of the way we look at that is we're the ---+ we're a 30-year-old proven solution in our structure and the way we manage benefits. And even though I think it does open up some opportunities for associations across state lines, et cetera, and there are successful association plans state by state, it's quite a trick to manage a national benefit program. And these association plans are still going to have the common issue that these type of multiemployer plans have always had. When people come to you for one reason, health insurance, you naturally have potential for adverse selection. And those plans can get very unwieldy. Now, when ---+ one of the advantages we have is that the health plan benefit is definitely a very desirable aspect of what we do, but it's only one component. [If] people come to us for the comprehensive solution and how it affects their business, so they're not just coming with that one reason to be in or out. That way, when people ---+ prices change, et cetera, if they're in for the one reason, price goes up, they're out of here. They can get a lower price elsewhere. That doesn't happen for us in our play and that's why we're able to have, over many, many years, these small increases compared to the marketplace at large. And I just don't see anybody being able to compete with that for a long time. You're welcome. It's been fun. Yes. It's a good question, Greg. What's happening out there, you're right. There's some loosening of regulations at the federal level and that's kind of started a cascading out to the states for states trying to adjust. Of course, we've always had this whole multistate regulatory environment to contend with, but our team of government affairs folks are ---+ have a full plate because we're always monitoring what's going on state by state and have to stay on top of any regulatory changes that are going on out there. So we do see that as a risk going forward, kind of states ramping up while the federal regulation is kind of being reduced, if you will, or at least not growing as fast. And we just ---+ we're ready for that. We're kind of in place to go fight fires where fires come up in different jurisdictions. Yes. It's always a double-edged sword for us. More regulation is more burden for employers. They start looking for a solution. So we do use that to grow the business. At the same time, we have to comply and we have to deal with the changes and so that adds a little bit of cost, but it's what we do. It's what we know how to do. We are good at it and it's a part of what we're delivering to our client. Yes. Well, I mentioned that our marketing efforts produced 56% of our paid worksite employees this year. It was 58% increase over last year. And that's been driven by 3 primary programs: The loyalty program, which you know are leads that come from current customers or worksite employees of customers or even close advisers to our customers. Those are kind of our best leads and they close at the highest rate. We continue to have a corporate-sponsored methodology of localized meetings where we provide a benefit to the customers, but we're also very focused on [leaning] opportunities out of those meetings and that's gone very well. The second component is a channel program. We have some excellent channels, different types of channel ---+ the relationships that we've developed, some with the insurance community, some with the banking community, other types of relationships. And we constantly have programs of channel managers that are responsible for delivering up a certain number of qualified prospects for our BPA channel. And then, we also have a ---+ so you've got the channel programs, you've got the ---+ so what's the third one. Well, the digital program. Our digital effort is just going fantastic. I mean, we have made a significant investment there and we have excellent people across our company that have blogs that they write on various subjects and we have quite a following out there. And our digital activities generated a good number of opportunities as well. Why don't you hit the tax rate first. Yes. Regarding the tax rate, so the 21% bridging up to the 27% level, the big piece there is the state and income taxes. We've also got the ---+ they are no longer allowing a qualified transportation deduction. Some of that we're still trying to get clarification on, but that's one aspect of it that may lead you to believe it's a little bit higher than probably what you expected, sort of in the ---+ if that does stick, it's probably an additional 2% or so, 1%, 2% on our effective tax rate. What we've done, we're not anticipating any great change. However, we've ---+ we essentially now have set up in our sales and marketing team kind of 3 campaigns: So there's spring, summer and fall. Obviously, fall was up. It will continue to be our most dramatic and biggest investment campaign, but we are moving toward a kind of a more evened out approach because we think there's really not any limiting factor about wait until the end of the year or wait until the end of the quarter or whatever. So we're going to work that this year and see if that produces a change. Well, once again, thank you, everybody, for joining us today. An excellent year, off to a great start this year and we look forward to seeing you out on the road over the course of the spring. Thanks for joining us.

2018_NSP

2015

WDC

WDC #Yes. Most of it, more and the lion's share of that is growth in ---+ it's mix up, is most of that. Absolutely. Well, that's ---+ honestly, that's a lot of data to throw out straightaway that would require a little bit further analysis. But we continue to believe that from a competitive positioning standpoint, we will remain, particularly in the enterprise space, we will remain cost competitive in terms of any other solution. Generally speaking, I would say yes, I agree with your assertion. All right. Thank you for your question. Thank you again for joining us today. In closing, I want to thank all of our employees and suppliers for their commitment and outstanding execution, and our customers for their continued business. Thank you so much.

2015_WDC

2016

KLIC

KLIC #From a percentage perspective, the degradation from say ---+ when we start to provide the mix between wire bonding and flip chip was actually started out on the 85% level. The degradation is 1% per year, but in a growing pie from a units perspective. In terms of our traditional core business, we haven't seen that much changes in terms of the players that's competing with it. We are still a dominant leader, but we have seen a lot of pricing, let's just say competitiveness through pricing, especially in China. This could be a Japanese player who has actually 5% or actually the second player with 20% market share, but I would say, in terms of the competitive landscape, it is still the same. Thank you. Let me just address the APMR side and then maybe, Joe, you can get the other one. The APMR business, as we actually had communicated and shared with the Street, is that we had a sizable order that came through, which really accelerated the performance of that unit. That's actually related to an SIP application order of 60-plus in terms of units and is actually multi-quarters. That went from the March quarter to June quarter and it will taper off in this current quarter. So this is all in line with expectation and this is for the more performance-oriented smartphone sector. So from a performance perspective, even though it is actually a modest increase from March to June quarter, it is still reflective of that volume order that we received. So from a performance perspective, we are very pleased actually with the performance of APMR and we continue to actually look for other opportunities going forward. Obviously, this sizable multi-quarter order was actually fantastic for us and we'll continue to look for something, but that is something that doesn't come quite as consistent as we like it to be. But what it proves to us though is that the acquisition of actually Assembleon and through the hybrid platform, it really positions well for the advanced packaging, how we serve our customer in the semiconductor space through these advanced packaging solutions. Whether or not it's APAMA, which is definitely a more accurate ---+ has higher accuracy, but the hybrid machine definitely has the higher speed and the necessary accuracy to meet the customer's needs in today's requirement. Well, we do expect the fact that we ---+ at least with this higher-end performance segment, smartphone segment, we do have actually quite sizable share with this particular customer through an OSAT. So we do expect future, let's just say demand, possible demand, for the same type of applications, perhaps through other makers of these high-end smartphones. You're welcome.

2016_KLIC

2017

SRCL

SRCL #Sure. I think if you think about our international footprint, there are some markets where we have secure information only businesses today, and there's some markets where we're in that we don't have any secure information, but we have certainly operational platforms there for medical waste. So one of the acquisitions we did internationally actually was in Spain. So we were able to acquire a leading secure information destruction business in Spain and then take our operational assets and help that business from a leverage standpoint, where we park our charts, using it now to sell secure information for the healthcare customers we have in that market, very similar to the United States and the Shred-it acquisition. Certainly, in markets where we currently have Shred-it assets, we add on acquisitions where we think we can get either tuck-in, so we'll do tuck-in acquisitions to leverage the existing secure information businesses that we have in those markets, or it might be an expansion of the geography where we're not currently in. So that's really how we're looking at secure information. Margins vary by geography. For the most part, if you look at Shred-it margins globally versus Shred-it margins in the US and Canada, they're very similar. Thank you. Thank you, Devon. Well, thank you, again for joining. We look forward to seeing some of you at various conferences and road shows in the coming months ahead. Have a great evening. Thanks so much.

2017_SRCL

2015

NTRI

NTRI #Well, the way the retail business works is they take inventory in Q3, Q4 to support diet season growth. So we have five supermarket grocery chains that are ---+ will have product in diet seasons and Sam's, as well, and of course, Walmart. And this was, again, something we had factored into our full year guidance for 2015. Thank you. Thank you. Thanks for your time this afternoon, and thank you for your confidence in this management team to lead and deliver results. Once again, we're confident in our full-year double-digit growth projections for 2015 and believe we're well-positioned to grow in 2016. We've helped millions of people lose weight safely and intend to help them do so in the future. I look forward to sharing more about diet season 2016 and our 2016 outlook on our next call. Have a good day.

2015_NTRI

2016

CLDT

CLDT #Thanks, <UNK>. Good morning, everyone. Good to be here with you as always. I'd like to start by spending a few minutes on our first quarter results, which produced RevPAR growth of 2.6%, in line with industry performance and within our guidance range of 2% to 4% for the quarter. During the quarter, RevPAR grew 4.3% in January, 3.1% in February, and 0.9% in March. Of course, everybody talks about the March Easter impact and the shift to April, but for us anyway, which is part of the premise of our guidance sort of view for the rest of the year, April only finished up 2.1%, so not particularly strong, either. We were able to increase RevPAR 2.6% through an increase in occupancy of 2% despite industry-wide occupancy declining 0.5%. High-quality select service and upscale extended-stay hotels are the most flexible hotels in the industry to appeal to a diverse group of travelers at various price points, and that really allows us to maximize RevPAR at various stages of the lodging cycle by changing our customer mix if necessary in the hotels. The industry is certainly feeling the effects of weakening demand and rate challenges as a result of online rate transparency and brand loyalty discounts. This is the first time since the fourth quarter of 2009 where new supply, which grew 1.5%, outpaced demand growth at a low 1%. So we've got a backdrop of a more moderating environment. Brands, it's interesting, have issued guidance which implies over 5% growth for the balance of the year when you consider what they did in the first quarter and they cite strong group trends and compression caused as a result of that. Of course, our hotels don't, A, don't have that kind of business generally, and B, as select service and upscale extended-stay hotels, we don't have that kind of longer term visibility. We've always been and these hotels are always short booking cycle hotels. So we have to consider that as we look forward to the rest of the year. But looking at individual markets, RevPAR in our four Silicon Valley hotels was up 4.3%, all driven by increased rates. While others saw a boost from Super Bowl related business, most of those were all in the city in San Francisco and I think most travelers if given the choice certainly showed that they would rather stay in the city as opposed to the more businesslike environment of Silicon Valley. But unfortunately, we had saved a bunch of rooms for Apple, for a very large piece of business for two of the Sunnyvale hotels that actually canceled about two weeks prior to the Super Bowl. So we were kind of left a little bit high and dry there. Of course, given the customer, there were no cancellation fees and given the timing and the preference of travelers to stay in San Francisco, it was tough to replace that block of business. So in February actually, RevPAR was essentially flat for those two big hotels, which really are drivers, each being approximately 250 rooms in our portfolio. By the way, as a footnote to that, Apple did ultimately rebook the business, but of course that will shift into the second quarter of this year. But our normal other top 20 and top 10 accounts and key corporate accounts, it's good to report, in Silicon Valley remain productive and are looking forward to continuing with their growth plans through at least 2016. We're also encouraged by the growth we're seeing at all four hotels we acquired in 2015. We were very bullish with those acquisitions and our view towards what we can accomplish when we acquired them, and as a group, RevPAR for those hotels was up 6% in the quarter, with the Gaslamp Hotel in San Diego and the Marina Del Rey Hotel, leading the group. The Hilton Garden Inn Marina Del Rey and other folks have talked about the strength in the Los Angeles market, and we experienced very strong double-digit, actually 13% RevPAR growth in the first quarter for that hotel. So good trends there, strong, and frankly looking to continue to be strong. We've got RevPAR at our four Houston hotels, just to preempt the question, because it always comes up, was up. So this kind of steals <UNK>' thunder. Sorry about that. Was up 5.4% due primarily to a 12% gain in market share at the Residence Inn and Courtyard West University Hotels that we acquired last year that sit side by side. Under the prior ownership, these hotels were run by two separate management companies and there was little cooperation between the hotels in terms of revenue management. We've got a great team in place at both hotels now with Island Hospitality running those hotels, and in the first quarter we gained some very nice corporate business that we housed in the Residence Inn, which allowed us to optimize transient retail rates at both hotels. And in downtown Washington D. C. , The Foggy Bottom Residence Inn had a strong quarter with RevPAR up 7% in the quarter, benefiting from special corporate business related to the expansion of the Kennedy Center and of course leveraging that business to drive midweek rate increases. On the weak side, because obviously there is some, we've got our two Western Pennsylvania hotels that are highly reliant on oil and gas, and those hotels saw RevPAR decline 16% in the quarter. Other weak hotels were our Residence Inn in New Rochelle. It's been a great hotel since we acquired it, this year being impacted somewhat by a new Residence Inn that opened in the Bronx and our Farmington, Connecticut Homewood Suite, which faced a real tough comparison from a very large piece of business that we had in the first quarter last year. So as we move through the rest of the year, our relationship with Island Hospitality will allow us to maximize RevPAR, especially in a moderating demand kind of environment that we see and that most others have talked about. And the way we do that is quickly adjusting the travel or mix and keeping of course our usual tight control over expenses. When you look at our upscale extended-stay hotels, especially of course the Residence Inns and the Homewoods, we've always liked those hotels for a lot of different reasons, but as a brand or brands, one is when things do get a little tougher, you could take that hotel and you can maximize your extended-stay business. You could take 30 day ---+ we call 30 day plus business in those hotels. Of course, it's going to be at a lower rate than your transient one to four business, if the transient business is running a little bit weak as it is now. So that still allows us to grow RevPAR in this kind of environment, and as we talked to our Island folks and particularly the revenue managers, we see that in certain of these markets that kind of rate mix and customer mix is absolutely required. So that's already going on. With that, I'd like to turn it over to <UNK> to give a little more detail on the results. Thanks, <UNK>. Good morning, everybody. Our RevPAR growth guidance for the quarter of 2% to 4% was for all the hotels and we ended up seeing growth at 2.6%. The primary driver behind the underperformance, as <UNK> spoke to, was the soft February in Silicon Valley. And I know he also mentioned the Western Pennsylvania hotels that are managed by Concord Hospitality, which saw RevPAR decline 16% in the quarter. In the first quarter, we did see a shift in business mix. Our corporate and local negotiated revenue was down about 17% in the quarter, but rate for those accounts was up approximately 4%. The tradeoff was that production was way up in our retail segments, especially those booked through our OTAs, but rate was flat to down slightly with the business transient traveler that most of us hoped would be stronger this year hasn't quite been there to date through the first quarter. From a margin perspective, our operating margins were down 70 basis points to 46.6% and hotel EBITDA margins were down 90 basis points to 39.2%, which 39.2% was at the lower end of our guidance range. During the quarter, our margins were impacted 80 basis points due to a one-time adjustment to some worker's compensation self-insurance reserves related to prior year, so just over $500,000. And if you had excluded that item, GOP margins would have risen 10 basis points in the quarter, which is not so bad given the fact that occupancy accounted for about 75% of our RevPAR growth. A continuing trend for us and the industry is the growing cost to acquire guests, whether that is OTA booking commissions or brand loyalty program fees, discounts, and expenses. We saw significant growth in these areas in 2015 and it hasn't slowed through the first quarter. During the first quarter, those expenses were up almost $500,000 or 27% and impacted our year-over-year margins by approximately 70 basis points. To counteract the OTA booking volume that comes with higher commissions and fees, brands have been and are implementing rate discounts for loyalty members, which supposedly is tracking significant new member enrollments. However, as they say, the proof's in the pudding and we'll have to wait and see if those booking patterns on the brand dot com sites increased over the long-term or if it's just a short term change of behavior. Excluding the one-time adjustment for workers' compensation reserves, our flow through of total revenue to total hotel EBITDA was a solid 50% for the quarter for the comparable operating results of the hotels regardless of ownership. Again, that's pretty strong given that the occupancy was the primary driver of our revenue growth. Offsetting the onetime adjustment in higher guest acquisition costs were lower utility costs and hotel G&A costs. With respect to the Silicon Valley expansions, work continues on the 32-room tower addition in Mountain View and we expect to complete that project early in the 2016 third quarter. We've experienced some delays due to the massive amount of rain that has been received in the area. We'll begin redevelopment of the gatehouse in the Mountain View location later this year. With respect to the two Sunnyvale locations, we expect to begin those expansions in the fourth quarter and expect that process to take approximately 12 to 15 months. Based on the reduction in the number of rooms that we're going to be able to add in San Mateo, we're tabling that project for now. Costs remain unchanged from the estimates provided on our last call in that we're expected to spend approximately $70 million to $75 million for the Mountain View and two Sunnyvale expansions. These three projects are going to have an incremental 220 rooms in Silicon Valley and we still expect those three expansions to add approximately $10 million of EBITDA and $6.5 million of FFO on a full year basis in 2018, which is very meaningful, almost $0.17 a share. We're going to spend approximately $7 million on the redevelopment of the Gatehouse in Mountain View in 2016 and 2017. With that, I'll turn it over to <UNK>. Thanks, <UNK>. Good morning, everyone. For the quarter, we reported net income of $3.3 million or $0.08 per diluted share compared to a net income of $1.4 million or $0.04 per diluted share in Q1 2015. The primary differences between net income and FFO relate to non-cash costs such as depreciation, which was $12.4 million in the quarter. Adjusted FFO for the quarter was $17.7 million compared to $15 million in the 2015 second quarter, an increase of 18%. Adjusted FFO per share was $0.46 versus $0.40 per share in Q1 2015, a 15% increase year-over-year. Adjusted EBITDA increased 13% to $27.6 million compared to $24.4 million in Q1 2015. In the quarter, our three joint ventures contributed approximately $3.3 million of adjusted EBITDA and $1.3 million of adjusted FFO, in line with our guidance of $3.2 million to $3.3 million for EBITDA and $1.2 million to $1.3 million for FFO. During the quarter, we received distribution of $800,000 from the JVs. Our balance sheet remains in excellent condition. Our net debt was $594 million at the end of the quarter, our weighted average cost of debt was 4.4%, our weighted average maturity was 7.4 years, and our leverage ratio was 41.4%. Transitioning to our guidance for Q2 and full year 2016, I'd like to note that it takes into account renovations at the Hilton Garden Inn, Boston Burlington, Homewood Suites Carlsbad, and Courtyard by Marriott Addison in Q2, and the Residence Inn San Diego Gaslamp in Q4, and the completion of the 32-room expansion of the Residence Inn Mountain View tower in early Q3. We've amended our full year RevPAR guidance to reflect actual performance in the first quarter and current business trends. We are lowering slightly the bottom end of our RevPAR growth range by 100 basis points and the upper end of the range by 50 basis points, and lowering our hotel EBITDA margin guidance by approximately 50 basis points. We now expect Q2 RevPAR growth of 2% to 3% and full year RevPAR growth of 2% to 3.5%. As a result of our RevPAR margin adjustments, we are trimming slightly the midpoint of our adjusted EBITDA guidance range by 2% and FFO per share range by 3%. Operator, at this point, we will open up the call for questions. Good morning, <UNK>. I don't think it's been a surprise that certainly the Western Pennsylvania Hotels were certainly underperforming. The Hyatt Place that's in Pittsburgh, which certainly is ---+ at Pittsburgh Market is seeing some new supply but it's also experienced some good corporate growth in the oil and gas space. It also was ---+ it performed pretty weakly in the quarter. I don't think outside of the New Rochelle hotel, I mean I would say that DC, on the positive side was good, but we haven't that compression go out to the Tyson's Corner market yet. Its RevPAR was up 3% in the quarter so it's performing okay. The one other market that certainly isn't a great market for us at the moment, which is the Anaheim market, has got a significant amount of new supply in it, not only just within the Marriott brands that are located a little bit closer to the entrance of Disney World, but it also just opened up a massive 600-plus rooms at Great Wolf Lodge down the street. So that market has definitely got some challenge to it. But not surprising, but certainly one of the weaker performing markets for us. I think for the three that we're going to ---+ the Mountain View obviously one is pretty close to completion. The two Sunnyvales are in the almost ---+ there's not much of a better market in that location from a corporate client perspective. So we still see even with demand softening a little bit, but as <UNK> alluded to, the corporate especially the major corporate accounts that are out there, still have significant plans for growth over the next multiple years. So they have long-term plans. We still feel pretty confident or very confident that those rooms are going to get filled up and will be absorbed into the market. And for the franchises themselves, those are going to be nice assets for the long term. Yes, I mean certainly we've got ---+ I think with most others, we do have some new supply issues. There is new supply, again, a significant new supply in Anaheim. Our Mission Valley Residence Inn, both on the Marriott and Hilton side, a lot of new supply going around there. There's again a lot of demand growth there but still some pretty good supply growth. Generally speaking, we do see it popping up around the country. Obviously, new supply growth is increasing but I think from a pure market perspective, those two are pretty significant. There is some new supply going up in Silicon Valley as well. We're not going to be stupid and say there isn't, but the demand and again the long-term prospects for business growth still seem okay. What's happening there, <UNK>, this is <UNK>, is just I think in concepts, brands are trying to address the ongoing shift of business out of their distribution channels to the OTAs. So that's been something everyone's talked about and will continue to talk about, in our opinion, even more so over the next few years. It's a dangerous trend. <UNK> talked about and every single quarter we talked about our prime line where we're showing over budget expense increases is in our TA commission line. It's all due to OTA business. It's obviously a very expensive channel and therefore Hilton's well-publicized recent and Marriott's as well attempts at putting more business direct into the dot com and brand sites I think is a good thing for the long haul. But there is some price to pay in the near term and so I think all of us that have Marriott and Hilton branded hotels will see that. Hopefully, it's the right investment to make, though, in the long haul. For now. I mean, listen, we're just a couple of months into this for Hilton and even less for Marriott. So we haven't seen any significant changes yet but I think you've got to give it a little time to incubate to see exactly how it's going to work out. But ultimately, over the long term, it should be good. You've got some ability in your Hampton Inns and your Courtyards, obviously, to take a little more government business than you took before. That was something obviously that in a double-digit up or 8% or 9% up RevPAR environment we would taking out of the hotels because you just change the mix accordingly on the up side, the same way you do on the downside. So that's one source of business that will stay in these hotels. I think the other thing, <UNK>, is you've got ---+ when you're going into a year and you're negotiating all your corporate accounts and you're making decisions on certain customers that you want to tie up, if you will, for the year, you make decisions based on where you believe demand growth is going to be. So as that demand softens a little bit, if there's a corporate customer that ---+ or whether it's government, as <UNK> alluded to, that you can go back to and say, hey listen, here's what's going on and try and get them back into your hotel, you go back to those guys as well. You circle all the ones up that you want to have in your hotel and you reignite those conversations and see if you can win some business. I will briefly, thank you. Well, we appreciate everybody being on the call today. Again, as industry growth moderates, we're well protected with a very sound balance sheet, no near term maturities. We've got a great high-quality and flexible hotel portfolio, as I talked about. We'll continue to aggressively operate the hotels alongside Island Hospitality, and produce significant cash flow that we can invest in our existing hotels or distribute to investors. We do look forward to the long-term effects of the Silicon Valley expansions. Again, the original projections we put together there never included a substantial inflation in RevPAR. So we're safe. I don't think RevPAR is going down anytime soon there. And we are actually hearing real-time stories of every single automotive company looking now for office space in Silicon Valley because the next big thing there is going to be the self-driving car technology. So our people on the ground are reporting and thinking pretty bullishly as you move forward in the mid and long term in Silicon Valley. And of course, we've talked about how much FFO those expansions will deliver over the next couple of years. So with that, by the way I'd like to remind folks that we'll be hosting meetings at NAREIT in June and all three of us will be there, so if you're going to attend make sure to reach out to <UNK> or <UNK> and schedule a visit. Thank you very much. Have a great day.

2016_CLDT

2016

MTSC

MTSC #Yes, thanks, Brandon. Very good question. So these were a couple of very unique projects, one of which we'd been working on for some time is coming to its end now and getting very close to shipping to the customer. It was related to automotive testing to a large Korean OEM. It's truly a novel machine that is doing integration between testing and modeling that's never been done before. It's a very large project; very late in its phase before shipment. And we had to do some tunes and tweaks to meet the customer demand, which has evolved over the last couple of years, and to accommodate the facility that it's going into. So some fairly special requirements for that project near the end before it ships from the factory. It absorbed a significant amount of engineering and manufacturing effort very late in the quarter, this quarter. But it's very close to shipment and we're very excited about it being in the field and running. We have no more of those in our backlog. So it was a frustrating a quarter in that sense. But the machine's a marvelous machine that will do things to tie testing and simulation together that have never been done before. The other unique project we had in backlog ---+ or set of projects ---+ was related to hybrid electric vehicles. This was taking our electric motor technology, which is marvelous, and adapting it for what's called Formula E, which is the racing series that are entirely electric-driven cars ---+ taking that motor technology and adapting it to for those cars. This motor technology is special to us. It goes in both our testing equipment and increasingly on hybrid electric vehicles. We had extremely difficult performance challenges, which we well understood, but the schedule requirements were very tight. To accommodate the schedule the customer needed to beat the upcoming race season, we had to apply a lot more engineering resource than we had planned. While I'm very disappointed in our planning performance, if you will, I'm extremely excited about the technology. The hybrid electric system is simply fantastic, and it will allow testing machines that have never been fielded before and has applications broadly in hybrid electric vehicles that we're very excited about for the future. So we're excited about both of those. They raise the technology level in the industry to a level never seen before. But clearly it was very frustrating in terms of the final execution of those projects and the inability to plan appropriately in our factories to accommodate it. We've made adjustments for that, in terms of the leadership in that aspect of our business, and in use of our planning tools. I'm thrilled with the projects themselves and the technology level they bring and the broad application; I'm disappointed in the impact they had on the quarter. Go ahead, <UNK>. Yes, I covered it in the backlog. It's 77%; it's remained pretty consistent quarter after quarter. And then, in regards to when we look at the pipeline, which we referred to in the past, it's pretty consistent. There haven't been significant shifts there. I would tell you, Brandon, what we're very pleased with is the rise of our base order business. We quoted some numbers in the prepared remarks where we're up in excess of 20% in terms of base order performance. That's the kind of resurgence that we need to see in terms of smoothly flowing product through the factory and improving efficiencies for the future. I think the orders performance in the quarter bodes well for our future. And, as we quoted, we saw a decline in large project orders, but a strong resurgence in base orders within the quarter. Thanks, Brandon. Good morning, <UNK>. Well, it's interesting, I'll give you a bit color, <UNK>. The numbers ---+ if you look at the percentage of large versus small or custom versus standard products, it's pretty steady at a mid-70% kind of number. But encouragingly, the number of first-of-a-kind systems, which we love to do occasionally, because they do raise the technology level in the industry, but we don't like them to the magnitude that we've had them in the last 18 months. So I would tell you the risk profile is coming down. The number of first-of-a-kind projects within that custom mix is coming down. Frankly speaking, we're looking really hard at pre-sale risk analysis and shared risk with customers ---+ things of that nature on these very first-of-a-kind, highly complex custom projects, to the point where we've had to walk away from some because we believe the risk is too high. We're scrutinizing our opportunity pipeline to a level never seen before in our business. Even though the custom-to-standard mix is relatively constant in that pipeline, the amount of first-of-a-kind projects in that custom mix is declining. We're looking at it with a lot more scrutiny from applying engineering up front before we take the order. So those are all changes we're making or changes we're seeing in the demand. Since you follow us closely, you would understand that subtlety, but it is a big deal. Custom isn't bad historically; it's just first-of-a-kind custom is challenging. Thanks, <UNK>. Good morning, <UNK>. I think there are several embedded questions there. So every company faces positives and negatives. What I would tell you about our Company from a positive standpoint ---+ and I would always rather play this hand: from a positive standpoint, we have outstanding customers who are financially very strong ---+ the automotive OEMs, the aircraft OEMs, those guys. They are more technology-dependent then ever. They're driving for shorter lead times in their laboratory, and we're the technology leader in helping them. Okay. So our problem is not in demand. We have focused heavily on our technology development, our sales activity with these customers to try to address their needs globally, which are evolving especially in Asia. That has gone very well. We've got a strong orders profile ---+ continuing strong orders profile for the business. Our issues are internal now. Our issues are, first and foremost, having the engineering capacity and tools to do our job. Yes, exactly. That's what I'm getting to. Our issues now are within our own four walls. We faced an issue late last year with engineering capacity; we addressed that. We brought on new tools and methods. We're now focused on both using those tools well and on the raw talent and organizational structure and operations. It is our intense focus. That is the focus of our management team all the way through me. I love to spend time with our customers, and it's served me very well in the last few years. My focus right now, to me personally, to our test general manager and to the whole test organization, is executing our backlog. It's managing our risk in new orders, and making sure we scrub those well, so that we're taking orders that we can execute well on from both customer and shareholder perspective, and delivering on those. We did not do a good job of that in the second quarter and I in no way want to candy-coat that. We had some stressful projects, yes ---+ first-of-a-kind technology marvels ---+ and we own the IP for those, so that's great for the future. We did not deliver on our commitments for revenue and earnings, and that's what we're focused on doing for the rest of the year. With regard to the PCB acquisition ---+ it is very special, <UNK>. We would not have undertaken this size of an acquisition for anything less than something very special. I would tell you, there is tremendous synergy between the sensors that they manufacture and both our sensor and our test business. I was at a test customer ---+ a long-term test customer ---+ two weeks ago, and they walked me through the labs that use MTS testing machines. Directly into the lab they use PCB sensors, the same management structure, the same focus and the same very positive feedback on having all of this technology under one roof. So I believe it brings substantial and unique value to our Company. You can always say, well, gosh, I wish the timing were different, or something else, but the asset came on the market. It has tremendous management team that's been in place there for a long time at PCB. We are focused on them doing a reverse integration of our sensor business, which allows us to focus our current management team primarily on the test business. PCB has a very seasoned leader and a very seasoned management team. They're going to be integrating our sensor business into their company, and coming under the MTS roof. So all that's required from our management team at the current MTS, is to make sure we get the revenue synergies between their business and our test business, which is a natural. It's what customers want and what they'll look for from us and PCB combined. So the integration is very straightforward. The focus is on internal execution and test. I can absolutely assure you it occupies every minute of every day. I hear you, <UNK>. Thank you for bringing it up; it certainly is a challenge, no doubt about it. And some of that we don't control the timing of, but it's too good of an opportunity for our owners to miss. I could not have passed on the PCB deal; it's a fantastic long-term thing for the Company. Our intense focus, I assure you again, is on operational execution within our test business. Okay. I really can't comment any more on the financing activities that we've already done. I think it's well publicized what our plan is for financing the acquisition; I just am prohibited from talking about any more detail on that. In terms of our confidence in the synergies, the basic strategic rationale for the deal ---+ it has been nothing but gone up since we signed the merger agreement. I've had gross confirmation from our customer base that they like the deal; that they will really enjoy bringing these brands and technologies together. I feel very confident on obtaining the synergies that we've talked about publicly. I can't comment any more on the financing activity. The acquisition opportunity came on rapidly. And those stock purchases were done very early in the quarter, if I'm not correct ---+ so was it January/February time frame. Yes. Yes. After that we halted stock purchases. So yes, we haven't been in the market for some time now. Thanks. Hello, <UNK>. You mean our earnings estimates without PCB. Or the earnings estimates with them, <UNK>. Yes, without ---+ Sure. At a high level it's very simple; and, <UNK>, I'll ask you to elaborate in a moment. At a high level, as I said, it's very simple. The revenue issue we had in Q2 is more of a timing issue. It was a shortage of direct labor at the end of the quarter that we get back as these projects move forward with the hiring plan that we have in place for direct labor. So that's a pretty easy one ---+ we get that back in the second half. The earnings drag that we talked about, the EPS drag, is from the cost experience in the second quarter. And then the efficiency projections we have in the second half ---+ we had assumed our engineering operations team would be gaining efficiencies faster than we're modeling now. Part of that is, obviously, we've brought on a lot of new folks. Part of it is the usage of the tools and making sure they're comfortable using the planning tools we put in place. And part of it's the complexity of the backlog. So we modified our projections from the second half of the year in terms of efficiency improvements. Other than that it was the cost impact from the second quarter. <UNK>, is there any more color. Yes, a couple things, <UNK>, I just want to highlight. First, I mentioned the project cost adjustments. I was very specific in speaking to the $4 million that would flow through from an EPS standpoint in Q2. So when we look at the second half of the year, we have projected project costs adjustments, just not to the level. <UNK> already mentioned the revenue timing. And the other things I want to bring in is the cost actions. When you're modeling in Q4, we'll get three months of benefit versus only one month of benefit in Q3. So it's those three items. At this point I would tell you we're assuming that we plateaued on those until we clear this backlog; that we've plateaued on those, and we're holding steady for the year. I hope there will be some further improvements made. We're certainly driving for that. We've already made changes in some of the leadership team in operations to drive that harder, if you will. It gets back to the earlier question on focus. We're intensely focused right now on our operational performance and that planning process between engineering and manufacturing and manufacturing efficiencies. We've made some people changes, some talent upgrades here in the last month. We're intensely focused on doing that. From modeling perspective we've assumed it's plateaued for the year, and we're not going to realize any benefit of that within FY16. No, there's nothing from a seasonality; the revenue is pretty evenly split. Is it fair to say, <UNK>, revenue is split and EPS is more fourth quarter than third quarter. Right. Because of the timing on the benefits <UNK> mentioned, <UNK>, so we get one month of benefit in Q3. We get three months in Q4, which will impact EPS. In terms of revenue, it's pretty evenly split between the quarters. Thanks, <UNK>. Thanks, Roxanne. Thank you all for participating in our call today. We look forward to updating you on our progress again next quarter. Thank you, and have a great day.

2016_MTSC

2016

AVY

AVY #We saw a little bit of modest inflation that we talked about last quarter, but we've seen relative stability. And individual components, Jeff, move different directions, but on balance is where we're seeing things fairly muted, if you will. So that is what we are referring, to not any individual components. You are absolutely right. What you are seeing is what we're seeing, for that component. What we do is, when there is inflation ---+ so if we were to start seeing inflation, we go through, and we will announce price increases on which products or which regions, it is affecting. And a good example of that is, last year, we were still in a relatively deflationary environment. We raised prices within filament categories, within Europe. So we went out and announced it, and pushed it through. You've really got to think through, with the commodities we're seeing, it is different in US dollars or if you are in Euros, and so we basically make adjustments, and we will put price increases through, where we see inflation. They are very small, so we don't want to disclose all the details about them, but I can tell you the Ink Mill acquisition just has a few million dollars of revenue, so very small. It is a business that is really investing in our high-value Reflectives business, but it's also a capability we think we can leverage elsewhere within the portfolio as well. They make UV and UV LED curable inks, and as part of our TrafficJet solution within that business. On PragmatIC, that was an investment that was earlier in October, so it is not in the results right now. That is a minority investment. , there was an GBP18 million funding round that PragmatIC went through. We were less than half of that, I will say. Europe, broadly speaking, gets the benefit of Eastern Europe emerging markets. And, Eastern Europe, this quarter, is what really was a key driver for them. Actually, pretty consistently for the past years, even Western Europe, we've talked about growth being higher than the US. There's a number of factors behind that. We cannot point to any one. One of them is regulatory requirements around larger label sizes and so forth. There is not one thing I can point to, that is one example. But to be honest, the differential between the US and Western Europe has pretty much consistently been a little bit bigger than we would have even expected. I'm talking the market level not just our performance. Not a particular market, no. It was relatively broad-based. You're welcome. I would say, it is as good and getting better. (laughter) Basically, a year or so ago, we were talking about getting it into an inflection point and starting to see some customers adopt. We have seen that, but it is really hard to call when that will happen to the point that you raise. Next year, we expect this business to be double-digit growth. It could be just over 10%, or could be 30%. Timing specifically is hard to tell, but over the long run, we talk about this business being a 20% growth business and that is what we continue to expect. I think it is more retailer by retailer, and brand by brand, them going through the process. It's a pretty big shift in how they do things, how they think about running their supply chains. The returns have been strong ---+ very strong the last years, for adoption, it is just each business, each customer, needs to go through that assessment and evaluation. And the reason pilots can take so long, and the early adoption phase can take a while, is purely because of the change in adjustments they need to make. Is really a balance between driving the growth strategy, as well as driving further productivity. If you look at the business, we've consistently delivered over half-point a year of margin expansion, regardless of what is going on the top line. If you look over the last few years, we have grown this business 2.5%. So our objective here is to ensure we can get those margin target, even in a lower-growth scenario than the 4% to 5% we had targeted. We will get there, even in this lower-growth environment, and ensuring there is upside as we develop and push through our growth strategies. So that will we start achieving that 4% to 5% growth, which is still our goal, you will then have further uplift from there. The mix was primarily in two different areas. First, was the customer application that we had discussed in the Personal Care space, for Tapes. The second piece was North America. Primarily in the high-value segments, we've been talking about the North America volumes as well. Those were the two pieces in the mix. It was geo mix, as well as the customer tapes. As far as ---+ As far as on the geo mix comment, <UNK>, our margins we've said are higher where we have higher relative market share. In North America, we have relatively-high relative market share. In the 53rd week, that was really 2014, 2015 impact, so you really wouldn't see anything for 2016. Thank you. Okay. Thank you. Thanks, everybody for joining the call. Again, I'm pleased with the progress we're making against both our strategic and financial objectives, and we remain committed to achieving our long-term targets for value creation. I want to thank the entire team, within Avery Dennison, for their hard work and commitment to our success. So, thank you.

2016_AVY

2016

LMNX

LMNX #Yes, I mean, basically Nanosphere have developed their own system. They had their own timeline. We had our own timeline. We are validating now their timeline and ARIES function before the acquisition. At this stage I don't want to provide a timeline but again it's not something far away. They have a system but I would rather wait with the timeline still would be 100% that we can both execute on this timeline (inaudible). So again it is probably not too long we will speak about the timeline. Yes. So nothing was pulled into the first half, to use your words. It was pure partner timing. I think that we were ---+ we received orders in the first half that were anticipated to come in the second half, and that actually affected some of the timing around consumables. I mentioned consumables were expected to be down slightly in the back half of the year as a result of some of those timings. What actually we see in the quarterly guidance is that we ---+ if you take the $13 million to $16 million of Nanosphere and you back that out of the $261 million to $269 million number that we provided, what you end up with is a increase in the bottom of the range modestly, but then cutting a little bit of the top of the range off as well. So it was a narrowing of the range of the Luminex only ---+ which, I guess, when you average it right, you end up with a smaller number in the middle. But we really didn't take down overall expectations for the business. What we did is we resolve issues at the end of the year ---+ for instance, clarity on Lab Core's ultimate departure caused us to be able to moderate that top end of the range. Things like that provided ---+ we're halfway through the year, right. And so we have significantly better clarity there. Sure. We are in the midst of the work on integrating the sales force. I don't think we are going to send people home. I think with the performance in our sales force and the excellent performance of Nanosphere sales force, we'll combine the sales force ---+ obviously under one management, but we'll combine the sales force. And we will continue to get there. At the MDx, we will have about 44 ---+ 45 people carrying close to $130 million of the pull-backs. So that's I think a very productive sales force. What we are doing in there if you think about the synergy, that Luminex was planning to beef up ---+ and we're starting actually this part of the year in anticipation to continue to grow ---+ but our plan was to hire additional salespeople to Luminex to help us continue of the penetration of the market with ARIES and et cetera. So we are not going to hire an additional salespeople but that's the synergy we have. But overall, combining the sales force, it's a great team; very motivated to the sales force. We have great comments for the salespeople as well as customers. So we are feeling very good in the direction with this integration. No, I mean, but you're right ---+ we listen here to customers. One of the most important things that we are working in Luminex is to listen to what our customers are asking for, and they ask for lower throughput systems for the satellite. But beyond that, when you look at the system, it's giving us really a great opportunity. Also as I keep saying, we are in the business of making money. And compared to some of our competitors here. And this one is lowering our costs because we are giving systems away, so it's giving us a very good introduction at the lower cost to our customer without really putting too much ---+ talking too much money out of our pockets. So again, as I keep saying, it's another offering. Our salespeople have to have more items in the bags and that's what we are getting in order to excite the customer ---+ exciting to each of the customer what feed their needs. So ---+ this is <UNK>. Let me help you out a little bit there. So, with respect to CF being incorporated into a much bigger panel or overall genetic screening, the only way that that really is going to happen is if reimbursement is established for full genetic screenings that amount to a search, if you will, for ---+ I won't call it buried treasure, but certainly a search for things that exists in the genome that aren't apparent initially. Today the way CF is reimbursed, it would be difficult to do that. However, as the market ultimately moves there as the cost of an overall genetic screen comes down significantly, the likelihood that overall CF moves to absolutely ---+ entirely a technology like NGS is not unheard of. I mean, we certainly can see that happening in the long-term. But reimbursement is what's going to drive a shift from a CF panel to an overall genetic panel being able to get paid for the work that you do. Yes, but also we need to remember in Lab Core, it's totally different because it's Lab Core, it's so big. We see a lot of smaller customers embracing our technology now. Why. Because they are not planning to have NGS; it's too expensive to them, and we provide them the perfect solution with what we have now, with the panel we have now. So, right, again part of the overall offering to our customer. You bet. Thank you, Abigail, and thank you for everyone for your attendance today. We look forward to seeing you in person in the very near future. Have a great day. Thank you.

2016_LMNX

2016

PJC

PJC #Mike, maybe I would just add one last thing. The mark that Deb reflected did show up in the quarter, but I would say the performance of the portfolio and the investment is tracking to what we would expect in a year, right. So not outsized from that perspective. So when I give you the first some context and maybe Debb wants to add some specifics. Our performance quarterly is a blend of flow and some P&L, the majority of which is flow. From a P&L perspective, the thing that's probably going to most impact it is credit spreads widening and tightening and then we've talked about this before, in particular for us, it's going to be municipal speeds. And if they're expanding rapidly due to market dynamics that's going to reduce our P&, if they're tightening in tightening consistency leave with good new issue volume, we're going to get some good P&L. Yes, I guess I would add. Mike, if you look over the last few quarters and you said since GKST gets come on board. If you go back to the fourth quarter of last year when we fully completed that acquisition, you saw the revenues increased quite substantially, that would primarily driven by adding on all of those additional salespeople with the constructive market from a trading P&L perspective. As we talked about last quarter on the call, what you saw this significant decline which was really a result of not having the markets that were conducive and not having some of that trading P&L helping some of like the first quarter ended up being a little more of an outlier than what you saw in the fourth and second quarters, if that makes any sense. And maybe one more final comment, part of this strategy with that team joining us was really threefold, additional distribution from sales, some trading expertise and a couple of asset classes that was superior. And then, finally, we believed that we could reduce the capital with the increased revenue. And if you look at our [mark]continues to come down. We are accomplishing that. Yes. Morning, <UNK>. Morning. So let me start, <UNK>, and just give you where we ended up the second quarter. We have $4.4 billion in AUM in our MLP products and $3.7 billion in our value products. I'll let <UNK>. Yes, so from a flow perspective <UNK>, I'd call it healing after the precipitous decline, we did have net inflows in MLP is for the each month of last year as a decline. That did turn to some modest outflows in Q1 as it bottomed out. And then as we mentioned we've turning now to the modest inflows. So I think that's fairly indicative. If this going to stabilize and continue to improve from here, I think we could expect that we're going to start getting flows into the product again. In particular, some we have a set of products, some are more institutionally or some are more retail oriented, I think particularly for the retail to have that kind of decline really causes a pause. But when you relook at it now in the endless search for yield, it's pretty attractive, if you had some confidence and thought oil would stabilize, it's attractive. So could of things. One I'd start with the context, again, with this environment being as challenging as it has been. We're experiencing some of that, it's very challenging for others as well and we are seeing product opportunities with some regularity and we're spending some time on it. We would be much more inclined to active; passive, while it's enjoying and obviously doing very well, I think that's very much a scale business and we would be late and small. So neither of those is particularly appealing. Some areas where we would not have overlap would be a global product, maybe some yield and growth and again we would look for niche strategies that could be differentiated. I do think part of the past passive, this is my view and not the view for the firm. The passive trend is real obviously and it's been here with ETFs. I also think it has to some degree a cyclical quality that is reflected in very low interest rates, very low dispersion. Why don't I just get the most efficient product that I can, if we return to more normalized markets. You can see alpha from good fundamental work, then we would like to have a broader set of products. So it has changed and it's definitely improving. One of the ways I think about it, <UNK>, a little bit is, there is essentially this air pocket as for nine to 12 months oil declined just week after week after week and bottomed in February at $26. It just created an air pocket, it's sort of impossible to put together buyers and sellers in that environment and as it's stabilized now for let's call it three months, the sentiment is definitely shifted. Our pipeline is solid and with this stability, our pipeline keeps growing, and we certainly have an improved outlook for the second half of the year. Good. So I'd start with saying our fundamental strategy for the firm, again is to lead with the industry expertise and leverage that across the products. So some of the turnover you saw is optimizing our business against the market opportunity. So, we did reduce coverage in sectors like insurance, but we're aligning it really around our core franchise which will be depositories and (inaudible). I'd say from a sales trading research the resources are in place. We continue, have added a couple this year and will continue to look to selectively add bankers in both getting a full national footprint on the depository and some additional resources over time into FinTech, and expect that really to be our go-forward big franchise. Hey, I would add specialty finance and those three would really be what I'd anticipate being our focus for the next couple of years, and again I believe we've got to distinguish ourselves in a couple of areas first, and then you can do adjacencies that those three would be absolutely our focus for the coming 12 months, 24 months. Okay. So our pipeline there is solid and continues to be from a capital raising, obviously the biotech opportunity moderated very substantially. I guess you could (inaudible) shut down for a quarter, maybe almost two, but from an M&A perspective, our backlog in healthcare is very solid. Thank you. Thank you all for joining us this morning. We look forward to updating you on the third quarter. Thank you.

2016_PJC

2016

FLO

FLO #Good morning, <UNK>. Yes, from a gross margin perspective you will see them remain dilutive as we continue to buy from our copackers. But again that is key to the integration of the acquisitions and making sure we have the production to meet the market needs. What you will see though the with the Tuscaloosa facility coming online at the end of the first quarter you will see that impact begin to abate some as the year progresses. I think when you look at the demand for the products and you look at the production capacity, Tuscaloosa will only meet the some of the incremental needs. We will over the next two years to three years will continue to rely on some copack production to be able to fill markets. But again as we bring more of that into Tuscaloosa, some of that into Alpine, you will see the impact of that begin to decrease. Yes, from an operating margin perspective we do anticipate them ---+ they will be accretive. Looking at 2016 we do expect $0.03 to $0.05 accretion from the acquisitions from an earnings perspective. At this point it is hard to forecast that, <UNK>. Again those costs can be lumpy from quarter to quarter. Looking at 2015 we were up roughly $5 million to $6 million, and then projecting for 2016 currently we're just saying we anticipate incremental <UNK>, again looking at the fourth quarter the market was soft, and we have heard that from retailers. We have heard it from other food companies. And whatever the reasons were, whether it was weather that was warmer than usual or other reasons, the fourth quarter was soft. I don't see any of the factors that influenced the fourth quarter dramatically changing the profile going forward. We're as I mentioned earlier, we've started this year pretty much on track from a sales standpoint. We're very excited about the brand portfolio that our Company has. Would you look at the brands we've developed and the brands that we've acquired, now we have a strong brand in every segment of the marketplace. And the good news is that there is a lot of room to grow from a market share standpoint. I would like to point out the specialty bread category and also the breakfast category are two segments that are very much underdeveloped. Dave's Killer Bread and Alpine, again those also fit well in underdeveloped segments. So we have opportunities from a brand standpoint. We also have opportunities from a geographical expansion standpoint. Even though that we have ---+ we are now serving 85% of the US with DSD distribution, a large percent of that our market share is underdeveloped, because we haven't been there that long. So we have tremendous opportunity to grow in new markets like Omaha, Indy, Kansas City, Denver, the list goes on and on. And then we have tremendous opportunity to grow our market share simply by developing our brands in these new markets. And I think it's also worth reminding that this fresh bakery category is the third largest category in the supermarket. And so even though category is flat to down slightly, it is still the third-largest category which is significant. So we are bullish about 2016, and we feel like we have all of the elements of growth that are going to be needed in place. <UNK>, at the end of the day the consumer determines what the correct price is for products. We're running our offense based on our cost structure and what price should be for our products, and based on what happens in the marketplace, we will make adjustments if necessary. But we're very confident in all of the work that has already been done to maximize pricing whether it's promotional pricing or increases in everyday pricing. Through category management our retailers realize that profit contribution that this fresh bakery category makes to their store, and they understand the need for improved pricing. That is a general statement. You do have specific supermarkets or retailers that may have a different philosophy. But in general the retail trade understands the value from a profit standpoint of the category. When you look at the components of the growth primarily in DSD, I think <UNK> mentioned it earlier we did see some pricing softness. When you look at price mix it was relatively flat for the quarter, and we had seen some improvements from that perspective in the first three quarters so that did fall off in the fourth quarter and continued to progressively, probably deaccelerate a little bit or accelerate more than we anticipated. As I mentioned the Alpine acquisition did come in slightly below plan, so some of that business did not come on as we had anticipated. That was roughly $9 million to $10 million of revenue. And then our volume and DSD did get softer in the fourth quarter than we had anticipated as well. We did not have as strong of a holiday around Thanksgiving or Christmas than we had forecasted. So those were too big factors in part of the fall off as well. From a share perspective we actually improved our share slightly with our DSD business. Again, part of it is just from an execution standpoint we didn't meet some of the targets we had set. And then another factor would be, obviously, some of the slowdown in the category. But generally speaking there's really no one factor that we can point to. I was going to add that if you look at the IRI data for the quarter, obviously the category was down slightly, but our share did not decline. So any sales that we did not capitalize on did not to go to competition. We still maintained our growth trend within the category. The problem is that the category declined in the fourth quarter for a, as <UNK> said, a multitude of reasons. When you look over the last two years we've made several acquisitions. There has been a lot of cost coming in to the system. Obviously based on the top line performance you can see we have not gained a topline growth that we had forecasted. So as you look to 2016 and coming off a couple of quarters here where there's been from an earnings perspective and a topline perspective, we feel like we are cautiously optimistic coming into the year. But what I would say is that as we look at the growth opportunities, we're betting down a lot of that in 2016. We have a history of being the low cost producer. So if cost and revenue are not matching we will take the necessary measures to make sure that cost is in line with the revenue structure. But I do believe with this organic acquisition the all trend growth there, we have a significant opportunity to get back on track from a revenue perspective. And then if we hit our revenue targets then you should see the earnings come back in line with what you would expect from Flowers from a growth perspective as well. Thank you. Hello. Good morning, <UNK>. Yes. You should see in the first quarter of 2016 some of the pricing actions take fruition. You should see a majority ---+ a majority of those will be in place for most of the quarter. Q1. Yes. No, <UNK>. Of course our Nature's Own brand is the number one brand in soft variety. Price competition is different from one market to the other. We did have some activity in our core markets we had to react to. But we also in expansion markets basically are growing our nature's own brand and expansion markets by being very competitive with the market leader as we move forward. There is really no ---+ it is a market by market situation. And we want to make sure that we protect our brand share. But at the same time we're very focused on maximizing margins. We are ---+ we have a lot of focus on making sure that we're making the right decisions when it comes to pricing. As I mentioned earlier our average price in the soft variety categories is roughly 9% higher than the market. So, because we have the number one brand, our competition is always aiming at that brand. But in terms of moving forward, I don't anticipate any deterioration of pricing. I'm encouraged by the IRI numbers in the fourth quarter showing overall pricing included ---+ increasing. And as I mentioned earlier we are very focused, starting to see some of the results of that pricing in the last few weeks. So we're optimistic about improving pricing in 2016, not deteriorating pricing. That is correct. I think that's probably one of our strengths. Our team whether it's an account team or the individual bakeries, we work very closely with the retailers to help them manage their overall bakery department. I feel like from a merchandising standpoint they recognize the benefit of strong brands, and they also understand that selling branded products is the best thing for their margin. But I feel like in terms of merchandising we have direct influence with many of our retail customers, and we're helping them to merchandise their stores to the benefit of their business which also helps us along the way. Our ---+ in terms of actually activity within each individual store, our distributors are very important. The relationship between our distributor and that local store manager, they are able to do things from a merchandising standpoint that can help him build his business as well. So really working on a merchandising improvement at many different levels, and I would like to think that is one of our distributor strengths and one of our strengths. Very good. Thank you for your interest in our Company. We're excited about 2016 and the momentum that we have moving forward going to the new year. And we'll look forward to visiting with you at the end of the quarter. Thank you for your attention this morning.

2016_FLO

2016

KO

KO #Let me take a bite of that, <UNK>. I think the answer on the slow-down, we don't get all the category numbers necessarily. Clearly, as we're gaining share in that top-line number, there's got to be some weakness in the category versus the long-term target of 5%. I think we talked a little bit about that at CAGNY, about how our expectations for 2016 and 2017 were below the long-term 5% dollar value for any RTD. There's definitely some of that. I think you can see the macros influencing the industry in the sense that a number of the emerging markets, particularly the commodity ones, where we have had the slow-down, and that's clearly flowing through into the industry. I think what I would highlight is we're going to focus on what we can control. We have a long-standing game plan of what to do in countries that are in crisis, focusing on really gaining a lot of share to set ourselves up profitably for the long-term, as we did in a lot of countries in the past. It seems to be working now as we gain share in the Chinas and the Russias and Brazils. It will pay off in the end. I think the visibility, look, we are managing to our corridors at the top and the bottom line. We feel that this quarter was within the envelope. Clearly the macros slightly better, slightly worse, will be an influence in where we end up; but we've got a lot of management left to do in the balance of the year. Good morning, <UNK>. <UNK>, this is <UNK>. We've said from the beginning first that the new campaign is not just a new campaign, but also it's a new strategy in terms of the one-brand strategy, and that it's got many advantages. We expect it to give us significant efficiencies and effectiveness. But also in terms of how we communicate with our consumers, it will certainly play into that as we execute the strategy, and we've now launched the new campaign. Then I'll let <UNK> comment in terms of you asked the Mexico specific example, but also there's also many other places where it's been tested, and tested favorably. Go ahead, <UNK>. Yes, <UNK>, a few thoughts. One, the initial pilot markets, the two sources of very clear impact were one, it helped us expand and grow the zero-calorie variant of Coca-Cola by driving availability and driving trials. We would expect to see benefits on the zero-sugar variance. The second big area of benefit is it helps us create what we would call corporate blocking. In other words, we execute in stores all the variants of Coca-Cola together as one big block, has a much greater store impact, visual impact, engagement with people who are shopping the stores. I think slightly more strategically and back to <UNK>'s point, this is an implementation of a strategic idea. I'm sure we'll evolve it. I'm sure we'll make it better, but it's the strategic idea that's important. It's not just about the efficiency in the advertising. It's about helping consumers join and stay in the Coca-Cola franchise, whatever the ingredients they want to manage, including their management of added sugars, whether that's in drinks or any other categories that have added sugar in. This has a number of benefits that are going to play out strategically, and we will keep improving the execution. Yes, a few thoughts then. Clearly, North America has had a lot of traction in pushing forward smaller packages away from the traditional two-liter and multi-pack of cans. It is worth noting that some of those packages are premium packages, and some of those are intended to create affordability or low-price-point entry points for the category, whether it be the mini cans. That combination does generally help price mix. You can see that starting to roll out across other parts of the world. I think Latin America has traditionally been very good at that. You do see more of it coming into Asia-Pacific and Eurasia on a global basis. The immediate consumption packages out-paced general volume growth, so it is part of our strategy to push more into smaller packages. Just this last month, India launched a new technology, very small package, with a special technology that allows a much longer shelf life in ambient environment of rural India, so it will be able to get to many more places. A lot of innovation in the technology. A lot of innovation in the package and the sizes and the occasions and the channels, so that we can bring down the price points for affordability, take advantage of premiumization, and also offer people the right amount of any beverage that they want to actually consume. One point I would just add, <UNK>, would be that the US compared to the rest of the world, the prevalence of small packages was much less in the United States three or four years ago compared to the rest of the world. If you look at Europe and places like Spain, or if you look at many countries in Latin America, you had much more prevalence of smaller packages then in the United States. In a way, the United States in the last four or five years, but particularly last two and a half years, has moved very rapidly to the 12-ounce glass to the 8-ounce glass to the 7.5-ounce can, to the 8.5-ounce aluminum bottle. That has really worked. Those are all growing double digits in the United States because of two ---+ the consumer customer preferences, and also benefiting our system because they have a higher price per liter. That's in a way playing out from what was already prevailing in many parts of the world in the past. Good morning. Vivian, I think a couple of things. One, obviously most of our campaigns are weighted into the second, third, and fourth quarters. Those are the biggest quarters. Even Taste The Feeling, we announced it this quarter, but it's only really hitting at towards the end of the quarter and rolling out in the rest of the year, as with the Euro Cup and the Olympics. I think a lot of the programs are going in later this year. They ---+ obviously the execution is there, so we would expect to see better performance in trademark Coca-Cola going into the downhill. I would make one other note, which is the relative change in where global growth is coming from, or industry growth is coming from ---+ a little more in developed and developing, a little less in emerging ---+ tends to create a portfolio effect that weighs a little more against sparkling and therefore Coca-Cola, because those emerging markets tend to be more sparkling orientated. You see North American, Latin America, Japan, with stronger stills growth. We do expect to see growth. We would expect to see it coming back. There is a geographic mix impact, but when we look at the markets, we believe we will be back on track with Coca-Cola. <UNK>, it's <UNK> here. I think first, in terms of the efficiencies, the most important benefit will be simpler and less-fragmented communication with the consumer. That will be the biggest benefit. But also, it will certainly help provide ---+ create more efficiencies and effectiveness in our non-working DME, and therefore will also provide some productivity in that respect. But the most important benefit will certainly be a less cluttered and better and more direct communication with the consumer base. In terms of the trial of product, that will certainly come as a result of that, of what <UNK> mentioned in terms of better presence in the store, in terms of better merchandising, in terms of better interruptions in the store, and also in terms of the communication piece. We believe that the most important benefit of this will infuse and will come to brands like Coca-Cola Zero with more availability, better communication, and have the broad perspective of the global campaign, as opposed to every different brand under the Coca-Cola trademark having their own campaigns. That will be how I think the benefits will come. We ---+ trials and pilots so far have proven that in Europe and other parts of the world. Thank you, <UNK>, <UNK>, and <UNK>. We're in the midst of transforming The Coca-Cola Company to one that's even more focused on our core value creation model of building strong brands, enhancing customer value, and leading our franchise system. At the same time, we continue to evolve and strengthen our global bottling system as we accelerate re-franchising, and as we return to a predominantly concentrative model with significantly higher margins and returns. We remain confident that the long-term dynamics of our industry are promising, and we absolutely believe that The Coca-Cola Company is well-positioned to deliver long-term value to our shareholders. As always, we thank you for your interest, your investment in our Company, and for joining us this morning.

2016_KO

2016

EDR

EDR #Yes, actually in the low 5%s. It is not. Continued increase in land cost and construction cost relative to increases in revenues and ---+ but importantly, we believe that the premium that you need for the added risk of developments over acquisitions needs to be 150 basis points and so with acquisitions for true pedestrian to campus Tier 1 institutions being approximately 5, we think we're still being properly rewarded for the added risk of development. Probably both. Yes, it does incorporate Oklahoma and Mizzou netted out by some upside at some of our other communities. Well, in our new developments, in the past we averaged approximately 94% occupancy in all of our first years on all new developments, so it doesn't equate to same-store kind of norms. Sometimes it's because there's ---+ the lower occupancy is driven by apprehension of completion in a market where maybe another deal hasn't completed on time. You've also got the missing renewal base which is the first piece of everybody's leasing season, you don't have anybody to renew to, so that takes away from some of it. Depending on the market, we don't necessarily underwrite year one to same-store level. <UNK>, as <UNK> noted in her comments, right, our same-community portfolio is performing in line with expectations. We reaffirmed the full-year NOI growth guidance of 3.5% to 4.5%. So overall obviously that means it's performing in line with expectations. You're right, full year real estate taxes are only ---+ are up less than 4%, in line with our budget expectations. The six-month number is in line with the full-year run rate. So you are exactly right, that quarterly can be lumpy depending on timing of receipt of assessments from various taxing authorities. And, finally, when we look at it as we think about it for a portfolio as a whole, we're modeling somewhere in the 5% to 6% increase of real estate taxes year-over-year on a same store basis. Sure. As you know, <UNK>, when we look at our 2018 pipeline, if you include Cornell in it, it goes up to $230 million from $115 million. We have until March of 2017 to add more properties to the 2018 pipeline. That's another nine months. Our average and guidance in May was $250 million a year, just on average developments for 2018. It's likely we will exceed that given our new debt-to-gross asset targets of 25% to 30% that's inclusive of everything we've announced. As you can see in the supplement, we're just under 27, so we're still solidly in the line of the guidance range we gave. I think it just depends on the specific facts and circumstances, <UNK>. Obviously the ATM is the cheapest form of raising equity versus a spot or an overnight offering. As you can see, we renewed our ATM program again at $300 million authorization from the Board. So, again, it's facts and circumstances specific. Sure, Alex. So this project is one block north of campus. It's in between Carnegie Mellon and Pitt. The number of parking spaces that we're going to have, I'm looking at my write-up. Well, I can't seem to find that. There is structured parking beneath. It is 400 parking spaces. What we really liked about the market is there's no purpose-built student housing in the market. There is one smaller project that's delivering this year 400 beds and then there's another one that's delivering I think in 2018 of another 400 beds. With full-time enrollment of 25,000, essentially none or very, very small number of purpose built student housing, we think this market is ripe for this development. No, they're right in the span that <UNK> mentioned earlier. The 2017 new supply projections are I'll say new. AXIOMetrics just came out with them I think it was two weeks ago and of course we just released ours today. Look, we were a little bit surprised. Frankly, that new supply in our markets was going to be up a little bit. But realize what we've done and I think AXIOMetrics is similar, is it's new supply that is out of the ground but we also include in our numbers stuff that we think has a reasonable shot of coming out of the ground. As we all know, it's August 1 and so if you're not out of the ground now it may be a little difficult to get done in time. So with all that said, I think the span for AXIOMetrics was supply being down 8% but if none of the planned stuff gets done it's down 30%. For us, we think it's up a little bit but is it possible it could be better than that for us. Sure, it's possible, depending on if things get out of the ground. But we think our analysis is ---+ or the numbers that we've shown here is I'll say worse case. The great thing about that is worse case is essentially the same gap that we've seen in the past where we had good leasing. Moving on to your question about 2018 supply. We are seeing in our joint venture program a lot of activities from merchant developers that are not liking the first indications that they're getting from banks on construction lending. As you know, it doesn't impact us but it does impact them. So it's too early to tell about 2018's supply, but that marker is a favorable possible indication. Well, in that market, Alex, there's two kind of separate sets of communities, right. So there's a lower end set with a lower price point and then there's the higher end, the new developments that have come out of the ground, and there's quite a bit of gap between the two. And so we ---+ this property is over 10 years old, and although close to campus, it sits on a dead-end street. It's not new like the new ones with the new bells and whistles, so we had always kind of favored the lower end of the price point and that didn't include utilities. One of the objections that we continued to get coming in the door was why are your you utilities not included like everybody else's. I think it was hard for the students to comp it. So we decided ---+ we did it in two other markets, Orlando and Athens, in the past and had great results there, and so we decided to do that here this year. What it left us was with rates kind of in the mid range. There was no comp for us, right. So we were lower than the new developments that we weren't new and we were much higher than the lower price point kind of comps and so we didn't fit. I don't think it was a case of ---+ it wasn't a case of marketing materials or not getting the word out. But as we discussed in the of past, renewals start early and renewals are a big component to how well your same-store portfolio does and when we came out with a higher price point we lost some of the renewals. We did react. We just reacted later than we should have. Even in the last 30 days we picked up over 15% or almost 15% new leasing. So it was truly a judgment call on whether or not this action would work and it didn't. Sure. On the surface, Northern Michigan is not equal to the stature of our other ONE Plan assets at Kentucky, Texas, TCU, Syracuse, Boise State, but we found a lot of positives up at Northern Michigan. One, the enrollment is about 9,000, so the enrollment is not too small. And it is ---+ it does cater to a certain demographic that is attracted to that university and that upper peninsula. But what we were also able to do is working with the university, the university provided us with a variety of items that help in case there's some difficulties from occupancy. For instance, they've agreed essentially to shut down or close other beds on campus if for some reason there's a difficulty. So the way we looked at it is are we creating value and so both the pricing of our yields there and the enhancements that we received from the university in our opinion equated to our usual spread between what we think the development yield is going to be and what we think the asset would trade for if for sale. But, as you know, we've never sold an on campus asset and don't intend to, but that's part of our analysis. That's fair. Right. Well, as we said, the big driver for the pressure in this market is enrollment and what we've learned from universities over the years, in particular land-grant institutions, is that universities have a kind of tool kit full of levers that they can pull when they have enrollment pressure. And what we believe will happen is that Missouri will start pulling these levers to increase their enrollment over the next several years. So, unfortunately, it impacts some of the other schools, right, in the State of Missouri because it pulls from some of the lower tier institutions, but I believe that's what will happen. Last year it was 50% freshmen and a little over 10% graduate and then sophomore, junior, senior kind of fell in the middle. I don't think it changes it any but realize what Missouri has done for their on-campus portfolio. I assume you're asking about on-campus University of Kentucky exposure versus off. On campus is different. What the University of Missouri has done is they've closed two different dorms that had 890 beds ---+ I'm sorry, four dorms that had 890 beds. And as you can imagine, the dorms that they closed were not the you newest and best, they were the oldest and worst. So when you're looking at our exposure at any university, I think that's very important to consider is how many beds do we not own on campus and whether that provides enough cushion for an event like this. At Kentucky, for instance, today we do not own 650 beds and it does not appear that we will own those at any time in the future. Economic forward. $200 a bed. The dispositions of the two assets we sold, keep in mind these were older products about 1.9 miles from campus, pretty much in keeping with some of the dispositions we did earlier in the year which is in the low 6%s. Yes. I would not assume that it will grow as significantly next year as it has this year. There are a lot of programs in place to bolster this. In addition, there's a pick-up in other income this year with EdR assuming the responsibility of the summer conference housing at the University of Kentucky which falls in the other income line. We did not manage the marketing and the process last year. We do this year, which has been part of the pick-up. UK. UK actually made up a larger percentage of the new beds last year than it does this year and those are all at 100% as of May 10 or something. That's the difference. In the past our average has been 94%. Totally agree. Obviously Cornell has a very large endowment, but at the end of the day in talking to the chief financial officer, they want to preserve their debt capacity for other purposes at the university. So it is the same thought process that we see with somewhat lesser universities. Look, there are other companies that are trying to explore into ---+ venture into I'll call it the inequity model. At this point in time the only two companies that have been awarded any are us and that other company down in <UNK>, Texas, which is our friendly competitor. But look, people are taking notice. At recent conferences, the merchant developers I think very much are shying away from the P3 processes. It is a time-consuming process. Sometimes decisions take a year to a year and-a-half. And those that have played in this segment of the business and have a positive track record have a distinct competitive advantage. So I do think we'll see more companies try to find outside sources of capital, but we and ACC have a real competitive advantage. Good question. I guess time will tell. Not at this time. No plans to put them back on the market. Good morning. So allow me to explain. First of all, this is replacement housing and so the university will house students and as new beds are made available, old beds will be taken out of service. So it gives us flexibility relative to potential weather conditions and all. We're targeting 400 beds to open in the summer of 2017 and then additional 400 beds in January that actually open to be completed in December, and then the final 400 beds summer of 2018. But it is a wonderful situation to have existing beds available so that if, because of weather conditions, the schedule slips or whatever, the project will be full. We won't be sitting and looking with any vacancies because students will actually transfer out of the older housing into the new housing. The intent is to have them transfer at the end of the first semester for second semester. You're welcome. Thank you for your time today and for the people in the field, thanks for your efforts in the first half of the year and I know you'll do an outstanding job welcoming our new and returning residents in the days ahead. Thank you, everyone.

2016_EDR

2016

POL

POL #Yes, sure, <UNK>. On the first question relative to pricing pressure in the specialty segments, I don't believe that is a direct correlation or reflection on where oil prices are. But, it is a very competitive environment right now. And I do believe that when macroeconomic conditions are flat and/or down, and companies are going through a long period where you're just not getting any kind of tail winds, that increases competitive pressure on all products. I believe that the margin, the pull back that you see in Color and EM, for example, are actually more of a reflection, really, of the declining sales in the end-markets that were reflected versus a pure price reduction. And I think that's been the biggest effect. That being said, I don't think that erodes our ability or our confidence in getting to our Platinum Vision. I don't think those markets are going to stay down forever, for the most part, and hopefully we've characterized our feelings on that with respect to this being a short-term phenomenon. Absolutely. First of all, I am proud of our team for delivering and accomplishing what we have through the third quarter. That represents seven years of really outstanding performance. At this point in time the fourth quarter is always the most challenging to predict. What we have seen in prior years is that when end-markets are challenged or macroeconomic conditions are slow, that typically leads to a weak December. I've always said you can't judge a year based on December or January results because of many of the things that happen at the end of the year in our industry. However, if I believe that December shakes out like what it has in prior years when times have been tough, then I think we would get to an EPS number that I mentioned on the call previously. With respect to October, I haven't seen that yet and it really probably is more of an end-of-the-year effect. So, at the moment, October is probably more of a carry forward from what we saw in the third quarter. But a lot can happen in November and December. Yes, I think that's fair. As you know, we don't have a backlog, and we have short lead times. So, our visibility, when you reference orders and looking out into the future, is pretty short term. So, I think that's a fair characterization. And the way we see things right now, if I had to call it, around that EPS I referenced earlier. Yes. And, really, I'm very optimistic about that being the case. This has been a year of challenging pricing and, in fact, it goes back to earlier in 2015. And it hasn't always been the same underlying resin where price deflation has existed but it seems like it's played out over that time frame. That's why margins have compressed. When you look at a distribution business we really do have, effectively, a material margin over SG&A. So, when you think about leverage you don't have the traditional type you would get with a manufacturing facility. But what I do think will happen is that, if we get into a stable-price environment and/or you start to see modest increases, we would see margin expansion as a result of that, and I think it would be significant. We have continued to hire in 2016. And if I look at the net, and this is an organic comment, so it doesn't include acquisitions, if I look at what we have added across sales, marketing and technology, we are up about 5% this year. As you know, end of 2014 and in 2015 we added more significantly. That was a number closer to 10. So, we continue to invest in those resources. I'd say that you don't have to look any farther than what we've accomplished in distribution to see the productivity gains from them. But admittedly, in our specialty segments, that productivity takes longer to realize as we drive toward specification and the longer sales cycle that those businesses are in. I'd also say following close behind distribution is PP&S, where we have had some good early wins and feel very confident in the productivity of these additional resources. I think we're doing an outstanding job from a service perspective and that is a real differentiator in a distribution business. It goes beyond just on-time delivery. And, as you know, <UNK>, oftentimes the customers that we serve do need advice and counsel on material selection and I believe that we offer that. We have done an outstanding job of doing that. We have also in the last couple of years launched and grown impressively an inside sales organization that is doing the same thing, but just not hitting the street in an automobile. And we're seeing some gains there, as well. And that, really, honestly, <UNK>, comes down to more people making more calls and getting back to basics with respect to how we go to market. It's working. I think it's going to be broad-based. Historically, if you look at December, it's our weakest month of the year for all of our businesses. If the question is getting towards, if there is an additional anomalous or unusual reduction in demand, I think that would go across all the businesses, as well. I don't know that there was one that I would point to outside of potentially PP&S or distribution where customers may think, I'll wait for January or February, simply just based on pricing dynamic. That's probably the best way I can answer that, <UNK>. I wouldn't point to one specifically and say that's where you're going to see it more than any other. I think we have an outstanding foundation in four out of five of our segments and we're building one in DSS. The investment that we made in commercial resources is already paying off in POD and PP&S. And my response to one of the questions that I think <UNK> had about pricing within POD, certainly if we saw a little bit of an uplift there, I think you'd see some margin expansion within distribution. And while we're delivering new business gains inside of EM and Color, it's not offsetting, and hasn't at this point, just some of the macroeconomic declines that we've experienced, particularly in oil and gas and certain packaging end-markets. I think the foundation is there, <UNK>, for growth. The investment certainly is to help drive and push that in 2017. And we really are looking for some of these end-market recoveries, I think, to get us back up into that higher level of EPS growth that we're looking to achieve. We're continuing to look at a number of deals. I'm personally spending more time on that with our Head of M&A. At the moment, they are really more bolt-on type deals like you've seen us do in the last 12 months. As you know, I can't comment on any specific names or things that we're looking at, but a good pipeline. That's fair. It's a combination of things with respect to probably knowing that those markets are down, believing that we still have the amount of share that we have, we have enough out there that we should be able to offset some of that. So, in fairness, it's a combination of things, <UNK>. One was that market being down, and, two, was us not ultimately delivering on the gains over the course of the last year to help offset that. So, it's probably better said to say it's influencing from both of those factors. And, quite candidly, we probably just under-estimated the degree to which those markets would ultimately be down and stay down. Yes. In the last quarter, we did close one facility, which we had announced earlier in the year. We don't have any plans to close any additional facilities at this time. In fact, we're really doing the opposite with investing in new lines, for example, at our Greenville facility. I think if you were to go there and look at it today, it's night and day compared to what it was three years ago. That is the best evidence that the operational improvements are taking hold and that we are building this foundation, as I described it, for <UNK> <UNK> in the earlier comments that I made. But it's just very frustrating to not see that go through to the bottom line because, candidly, you've got to have the additional sales to have that hit the operating income. I would say, in summary, we're going to continue to make improvements in operations, but we have come a long way, and we're at a point now where we really need to see the sales pick up in order to deliver that to the bottom line. A few questions in there. One is I don't believe we lost anything on the PET-specific applications where we play in those beverages, which is primarily with liquid Color and additives. But I do believe that the overall market is down and certainly weak as demand for carbonated beverages is declining. So, to answer your question on that, no, I don't believe we've lost any business or shares specifically on the PET or packaging. But in other packaging applications there have certainly been a lot of competitive pressure outside of the US, and there are some onesies and twosies and things out there, for example, with some of the business that we inherited from Spartech, that we haven't been able to hold on to. That certainly ended up in somebody else's hands. There's no doubt that we're making some gains from a consolidated perspective. When you look at that underlying growth ex the selling price declines, it's there, it's happening now. It is low single digits. A lot of that, as I said earlier on the call, is some new business gains. You're not seeing a whole lot from a macroeconomic tail wind, really more down than anything. So, difficult to answer that question exactly for what the future looks like. But certainly in terms of what we're doing that is under our control, I think that's in that low single-digits number, <UNK>. <UNK>, I think we have been pretty consistent with our cash deployment strategy. We have been keeping our balance sheet preserved, so to speak, been deploying that for M&A and also for share repurchases, all the while keeping our net debt to EBITDA in that 2 to 2.5 times range. So, I think, as we go forward, again, as <UNK> mentioned earlier, we are actively looking at M&A and we'll continue to look at that pipeline and evaluate it relative to where our share price is and execute accordingly. We look at our overall success from an innovation standpoint, <UNK>, with our vitality index, which measures the percent of current-year sales from products introduced in the last five years. Our goal is to be over 35% and we're at 40%. So, I feel very comfortable with what we have been accomplishing from an innovation perspective. We are right where we want to be and feel also very good about the mix of innovation with respect to that, which I'd say is directly invented by PolyOne versus originated by a customer or done in collaboration with them. So, I can't say enough positive things about what we've been doing from an innovation perspective. Yes, I think when we went back to the last quarter and made some projections on that they are holding true with respect to the weaker pound, probably playing out to be closer to $0.025 or $0.03 for the full year. So, that is maybe disproportionate here coming up in the fourth quarter. They are all very short lead times. I'll tell you that with respect to certain end-markets and specification, you'd probably get better visibility into healthcare and medical devices, for example, that are less immune to recession and/or challenges in the economy. So, those are probably easier to look out and predict, even though you don't have a backlog on those either with respect to orders. And then certainly, if I look at distribution, oftentimes those are same-day calls and shipments, so very short lead times. I'm going to try to get to all those. First, the question about margin expansion, I believe, as it correlates to sales growth in 2017, as you've seen, <UNK>, with the improving margins in EM and Color over the course of the last year or so, we've been very consistent in saying that to get to that Platinum Vision, we needed sales growth to help push us in that direction. This is a year when you're seeing that really play out as flattish because of the absence of that sales growth. And I believe that when the growth returns and we get to even something as modest like low single-digit growth, you can see us adding a point to margins next year. That's my view overall on the specialty side, and clearly not quite the same level of expansion in PP&S or POD. The second question I think that you had was around what was going on with some of the end-markets, but I may not have understood that one so well. Hit me with that second one again. I'm sorry. Sometimes that might be the case in the sense that, when you look at consumer electronics, for example, everything hinges on product launches, and you just haven't had the level of degree in 2016 that we had in 2015. I guess that's not churn in terms of lost business or lost sales, but it certainly explains some of the declining revenue that we've seen in that space. But that picks up as those new launches start to take place. That's probably where I see, maybe some of that linkage greater than in other. And then your third question again, I'm sorry. Asia. Thank you, <UNK>. Asia was actually a very strong performing region for us and probably didn't get enough positive attention on this call. I appreciate you bringing that up. The underlying growth rate in Asia absent FX was 6% to 7%. So, that's one of our best performing regions and continues to be. I think you are right that does warrant additional investment. We have specifically added, and most recently announced, the additional engineered materials manufacturing in India. But also believe that we should be driving additional investment in China and Southeast Asia where we think there are bigger and better opportunities to serve some of the local customers than what we have done in the past. So, I'm completely aligned with that statement. No. That always is in the Q too, but that was down slightly for the quarter. Absent FX I think it was down about 2%. That really was mostly volume with respect to the consumer electronics as well as some other personal care applications. We have obviously done very well with respect to handheld device accessories like covers. The same thing is true for iPads and any of these electronics that are pick up and carry with you. And I think there is some lapping effect going on this year where those sales are below where they were in terms of our customer sales. And then, as a result, the accessories and things we play in are down. So, like I said, I don't think that we've lost any business. I just think that without the additional or new handheld devices coming out, it's not driving the related accessories market that we're in. That's absolutely my expectation and we're driving towards that. As you see this quarter, our expectation was to get there by the end of the year. Operationally, I believe we've done the right things and that was a very first and necessary step in order for us to confidently and reliably go back to our customers to deliver. At this point, it's really a sales phenomenon. We've got to drive the additional sales and new business gains to make that happen. And I believe if it does, then we'll see profitability expansion in 2017. We had an incredibly strong start to the year this year. And that wasn't isolated to just January. That was actually even a stronger effect in February than January. I'll tell you, historically, it's not unusual to see, if you've got weak demand in December, to have that offset by stronger demand in January, and vice versa. So, I think it's a natural and appropriate conclusion that if December is weak, that January should be, everything else held equal, better as a result. But I'm not sure that necessarily you find yourself in a situation where it's better than where we were in January of last year because, like I said, incredibly strong start to the year. So, really too early to tell how that's going to play out, <UNK>. As I think as we said, the combination of the two businesses is roughly breakeven results. That's right where we expected it to be. So, that helps you to put into perspective the margins in EM. Yes, it will help us out with respect to, again, some of the accessories that we supply into that market such as iPhone covers, etcetera. I think we can see an uplift from that as those sales improve. I think we'll be somewhere between 31% and 32% for the fourth quarter. That is probably a good proxy for where we see 2017 at this point. All right, thank you very much. And also to everyone who joined us on the call today, we appreciate your support and continued interest in PolyOne, and look forward to speaking to you at the conclusion of our fourth-quarter results. Thank you.

2016_POL

2016

ITT

ITT #Thanks, <UNK>. Okay. In terms of ICS and margins we are very happy with what we see ---+ the increase that we saw from Q1 to Q2. We do expect to improve as we go throughout the year. The thing to recognize with ICS is, you know, they've also had a strong oil and gas business that has been impacted by what's been happening with oil price. So we've seen a decline in that business for them from where they were in 2014 to where we are today and we continue to see declines in that business. That is our highest margin product line within ICS. So when that goes down that really impacts the kind of margins that we have in ICS. So we were happy to see the improvement in Q2 because that was, despite the decline that we've seen in oil and gas revenues, and its associated with the fact that we've had a relatively good business in our transportation and industrial segment in ICS and then we've been seeing these improvements in our aerospace and defense business with what's been happening in Nogales. From an operational perspective in Nogales we have been seeing increasing weekly production rates as things get better as we go forward. In terms of on-time delivery we are still working through some of those challenges that we have there but we been able to effectively lower some of the overhead costs and really working hard on some of those inefficiencies that we've had in that operation. So it is going to be gradual increases associated with that as we continue to chip away at some of these issues that we've had and the teams have been working very hard in addressing those. Yes, <UNK> ---+ (multiple speakers) Sorry. Just quick. A couple of steps labor productivity in Nogales has been trending up significantly from Q1. We have also seen a nice improvement in our overall utilization rates and machine efficiency is certainly going in the right direction. So we have some good underlying performance results that we track with the team on a regular basis and I think there's kind of two sides. We are seeing really good improvement in the throughput and the scheduling and the planning. We have new leadership in place that is really driving some of these actions and I think the other big category that <UNK> was touching on too, is that we have a much tighter control of our costs and spending particularly in the overhead freight and other categories where we've had some inefficiencies that have piled up over the year. So we are working through those pretty well. They are going well for us, particularly with the new awards that we are winning there and we are happy to see that they are ahead of schedule from what we had even anticipated. You know this is very similar to what happened to us in Wuxi. When we started building that facility there and it was really local for our customer base. We started out slow you know you only build as you see the volumes coming in as you see the awards coming through. This initial buildout for phase 1 is about 8 million break pads. And then we will just continue to increment up from there and, you know, when we see that we need more capacity we will do what we did with Wuxi and will get approval for that and put that into place so that we can make sure that we hit the ramp up that is necessary. We decided to put this facility in place now because we saw that there were going to be many new platforms in 2018 and 2019 that were going to be coming through. And so we needed to start building the facility now and winning the awards now because it typically takes that period of time before you actually are going to start seeing the production happening through that facility. So, you know what's nice about it is these are share gain opportunities that we are going after here. We only have a 10% market share today in North America, in China only 13% and so this is not based on market growth in North America. This is based on market share gains which we have been gaining market share in Europe and in China and we expect to do it in North America that's at the rate of three or four times the market growth and so we expect to continue to do that in North America. Thanks, <UNK>. Hi, <UNK>. You know we were hopeful at the last earnings call that we would see some improvement in the aftermarket and the baseline, you know, short cycle business as we went throughout year. Unfortunately we're not seeing that. And we're not seeing it in the order rates and so we decided to forecast that there will be no improvement as we go in the back half of the year. In fact, when you look at the second half versus the first half we expect our short cycle business in this forecast to be down about 6%. Where our backend ---+ after the first earnings call we actually expected to see some improvement as we went through the back half the year. And this is really predicated on looking at where order rates are, thinking again about what is happening from a macroeconomic perspective. That we just think it's prudent to be able to forecast it this way. And you know, if it turns out better that's great but we just think things are going to stay pretty low from what we've been seeing in the marketplace today. Pricing in the short cycle is pretty consistent. Haven't seen any real major changes with that. Projects out of the business as we came into this year we indicated that we were going to have some price pressures from where we were in 2015. Those price pressures continue. It is really very much project specific but when you've got the kind of situation that is out there today with projects and not many projects being awarded, it is pretty competitive and we are seeing a little bit more pricing pressure on the project side than we expected, let's say six months ago. That is as we work through some of the backlog that we have, the new backlog coming in will reflect those lower prices. As part of that we are also improving from an operational perspective and we are working on our cost structure so that are able to get these products out in a very cost efficient way which is part of the restructuring that we've been doing and the new organizational structure that we have put into place. And that should help us from a margin perspective to partially offset some of the price pressures we are seeing from a customer perspective. You know not much on the independent aftermarket. There is again just some timing associated with the independent aftermarket. Where we have seen improvement is more on the dealer service activity which is the OES business and that's because we been winning so many new platforms that we are beginning to see that dealer service cycle beginning to kick in and that's where we are seeing the real benefits from an aftermarket perspective is really in that dealer service cycle. Thanks, <UNK>. Good morning, <UNK>. Yes, you know, <UNK>, we, as <UNK> mentioned, we are ahead of schedule on the 25% particularly at Industrial Process that we had identified. So we are happy about that. We are also managing headcount through attrition and other activities. So, net positive to where we expected to be, which I think is a good indicator. Based on what you are seeing as projected in the second half of the year, you know, we are continuing to look for other actions as we kind of go through this reset. None of which are kind of factored in yet but we are certainly continuing to evaluate incremental actions as we go through the back half of the year. No, with Brexit our revenues in Europe are minimal to us. They are only about $35 million or so. And part of that is across all value centers, about 40% of that is on the automotive side but we are not seeing any impact associated with that really again, it is so insignificant to us that it is not impacting our results at all. Yes, you know, <UNK>, I think it is the intersection of the two. So we have been working on the pipeline. There have been some acquisitions that we have pursued that are close to core in our typical categories that we been looking at. And we didn't see the right price opportunity there from a valuation perspective so we have exited some activities and remain disciplined through the cycle. And based on, you know, the velocity that we have seen in the pipeline up to this point, as we said in the past if we don't see actionable M&A then we would want to return incremental capital to shareholders. And that's why we felt, you know, it was the right time and certainly given our relative evaluation we thought it was the right time to do some additional share repurchases and that's what we announced today. Thanks <UNK>. Good morning, Shannon. We think about two to three times the market growth, we should be able to continue to do that and again it's based on the awards that we've been winning; and it's also because we are able to go in where we might have a competitor that has won a platform and we come in we have better technology, we come up with a better solution and we are able to be able to get that business. You know, it is really how MT operates in terms of the footprint that they have which is similar across the globe. It is the R&D capabilities. It's our ability to prototype. It's our on-time delivery which is almost 100%. It is our defect rate which is less than one ppm. All those things really create this very powerful model that we have in MT where we are able to continue to outpace the market because we meet the customers needs that we have. So we look about two to three times that we should be able to outpace the market growth and we continue to believe that going forward. You know we look to ---+ when we look at acquisitions we just think about where we can add value in the portfolio. And as you have seen the acquisitions that we have done, you know, we did one in IP a couple of years ago; we have done one in Aerospace; we did the Wolverine which was associated with the automotive business. But we go across the different end markets that we have and we look at where we think we've got the biggest opportunities. Now from a Motion Tech perspective and automotive perspective we ---+ our strategy there has been growing it organically because we have got such a powerful model in terms of how we can take ---+ how we operate today and just transplant it like we've done in China and like we are doing in North America. So, we like from a brake pad perspective doing that from an organic perspective and that works well for us because we can replicate the model that we have today. So, we go again we go across various end markets we will continue to do that; and our Motion Tech business is really a unique business. It is not a typical automotive business. And it needs to be valued and recognized that way in the marketplace. Thank you. Good morning, <UNK>. Good morning. We like to be able to beat some of the numbers that we put out there but I think if you just look at it over time, you know, two to three times is probably the right way to think about it. The other thing to remember is Europe. We are at a 50% market share and Europe maybe a little bit more than that, a little bit less than that. So you know there's not as much opportunity in Europe as we see in China and in North America. So we think two to three times is the right metric to think about it. At any one point in time it could be more than that but that should be a good ballpark for you. You know <UNK> if you look back through the trend rates on Europe even in tough markets you know we focused in on conquering share. So we have been outgrowing Europe market rates 1.5 to 2 times on average based on our competitive positioning in Europe and in North America and China the rates of growth would be certainly in excess. So we are looking at depending on where we are in the cycle three to five times growth in those regions in some cases. You know our goal as we have been talking about for China and North America is to double our share in those regions over the next five years. So we see the share wins that we have already generated and the opportunities that we have giving us the opportunity and the entitlement to go for that level growth. You know we will do everything we can to position ourself that way but I think the opportunity set, the wins that we already have give us some good visibility into significant outgrowth in North America and China and, you know, above-average performance in Europe which is what we've been able to do over the years. You know, IP is a great business. It still remains a great business and we still see some longer-term trends that are really going to benefit us. So you're going through a cycle right now with IP. But in terms of the quality of the operation. In terms of the brand name, the equity that we have, the position that we have, it's a very strong position for us. And so, you know, we look at all the elements of our portfolio all the time and think about how do we feel about it, how does it look, how does it fit and we make assessments according to that. But there's a lot of opportunity for IP out into the future. And you know, we are in the process of restructuring that organization, putting in place the right leadership structure, the right cost structure, creating centers of excellence with our manufacturing footprint and really aggressively going after some of the aftermarket and some of those opportunities. So you know, we have got a lot of work ahead of us there but there's just a lot of opportunity for us also. Yes, I would just add to that, <UNK>, that our view is we would like to grow our Industrial Process business from an M&A perspective. Right now it is important that we have clarity from a strategic perspective of where these end markets are going and how we are going to realign ourselves to be best positioned for those organically and I think it's a critical first step in rethinking through the M&A pipeline as well. So we are making sure that the M&A pipeline that we are building for the future at IP aligns with where we think the businesses are going. And then that will allow us to target some opportunities that we consider close to the core that we are establishing for the long-term. But as you know right now in the space I think valuations are very complicated and it's very difficult to have meaningful conversations even on small targets that fit into some of the strategic areas of focus. So for all those reasons we are still looking at IP as a way to grow our portfolio but we are going to do it with the right pacing and sequencing that makes sense for the creation of long-term value and we are kind of in the middle of that process right now, given all the market dynamics. Hard to say, <UNK>. They are not as big as some of the petrochemical projects was seen as far as the size of the orders but we did see a nice uptick. I think some of that will fill into 2016 but we were expecting more to be coming through and given the nature that they are not as large ---+ you know, we ship them out the door this year it would benefit 2016 most likely more than carry into 2017. But we are seeing, as we mentioned, some customer delays once we even have orders kind of on the books as to when they want ship dates. So I wouldn't draw too much from it other than it's nice to see that there are some increased activities in petrochem and, you know, I think we are going to go through this cycle with hits and misses around the different end markets. So a project here and there gives us a very nice variance but it doesn't necessarily mean that there is a dramatic change in where things are going. But I would say what we are seeing in petrochem in particular this group is probably a 2016 shipment category more than a 2017. Thanks, <UNK>.

2016_ITT

2015

TXRH

TXRH #Thanks a lot.

2015_TXRH

2016

TXT

TXT #<UNK>, I think you are accurate in terms of your assessment of how we get there. It's certainly on the lower end of the conversion than we would normally like to see. But, again, a big piece of it is expectations on lower margin in terms of the fractional, which is a big part of our growth, frankly. So if you look at that year-over-year incremental ---+ and <UNK> was just walking through the map as well, reading serial numbers of aircraft. But a lot of our incremental as we go from 2015 to 2016 is Latitudes. And a big chunk of that is going into the fractional market. I think that's just the reality of where we are. A big piece in the year over year is going to be fractional deliveries which are at lower margin rates. It's still good business for us, but at lower margin rates. Yes, it's the pricing on the fractionals as opposed to the cost basis. I think where we wanted to be on the cost, we feel pretty good about where we are on the cost on the Latitudes. You are always going to have a little bit of inefficiencies in the ramp of a new one, but it's not a material issue for us. It's doing really well. The cost is in a good place. It's really a question of pricing on fractionals. Sure, <UNK>. If you go to back to fourth quarter last year, we did talk about the fact that we had a pretty significant international military order. And those are lumpier than the normal flow. That contributed a pretty good backlog into Q4 next year. So if you took that out, the dynamic we've typically seen in Q4s, because it's such a high-delivery quarter, has been that we see a much lower book to bill in Q4s, at least we have in recent times. So I don't think this year, if you were to back out the military deal in the fourth quarter, it doesn't look very different on a year-over-year basis. It was 25 firm ---+ I thought it was actually 150 option. It's 125 option, so it's 150 total. Right. Anyway, yes, I think it's a few hundred basis points ---+ 200 to 300 basis points, <UNK>, when you think about the margin impact of sales into fractionals versus retail sales. Correct. Yes, it'll be up but not a lot. Yes, not a lot. The R&D is relatively, as I said ---+ if you look segment to segment it's relatively the same as you go from 2015 to 2016. So not a headwind for sure. Yes, particularly driven by TAPV, <UNK>. The ship to shore, the development program is relatively flat through the quarters. But the TAPV will certainly be a very heavy Q3, Q4. The auto markets continue to be pretty healthy. As I mentioned in the prepared comments, we saw growth again this year in all three regions ---+ in North America, Europe and Asia. All the forecasting ---+ we drive our guidance, obviously, and our model based on what's out there in terms of what all the OEMs are saying. And right now they are all forecasting growth again in 2016. So we expect obviously to grow with that. We have had some nice wins on new models, which is helping to drive our growth. Our growth has been in excess of what overall markets have done on the auto side. And I expect that will be true again in 2016. It's been pretty flat, <UNK>. Some models are up a little bit, some are flat. But all in all, it's not materially different. It's a fairly stable price environment. On the aftermarket, on a comparable basis we were pretty flat. We had some changes in how we recognized revenue in terms of some engine programs, which I think we've talked about before, which doesn't affect our profitability but just the revenues. We are not basically in between the customer and the engine side. So all in all, I think it's relatively flat and we'd expect, frankly, on a comparable basis, a slight uptick in aftermarket in 2016 from 2015. And similarly on the used aircraft pricing, it's been fairly stable. From a balance sheet standpoint, we will probably refi what we have coming due this coming year. We're pretty comfortable now with our debt levels that the balance sheet has. We have had good flexibility over the past couple years, we think, from an M&A standpoint. So I don't think there's a real change in the M&A aperture. We feel like we have been able to do the things we wanted to do. And we will be able to continue to do that. But we will stop paying down debt at these levels. Our debt levels are getting to about where they should be from a ratio standpoint. But I would add the same color <UNK> did. We will do deals that we think make sense. We haven't felt in any way constrained. Clearly, we have access to the market if we need to do that if the right deal came along. But we are not going to do deals that we don't think make sense. And we are certainly not going to run around and try to find stuff or force stuff that we don't think fits in the business very well just to deploy that way. I think our M&A strategy is one where, if we see opportunities ---+ it's a great fit, we think we can get great leverage, it supports the balance of our business ---+we will do them. Again, I don't think our cash, the balance sheet thing, is particularly excessive yet. It's not like we are worried about accumulating too much cash. We will continue to be pretty aggressive at looking for opportunities across all our business on the acquisition side. And, as I said, we will also be opportunistic around the share buyback in terms of deploying that capital if we think it makes sense based on where the shares are trading. I think when we look at the Hemisphere and how we size the Hemisphere, our intent is to be just below where that market is. Because, you are right. I think the 450, 550, the Global 7000 ---+ there's 7X, 8X ---+ it's not our intent to be competing with that guy. So if somebody is looking at a G450, the Hemisphere is designed to be slotted one tier below that echelon of aircraft. We think that's the market where there hasn't been a lot of reinvestment by a lot of the big iron guys, which is why we're going there ---+ not with the intent of going up and joining in that area. Because I think you're right; I think it's a well-served market. In terms of current pricing, I have no idea. That market cycles just like the light mid-sized cycle. So where pricing and demand is right now is a function of the market. But the intent that we have with Hemisphere is it slots just below, before you get into those big iron guys. No. No, we haven't. It's been pretty solid. The Scorpion ---+ I think the good news is that one of the most critical issues for that program was always determining a path to certification. I think the good news is, through a lot of work last year, the Air Force has now opened up the ability to go through an air-worthiness process with the Air Force. They have initiated that program. Obviously, we fully expect to participate in that. We have the first aircraft that will be the conforming test articles in production as we speak. And are working with the Air Force to get under contract to have them conduct and ultimately provide air-worthiness certification for the aircraft. So that's a big step forward for us. I think eventually there could be. Obviously, there's a lot going on budget-wise in the US Government. But we've always thought that, while this is certainly intended more as an international product for a lot of countries that can't afford to fly the F-22s and the F-35s of the world, we certainly think the capability of the aircraft might be one that at that price point and that capability could be attractive for a lot of missions that could include the US. Thank you, ladies and gentlemen.

2016_TXT

2015

WU

WU #The vast majority of the business is still paid out to an agent location. However, the bank payout and the bank funding of those transactions is one of the faster-growing areas. It's still a small portion of the business, but still the largest use case is to pay out in cash. And again we're trying to create this omnichannel capability where consumers have an opportunity to use us however they want. Whether it's cash at a retail location, or mobile, or bank or online business. So however they want to transact with us, that's really what we're driving towards. So cash is still obviously a very important component of the equation, but bank payout and bank funding are going to become more a part of the mix as we move forward. Especially in the sense ---+ it really depends on the country, depends on the corridors, right. In countries where you send money where the people need to pay out in cash, the corridor, it's extremely high growth rates. But on the send side, there is a different use case. The people want to use online. Maybe sometimes credit card funded, sometimes ACH, sometimes, especially in Europe, debit cards and debit accounts funded. On the receive side, we see a huge ---+ the agent locations advantage is huge to cash payout. But as <UNK> said, it's small, but we see also very fast growth rate on the bank account and mobile wallet payout. So that's something that we are also focused. It's largely an incremental opportunity for us, the bank payout. We typically don't see a shift of preference there. It's really an incremental opportunity for us. I mean, <UNK>, we're always looking for opportunities to take some cost out and optimize, and we continue to evaluate opportunities. As you said, we've done quite a bit already. We still are looking at ways of optimizing our overall distribution costs, so we really look at the mix of that business and how that's going to drive distribution costs down over time. And that is our single biggest cost item in our cost structure, as you know. Then compliance has certainly become more stable, I would say, this year, than we've seen in the last few years. We have a better handle on it. And then in our fixed and variable cost structure, other variable costs, we're also looking at opportunities. So certainly if there's something of significance, we would definitely call it out to you at some point in the future. <UNK>, on the compliance we ---+ if I understand your question correctly, we have compliance activities that are ongoing in nature. So we have many markets and geographies where we're implementing programs. Even if we complete those activities, we know that we have more regions and more markets in which to go to, and so that's why we continue to see some higher level of spending on the compliance side. That's where we are today, but things don't necessarily just drop off. <UNK>. I think if you're referring to the industry in general, <UNK>, we do think costs are going up for competitors, and that's probably playing into pricing in the industry. It's early in the relationship. It's within our B2B business that we've entered into this relationship, and it allows us to deliver mass payments around the world in an easier way. Hyperwallet has a receive-oriented portal that ultimately requires the beneficiary to input their own information, so it makes it easier. The center doesn't have to know every single beneficiary detail. And so, instead of having to put thousands of data points into a system, you can rely on the beneficiary to actually pull the payment to wherever they want to. It's easier for mass payments and it's applicable in the B2C space mostly, and pension payments or payroll. I think it fits into our strategy, also. It's not only what we do, it's not only sender decision, it's also should be a receiver decision, how to pull out the money, where to direct the money, and these kind of relationships help us as we expand our receiver-driven products also to different countries. One thing we realized that receiver wants also to have the choice, sending money as cash or account or even sometimes dividing the money, half of the money to an account, half of it paying out in cash, so something like that. The relationships like Hyperwallet helps on our future strategy. The business grew 11% in the first quarter and 12% this quarter on a constant currency basis. The drivers have been the same that we've seen for the last few quarters. We had good growth in our Argentina business, and we also had good growth in our electronic payments business here in the US. And we had a little bit of offset from the declines in our cash walk-in business in the US. But pretty similar components of growth, as we've seen in the last few quarters. Yes, the business continues to execute. That's the fourth quarter in a row that we've had good constant currency growth acceleration. They are focusing on driving continued expansion of our hedging and risk management capabilities, as well as driving growth in our integrated payments vertical. So university payments, financial institutions, NGOs, these are typically more sticky relationships. They require a little bit more of an integrated solution. We've been quite successful and we continue to expand that into more markets. Laura, I think we have one more person in the queue, so we'll take the final question. So our pricing actions that we put in place in 2015 are working and we've been seeing good response to our pricing actions. But really corridor and corridor specific, the pricing actions we put in the US is in the higher band. And we see the early transaction growth, it will take some time, and you need some quarters to understand really the response on the pricing actions. But we see early signs of good transaction growth on the higher bands. Other than that, we did the usual pricing actions corridor by corridor and country by country, but it's not that big, and the current business model is pretty much working, and we are satisfied with that. We didn't price very much of the higher bands. If you recall, it was 25% of the above $200 principal band, which half of the business roughly is below $200 and half is above. And we only priced 25% of the above, above $200 principal band. So a relatively small amount of the business that was priced and we've seen good results, as <UNK> said. Thanks, everyone. Have a good day.

2015_WU

2016

CTRL

CTRL #Thank you, operator, good afternoon, everyone, and thank you for joining Control4's earnings conference call for the second quarter of 2016. My name is <UNK> <UNK> and I'm the Chief Financial Officer for Control4. With me on the call today is <UNK> <UNK>, our Chairman and Chief Executive Officer. Prior to this call, we distributed our Q2 2016 earnings release over the wire services and we have posted on our website, at investor. Control4.com, as well as furnished it to the SEC on Form 8-K. This call is also being webcast and a replay will be available on the Investor Relations section of our website for 30 days. Before we begin I would like to remind you that, during today's call, we will be making forward-looking statements regarding future events and financial performance, including our financial outlook for the third quarter 2016 and our revenue and non-GAAP net income outlook for the full year of 2016. We caution you that such statements reflect our best judgment as of today, August 4, based on factors that are currently known to us, and that actual future events or results could differ materially due to a number of factors, many of which are beyond our control. For a more detailed discussion of the risks and uncertainties affecting our future results, we refer you to our filings with the SEC including the 8-K we filed earlier today, which contains our Q2 2016 earnings release. Control4 disclaims any obligation to update or revise these forward-looking statements to reflect future events or circumstances. During the call we will also discuss non-GAAP financial measures. We do not provide guidance on GAAP net income because of the variable and unpredictable nature of certain items such as acquisition-related expenses, stock-based compensation, litigation settlement expenses, and executive severance costs. Unless we specifically state otherwise the non-revenue financial measures that we will discuss today were not prepared in accordance with generally accepted accounting principles, and these differences are detailed in the reconciliation of GAAP and non-GAAP results provided in today's press release and posted on the Investor Relations section of our website. Now I will turn the call over to <UNK>. Thanks, <UNK>. Welcome, everyone, and thank you for joining us on the Control4 earnings call for the second quarter of 2016. I am pleased to report that Control4 experienced another strong quarter with revenue and earnings that exceeded our guidance. Here are the high level financial results for Q2. Revenue for the quarter was $53.2 million, $1.9 million above our guidance range, representing total year-over-year quarterly growth of 19%, and a sequential quarterly growth of 24% from the $43 million we delivered in Q1. Revenue for the first half of 2016 was $96.3 million, up 25% from the first half of 2015. Excluding the $9 million of Pakedge product revenue this year, our Control4 organic growth rate for the first half of 2016 was 14%. During Q2 we saw continued strong demand for our new EA Series controllers with over 22,500 EA Series controllers ordered and delivered, a sequential increase of 15% from the 19,600 EA Series shipments in Q1. Our acquisition of Pakedge is going well. Pakedge networking products delivered $5.9 million in revenue in the quarter including orders from over 830 Control4 dealers that have purchased Pakedge products for the first time since the acquisition, up from 370 since we reported in May. Our strong revenue and improved gross margins enabled us to deliver $5.5 million of non-GAAP net income for the quarter or $0.23 per diluted share, also above our guidance range. On the heels of this record quarter, I would like to take a moment and thank and recognize our recently retired Senior Vice President of Sales, Jim Arnold. Jim led our sales team for over nine years from a team of eight to now over 90 and was instrumental in architecting and driving Control4's channel growth. Among his many contributions, Jim and his team helped establish Control4 as the go-to product line, brand and company for thousands of custom integrators worldwide. During this recent quarter we [suppressed] $1 billion in total history to date revenue and we are eager to keep delivering great products and services to end customers through our expanding ecosystem and professional installation channel. We also welcome Bryce Judd who joined us in June and now leads our worldwide sales organization. Bryce comes to Control4 most recently from Nokia's motive division with over 20 years of both consumer and enterprise channel sales leadership experience with a strong emphasis and track record of growing technology solution businesses and their respective channel presence. As we have noted in prior calls, Control4's mission is to be both the platform ecosystem end market leader in premium automation and network solutions for the connected home market. Our strategy is threefold. First, to provide premium high-quality and durable networking and automation solutions for homeowners and businesses focused in the areas of family room entertainment, multi-room media, intelligent lighting, comfort and convenience, and security and safety. Second, to enable consumer choice and deliver automated lifestyle experiences by integrating with thousands of third-party products produced by hundreds of manufacturers. And third, to deliver our solutions to families and businesses through an expanding global professional dealer network specifically intended to deliver the highest levels of consistent end customer satisfaction. We have been directed operationally by these strategies to expand our solution presence, build a stronger ecosystem of partners, grow our worldwide channel and add new customers at an increasing rate, all of which are happening, advancing and being recognized by our industry. This past June, CE Pro magazine published its annual CE Pro 100 Brand Analysis which polls the largest domestic designers, installers of smart home systems including audio, video, lighting control, whole house controls, security systems and other electronic devices. The CE Pro brand study determined and recognized Control4 for the second consecutive year as the brand leader for the whole house automation and control category and named our Pakedge brand for the fourth consecutive year as the leader for the advanced home networking category. Control4 was further recognize this year by CE Pro as the top brand theater in three additional categories ---+ whole house audio and video, Access Control and HVAC and thermostats and was additionally named among the leading brands in categories of lighting control, remote control and communications. It is in this context that our 2016 operating plan remains focused on several central business areas and I want to provide you a brief update on those today. First, growth with expanding profitability. We continue to execute in accordance with our operating plan, which contains our combined Control4 and Pakedge operating expenses to slightly above 2015 levels with the objective of delivering improved profitability and cash flow, along with stronger topline growth. As <UNK> will explain in greater detail later in this call, our year-to-date financial results are better than we expected. And we will be increasing our revenue and net income guidance for the full year. Second, new products. During the first half of 2016, we released two new versions of our Control4 OS that are now running in more than 70,000 connected home installations. Additionally we introduced and began delivering our new entertainment and automation series controllers in Q1. During Q2, of more than 24,500 total controllers ordered and shipped, over 22,500 were EA series controllers, up 15% from approximately 19,600 delivered in Q1. And the total number of controllers shipped were up 17% over Q2 of 2015. The continued traction of our EA Series provided validation that our thesis that the EA-1 and EA-5 are market expanding products for us ---+ notably the EA-1 for the introductory or single room automation segments. During these first five months of EA-1 availability, we are observing continued adoption and mine share shift towards Control4 for one room AV automation and lower cost start or systems where more dealers are beginning to refer to the EA-1 as their everyday offering. Our new EA-3 and EA-5 controllers are also being well received by dealers and end customers for traditional multi room and very large whole home automation installations, resulting in strong order rates and unit volumes that are well-balanced between these two models. Third, Pakedge networking. As we reported previously we acquired Pakedge Device & Software on January 29, 2016. The response by Control4 dealers to the Pakedge acquisition continues to be very positive. Since the acquisition in January over 830 Control4 dealers purchased Pakedge products for the first time. Up from 370 we reported in May. The approximately 1,100 Pakedge dealers that are not also Control4 automation dealers are becoming more comfortable with the combined Pakedge and Control4 organization. In late July we unveiled a new online dealer portal for our 1,100 Pakedge-only dealers, enabling 24/7 online ordering and product support and information equivalent to the Control4 dealer portal, both of which are powered by the same SAP ERP system. During the quarter we also completed the integration of the supply chain and fulfillment functions as well as consolidated all warehousing and delivery operations into our facilities in Salt Lake City, York, UK, and Melbourne ,Australia. We are ready for expanded business. Control4 is committed to enhancing the business and technical relationships with all Pakedge dealers and distributors, regardless of whether they are also marketing and selling Control4 automation solutions. We believe that all connected homes can benefit from more substantial and intelligent networking capabilities. Control4 aims to be the networking provider of choice for the connected home, and we intend to support our expanded global channel of 4,900 Control4 Pakedge active dealers in order to do so. Networking has always been a key element of Control4 installations, and we are now seeing that as we embrace Pakedge capabilities we are able to deliver a much broader and more differentiated product line to our dealers and provide more reliable integrated experiences to our end customers. We believe that by further integrating Pakedge technology with our entertainment and automation capabilities, and by ensuring that a single cloud-based reporting and management solution expanding both home networking and connected home devices, we can further strengthen our product and service offerings, improve the effectiveness and efficiency of our dealers, and increase end customer satisfaction. Fourth, capital allocation. Our balance sheet remains strong. As of June 30, 2016, we had $48.8 million in cash and investment equivalents and over $25 million in additional capital that is accessible via our credit facility. During the first half of the year we invested in product inventory to enable prompt delivery from our three fulfillment centers at higher expected volumes in the second half which are typically our seasonally strong periods. With our solid cash balance, available credit line and continued expected improvements in cash flow from operations, we will continue to explore and evaluate strategic acquisition opportunities and, on a quarterly basis, determine if and when it is appropriate to use a portion of cash flow from operations to repurchase Control4 shares during open trading windows. Wrapping up, although we are pleased with our continued progress and performance we are not content. We are confident in our ability to expand our connected home solution set and ecosystem and thus our business. We believe Control4 is well-positioned and expanding in the connected home and home automation landscape. For the second half of 2016, and the start of 2017, we will continue to focus on five central aspects of our business operations. First, continue to grow and optimize our professional dealer channel in the key regions where we have direct presence, including the United States, Canada, United Kingdom, Germany, Australia, China and India, as well as deepen our support for our 44 international distributors covering the rest of the world. Second, strengthening our marketing service collaboration with our dealers to improve business and technical best practices as well as begin to provide select services at scales our dealers, such as managing their Control4 and Pakedge installations, communicating with existing customers regarding upgrades and expansion opportunities. Third, facilitating relationships and business with new homebuilders, and D, thoughtfully generating and qualifying new customer interest and handing that off to confirm prospects to our dealers. [Third], continue to facilitate and support our growing and industry-leading interoperability ecosystem, now with over 9,700 devices and 185 [STDP] licensees selling and delivering over 1,500 product models that are all Control4 STDP-enabled. Fourth, we will continue to optimize our cross company internal systems for higher transaction volumes and fulfillment velocity as well as product and supply chain cost optimization in collaboration with our contract manufacturers. And fifth, continue developing our connected home solution capabilities and providing them at value price points in order to expand our addressable market with homeowners at the entry-level, at the mid tier, and the luxury high-end, as well as enabling our professional installer channel to become more responsive, more effective and more efficient. We believe these initiatives will collectively create additional shareholder value by strengthening Control4 as the premium and preferred choice for homeowners and their families, custom homebuilders, independent connected home integrators, and consumer electronics partners. In closing I want to thank all of our employees, customers, dealers, distributors, suppliers, business partners and shareholders for their continued support and their many contributions to our continued progress. We crossed the midpoint of 2016 with good momentum and we intend to keep racing forward smartly. With that I'll turn the call over to <UNK>. Thanks, <UNK>. I'll start with a summary of our results for the second quarter and then provide guidance on the third quarter and full year before opening the call to your questions. Total revenue for the second quarter was a record $53.2 million resulting in 19% year-over-year growth. Our previous high water mark for revenue in the quarter was $44.6 million in the second quarter of 2015, as <UNK> mentioned, since the acquisition of Pakedge, over 830 Control4 dealers have purchased our networking products for the first time, helping generate $5.9 million of revenue from networking product sales during the second quarter. Adjusting for revenue from this new source, our organic revenue growth was 6% and 14% for the three and six months ended June 30, 2016. North America core revenue, which include sales in the US and Canada, grew 19% year-over-year, driven in large part by several new products including our EA Series controllers and our networking products. Nearly all of our 25 North American sales regions contributed to that year-over-year growth. International core revenue grew 12% year-over-year, reflecting modest economic rebound in many of our international countries with the exception of Latin America where we continue to see macroeconomic factors suppressing business. In regions where we've recently transitioned from a two-tier distribution model to a direct to dealer model, we saw impressive quarterly year-over-year growth in India, Australia and Germany, up 16%, 54% and 61%, respectively, while China was sluggish this quarter and grew 13% year-over-year for the first six months of the year. We continue to believe that the sales and marketing investments being made in those specific international markets will help drive additional revenue growth in the future. Our non-core other revenue consisting primarily of hospitality business attributed $1.4 million to the quarter compared to $500,000 during Q2 2015. During Q2 we added 84 dealers in North America and the total number of active dealers defined as dealers purchasing during the trailing 12-month period increased to 2,820, up from 2,794 at the end of the first quarter. Internationally we added 143 new direct dealers during Q2, including 102 dealers in Australia. The number of active international direct dealers increase from 840 at the end of Q1 to 972 at the end of Q2. Our non-GAAP gross margin percentage for the quarter was 52.4%, up from 51% in the second quarter of last year, and up from 50.7% in Q1 of 2016. The increase in gross margins were due to a variety of factors including manufacturing cost reductions and favorable product mix. While we have historically seen some volatility in gross margin from quarter-to-quarter, we anticipate gross margins for the second half the year to be similar to the second quarter. Our non-GAAP operating expenses in the second quarter of 2016 were $22.2 million compared to $18.6 million in the second quarter of 2015. For the first six months of 2016, our non-GAAP operating expenses were 45% of revenue compared to 47% of revenue during the same period in 2015. We expect to realize further operating leverage in the second half of the year as we grow revenue and recognize synergies from the Pakedge acquisition. Non-GAAP research and development expenses during the second quarter of 2016 were $8 million or 15% of revenue compared to $7.6 million or 18% of revenue in Q1 of 2016 and compared to $7.4 million or 17% of revenue during the same period in 2015. The Q2 year-over-year increase in absolute dollars is due to the acquisition of Pakedge. Non-GAAP sales in marketing expenses in the second quarter of 2016 were $10 million or 19% of revenue compared to $9.4 million or 22% of revenue in Q1 of 2016 and compared to $7.4 million or 17% of revenue in Q2 of 2015. The Q2 increase, relative to Q1 of 2016, includes incremental commission expense from sales overachievement, sales and marketing expense to grow sales and networking products, and incremental costs associated with developing a direct dealer presence in Australia. Additionally, relative to the second quarter of 2015, we increased our general marketing expense to drive lead generation, grow our dealer and distributor networks, and deliver tools to the sales channel to support local marketing and sales lead generation. Non-GAAP G&A expenses in Q2 were $4.2 million or 8% of revenue compared to $4 million or 9% of revenue in Q1 of 2016 and compared to $3.7 million or 8% of revenue in Q2 2015. The Q2 year-over-year increase in absolute dollars is primarily due to increases in personnel costs and other administrative costs associated with running our business including transition costs associated with the Pakedge integration. Our second quarter non-GAAP net income was $5.5 million or $0.23 per diluted share compared to non-GAAP net income of $4.1 million or $0.16 per diluted share in the second quarter of 2015, representing non-GAAP net income EPS growth of 34% and 44% respectively. For the first have 2016, our non-GAAP net income and EPS grew 118% and 125%, respectively, over those of the first half of 2015. As of June 30, 2016 we had $48.8 million in unrestricted cash, cash equivalents and net marketable securities, an increase of $900,000 from $47.9 million as of March 31, 2016. The increase in cash and cash equivalents and net marketable securities included the following. We generated $3 million of free cash flow defined as cash flows from operations, less capital expenditures during the second quarter, received proceeds of $600,000 from the exercise of stock options and we paid down $200,000 of our bank debt. We repurchased 193,831 shares of our stock during the quarter for $1.5 million bringing the total number of shares repurchased under our $20 million board authorized share repurchase program to 1,582,126 with a cumulative price of $12.3 million, and in July subsequent to quarter end, we paid down our revolving credit line by $3.5 million, reducing our outstanding balance from $5 million to $1.5 million and increasing our available borrowing capacity on our $30 million revolving credit line to $28.5 million. Before turning to our guidance, I wanted to provide a brief perspective on the possible impacts of the recent Brexit vote in the United Kingdom which has raised concerns of a potential slowdown in that portion of our business due to UK and Eurozone economic uncertainty and currency volatility. As part of our diligence, in July we reached out to many of our dealers in the United Kingdom to assess their perspectives. Responses varied and reflect the broader uncertainty that exists across many industries generally, but we did not observe any widespread panic among our dealers about their businesses as it relates to Control4 and Pakedge products. The recent significant change in the British pound's value relative to the euro and the US dollar also raised questions. Control4 prices and sells our products and incurs operating expenses in British pounds and the euro, and we incur exchange rate gains and losses for US dollar-denominated assets and liabilities, including intercompany and third-party accounts receivable and payable. We enter into forward contracts to help offset our exposure to rapid movement and currency exchange rates. The natural hedges resulting from conducting sales and operations in British pounds and euros as well as our forward contracts to limit balance sheet exposure lead us to believe that from a currency exchange perspective, there should be no material impact our net income generated by our subsidiary in the United Kingdom in the near term. I will now turn to our forward-looking guidance which includes the expected contribution from Pakedge. Given that Pakedge networking products are complementary to our current business and will generally be sold through the same or similar channels, all results of operations and forward-looking guidance will be based on our consolidated single business segment. We expect our revenue in Q3 to be between $52.5 million and $54.5 million. We expect our non-GAAP net income for Q3 to be between $4.7 million and $5.7 million, or between $0.19 and $0.23 per diluted share. For full-year 2016, we are raising our annual guidance to $202 million to $206 million for revenue and $17 million to $19 million for non-GAAP net income or non-GAAP EPS of $0.70 to $0.78. We will now open the call for your questions. Good question. Number one, we had a very, very extensive search process. We were very fortunate to have the transition time that Jim provided us, and we had three very, very qualified top candidates, and Bryce was the finalist. Bryce is a business leader, a field sales leader as well as a sales and business operation expert. We really think that he brings to us the skills needed to scale our business from our $200 million run rate to a much larger scale, I think our opportunity worldwide supports that bigger business. And that will not only take larger transaction volume but also more sophisticated programs and infrastructure on how we manage and lead and motivate our channel, as well as our own teams and our processes and systems. These are all areas that Bryce has done quite well and effectively in growing businesses. Several of his assignments were involved with businesses of several hundred million dollars larger than our existing business, so we are confident that he has the experience and bandwidth to help us grow. For the full year up through June 30 was $9 million. And $5.9 million in Q2. Sure. Naturally we were two companies, with two channels, and two channel management organizations. At the time of the merger, there were about 600 dealers that intersected the 1,700 that Pakedge had and the 3,700 or 3,800 that Control4 had. The first things that we did was align our two geographic sales territories so that they were co-resident with each other. So that we could manage areas of a total combined revenue of Control4 plus Pakedge, even though the channels were independent inside those regions. The second thing we did was we have aligned the sales organizations and our geographic distribution, we have six area sales directors, and inside those are over 40 sales professionals that run each region. And those now have Control4 management channel focus as well as Pakedge-only dealer focus. We also ---+ the Pakedge team brought with them a large network of manufacturing reps, we are still engaged with them and we are working with them to continue to manage the Pakedge-only channel to keep revenue continuity and services going. As I mentioned in my prepared remarks, behind that, backstage we've now consolidated all of the SAP order entry and ERP systems. So from a system standpoint we are one company. With a Control4 pricelist, a Pakedge pricelist, Control4 dealers can self all for product and Pakedge products, Pakedge dealers can only sell Pakedge products. We maintained a lot of the dealer incentive programs to maximize continuity for our dealers, and then we will keep those going and make smooth transitions and tuning as we see appropriate in the future periods. We did not say that, but it is true. Our primary focus at first is to get adoption of Pakedge networking in the larger of the two channels, which is the Control4 channel. The Control4 channel has about 3,800 dealers, the Pakedge only channel now has about 1,100. And at the time of the acquisition, there was a 600-dealer overlap between their 1,700 and our 3,800. Since that time, the 830 dealers on the Control4 side have adopted Pakedge and bought Pakedge products, so that brings us to 1430 dealers in the Control4 ecosystem that are adopting Pakedge. So that's a significant acceleration of Pakedge-enabled channel sales. We are not disclosing the actual mix between them, we can remind everybody that the HC-Series had two models. HC-250 and HC-800. The 250 was priced at $750 retail and the HC-800 was priced at $1,500. EA series has three lines, EA-1 priced at $500, EA-3 priced at $1,000, and EA-5 at $,2000. But we have seen is a large percentage of the 800s flow towards the EA-5, small amount flows towards the EA-3, and HC-250 splits between the EA-3 and EA-1, and the EA-1 has provided a market expansion opportunity at the below $,1000 installed price point for single room or entry system opportunities. And we are getting good feedback from that. We are also seeing EA-5s go into very large installations and that's also the market expansion for us. Great question, as we mentioned in our prepared remarks we think that the rest of the year in terms of gross margin percentage that will be similar to what we achieved in Q2. So for the balance of the year and improvement over Q1. As we've mentioned in the last couple of presentations, Canada has been an area of focus for us. One of the changes that we made in Canada was to transition from US dollar pricing of our products to Canadian dollar pricing, and we believe that's going to help us in the long term. In the first quarter of this year, we saw some continued downward pressure in terms of year-over-year sales. That's rebounded a bit in Q2. We were flat, up a little bit in terms of year-over-year sales, and so it appears that we are seeing our sales volumes move in the direction we want them to. It's still tough growth for us there, but we think the actions we have taken will help us as we go into the balance of the year and obviously into future quarters. I think right now, we are going to stay focused on our core markets and core geographies, which are the residential space, both existing homes and new construction. We do have a good interest within our channel in light commercial and boutique retail, and then we have a very small, a very targeted expert set of integrators that serve hotels. I think that strategic focus, combined with our expansion in the direct regions, Germany, Australia, China, India, Canada, UK and the United States, is sufficient frontage for us to grow our business without biting off a new vertical. This is <UNK>. Thank you very much for joining us today. We are excited about how we started the first half of this year and the momentum and foundation that we've built. We are looking forward to the second half and building that foundation broader and stronger so that we can support a growing business in 2017 also. We look forward to reporting to you at the end of Q3, and thank you very much for joining us today.

2016_CTRL

2015

LYV

LYV #I'll give you a general on the pipe. Every year we always say that we have such scale that will I be sitting here in a year from now here telling you that I had 22,000 23,000 shows. Yes. We have no fear that our global staff - were the best at it. We will continue to get our share of the market and slightly more. Last year we had an exceptional, in the US only, an exceptional stadium year, had a lot of big stadium tours out last year. We don't see that repeating this year. But we are already seeing a much stronger arenas business this year, because the artists have decided maybe I'm not going to go in stadiums, but I'll do longer ---+ US states will come to life. I think you'll also see some artists debate whether with the FX cost and the cost of business if they do a few more shows in America versus traveling overseas. So we would look at the pipe, it will be consistent from a show count, total ticket number year over year. We see it still being, given again it was a record year this year, which beat a record year the year before, so the benchmark continually gets higher. But we think we will repeat history. We think we'll have a strong arena market this year. We think festivals in Europe will be stronger this year than last year. And we think the EDM business, we are continually with Insomniac taking a very disciplined approach to how we will grow Electric Daisy, the main festival in Vegas. We launched one last year in Mexico; we launched one in London. We'll continue to launch a few more of those on a global basis this year. And we continue to think EDM is a great channel to be in the portfolio and is providing some great advertising sponsorship opportunities. As well as in 2015, it's the first year we'll officially move Insomniac all over to the Ticketmaster platform. As we start to get the double benefit of feeding the ticketing and advertising pipe. No, I would characterize it as I think it is a strong, stable global business. But the reality of EDM is when you're not hitting mainline arenas, stadiums, and festivals, like country, rock and roll, pop, and urban, it is always going to be a small percent of our total business. Because it is more about 10 great festivals of summer that matter versus 4,000 shows that happen across America that matter. So great small niche business, but given it operates outside of the traditional venue platform, it will always be more eventism and smaller to the total business. Thank you.

2015_LYV

2016

GVA

GVA #Okay. The biggest driver of the increase in SG&A is personnel-related costs, primarily incentive comps and then the typical normal increase in salaries and burdens. (inaudible) as far as how you should look at it, I would say at about the same percentage of revenue as we currently have. Our objective is to grow revenue without growing SG&A a lot. So, we want to hold the percentage that we have and begin to work that down as we grow the topline. Yes, I think that as I mentioned a little bit, <UNK>, earlier, the private sector is driving that. There is just no doubt about it. The expansion in the commercial markets, the renewable markets, the underground markets with some private clients have really jumped up in the last 12 months. And so, that's what's driving the big returns today and that's what's going to drive the bigger returns down the road. The DOTs and the public sector markets are typically more commodity markets that drive lower GPMs. But I actually think that the private sector is growing nicely and although I wouldn't expect 20% every quarter, as I mentioned, you get into the mid-teen margins in Construction and you're doing a really nice job. So the Granite teams did a really nice job in 2015. And I also think that our people are just doing a better job in the field. They're executing at a substantially higher level. We've enacted our continuous improvement program and the people in Granite are just taking the execution issues to heart and they're just operating better than their competitors. And that does make a huge difference in a couple of points here and there in the Construction business and as you can see, when you can move up into a 20% margin, that means you're executing at a high level. The other thing that happened in the west, which is where most of our construction work is, it was a pretty mild winter through December. We didn't get a lot of rain. We got a lot of rain in January, but on the whole West Coast, we had nice weather and they got to operate consistently through say mid-December, which makes it a nice fourth quarter. So, that does help. Yes. So, remember what they did up there last year, they passed a 16-year or a 10-year $16 billion bill, yes, 16 to 16, that's right. So, it was $1 billion a year. We are seeing releases already. One thing that will happen in a state like Washington, any of the northern states that have a winner attached to them, what you'll see is a very competitive bidding environment in the first quarter. You'll see lots of work out to bid typically and you'll see more bidders in the first quarter. So, I think it's yet to be determined, <UNK>, exactly how that $1 billion a year additional program will hit the Street and how it will affect the bidding environment, but the Washington market is healthy. It's got a very strong private sector, it's very diversified from the east to the west, the Cascades that lie in between and I think you're going to see that continue to make it healthier, especially when the FAST Act ties in at the same time later on in the year. That's going to be a really nice addition to the Washington program, because as I mentioned before, I see the FAST Act starting to hit the streets in the third and fourth quarter of this year and then you got the $1 billion year program (inaudible) on top of that. I think you're going to see Washington do some really nice things. Yes, sure, <UNK>. So, the business is ---+ we ought to break it in Granite into two components for our Materials business. First of all, the aggregates business, which is much easier to track, because you have a very static number of inputs to it, you have aggregates, you're extracting from the ground and you're using a host of different methodologies to crush and make product. That ---+ those products have risen in pricing somewhere I would say 3% to 5%. Last year, we see similar type increases. This year, maybe more. And it's a nice methodical market and I like where it's going. I think that could have an inflection point later in the year again if we start seeing the volume demand from both private and public hitting at the same time. We haven't seen that yet, but we have seen a healthy volume increase about 10% year-to-year in that end of the market, which is healthy, which has helped the pricing. Now, the second part of the business is a very interesting part of the business and that's the asphalt business. The asphalt business has, as you would imagine, driven heavily by crude pricing, which liquid asphalt is a major component of asphalt and it's the bottom of the barrel out of the refinery. And as those prices dropped tremendously over the last 18 months, so therefore, has the pricing for asphalt. The key ingredient there is to be able to not price the asphalt with the full reduction in price of liquid and capture some upside in the gross profit margin and our businesses have been able to do that and I think they are ---+ and continue to be able to do that. That is a very healthy market as well, but what happens with the asphalt market is the big volume from that market is typically driven by public projects. You get very large, we call it, asphalt overlays [and whether Granite does and we're a] third-party, we really like to sell products to the end of very large arenas there, so that we can get some fixed volumes in our plants. So, I think again in the Materials business and the asphalt business especially, once you see the public sector gearing up and you start seeing more of the surface work coming into play, I think you're going to see that part of the Materials business, the asphalt side, maybe reach an inflection point at the end of this year or beginning of next year. It's pretty much in line. It might be down a little bit, but what happens is that we have a whole bunch of them in the hopper that we haven't made our minds up on yet. So, you could get one $3 billion project and go through what we call our Large Projects committee and get it approved and then it would change, it would add $3 billion to that list. I would suggest this <UNK>, it is robust, we're being very choosy and we're turning opportunities away and the amount of work that we're going to bid is going to be in line with what our capabilities are. Okay, that's an interesting question, because that's what we use to chat about 10 years ago that do we have a capacity issue, is there some saturation point in your business that you're going to not be able to do any more and you're going to turn work away. And the key ingredient is exactly what you said is that you start optimizing your margin expectations long before you reach a saturation point, so that you don't fill yourself up with lower margin work and then lose the opportunities in a higher margin work. I will tell you with the businesses that we have across the country, we have a huge opportunity to increase the amount of work we do in the Construction Materials segment. We are nowhere near capacity, but it is smart business to watch what goes on in the markets, and not reach capacity too quickly because what we have seen historically is that our competitors are smaller, they have less elasticity in their business, and they tend to fill up faster when the markets improve and then there is a significant change in the pricing, that inflection point. So, I don't see a capacity issue with Granite today. I think that it is a good business to continually move prices up, find out where that pressure point is, and I think we're going to be working that very hard over the next ---+ in 2016. Well, I'll say it's both, you're getting some other industries, there is an influx of workers from the other industries, no doubt. The upstream oil industry has allowed some opportunities for those individuals to move into the Construction segment, which is good, but of course that's not in all geographic parts of the country. The other thing that we've seen is that when we are on prevailing wage jobs, which is a big chunk of our work, we typically are able to get craft workers, because the wage rates that we're providing those craft workers is higher than the open shop or non-prevailing wage work in the same geographic market. I would suggest that there is an equal pressure point on talented professionals in the industry. And when you start obtaining large work and unique 30, 40 engineers, different types of capabilities, scheduling, quality, safety, the technical side of the professional business I think is going to be actually reach a saturation point before the craft level does. So, there is a duplicate of concerns. But as long as you're willing to reward those people properly, I think those kind of companies are going to make it through this nice upward pick in the market. But if you're going to stay on the cheap side, you're going to have a problem obtaining and retaining people. Absolutely. Yes, we're doing some big work in Dallas and it has affected, that's the IH-35 job, it has absolutely affected that job. We've had a big ---+ we had a big wet year at the beginning of last year as well that had a significant negative effect in Texas, then it dried out, we made huge progress. But I would say that that job ---+ one job there in Dallas itself has been affected by rain over the last 12 months. Well, I would say, <UNK> ---+ by the way, good to hear from you, I would say that it's pretty similar to where it's been, it may be not even getting bigger. The overall market size is growing. And the question obviously is when we give you a $60 billion number, it's ---+ those are things that are in our hopper that we're looking at and that we know are out there and that we're tracking. And it could be two or three years down the road before that actually comes into play and there are also times where the owner decides to go different route, break the project up into smaller projects or they can't get the permits to actually build the work, but I don't see that changing. I actually see the amount of construction work growing, the thinking about the marketplace on construction, that's a $75 million and less on the Granite portfolio side. I think that long-term outlook for work is actually growing quite a bit. The other thing that's happening is that we're looking at a more diversified kind of pile of work out there in the US. So, we're not just looking at a big transportation project anymore, we're looking at big power projects, we're looking at big water facilities. And as we expand our horizons and diversifying, I think that what you're going to see is that pot and we can talk about this in the future, the size of that overall long-term tracking is going to get bigger and bigger. I think that yes and no. I think certainly the oil sector and the crude pricing has caused some revenue issues in certain states. And I mentioned in my remarks that the drop in crude and the Board of Equalization just dropped some significant gas tax requirements in the State of California, and you think about a state that we do have a nice business in that has been hit with the ---+ because of oil entry is Alaska. That's a very focused state on oil and energy and that has hit that state. Now, we've done quite well up there and we anticipate doing quite well, but certainly it puts struggles on states like that. But it's interesting in the power market, we're actually seeing our power business having tremendous opportunities by changing the transmission and distribution systems and looking at new power lines and decommissioning lines and expansion in right away projects and the construction management portion that we do. So, the oil and gas side and the related energy side, except for the gas tax reduction in the State of Alaska, has actually helped our power business. Yes, thanks <UNK>. Thanks. I wouldn't call it really a huge headwind, I would call a lack of what I would want to see is a huge tailwind. There's plenty of work in California, the private sector is alive and well in California. I'm just frustrated that California can't get if I call it top [debt] center and get moving on a very proactive environment where we know that this work has to get done. So, California is one of our stronger states right now overall and the way that we're performing business, the bottom line, the revenue and everything else, it just has another significant notch up that it can go when the politicians do what they're supposed to do. I think there will be spring lettings, but remember what happens, <UNK>, a spring wedding, which is typically you've got more states, you got a minimum requirement of 30 to 60 days of public announcement to actually put a public bid out and then you've got somewhere between 30 and 90 days to award the job typically inside the contract and then you've got another 30 days before the notice to proceed and you physically get out on the grade. So, that's why I was saying that I think we'll start seeing the positive effects of it late in the year, but we absolutely can see some spring weddings. But you still won't see the financial effects of that until later in the year. Well, what we mentioned there was that it should be somewhere in between. We said that it should be better than last year, but we don't see it at the mid-teens range in 2016. We've got some early progression projects. And again, we've mentioned before that at the early part of our projects we hold some monies back to try to make sure that the jobs are heading in the right direction. And when the portfolio mix is still young, you're going to naturally have a lower margin expectation. So, we mentioned 2017 is when we start seeing getting back to the typical expectation, 2016 will be somewhat as a progression from where 2015 was and in between 2015 and 2017. Well, they are very complicated jobs, complex inside and outside, but all four of them are progressing quite well. Again, only two of them are over the 50% mark and two of them are early in the stage, just the I-4 is very early in the stage and the Pennsylvania job is in the first quarter quartile of its stage. So again, we expect lower margins while they're in those early stages. And the Tappan Zee is progressing quite well. It has had a very nice 2015. Weather certainly helped in 2014 and the previous two winters did not help that job. And I think I-35 has progressed quite nicely in the second half of the year. It got stung with some serious range in the first half of the year and is progressing well now as well. But what happens is that when you get your new work, now you're start having to add on, you got the 202, which is a really nice win for Granite, you got the Alabama I-59, I-20 job, another nice win. Now you got to mix those young ones back into the portfolio. So, I think that our projects are going well. I think that you're going to see that we're going to continue to increase the backlog and progression will be a combination of how well we execute and how well really we can get to work in some of those locations where we've got some significant winners. New York so far is good, Pennsylvania is kind of come and go, I know they got some weather hitting them right now. But overall, I think our large project progression in 2016 should improve from 2015. Okay, once you hit the cash side first, <UNK>. Sure. So, we have private placement notes that have five years of $40 million of payments and the first payment was due in December of 2015. We refinanced our credit facility in the fourth quarter in October and as part of that, we took a portion of it as a term loan and we used $30 million of that term loan to pay off some of the $40 million and then used cash for the remainder of it. And so, every year we will ---+ and our plans for 2016 are similar to what we did in 2015. And then the other thing that happens with that new credit facility, obviously larger than our old credit facility, it ties nicely into the second question, the M&A side and we certainly are considering expanding the business through acquisition. We are in the market to look and see what's out there. We like and I've mentioned it before diversifying geographically and in both end markets. Diversifying into the water market I think is really top in our list, geographically diversifying our vertically integrated business is top on our list. And I think one of the things I've always said that's really important is that you do not move into the acquisition mode before you are efficient and effective in your core business at all times, and I'm happy to say that. I think our teams have done a tremendous job in 2015 becoming more efficient, more effective and our strategic plan is to grow both organically and through acquisitions. The majority of it. I would suggest that when we start looking at large projects work now, <UNK>, there are very few jobs. Remember our threshold is $75 million and most of the jobs today in this environment are way over $75 million and most of them are design build. I'll give you an example of one that's not, that's actually bidding today is a job in Hartford, Connecticut, which is somewhere between $200 million and $400 million tunnel job, that is a bid build. So, different types of jobs are taking on different contractual outlooks. Tunnels are typically bid build, the other projects we're looking at are almost all design build nowadays, all the big ones. Well, okay, so that is a very strong topic of discussion inside Granite as well, and it's a very strategic question, <UNK>. It's actually a really good question, because there is a combination of things that you have to look out when you call yourself a sponsor or a non-sponsor on a joint venture, and when you get into design build, you have to make sure that if you're going to sponsor a job that you have the personnel to lead the job and that could be up to 40 or 50 people, and I mentioned the engineering staff and those people that you're going to need to put on a project in order to be the lead player. So, you need to have those people available if you're going to lead $1 billion job and be the sponsor. The second thing that you need to be a sponsor is to make sure that you can handle the cash requirements of a large project. A lot of these projects will start with the cash call and equity infusion and if you're going to be a 50% or 60% partner, you need to do some very strong cash flow curves on these jobs to determine what kind of cash the company is willing to infuse in the job before you get to distribution. Now, secondarily ---+ so that's part one. Part two is, a lot of times, you can obligate yourself to a partner on the premise that if you are a non-sponsor or you are taking a smaller role today that you promise your partner you're going to take a larger role, you're down the road. And because that takes a lot of different requirements from the partners and sometimes there's not an even percentage of effort going into play, you could be a 40% partner and put in 60% of the assets and the resources. So you have to sometime sponsor, sometimes non-sponsor. I think you're going to see Granite on jobs, $500 million to $600 million and lower typically be the sponsor and I think that when we get to the larger jobs, we would like to increase the size of projects that we're sponsoring, we're healthy, we're developing a lot of people in the field today, and I mentioned this earlier, in role, so that they can actually run these billion dollar jobs going forward. And when they become completed on the jobs are on and they become available into Granite for future work, I think you're going to see us bidding and sponsoring larger projects going down the road. It's about 60% external, 40% internal. Well, it's really important, <UNK>, that is so ---+ such a big deal, especially in the Large Projects business. And I'll tell you what really surfaces in choosing and not choosing a job. Number one, can you get the right team, are you in the game early, do you have the right partners, and does that allow you an advantageous position in on the project. Secondarily, we look heavily at the contractual documents themselves, how will they set up, does this owner provide reasonable cash flow, does this owner have a dispute resolution program that is fair or they have the judge and jury with a dispute. And also we look at the history of how we've done with these agencies across the country. We dealt with the majority of these bigger agencies across the country and we know how they treat people. The other thing we look at is when we go into a large job, we go okay, who are the competitors on this job and can we be competitor. And if there is somebody that we know has an advantaged position over Granite, then we're not going to spend millions bidding a job that we really don't think we have a great shot at getting the job. So, there is a host of issues that go into consideration and we actually have a complete committee in Granite that's led by our COO and our Head of our Large Projects group and we have ---+ we look at risk mitigation through our risk department. We have our legal department heavily involved in terms of how the contracts read, we have our business development group in there to look at the partnerships with not only our joint venture partners, but our engineering partners. It's a very comprehensive group that looks at all the opportunities and says, okay, this one you have a chance for obtaining the work and you have a really good chance of getting the margin that Granite needs in order to come out the back end of the job. Okay, so I think there's two parts to that question, <UNK>. First of all, I think in Large Projects, there is always going to be mobility. Our people have to go to where those specialized large projects are and that's what our people sign up for, and they know that and they're very good at that. Now, when you go to the Construction business, when you start seeing the local markets get healthier which they are, then I think you're going to start seeing less mobility of those people, because they're going to be in a market where they look out in front of them and see five, 10 years of growth in the local market and they know that they can create significant value for the Company staying in that local market, the Company is happy with it and we let them stay in those local market. So, two parts of the question, the smaller work is going to be less mobility required due to the strength of local markets today, Large Projects will always have mobility. Well, you nailed it, a lot of it. It is the fact that the ---+ what happens in those local markets and you put a geographic boundary around the local market, <UNK> and you say, okay, what's the health of the state and then you dial into what's the health of the county or the larger mix jurisdiction and what's the health of local municipality. What's going on in the private sector in residential, residential, by the way, I would say is not something that is driving our business today, but with significant opportunities, we are seeing development starting and I'm going to say starting to be built again, but the commercial market is very strong. But what else we've done over the last five years is diversified into other parts of the business. We're doing a lot of work directly for the larger rail companies today. We're working for water facilities today that we didn't do, we're doing pipeline rehabilitation that we didn't do, we're seeing the renewable energy business that we didn't do. And the other thing that we've actually migrated into and most of it is $75 million or less is in the federal market. We've actually gone to a whole new client. We got a nice couple of jobs bidding (inaudible) coming up in the next couple of months. So, we've diversified our portfolio and that's the strength of the Construction business today that we didn't have five years ago, <UNK>. Sure. I think our CapEx is definitely going up. We've been typically in the 2% to 3% of revenue range and will stay within that range, but they started migrating towards the upper end as we start building new work. The other thing that happens is and I will tell you one thing that's changed in our portfolio of capital expenditures is the tunneling industry. So, when we go out and sponsor a large project, we now have to go out and buy these very, very intricate tunnel boring machines that can be $20 million each. Now, we typically get paid by the owner very quickly, because they understand the cash requirements but that makes a very quick change in the overall volume of capital expenditures and those are quick turn items. So, that's not a big deal. I will say this that we've done a complete kind of reboot of our capital expenditure program inside of Granite and we're ordering equipment now in the fall of the previous year for delivery in the spring. And that was something that I commend our COO, head of our equipment apartment and our local businesses are just planning better now. And so, you give a six-month lead time, but you got to be that far in advance of the business. There's another question that I better address. So, what happens if Trump gets elected, do we have bridge building abilities, I heard that one in the background, and we've got tremendous bridge building abilities, and that's what we do. So, certainly we are ready for the next elected official to help us to help build bridges and entire infrastructure in the US. Okay, very good. Well, thank you for your questions today and thank you again to all the Granite employees for working safely, working hard and living our core values every single day. We look forward to seeing a few of you in San Francisco on Monday, Denver on Tuesday and Chicago in few weeks from now and as always, <UNK>, <UNK>, and I are available for follow-up if any of you have any questions at all. Thank you. Have a good day.

2016_GVA

2016

PPG

PPG #Sure. If you look at our last six acquisitions, they've all ---+ we paid less than 10 times EBITDA for all of them. The only one that's been above that has actually been Comex where we paid, if I remember, 11.2 or something (multiple speakers) Pre-synergy. Pre-synergy. So, you know, clearly the most ---+ two large ones in our space that were done at a significantly higher level, I'd regard those as unique properties at unique times in the cycle. Everybody I talk to that I want to buy, they point to those two and I'm sure they would like to have that, but it's not realistic for the sellers to do that. And obviously when we bought MetoKote, those numbers or at least one of those numbers was in the space and we are negotiating with others right now, so I would tell you we are going to continue to remain disciplined and we're going to do the best we can to make sure we increase the value for our shareholders. P. J. , I just want to add to that. I want to pick up something that <UNK> said, too, is that there's pre-synergy and there's post-synergy multiple. And as <UNK> said, there is a very disciplined process here, but when we evaluate each acquisition on its own merits, there's the headline price, but then there's a lot of sensitivity analysis that goes around the revenue CAGR, as well as the synergies. I think one of the reasons that PPG has been more successful than the average Fortune company in integrating acquisitions is the diligence around both revenue and cost synergies. If you look at the properties we've acquired in the last few years, they've had an element of either a unique technology, unique customer base, but all had some kind of additional leverage that we could get either by expanding the customer base globally or putting the technology as part of our overall portfolio. So it's not just the initial multiple. We look at the whole resultant set of factors, including synergies and the multiple pre and post. So, P. J. , first of all, as <UNK> mentioned, we've got to get the organic volumes up, which we intend to do so in Q3. We have a lot of latent capacity, as we've talked about, in terms of ability to leverage our cost structure. I think <UNK> has given you a number in the past of 30% to 40% in Europe, 20% to 25% incremental margins elsewhere in the world. We continue to work on self-help activities. That's been a hallmark of ours and we have more coming in the back half of the year, based on our previous restructuring, and as we've talked several times on the call today, we are going to redeploy or deploy cash and accelerate our deployment of cash in the back half of the year. So those are the three pillars that I would tell you we are going to rely on to maintain good growth in our EPS. I'll just take the first section on the stranded costs. The stranded costs are relatively modest because the business, obviously separate from the coatings part of the portfolio, ran pretty much on its own. Of course, there were certain allocations that come out of the corporate group, but we've been obviously cognizant of this for some time and we have plans and we are planning to execute plans so that the stranded costs do not become an overhang for the Company. As <UNK> alluded to, as we get into 2017, it won't happen immediately, but as we go through the next several quarters, we have active plans we'll be putting in place and specific initiatives to eliminate that what I'll call relatively modest stranded cost situation. And then in regard to your question about fiberglass, we always evaluate all our businesses, and in this regard, fiberglass is a noncore business, and should anybody come to us and make us an offer that's worth more than we think it's worth, then we have a shareholder responsibility. We are not in any active engagement right now, though. <UNK>, if you look prior quarters, we were up 1% to 2% fairly consistently. I do have to remind folks, we had in Europe last year, so second-quarter 2015, extremely favorable weather, and this year we had the exact opposite. So if you said what's the base growth rate for our business there, it would be low single digits. And we expect the return there in the back half of the year. (multiple speakers). The only thing I would say to an organic growth, and <UNK> mentioned this before, is it's okay ---+ it is fair to focus on things that we are doing in the architectural portfolio because we would've liked the topline to be a little bit more robust in the quarter. But there was significant momentum generated in the industrial and packaging business, as well as really nice momentum in refinish, aerospace, and automotive OEM doing well in the vast majority of the globe. And that momentum should continue. If you look at the heat map, there are a few selected parts of the portfolio where, whether it's a macro issue where we get a little bit of help, and obviously a little bit of help from the weather in Europe going forward, as well as some activities we've got going on in architectural [rescha], with those turning, you'll have the vast majority of the portfolio on a pretty good path. And that's why we have confidence for the back half of the year into 2017 that we are going to improve in the organic growth rate overall. Let me take this by business. Automotive, the vast majority of that growth is coming from technology and market, right. So the market has grown between 3% and 4% and we are outperforming that. So that's all due to our new compact process. If you take our industrial business, you know that ---+ our industrial business grew mid-single digits in the quarter. That is really a variety ---+ some of it is automotive. Some of it is coil. Our coil business had a good one. Electronic materials had a pretty good quarter. So, all good from that standpoint. When you look at packaging, that's all technology. We are just ---+ our new technology is helping us grow. It grew high single digits. You know, one of our regions grew low double digits. You know, we are just taking share in that regard. When you bring it over to architectural, there's not as much technology in the architectural and we are not getting that. The market space we think is growing about 3%, maybe 4%, max, and then you shift on over to protective/marine. That's a declining market with a huge overhang in the marine. We are taking share due to technology, so that's another area. Refinish is all driven by the waterborne, so a good performance there, and aerospace is driven by technology. So I'd say in those segments where technology is a real key, it's both the market and our ability to drive share gains for technology. These are proprietary systems, so I wouldn't be able to answer the question about whether or not the other ones have a similar type plan. But it is across all SKUs, so that is a uniform initiative on that part. I think, <UNK>, we've been consistent in saying that it's in a slow secular decline, low single digits as the big boxes, as well as the company-owned store network, takes share in that regard. I do not envision that that trend line is going to change. And so, the other issue you have is that for some of these independent dealers, they have no succession plans, and so sometimes as they get older, they decide to either sell out or they decide to close their doors. So it's something that we are managing very closely. Like <UNK> mentioned, we are able to adjust our cost structure to match this decline rate. It's a very profitable segment for us. So we are very happy to have these customers. But it is a drag, if you will, on the overall growth rate of the business. I think <UNK> said in his repaired remarks the point-of-sale sales were positive for our DIY customers. When we bought the business, if you remember, we bought the business at a very favorable purchase price and reflection of the state of the business. We have made significant improvements. We reversed the negative trend ---+ growth trend. We now have a positive growth trend in that business. That positive growth trend is not at market, but it's closing the gap slowly, as <UNK> mentioned. We've got a lot of time and attention put into that and we continue to make strides and we expect to fully close that gap over time. But the purchase we did, with the synergies we've been able to capture, has been very, very accretive to our shareholders, so optically while the growth rate is not there, it's certainly been a shareholder-enhancing transaction. And we had to rebrand all the stores. We had to take the Glidden products out of their stores and put the PPG products in, so it's not something that transforms itself overnight. It's not like a light switch, but it has gotten better every quarter sequentially. And it's a great point <UNK> was just making. A lot of the capital deployment that was required to get things in the shape we wanted to be in is behind us, and so the incremental profitability on the incremental investment is going to be very attractive. <UNK>, we haven't made that decision yet. That's one of the scenarios we'd certainly look at. Year over year ---+ that's a comment on year over year, <UNK>, and we had exceptional growth last year in packaging Europe. So we are starting to anniversary that growth, so we still have very good growth rates, but we are coming up against some harder comps. If you remember, Europe is the first region that converted to the newer technology. And some of that is actually good news in the fact that we've got some really good momentum in the industrial business in EMEA, so it looks very, very good in comparison, particularly as compared to last year's comps. So if you start with Central America, I would say we are in inning two. We are very early. We just rolled out our own Glidden products under the PPG brand. Previously, it was a licensee. We started that about 15 months ago. The momentum is very significant, so we are very pleased with that. Clearly as we gain more momentum, we've gotten phone calls from people down there. We anticipate continuing to get phone calls. Obviously, we are making our own phone calls. So there is potential for that. It's too early to talk about what that might shake out to be, but clearly the model that we have in Comex, the concessionaire network model, plays very well into Central America where you have entrepreneurial people that are looking to put extra TVs in their house, go out and buy a car. This model works very well down there and we are exporting the Comex model into Central America. So, that's a real positive for us. You know, we are bringing the PPG products into Comex. That has continued, the acceleration of the Comex sales. That's why we are more than two times GDP. The Comex team continues to perform at a very high level. We've been pleased. We've added over 100 stores in the first half of the year, so we are adding a store every other day, basically. We anticipate having over 170 stores by the end of the year. So, we continue to get more geographic diversity. If you remember when we bought it, we said we had higher share than normal in the central part and we were underrepresented in the north and the south. We are taking care of that, and so we are growing additional share and presence in both the north and the south. So, overall, I couldn't be more pleased with our Comex team. You know, at this point of the cycle I don't anticipate much pricing, except for the new products, so anytime we roll out a new product. We've said that we are going to have flat pricing across PPG and that would also pertain to general industrial. The reason we are not accelerating that is we still don't see any recovery in heavy-duty equipment. Heavy-duty equipment remains a large part of that portfolio. Wood also is a little bit challenged, but I would tell you that momentum in our industrial business is quite good. And then if you're talking about the industrial segment, I would say overall all three businesses, packaging, industrial, and automotive, you saw good growth in those businesses and strong performance. First of all, I would bring to your attention that we did buy IVC. This is a powder and liquid coatings, mostly US based, although they also had operations in Asia. So we have done others besides Comex and Consorcio Latinoamericano. And in regards to your original question, for the other one, Sealants Europe has better than a company average return. I would tell you that when we bought REVOCOAT, it had less than the company average, but it has probably closed at least 50% of the gap and we continue to work on ---+ our customers are really excited the fact that we have REVOCOAT. It provides another opportunity to have more content in the paint shop in our automotive customers and they really like that. So that's been a nice win for us as well. I guess I would answer your question this way. There have only been two acquisitions in the past five years from a European competitor of any substance. And so, I would not necessarily say anything that the current advent advantaged interest rate environment in Europe is going to have any impact. We are going to continue to drive the consolidation in the coatings space. Clearly, one of our major competitors is actively engaged and so their activity level in acquisition might be reduced. So I would tell you we are going to still be the leader in driving consolidation. The other thing I would add, too, <UNK>, is that while it may be true that certain competitors are domiciled in jurisdictions that have very attractive debt rates, we have access to capital worldwide, as evidenced by the fact we raised EUR1.2 billion last year at an average interest rate of 1.1%. We have ample fire power. We've got a good credit rating. We have a solid balance sheet, access to all kinds of capital worldwide. Our primary consideration is getting a good return, good long-term return, for our shareholders with high-quality assets at both pre- and post-synergy. So, that will be our primary consideration criteria for when we do acquisitions. We don't want to just look at what might be opportunistic in the short term, although we'll look at any asset in our space, along with close adjacencies, but it's that long-term value creation that we are going to remain disciplined about.

2016_PPG

2016

AXP

AXP #Well, <UNK>, the short answer is no, I'm not going to walk you through that level of detail, because we would consider it competitively sensitive to be that precise about the areas we're targeting for opportunity, and also because as the world changes, it's very important that we retain flexibility to react to the evolving environment. I think I would go back to the themes I talked about earlier. What makes us believe we can moderate spending, without losing our ability to grow revenues. Well, it's our evolving use of Big Data, the growth in the percentage of our new Card acquisitions that comes through [digital] channels that are very efficient, and it's through focusing on the areas of greatest opportunity. The only point I would make, <UNK>, and I would say we're in an even better situation, because of the progress we've made on data analytics and performance marketing. But if we go back over the last 15 years, the reality is, we've gone through periods of elevated spending where we saw opportunities, and then we've reaped the benefits three or four or five years down the road, even when we have moved down those levels of spending. So we have an opportunity, and we're taking advantage of it, and I would say the analytics and the capabilities that we've developed give me confidence that we'll take advantage of those opportunities, and the efficiencies that we have brought to bear in our business over the last several years have really produced good results. So we feel that that dynamic is something that we can continue, and we're going to continue to push very aggressively. So to be very precise, think about a 2015 base of [11.3], which takes out those ---+ doesn't include the Q4 charge. And so as we think about the $1 billion cost target, the reality is, we've done the easy stuff. It will take us till end of 2017 to get to a full run rate, but if you think about full-year 2017 results, we should get at least down 3% below 2015. All right. So we'll split this up. I'll do Starwood; I'll have <UNK> talk about FX. Obviously, it would be totally inappropriate for me to go into the terms of the contract, but what I would say that's very clear is that if you have a group of customers that, in fact, have relied on getting very strong value for a product, the last thing you want to do is diminish the value of the product. And as I said earlier, not just from us, but if you look at independent card surveys, the SPG product is one of the highest-rated products from a value standpoint. So I think that the Marriott people are very customer-centric, very smart, and I don't think they would have done this deal if the objective was to dilute the value of products to some of their most important customers. So that would just be my perspective. I don't have any information from them there, but I do know, in some of what I have read publicly, they have talked about their excitement about having this type of customer, and the value that they put on it. And so that would be my perspective. And on FX, our comments today are based on the world as it exists today. And so we basically presume all of the increase or strength of the US dollar that you've seen today, but not that it continues to get worse. On provision, we've been very consistent in saying, we see a continued pathway to have loan growth grow at a good clip. Obviously, provision will grow with it, and as we continue to get the cumulative impact of a lot of really good growth in loans, you have a different mix, more early-tenured folks. So there's a little bit of seasoning that will also drive the provision rates up a bit. So that's all built into the commentary we've made today.

2016_AXP

2017

LMT

LMT #Good morning, everyone, and thank you for joining us on the call today We are pleased to have you with us to review our first quarter results As today's release detailed, we had a solid quarter operationally and financially with strong top-line growth and outstanding cash generation I would like to take this opportunity to thank our team for their continuing efforts, as we focus the corporation on growth, successfully delivering solutions to customers and value to stockholders While <UNK> will cover the financial results in detail a little later, I wanted to touch on several highlights for this quarter First, our operating profit and earnings per share were negatively impacted by two earnings adjustments that I will comment on in a minute Our EPS of $2.61 equaled that of last year; however, our EPS would have been $3 per share without these adjustments Second, our cash from operations was strong in the quarter and we increased our outlook for the year And lastly, we returned over $1 billion to stockholders in the form of dividends and stock repurchases I'd like to take a moment to comment on the two earnings adjustments that occurred this quarter, which caused an unanticipated negative impact to operating profit and EPS The first was a charge associated with an international C4I contract to produce the world's first end-to-end integrated air and missile defense system Our solution to date has proven to be less mature than needed for this highly complex effort and we are working with the customer to fulfill their requirements We do believe, however, that once completed, this system has the potential to bring these uniquely integrated capabilities to other customers around the world The second item is a non-cash impairment charge related to an international joint venture in which we participate During the first quarter, the venture in which we own a minority interest, determined that reduced business prospects required it to impair certain assets As a consequence, we recorded our proportionate share and this resulted in the other charge you saw in our earnings release today Finally, I am pleased to report that during the first quarter, we were able to arrive at an overall economic agreement for F-35 LRIPs 9 through 11, that allowed us to accept the unilateral pricing for LRIP 9, complete negotiations for LRIP 10 and establish cash payment terms for all three lots that were improvements over previous positions It was the overall bundling of economic considerations and resulting improved cash terms that enabled us to increase our cash outlook for the year that you saw in our earnings release We will continue our strong emphasis on growth, cash generation and shareholder-friendly actions as our business areas continue to provide products and services that are in great demand by our customers Before discussing operational highlights from our business areas this quarter, I'd like to outline the status of DOD budgets At this time, government spending remains limited by the continuing resolution that is set to expire on April 28. As you know, the continuing resolution, or CR, limits funding to prior year's levels and prohibits new programs from starting Discussions are underway to extend the CR as Congress continues to debate the regular appropriations bills We are hopeful that these discussions result in an approved FY 2017 Defense Appropriations Act as we feel a further lack of budget clarity could have longer-term consequences for our armed forces and our industry And we continue to urge our country's leadership to reach an agreement There are however, several encouraging indications that our nation's leaders are aligned with the need for a focus on defense spending First, the House recently passed the FY 2017 appropriations bill, and it is currently residing with the Senate This bill, which is in compliance with the Bipartisan Budget Act of 2015, also supports vital equipment procurement, with increased spending called out for BLACK HAWK helicopters, as well as additional F-35s Similarly, we are pleased to see President Trump's 2017 supplemental defense appropriations submission and the administration's initial FY 2018 budget outline, or skinny budget; both request funds in excess of the Budget Control Act caps Last month, I attended the Munich Security Conference, where well-respected leaders from the U.S and participating countries echoed the theme that the international security environment has become increasingly more volatile Recent events around the world have only served to confirm this sentiment We, as a nation, need to recognize these threats and provide our military leaders relief from current budgetary constraints and allow them to address the challenges they face in defense of our country and our citizens We remain hopeful that progress will continue to be made in this area, and upcoming legislation will include the increases necessary to continue to equip and maintain our fighting forces Moving to operations, the quarter contained multiple mission success events, and I'd like to feature one each from our Aeronautics, Missiles and Fire Control, and Rotary and Mission Systems business areas As some of you may know, this past February, the U.S Air Force held their premier air combat exercise, Red Flag, at Nellis Air Force Base outside Las Vegas, Nevada This year's training event featured, for the first time, the F-35A conventional takeoff and landing, or CTOL, variant, which was placed into service following its successful initial operating capability declaration in August of 2016. After flying over 207 sorties, the fleet of 13 F-35A jets posted an impressive success rate of 20 to 1 against the highest level threats known in the simulated contested environment Just as importantly, the aircraft's stealth capability and electronic warfare suite allowed it to eliminate ground-based surface-to-air missile installations, effectively securing the battle space and providing unparalleled situational awareness In addition, the F-35 flew alongside the F-22 Raptor and joint and coalition forces, including participants from the Royal Australian Air Force and the United Kingdom's RAF, demonstrating the important interoperability this generation platform provides Lastly, and just as significantly, the CTOL jet excelled in the maintenance aspect of the exercise The F-35 and its Autonomic Logistics Information System, or ALIS, proved to be a highly reliable weapon system, achieving a mission capable rate well above 90%, and far surpassing legacy aircraft averages of 70% to 85% availability during the high ops tempo environment of Red Flag, a design quality that has been recognized by users as a true differentiator of this product We believe the success of this event continues to highlight the unprecedented abilities of the F-35, and we are proud to produce the most capable and reliable aircraft in the world Turning to our Missiles and Fire Control business area, I'd like to highlight a noteworthy milestone that occurred this quarter Last month, we were honored to have our long range anti-ship missile, or LRASM, selected as the Aviation Week Laureate Award winner in the Defense category for its technical achievements in meeting an urgent operational need of our warfighters LRASM is a precision-guided, anti-ship standoff missile based on the Extended Range version of our Joint Air-to-Surface Standoff Missile, or JASSM-ER variant LRASM is currently being developed and integrated for operational capability on Navy and Air Force platforms Also, in collaboration with our Rotary and Mission Systems business area and their vertical launch system technology, our Missiles and Fire Control team initiated development with our own investment funding of an innovative surface launch solution that can be deployed from ships at sea, providing the U.S Navy with new anti-surface warfare capability as part of their distributed lethality concept We were pleased with this award recognition and with our ability to continue to bring our company's capabilities and collaboration to bear for our customers and warfighters Finally, just a few weeks ago, in our Rotary and Mission Systems business area, our Sikorsky CH-53K King Stallion heavy lift helicopter, received an affirmative Milestone C decision from the Defense Acquisition Board and will now enter the low rate initial production phase of the program This Milestone C decision comes less than 18 months after the CH-53K made its first flight, a remarkable accomplishment for this aircraft, with its unmatched payload capability and modern avionics I'll now turn the call over to <UNK> to review our first quarter financial performance in more detail, and then we'll open up the line for your questions Good morning So, Doug, just on a continuing resolution, we wouldn't expect any impact on F-35. That, as you know, is a long-cycled business The contracts that we're performing on were some time ago So with – the CR effects are not being able to add new contracts at this point So the program that we're producing on today is not impacted by the CR I'll let <UNK> pick up the question on margins And the PAO tubes issue is behind us now We have modified all the aircraft Sure, <UNK> Thanks for the question Just starting off with F-35, if you just look at the ramp-up on that program, it's very significant over the next few years And when we get to full rate production, we'll probably be delivering roughly 200 aircraft a year So, that's a big opportunity The next five years, we think about 50% of the orders will be in the international marketplace We're continuing to see additional interest from a lot of countries around the F-35 that are currently not in the program of record, so we expect that over the next few to several years, that we'll continue to see additional countries that will become buyers of the F-35. In the area of missile defense, that continues to be a great demand for us internationally You mentioned Aegis and PAC-3, also THAAD is another one that we expect Areas like in the Middle East, we expect that there we will continue to see opportunities You've probably seen that there was a notification on Qatar and we think some other countries in that region will also be considering THAAD as we go forward And then beyond that, Aegis, as we've sold some systems on Aegis, we'll continue to see opportunities for, potentially, for Aegis Ashore, which is the land-based Aegis and we continue to sell PAC-3s So, in the missile defense arena, PAC-3 MSE, the extended range, we expect we'll continue to see strong demand And then there is MEADS Germany has already selected MEADS, the Medium Extended Air Defense System, and we're moving forward on that We expect to get underway this year with a contract with them – or late this year, and we'll see other countries; watch that space We've had interest from Poland and others And then, continuing on the international front, F-16, as you've probably seen, there has been an informal Congressional notification for selling F-16s to Bahrain, up to 19 or 20 aircraft And we continue to be looking at the opportunity for selling F-16s to India, which could be a much bigger buy by India over time, as they move through their process So, and then F-16 upgrades, we were doing from South Korea, Taiwan, Singapore, and others that have made a selection on that We think, with that large fleet that's out there, that we'll continue to see other countries that will look at F-16 upgrades So on the aircraft front and the missile defense front, continuing opportunities And beyond that, I mentioned LRASM in my discussion on the front end with my opening remarks We think there is a big opportunity for LRASM for the U.S government as we move forward We've sold JASSMs to other countries, so LRASM even could be a potential for international opportunities T-X and JSTARS are two bids that, this year, that we are participating in We think we have a very strong offering on T-X, the next trainer replacing the T-38, that capability we're offering is a T-50A, It's a very mature program that has low risk, and we can accelerate the schedule and meet the needs of the Air Force up to two years earlier than probably a clean sheet design could do, or maybe more So, we're very much ready with our offering on that; we expect to be very competitive in that opportunity JSTARS, we've got a great team pulled together on JSTARS as well, and we're bidding on that opportunity Future Vertical Lift is a little further out, but of course, we're in the demonstration phase, in the technical demonstration on that, and are teaming on that capability So, we expect to be in a good position for Future Vertical Lift as we go forward And then the Ground Based Strategic Deterrent, we will participate in that competition, and we think we have a strong offering and LRSO So, we are engaged in, not only our current portfolio that we believe is very strong and there is a strong demand for, but we are pursuing some big opportunities in other areas And I didn't mention our Space Systems area, but commercial satellites and the satellites for the military, as we continue to grow that portfolio as well So, I think I've kind of walked around the system I did mention C-130, I mean, there continues to be interest in the C-130 in countries like India and Saudi Arabia and France and Germany, and we hope to – we are currently on a multi-year with the U.S government, we would expect them to continue to purchase C-130s going forward And I think that – <UNK>, any others, maybe, you can add to that? I've kind of tried to walk around the portfolio We have a very broad portfolio, as you all know, and a very strong portfolio So, we're really pleased with how well it's supported in the current budget, and what's in the budget deliberations going forward for the U.S government But around the world, we've got great opportunities internationally Thanks, Rich Well, first off, yes, we are moving the line to Greenville, and let me just give a little background on that I think we've let you all know that we will be delivering our last F-16s off the line in Fort Worth later this year, and then actually, the line will stop for a period of time It was important for us to continue to look at restarting that line We know how to do that, we have a robust supply chain that has been able to increase and decrease over the life of the F-16, and deal with changes in quantities, and we're ready to restart that line The reason we're moving to Greenville is, we're ramping up production on the F-35 in Forth Worth, we need the facilities there for what we're doing Greenville is a great operation that has a strong talent and good facilities there So, it will be a final assembly and check-out facility for the F-16 there, it's just – we basically produce the aircraft through our supply chain elements of it, and we will assemble it there and deliver it from Greenville And we're excited about that, it's a – we've also selected Greenville as our site for producing the final assembly of the T-X, of our trainer opportunity as well, the T-50A, so – and we have demonstrated the capability for doing fighters in that facility, so we're excited about it being the place for the future F-16s In terms of it being this year, for Bahrain, getting an order this year, we feel good about it, but it's really government to government, so we'll have to go through the finishing up on the formal congressional notification and get an order underway And we look forward to that opportunity We're very encouraged by that, and we would produce those in Greenville for that reason In terms of the F-16 SLEP, the Service Life Extension Program, we were pleased to see that the F-16 was designated to have an extended useful life It has been a strong program for us, and so we continue, as I said, to do upgrades around the world, so that airframe and its capability, it has demonstrated it can fly many more hours and that will open the opportunity for putting new systems on it, new weapons systems, new mission systems and radars and things of that nature So we see that as a very positive for that fleet, for it to continue to serve our customers, not only U.S Air Force, but customers around the world for many, many years to come So, <UNK>, maybe I'll take the JV, and then let <UNK> pickup on the AWE and <UNK> you can fill anything more on that The JV itself, as I mentioned in my opening remarks, this is a non-cash impairment charge And we are actually a minority interest in this JV Back in the mid to late 2000s, the UAE was looking for U.S partners that would help them to develop their fixed wing and rotary wing sustainment capabilities so that they could support their aircraft in-country and look at broadly supporting beyond the UAE, other countries' aircraft And we entered in this joint venture in 2010. At the time, we were a 20% owner in it from a Lockheed Martin standpoint, Sikorsky was a 20% owner, and the UAE entity had 60% Of course, when we acquired Sikorsky in 2015, that increased our position So, we are a 40% owner in the joint venture The joint venture has been successful It's been a good joint venture, it's got about 4,000 employees, sales of about $1.5 billion a year It's been very profitable every year with equity earnings that come back to us through Sikorsky and now to us, both our share and Sikorsky's share And it's generated to offset credits for us that have satisfied a lot of obligations for us for the programs that we have in country So from that standpoint, it's successful The ambition, though, for that entity is for it to grow regionally and become a sustainment center for the region And so facilities were built and machinery and equipment procured in order to prepare for growing beyond just the UAE market And unfortunately those projections haven't materialized The fact that oil prices have been lower has not helped matters, but it's been a damper on what the outlook was for it So, the charge basically recognizes the diminished value of those assets and the lower demand environment We still have aspirations for that entity, and hopefully, we will see longer term that outlook But as we looked at it today, the reduced business prospects, the entity determined that they needed to impair certain assets, and so that's what we dealt with So, let me wrap up Since that was our last question, I want to conclude the call today And I'll end by reinforcing our commitment to our strategy of growth in top-line sales and strong cash generation while at the same time providing our customers with world-class solutions to their continuous challenges and delivering our stockholders long-term value creation Thank you again for joining us on the call today We look forward to speaking to you on the next earnings call in July Karen, that concludes our call today

2017_LMT

2018

CPF

CPF #Thank you, Laura, and thank you all for joining us as we review our financial results for the first quarter of 2018. With me this morning are Catherine <UNK>, President and Chief Executive Officer; and <UNK> <UNK>, Executive Vice President and Chief Credit Officer. During the course of today's call, management may make forward-looking statements. While we believe these statements are based on reasonable assumptions, they involve risks that may cause actual results to differ materially from those projected. For a complete discussion of risks related to forward-looking statements, please refer to our recent filings with the SEC. And now, I'll turn the call over to Catherine. Thank you, <UNK>, and good morning, everyone. First quarter net income of $14.3 million reflected an increase of 9.2% on a year-over-year basis. On a sequential quarter basis, the dramatic change in net income was primarily due to the $7.4 million noncash income tax expense taken in the previous quarter related to the revaluation of our net deferred tax assets, or DTA, as a result of the newly implemented tax reform legislation. The current quarter net income included an income tax benefit of $700,000 that resulted from a further refinement of our estimated DTA valuation. Loan and deposit growth continued to be stable in the first quarter. Total loans increased by 1.2% from the previous quarter-end and by 7.6% from the same period a year ago. Loan growth from the previous quarter included an increase in Hawaii by 1.8% and a decrease on the Mainland U.<UNK> by 3.5%. The key drivers of loan growth on a sequential quarter basis were the increases of 3.2% in home equity loans and lines, 2.9% in commercial mortgages and 2.5% in commercial and industrial loans. Asset quality remained strong with nonperforming assets at 0.06% of total assets. Total deposits and core deposits increased by 0.5% and 0.4%, respectively, compared to the previous quarter and by 4.2% and 5.1% compared to the first quarter of last year. With respect to core deposits, on a sequential quarter basis, there was a slight shift from noninterest-bearing demand to interest-bearing demand money market and savings deposits. With the competitive pricing for loans and deposits in our marketplace, we have experienced a compression in our net interest margin during the quarter. This is an area that we are placing a priority on addressing. The quarterly cash dividend was increased for the second consecutive quarter to $0.21 from $0.19 per share in the previous quarter or by 10.5% and will be payable on June 15, 2018, to shareholders of record as of May 31, 2018. The economic outlook for Hawaii continues to be positive for 2018, following the solid performances of our leading economic indicators in 2017 that continued into 2018. The visitor industry recorded a strong first 2 months in 2018. Year-to-date, as of February, visitor arrivals increased by 7.7% and visitor spending increased by 8.5% compared to the same period a year ago. The number of nonagricultural jobs in February of this year was up by 1.6% over the same period last year, representing the 89th consecutive month that jobs have increased year-over-year. The seasonably adjusted unemployment rate in Hawaii remained at 2.1% in March compared to 4.1% nationally. The current economic forecast for the year 2018 includes year-over-year increases in real personal income by 1.5%, real growth domestic product by 1.7% and the Honolulu Consumer Price Index by 2.4%. At this time, I'll turn the call over to <UNK> to review the highlights of our financial performance. <UNK>. Thank you, Catherine. Net income for the first quarter of 2018 was $14.3 million or $0.48 per diluted share compared to net income of $4.3 million or $0.14 per diluted share reported last quarter. As Catherine mentioned, our fourth quarter 2017 results were negatively impacted by an estimated onetime $7.4 million charge for the revaluation of our net deferred tax assets. Also, our first quarter 2018 results include a $0.7 million onetime income tax benefit due to a refinement to estimate of the revaluation of the net deferred tax assets. On a normalized basis, our first quarter effective tax rate was in line with our expectations at 24.4%. We continue to expect our effective tax rate to be in the 23% to 25% range. However, we continue to evaluate additional tax strategies that may affect the effective tax rate prior to the filing of our 2017 tax return. Return on average assets in the first quarter was 1.01% and return on average equity was 11.60%. Net interest income decreased by $0.5 million sequential quarter. On a normalized basis, net interest income was flat sequential quarter as there was $0.5 million in interest recoveries in the fourth quarter of 2017. Also, the reported net interest margin declined by 6 basis points. 3 basis points of the NIM decline was due to the interest recoveries received in the fourth quarter of 2017, and 2 basis points of the decline was due to the tax reform impact on municipal bond income. On a normalized basis, we did experience 1 basis point of spread compression in the first quarter as deposit costs increased slightly faster than our loan yields. Our Asset/Liability Committee is implementing several balance sheet strategies to improve prospective net interest margin and net interest income. While some strategies can be implemented quickly, others will occur over time. As a result, we believe net interest income may be flattish to slightly higher for another couple of quarters. During the first quarter, we recorded a credit to the provision for loan and lease losses of $0.2 million compared to a credit of $0.2 million recorded in the prior quarter. Net charge-offs in the first quarter totaled $0.6 million as compared to net charge-offs of $1 million in the prior quarter. At March 31, our allowance for loan and lease losses was $49.2 million or 1.29% of outstanding loans and leases. Based on current forecasts, we believe that provision will return to a debit provision in the second quarter of 2018. First quarter 2018 other operating income totaled $9 million. Other operating expense for the first quarter declined by roughly $1 million sequential quarter to $33.5 million. The sequential quarter decline was primarily driven by decreases in advertising, legal and professional fees and salary and benefit expense. The efficiency ratio for the first quarter was 65.4%, which was a slight improvement from the fourth quarter. We continue to expect the efficiency ratio to trend towards the low 60s by the fourth quarter of 2018. During the first quarter of 2018, we repurchased roughly 344,000 shares of common stock at an average cost per share of $29.36. We've also repurchased an additional 102,000 shares of common stock month-to-date in April at an average cost of $29.09. Finally, I'd like to close by summarizing some of the highlights of our first quarter results. Solid year-over-year net income growth of 9.2% and EPS growth of 14.3%. We increased our quarterly cash dividend by 10.5%. We continue to maintain strong asset quality and solid capital ratios. And finally, we continue to have opportunities to improve ---+ further improve solid performance. Thanks, and I'll return the call to Catherine. Thank you, <UNK>. In 2018, we do have an ambitious business plan and have factored in our projections for the economic climate and market conditions in Hawaii as well as the competitive challenges we face in a rising interest rate environment. I am confident that we will attain the milestones and goals we have set forth, and we'll continue to focus on operational improvements and strengthening customer relationships. I would like to take this opportunity to thank our employees, customers and shareholders for their continued support and confidence in our organization as we work toward achieving our 2018 goals. At this time, we will be happy to address any questions you may have. The public deposits were roughly consistent in the first quarter. They increased slightly. So we're just about ---+ just over $700 million at the end of the first quarter. And that is a little contrary to what we've been discussing about running down public deposits. But there was a change in the pricing in the market. So during the third and fourth quarter, the pricing relative to treasuries of government deposits were about 11 basis points above comparable term T-bills. In the first quarter of '18, the pricing change were reverted back to more of the norm where it's 4 to 5 basis points below comparable term T-bills. So as a result of that 15-basis point decline in pricing, government deposits became roughly 30 basis points cheaper than comparable term wholesale borrowings. So we did maintain the balance. We actually slightly grew it during the first quarter. Yes. Yes. Again, you're right, Jackie. It's primarily in CDs, and I would say large CDs. That's where we've seen the majority of the increase on the deposit costs, and that's again primarily related to government. But there have been some other increases in costs. And what the team has ---+ we've been doing is we've actually been trying to segment the customer ---+ the deposit customer base a little more finely. And as a result, I think we've done a pretty good job of keeping deposit costs manageable outside of the government. So total deposit costs went up 4 basis points. But then I think if you look at the betas, the story is ---+ story remains the same. So the ---+ if we were to segment the large CD portfolio, the portfolio, the core deposit portfolio, the nonlarge CD portfolio is roughly $4 billion with a weighted average rate of 8 basis points and a rate beta over the last 2 ---+ last 12 months of 2%. When you contrast that with the large CD portfolio of $970 million, weighted average rate of 1.27% and a rate beta over the last 12 months of 88 basis points ---+ 88%. So again, we think the key takeaway is that $4 billion core deposit portfolio has exhibited a very low rate beta of 2% and currently has a weighted average interest rate of 8 basis points. Yes, yes. And there's other things that ALCO is looking at to manage net interest income, net interest margin. We do maintain the $90 million trust preferred portfolio. And while it remains a relatively cheap form of Tier 1 capital, it is hurting the net interest margin. So that's a lever that we can pull. All forward issuances that comprise the $90 million are callable on quarterly interest pay dates at par. Yes, it's definitely something that we're discussing. I think it's a keener focus on the loan and deposit pricing. So it's focusing more on our profitability reporting. Yes, I'll take that question, Aaron. So the new loan origination yield was about 3.80% in the first quarter. And that compares to our average loan portfolio yield of 3.98%. We are taking measures to address this, and we're continuing to look at the appropriate risk reward balance in looking at our loan opportunities. And if I may add, Aaron, the repricing of the portfolio, we have roughly 1/3 of the loan portfolio that reprices 1 year-end in. So that's what we consider to be the short-term portion of the repricing portfolio. And one thing to note on that is in that 1/3 of the portfolio does include the portion that reprices off of the CPB Bank base rate. And all of the Hawaii banks when interest rates were falling ---+ I think this goes back to 2008, when interest rates were falling, all of the large Hawaii banks, we floored our prime rate as 4.5%. So even though debt funds went further down, and Wall Street Journal prime went down to 3%, we stopped at 4.5%. So on the way up as Wall Street Journal prime was repricing up, we're not getting the benefit on this portion of the bank base rate portfolio until the March 22 tightening where Wall Street Journal prime went to 4.75%, and we finally were able to increase the bank base rate portfolio. About $165 million. Yes. That's a good question, Aaron. That's a discussion that we plan to have with the regulators. The way the trust indentures read today, it does require us to discuss the prepayments with our regulators prior to call. So like similar to what we did, we did call the ---+ our CPB Capital Trust I $50 million several years ago, so we'll go through the same process. And there's a possibility that it could be considered ---+ I guess, the term is extraordinary capital actually, so you can get an approval to do that, and then it was necessarily change what we change our plans on the repurchase front. But that's obviously something that still needs to occur. Yes, Aaron, we're still expecting mid-single-digit loan growth for the year. Sure. I'll take that <UNK>. Well, the first thing I will say is in the fourth quarter of last year, we announced an increase in our entry-level rates for our employees to remain competitive with our other banks here in the local market. I would say that we continue to be very aggressive out there in terms of attracting and retaining our best employees. As far as overall salaries and benefits expense, we're holding to the guidance that we've given in earlier calls, and so it still will be in the $18 million to $19 million range quarterly. Yes. I'll start and let me just look at production. And the first thing I will say is that we did have a nice uptick in production in the fourth quarter. So we were at about $230 million. That related in part to the completion of a couple of condo towers here in Honolulu where we got a significant percentage of the takeoff. The first quarter of this year, we have production of about $130 million. But we do expect in the second quarter for that production number to be more in the $150 million range. And then the other thing I would add is that and something unique to our bank compared with our competitors is we have joint ventures with real estate brokerage and development firms. So our percentage of production is represented by purchases that tends to be higher than our competitors. And in Q1 of this year, the purchase percentage was 64%. Yes, sure, <UNK>. I would say that, that we're going to be ---+ or continue to be careful as we look at that risk reward balance in our Hawaii opportunities but also Mainland opportunity. So you will see us being opportunistic, including on the Mainland. And where we see the right balance, specifically to the Mainland, you could see that percentage. I think it's under 11% today of the total portfolio. You can see that [bumped up] beyond the 11%. Actually, for this (inaudible), we ended the quarter at 10.7% of total loans on the Mainland. Let me start, <UNK>, and then I'm going to turn it over to <UNK>. I believe in earlier calls, we've been (inaudible) that we're coming to an inflection point. And we do believe in the second quarter that we are at that inflection point. So let me turn it to <UNK> to give you a little bit more color on what we could expect in the second quarter. <UNK>. So as you know, we don't set a target percentage level for us. So while we are at the 1.29%, as Catherine mentioned, we do believe we reached a normalized point. And really going forward, barring any major unanticipated changes, we do expect a provision, and that range is going to be somewhere between $500,000 and $1.5 million in the second quarter. And that's really based on a number of things: our loan portfolio performance; of course, asset quality, including our net charge-offs; and then again how the economy environmental factors. So a number of things that we're looking at that goes into that. I'm going to turn that over to <UNK>. Thank you, Catherine. <UNK>, the BOLI line, you're right, the normal quarterly run rate was probably in the $500,000 to $600,000 area. The reason for the underperformance in the first quarter is, first of all, we didn't receive any death benefit income. And then secondly, we do have a policy. We have a separate account. We have a one separate account policy that does not have a stable value wrap. And it's primarily invested in fixed income in bond securities. So it performs along with the bond market. When the bond market is performing well, it performs well. And when the market is more of a bear market, it underperforms. So that's a BOLI policy that came over in the past acquisition. So because it doesn't have the stable value route, it does agree to a little bit of volatility in the income line. Let me turn that to <UNK>. Don, the change in the first quarter, the decline in the DTA balances was primarily related to a real estate developer that's building a residential condominium in Hawaii. So we basically had their operating account. Last year, they deposited a bunch of construction funds, and we've been slowly disbursing those funds. And so the rundown in the first quarter was a result of their construction withdrawals. So it wasn't as if that money went into the interest-bearing DTA ---+ interest-bearing checking accounts. So we actually had an accrual on the interest-bearing checking account side. And now that was more ---+ so it feels pretty broad-based for a lot of good account(inaudible) increases in interest-bearing checking. No, no loans purchased, Don. Let me turn that question over to <UNK>. So our methodology, we did take a look at that and did do a change back in 2016. Where we're going with our reserve going forward is with our primarily due to two things. That's the growth in our loan portfolio as well as the net charge-off level. So we are seeing an increase in our net charge-offs, particularly, in the consumer segment. And that is really where the increase in reserves is targeted for. Thank you, Laura. And thanks, everyone, for participating in our earnings call for the first quarter of 2018. We look forward to future opportunities to update you on our progress.

2018_CPF

2018

CBOE

CBOE #Thank you. Good morning. Thank you for joining us for our first quarter earnings conference call. On the call today, Ed <UNK>, our Chairman and CEO, will discuss the quarter and provide an update on our strategic initiatives; then <UNK> <UNK>, our Executive Vice President and CFO, will provide an overview of our first quarter 2018 financial results and updated guidance for certain financial metrics. Following their comments, we will open the call to Q&A. Also joining us for Q&A will be our President and COO, Chris <UNK>; and our Chief Strategy Officer, <UNK> <UNK>. In addition, I'd like to point out that this presentation will include the use of several slides. We will be showing the slides and providing commentary on each. A downloadable copy of the slide presentation is available on the Investor Relations portion of our website. During our remarks, we will make some forward-looking statements, which represent our current judgment on what the future may hold. And while we believe these judgments are reasonable, these forward-looking statements are not guarantees of future performance and involve certain assumptions, risks and uncertainties. Actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Please refer to our filings with the SEC for a full discussion of the factors that may affect any forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after this conference call. Also, note that references made to the planned migration of C2 Options Exchange and the CBOE Options Exchange are subject to regulatory review. During the course of the call this morning, we will be referring to non-GAAP measures as defined and reconciled in our earnings materials. We will also refer to non-GAAP adjusted combined results, which are also reconciled in our earnings materials. As you know, we completed our acquisition of Bats Global Markets on February 28, 2017. The combined results present information regarding the combined operations as if the Bats acquisition had closed at the beginning of 2017 in order to provide a supplemental discussion of our results and review of our business. Now I'd like to turn the call over to Ed <UNK>. Thank you, Debbie. Good morning, and thank you for joining us today. I'm pleased to report that first quarter 2018 was our best quarter ever and that we raised our expected run rate expense synergy target to $85 million at the end of 2020, up $20 million and a year ahead of our initial projections. <UNK> will discuss that more detail later. CBOE Global Markets reported adjusted earnings per share of $1.38 on net revenue of $329 million, led by double-digit year-over-year gains across each of our business lines and new trading highs in our proprietary products. Our record results underscore the utility of our products and the strength of our diversified portfolio of exchanges, particularly in times of heightened market volatility, which we saw during the first quarter. As we shared in previous calls, we expected that the ongoing growth we saw in VIX and SPX options and VIX futures during sustained periods of low volatility would spike when volatility returned to the market. This expectation played out in the first quarter in the form of new quarterly volume records in VIX futures and options and SPX options as well as a lift to our equities and FX businesses. Following the sustained period of record low volatility in 2017, in which the VIX index averaged just over 11 compared to its long-term average of 19, investor perceptions of risk changed dramatically in Q1 marked by large spikes in both implied and realized volatility. The new normal appears to be a VIX level ranging between 15 and 25, which is more in line with historical levels that we saw throughout 2017. Historically, transitions from low to high volatility regimes result in traders reassessing the products they use and shifting into products that are best suited to a new market environment. We believe that small differences between front month and longer-dated VIX futures that is a flat VIX term structure is signaling that the market is still adjusting to the new volatility regime. We view shifts in product usage as normal during these transition period, and we believe we are seeing the shift play out within our proprietary index complex. While higher volatility is generally good for all of our businesses, the flat VIX term structure has been a headwind for VIX trades that seek to capture price differences across the VIX futures curve. At the same time, large daily moves in the S&P 500 have created new opportunities for VIX option users, who can capitalize on daily trading ranges that are 3x greater than in Q4 2017. As such, average daily volume in SPX options in April was up 20% year-over-year compared to April 2017 and largely offset declines in VIX futures and options volume relative to last year's solid April trading. Furthermore, SPX average daily volume in April was 15% above SPX options activity for the full year 2017. Since early February, the VIX futures term structure has been flat or downward sloping 55 of 61 days, an unusually long period not seen since 2011. However, we expect that VIX futures prices will eventually return to a more familiar upward sloping pattern, as it has done in the past, regardless of where the market sets the new floor for equity volatility. Let me be clear. Volatility is alive and well, and we are confident that our SPX and VIX products offer the trading tools to manage risk in any market environment. Regardless of market conditions, we remain intensely focused on our commitments to product innovation, leading-edge technology and seamless trading solutions. I'll take a few moments here to provide an update on key strategic initiatives supporting those commitments. Our legacy of driving growth through product innovation was highlighted throughout the month of April, which we proclaimed VIX month in commemoration of the 25th anniversary of the dissemination of the VIX. The month featured a daily VIX social media campaign, the launch of a new VIX website and a VIX symposium held for press and customers. Perhaps most fitting, we also announced a new VIX product. On April 17, we launched the dissemination of the CBOE 1-year volatility index, which provides up-to-the-minute market estimates of 1-year volatility. The 1-year index was designed to monitor the market's expectation for longer-term volatility, which we expect will be especially useful for investors with longer-duration liabilities, such as insurance companies and pension funds. We are exploring the development of a futures contract on the index subject to regulatory review and look forward to reporting on that going forward. Turning now to the migration of CBOE exchanges onto proprietary ---+ BATS proprietary technology, which we believe will maximize our value proposition for customers and shareholders and power our company's growth going forward. We completed a major milestone in the integration with the flawless migration of CBOE Futures Exchange to the ---+ our Bats technology as scheduled on February 25. The migration provides our futures customers with a more efficient and user-friendly trading experience that includes greater bandwidth, significant latency reduction, enhanced risk controls and improved complex order handling. We remain laser-focused on executing a seamless technical and operational integration for all of our exchange platforms. We are well on track for our planned C2 Options Exchange migration on May 14, 2018. And as announced last month, we have targeted October 7, 2019, for the migration of CBOE Options Exchange. We are modifying Bats technology to incorporate both electronic and open archive trading for CBOE Options Exchange, which includes SPX and VIX options trading. We targeted 2 technology enhancements for 2018 in advance of migrating CBOE Options Exchange: the migration of S&P 500 Index options to hybrid trading, which we successfully completed last week; and the introduction of new trading floor terminals, which we plan to begin rolling out on November 5, 2018, subject to regulatory review. We are encouraged by the initial response to SPX and hybrid and are very pleased with ---+ the conversion itself was flawless. The completion of the CFE migration and significant steps taken to prepare for the C2 and CBOE options migrations leave us well positioned to achieve our ultimate goal of providing our customers with a unified world-class trading experience on Bats' leading-edge technology across all of our equities, options and futures markets. As noted in our last call, our preparations ahead of MiFID II, which came into effect on January 3, have enabled us to grow our European business in the midst of a changing regulatory landscape. The rapid adoption of our periodic auctions book this quarter, which is a MiFID II-compliant lit order book operating auctions throughout the day, demonstrates that market participants are finding value in executing their trades in a venue designed to provide minimal market impact. Our Large In Scale block trading platform also continues to attract new customers and increase volume, with average trade sizes in excess of EUR 1 million. Additionally, we've continued to grow our systematic internalizer technology services business, further diversifying our European business model. While the liquidity landscape will continue to evolve under MiFID II, we believe our seamless rollout of new technology and services ahead of the new regulation leave us well positioned to continue to adapt and grow. In closing, I would like to thank our team for a truly tremendous quarter. While the return of volatility to the marketplace provided great headwinds, the collective work of our team helped position each of our exchanges to benefit with double-digit volume increases. Further, throughout what proved to be our company's busiest quarter on record, we continue to lay the groundwork for future growth by rolling out new products and services while advancing our technology integration. As a result, I look forward to all that we can accomplish to power the potential of our customers and shareholders in the months and years ahead. With that, I will now turn it over to <UNK>. Thanks, Ed, and good morning, everyone. Before I begin, I want to remind everyone that unless specifically noted, my comments relate to 1Q '18 as compared to 1Q '17 and are based on our non-GAAP adjusted combined results, including Bats. Building on 2017's positive momentum, as Ed already noted, we reported record financial results for the quarter. In summary, our net revenue grew 24%, with net transaction fees up 36%, nontransaction revenue up 7% and organic net revenue growth of 28% for the quarter. Adjusted operating expenses increased 3%, which, combined with our strong revenue growth, produced 560 basis point lift in our adjusted EBITDA margin of 70.4%, demonstrating our strong operating leverage. And finally, our adjusted diluted earnings per share grew 47% to $1.38. The press release we issued this morning and our slide deck provide the key operating metrics on volume and revenue capture for each of our segments as well as an overview of key revenue variances. Additional disclosures can also be found in our Form 10-Q filed this morning. At this point, I'd like to briefly highlight some of the key drivers influencing our performance in each segment. In our Options segment, the 24% net revenue growth was primarily driven by higher net transaction fees, reflecting the record volumes previously noted. Turning to futures. The 47% increase in net revenue resulted from a 44% increase in average daily volume offset by a 5% decline in revenue per contract, with the latter reflecting higher rebates related to elevated VIX futures trading volume. We continue to be excited about the opportunities we believe the CFE technology migration will have for our futures business, in particular allowing us to bring new products to market at a faster pace and more efficiently. Overall, the long-term growth of our proprietary products remains our primary focus, and we have a robust pipeline of new products we're excited about launching. Turning to U.S. Equities. Net revenue grew 10%, with equities volume benefiting from the return of volatility to the market, shifting more trading to on-exchange venues versus off-exchange. As this slide shows, total market data revenue for U.S. Equities was up 16% in the first quarter, with SIP market data revenue up 14% and proprietary market data up 24%. However, a significant portion of the $3.7 million increase in SIP revenue was due to auto recoveries. So the first quarter's not representative of our expectations for future quarters this year as we continue to expect downward pressure on SIP market data due to industry consolidation. Looking to growth in our proprietary market data revenue, a majority came from pricing changes implemented at the beginning of the year. We expect continued growth in proprietary market data in 2018 as we benefit from pricing changes and customer response to our CBOE 1 product. Net revenue for European Equities grew 37% on a U.S. dollar basis, reflecting growth in both net transaction and nontransaction revenues following the implementation of MiFID II in January as well as strength of the pound sterling versus the U.S. dollar. On a local-currency basis, net revenue increased a very healthy 18%. While we benefited from increased market volumes, we realized increased revenue from a higher net capture due to the later-than-planned implementation of the dark pool volume caps. We expect net capture to moderate back to historic levels for the remainder of the year. Net revenue for Global FX grew 35% this quarter, setting new highs in both market share and average daily notion of value traded on our platform. Volumes improved on both our New York and London matching engines, with the latter more than tripling its volumes year-over-year. Macro environmental factors have certainly contributed to the overall growth in the spot FX market, but we believe our market share growth reflects the impact of technology enhancements as well as more effective liquidity provisioning. Turning to expenses. Total adjusted operating expenses were nearly $110 million for the quarter, up 3% compared with last year's first quarter. The key expense variance was in compensation and benefits, resulting from, one, higher incentive-based compensation driven by and aligned with our financial and operational performance; and two, accelerated stock-based compensation recognized in the first quarter, up about $4 million and $2.5 million, respectively. As we pointed out on our last earnings call, there are several incremental expenses impacting our year-over-year comparability such as expenses associated with the Silexx acquisition, the increased strength of the pound sterling and the gross-up of OPRA-related expenses. Additionally, during the first quarter, we raised our capitalization threshold, which resulted in incremental expense. In total, these items accounted for about $2.9 million in incremental expenses in the quarter, with the currency impact being the largest. If you adjust for those items, expenses would be up less than 0.5%. We are reconfirming our full year expense guidance to be in the range of $420 million to $428 million. We expect compensation and benefits to be lower in subsequent quarters, reflecting the expected realization of expense synergies as well as smoothing out of the impact from the accelerated vesting, which is typically weighted to the first quarter when new grants are issued. For the first quarter, we realized $3 million in pretax synergies primarily from compensation and benefits. As Ed mentioned, we established our technology migration date for C1, our final and most significant migration to Bats' technology. With that key date now established, we raised our expected annualized run rate expense synergy target to $85 million from $65 million. Furthermore, we now expect to reach this run rate in 2020, a year earlier than our initial projections. We still expect to exit 2018 with approximately $50 million in annual run rate expense synergies and now expect to reach $80 million at the end of 2019. Turning to income taxes. Our effective tax rate on adjusted earnings for the quarter was approximately 26%, somewhat below our annual guidance range of 26.5% to 28.5% due to the settlement of uncertain tax positions during the quarter. The effective tax rate on combined adjusted earnings in the first quarter of 2017 was 28.1%. The decline primarily reflects the favorable impact of corporate tax reform. We are reaffirming that we expect the annual effective tax rate on adjusted earnings to be in a range of 26.5% to 28.5% for 2018, with the tax rate for the second quarter expected to be slightly above the high end of the guidance range and the tax rate for the third and fourth quarters to be at the higher end but within our guidance range. In addition, we are lowering our guidance for capital expenditures to be $45 million to $50 million versus our previous guidance of $50 million to $55 million. The decrease reflects more efficient spending and the adjustment of our capitalization threshold. Moving to capital allocation. We are maintaining our unwavering focus on effective capital deployment to drive shareholder value by prioritizing the investment in our business to support our growth strategy and then returning excess free cash flow to shareholders via a combination of dividends and share repurchases while continuing to delever to maintain a strong balance sheet and longer-term financial flexibility. Our quarterly results, once again, generate strong cash flows, which enabled us to pay out dividends of $31 million, use $44 million to repurchase shares and reduced our debt by an additional $25 million. Year-to-date through April 30, we have repurchased approximately 451,000 shares of CBOE common stock for about $51 million or about $112 per share. We ended the quarter with adjusted cash and investments of $166 million and a leverage ratio of 1.6x. The adjusted cash balance was higher than normal due to a number of significant tax-related liabilities due in April. In summary, CBOE delivered outstanding quarterly results and continued to demonstrate our focus on and the strength of our proprietary index products, reflecting industry-leading organic growth, strong growth in a diverse set of revenue stream, disciplined expense management, leveraging the scale of our business producing higher profit margins and integration plan on track with the higher run rate expense synergy target expected to be achieved a year earlier and ongoing focus on capital allocation by reducing debt while continuing to return capital to shareholders through quarterly dividends and share repurchases. With that, I'll turn it over to Debbie for instructions on the Q&A of the call. Thanks, <UNK>. At this point, we'd be happy to take questions. (Operator Instructions) Keith. Well, Rich, I think you\ Sure. While we'll leave manipulation to the prepared comments that we've made in the past, we are sure and certain that both our regulatory department, the first line of defense here on any market activity, and then ultimately, obviously, in cooperation with the regulators. That is a path, and that proceeds, I think, each and every day. And it's not just in the VIX complex, it's in everything that we trade across all of our exchanges. So if we put that aside and address specifically, I think what you're asking our question is ---+ and recognize that each and every day VIX trades, throughout the day, almost 24 hours a day ---+ VIX futures, and that there is this moment in time that we're always and constantly looking at how do we make better this settlement moment. If we could focus on that, I think it's exactly what Chris would like to tee up for you this morning. But again, I want to stress, let's concentrate on that settlement. The intraday trade and the measure of volatility and the perceived risk in the market, this measure is working beautifully throughout the day and into the ---+ almost around the clock. So let's focus, if you like, right at that moment of time of settlement. Yes. Thanks, Ed. And Kenny, great question with regard to the VIX settlement auction. Obviously, this is a moment-in-time auction. It's not much different than the auctions we run every day in equities at the open and at the close. And I've spent my career around auctions. So as I look at this auction, there are things that we can attack in this ---+ the VIX settlement auction. We have a variety of approaches that we're using, all with the sole goal of enhancing liquidity in the auction. As I think about it, it's really 3 areas of attack. First, we're enhancing the technology that we use for the auction. We're improving the distribution of the imbalance messages. Those are the messages that send out the imbalances that are formed in the auction. And then, we're taking steps ---+ active steps to increase the liquidity in the auction. Returning back to how we're enhancing the technology, just this week, as you know, we rolled out the hybrid platform for SPX. Now this platform allows market makers to have a more enhanced interaction with SPX all day long but more importantly, around the auction moment in time. We also plan to increase the speed of the opening process during the auction itself. With regard to the distribution of imbalance messages ---+ I just think about it, in the most recent auction we had, we had a large order imbalance. Now it is our job to market those imbalances to the market, to the widest distribution that we can possibly do that distribution. And those ---+ what we did see on that day was those imbalances messages were being read and received, and orders were filling in most of that large order imbalance, but not all of it. So it's not the trader that submitted the order, it's not his job to market the imbalance. It's our job as a market. So some of the steps we are taking to improve that, we plan to enhance the imbalance feed by increasing the speed of its dissemination. We are actively pursuing ways to improve the distribution of our imbalance information. We plan on making it available to a wider audience through a variety of means. Now turning to liquidity, where that's the most critical part of this. We are actively talking to our current market makers and new market makers to join, not only the VIX complex but the auction itself. We have been fielding inbound calls from our market makers and our end users that want to participate in those imbalance orders because those are moneymaking opportunities for all market participants to offset. So we have a three-pronged attack that we're taking in the auction. These are short-term and long-term plans. We ultimately will be rewriting the auction when we migrate to the Bats technology when we migrate the C1 platform in 2019. Hopefully, that answers your question, Kenny. Sure. Well, most importantly, on February 25, so post-February 5, we migrated the futures platform for CFE, and that was a, what I'd call, wildly successful migration, not only because it was perfectly executed but it enhanced the liquidity pool of our platform. And since that migration, we have been monitoring closely our user traffic, both in terms of the number of market participants and market makers joining the platform post migration as well as the ---+ as you mentioned, the user account level. We are now ---+ we have grown since migration to somewhere just over 6,000 active user accounts at the customer level. The majority of that growth, ironically, is in active in VIX contracts. While we have a very successful launched bitcoin future, we've seen some growth in the bitcoin active accounts in bitcoin, but the majority of the growth since the migration has been in VIX user accounts. So we're pretty excited about that. More importantly, the performance of that platform since the migration, we have seen our displayed liquidity has obviously increased during both regular and overnight trading hours. That's important when you think about Asia trading in the VIX complex. It has actually doubled since the migration. So that's an impressive stat. The spread has narrowed to our fix spread in VIX in particular. The spread has narrowed down to the actual nickel increment that we have minimum spreads on. So really, in some, a wildly successful migration. We're very positive about the active user accounts since that migration on February 25, and we like the performance of our market makers since that migration. Yes. I think the other potential is the amount of new eyeballs on a 1-year VIX contract in the current index form. It will be interesting, as we work through what it takes to make that a tradable contract in the future, what interest we'll see as a result from a new user base who is more interested in longer-dated vol. So in the prepared remarks, we pulled out insurance companies and pension funds. So I think there is ---+ I would think there's more to come. That short-dated vol exposure is not as interesting to that group as longer-dated vol is, so I think there's ---+ I'm hopeful that there's more interest as more eyes are looking at that 1-year vol number. So first, the trade that we said is really facing the greatest amount of headwinds is capturing the difference over time in the vol surface. So you\ Thanks, Ed. And with respect to the users, just to be clear, we grew our user base since the migration. That's something we were looking for and we were excited about, so over 6,000. We didn't grow by 6,000. I just want to make sure we're clear. But what that base gives us, and you really can't convert users to a formula of new contracts, it's actually ---+ it's very positive post migration. It's a very positive statistic. But I look at yesterday, where we traded over 300,000 VIX contracts in our complex. What those users really reflect is we're primed for the trading environment that Ed's talking about when the curve starts to shift. So having those user bases there, those users create the 300,000 day trades in the complex. So can't draw the formula from the number of users. Any one user can be a dramatic user of VIX, and we've seen some accounts have exceptional volume in the VIX complex. So it's hard to draw any formulas from new users to total volume. There's a chart. Yes, we have a chart in. . And you should be mindful what this chart is saying. Prior to that, we had a growth rate of 25% over a 2-year period. So it's really just a tremendous uptick we've had since the replatforming. Just maybe one. I know we're only 4 days in here, but the SPX migration to the hybrid platform and just maybe how ---+ or if you're seeing anything yet on how that plan strategy-wise, just how that customer mix might be shifting or how we could look forward to shift. Sure, great question. And as you mentioned, it's just been a week, but it's been a very successful week. Just some stats on the migration to the hybrid system. Spreads in SPX ---+ and again, this is 1 week of data. But spreads in the SPX have tightened by 50%. That's an impressive stat. Displayed size has increased by approximately 90%. So that allows the external all-automated electronic execution in the SPX to see a greater size that is available on the screen. The electronic [verse] open outcry continues to maintain about the same level pre migration, but we'd expect there to be some time before that starts to shift upwards towards the electronic side. Most importantly, what we have seen ---+ and we structure this very carefully to make sure the spread was going to narrow but not impact the open outcry liquidity. So we continue to see large trades being satisfied in the open outcry pit to solve for very complex positions. And again, it's critical that they are able to get those trades off in what is already a narrow SPX spread. So very successful migration. It's only been a week, as you mentioned, but the stats are pretty impressive for a week. I think yesterday, Chris, was a really good view into a unusually wild day in the market as far as a move from open to close and being able to satisfy roughly 1.6 million contracts on a 4-day-old platform from our market makers' perspective. So good view into busy day yesterday. Sure. The ---+ just to be clear, the SEC's focus was on the consolidated SIP fee change that was filed earlier in the year. So it's all of the SROs that participate in the SIP. And that filing was ---+ filing needs to be refiled with clarity around rationale for the pricing. So it doesn't mean that pricing can't be changed, it just means the filing has to be enhanced that is made before the SEC. So it's still early in the process, and the exchanges are working with the SEC on the SIP filing. Hopefully, that answers your question. Yes. I think, Chris, you can speak to the direct feedback from the customers and whether or not they see a concern from the media. Let me ---+ my comments and views from the customer are that we're trading day in day out because this is the vehicle we use to hedge vol exposure, and we do it 24 hours a day. That's the first inbound I receive. As far as communicating with our customers, that is a ---+ from our perspective, proactive that we want to tell our story every chance we get. We've done that with all of you when we think there's something to tell you that doesn't fit a normal cycle. So proactive communication and transparency is really what we've always been about. So I would expect you should see us doing that at any occasion when we think there's something to be told. As for, Chris, the feedback you're getting on the liquidity and trading in and around that settlement, I think you should share your views as well. Yes. One of the ---+ obviously, we quickly issued a letter proactively because we wanted complete transparency around what our visual into that event was, and we wanted to share that with our trading community. More importantly, the inbound has been, from many clients, "How do I trade with that imbalance. " They see that as a trading opportunity, and the inbound has been consistently from both market makers and end users very interested in trading with those imbalances that they actually missed that warning. So very positive from the trading community. Remember, not all of our end user clients trade into the settlement. Many of our clients are rolling their contracts into the following months. So they don\ <UNK>, I think you should expect us also ---+ as the press is trying to understand this, this isn't easy stuff. So the misperceptions on how these processes work, we're going to be helping all along, and we think that's part of our responsibility is to continue to educate. And if we can do that with the press, we're going to do it. So expect us to be engaged and trying to straighten out those misperceptions regardless of the event, the day or the market environment. That's just what we do. Debbie, can I give that forward-looking. Chris is going to take this one. I have attorneys around me. Great. So look, I said it earlier. When you do these migrations, it's critical to look at the users that come back after the migration. And obviously, we had the events of February 5 before the migration. So we're able to see the users that came back after February 5, along with coming back after the migration. Both our market maker participation and our client participation was up post migration. So those are all phenomenal statistics when you're analyzing the success of a migration. With regard to the activity levels, remember, the VIX contract is a sizable contract. It's not really a retail contract today. So when we look at those users' accounts, they're largely sophisticated users that are in those accounts. We don't ---+ we haven't tracked each account down to the level of activity and how that shifts the future volume of VIX. But I do think ---+ I was excited about yesterday's 300,000 contracts because it gives us ---+ we have successfully migrated a base of users that can deliver a day of over 300,000 contracts despite very small open interest. So again, the open interest and ---+ the correlation between open interest and the volume of VIX, there's not a lot of correlation there when you have a 300,000 ---+ over a 300,000 contract day like yesterday. I would say, though, in the past, we have said looking into the migration that we did not fit the global standard from a futures trader's perspective. So there were pros that weren't going to write to our old platform. We did point out that big, big traders, the most [meaningful] ones, were really customers of ours. But there was the next layer and the layer below those that just did not find our convention ---+ our quoting methods meeting their global expectations. So we knew there was a queue that should be coming as far as new users. But again, the big players we have had here. Sure. On the SEC front, probably not much change from my perspective. Over the last couple years, the SEC has been very diligent around any market data filing. They ---+ certainly, we've ---+ we spend a lot of time on our ---+ on what was originally Bats One and is now CBOE 1, working through that original filing and adding a lot more detail in the filing than traditionally in the past. So this is probably the last couple of years we've seen a great deal of focus on all market data filings, both the proprietary exchange level market data filings as well as SIP-related filings. With regard to the SIP pricing, the goal of that pricing was to be revenue-neutral. When you declare something revenue-neutral, you obviously have to spend a lot of time explaining how it is actually revenue-neutral. So I think a lot of the requirements that the SEC are putting on market data filings have been going on for a couple of years. I don't see this as any different really to enhance the description of the filing and really talk about how ---+ what the impact of that ---+ those revenue ---+ those pricing changes would be. And Chris, it's <UNK>. The ---+ of the $3.7 million of the increase we saw in that ---+ as far as year-over-year, probably 85% or a little over $3 million was actually attributable to the audit recoveries. Thank you. That completes our call this morning. We appreciate your time and interest, and we'll be around if anybody has any follow-up.

2018_CBOE

2016

TTI

TTI #Good morning. That's a pretty complicated question there, <UNK>. I would say on fluids we've said a couple things. One is obviously the second half of the year will be better than last year. We had record margins that will take us a while and a much better market to get to. I think as you look at the profile going forward on how this market compares to prior cycles, you've got the new technology we have in both the water and the Neptune that we didn't have the last cycle. So I think that mix of business will be good. I think it's going to take us a while, as <UNK> said, to kind of get some of that pricing back. I think that's going to be the real question is with which customers and which products and what geographies are we able to do that. Clearly you've heard some the larger service companies feel somewhat confident that they're on a path to do that. I think we know where those actions are required. We have a game plan that timing is going to be really a function of the specific customers and demand and the capacity. But overall, I don't know that I can compare it to prior other than to say we have a very low cost structure. I think our exit rate after this cycle on a Company-wide cost structure, both at the field level and the corporate level, is going to be lower than the exit. So I think there will be some structural advantages to that. That kind of gets done in tandem with how fast the pricing is going to change. And, <UNK>, with respect to CSI Compressco, we had the earnings conference call on Friday and announced the results of CSI Compressco. And we mentioned that EBITDA for bank covenant purposes in the second quarter was $26 million. It was an improvement over where we were in the first quarter. And obviously that annualizes to a very attractive number if you take current activity levels. We believe that we've got an excellent relationship with our lender group that includes three of the largest banks that are also in the TETRA revolver. If we thought that we were going to have issues in the second half of the year, we believe that we would have the support of our banks to take a look at the covenants again. But at the current run rate that we're at, we think we're in good shape. Again, <UNK>, this is, as we said earlier, we've been very transparent with our banks. We have a lot of great relationship and I think, as <UNK> said in his comments, we've kind of laid a path out last year of how to deal with an extended cycle. And we've continued to execute with the full support of the financial community. So we feel good about that and we tend to be conservative when it comes to managing the balance sheet. Thanks, <UNK>. Thank you. And as always, we all appreciate the good questions and the support. And we'll look forward to updating the group in early November on the actual results from the third quarter. So thanks again.

2016_TTI

2016

WTS

WTS #Thanks, <UNK>. Yes. I mean, when we look at it, less than 2% of our business. We're not real strong in the UK. It's really the question of what is the macro indicators all around Europe and the overall impact. I think we're constantly looking at our cost structure. We know ---+ you know we have some European restructuring initiatives going on. So we'll continue to look and monitor that, but right now our teams, they felt the noise, they felt the shock, but honestly they believe we'll move on and things will go forward with it. So right now we're watching it closely and we'll look for opportunities, further opportunities if we need to. But right now the team believes we've got the right actions in place. Well, <UNK>, it has usually nothing to do with compensation. We really talk to teams about what we're trying to do, what we're trying to build, the momentum we're starting to get. And they meet our leadership team, and really see the opportunities inside of the organization. So certainly compensation has to be a part of the discussion, but, honestly, that's the very last thing we talk about. So really everybody is excited to be part of this company. We have a strong 140 year history, a great brand and we're now going to capitalize on that brand to grow in the future. So people are excited to join us, and, you know, all the people that have joined us are excited to be here. So they want to be part of a winning team. Thank you.

2016_WTS

2015

ESL

ESL #Yes, <UNK>, thanks for the question. Yes, in the ---+ so let me say, in the discrete charges that we took, we did feel it was appropriate to identify unique financing expenses related to closing Barco. Okay. Basically that was the process of moving money from the US and/or from our other operations in place, and then some discrete closing costs but those ---+ we view those as discrete charges. You're correct. There is nothing else related to Barco in the guidance. So that's a great question, and I'm glad you asked it. Thank you very much. And again, I thought we made it clear, but obviously I didn't. One of the reasons why we have not included Barco more explicitly in our commentary and the like, is we did not close on Barco until the second quarter. So we did not own Barco in the first quarter. Although we paid some charges to get it closed. Right, right. Paid some expenses to get it closed. It didn't close until the second quarter. Right. We ---+ it did. You're exactly right. But don't forget, our first quarter ---+ because of our ---+ we're still operating under our old format here. Our first quarter. Our first quarter ended in January. Actually, no, it's not, although we did take a discrete charge for it. So last year we offered a ---+ in terms of derisking our pension plan, we offered a one-time opportunity for our former employees who are vested in the plan, who are drawing on the plan. We gave them a one-time lump sum offer, to effectively buy out their pension. Approximately 40% of the individuals who we offered it to took that opportunity. Per pension accounting, under GAAP and actuarial calculations, once you do that, you basically have to go back in, without getting too technical, you have to go back in, revalue the pension plan, and adjust for the embedded loss that you were amortizing in there for those terminated vested employees, which is the way it's referred to in the parlance. And that $3 million charge that we took there that's there, that's related to that. Our pension plan, just for the record, our pension plan is fully funded, okay, and has been fully funded, and our pension expenses are not a headwind for the corporation, relative to our prior results in prior periods. So this was a specific action that we took last fall as we were evaluating, as almost everyone is, that has a DB plan, I should say, a defined benefit plan. We are looking---+ Trying to be proactive. ---+ at specific actions to be proactive to derisk that plan. Even though it's in pretty good shape. Yes. It's in very good shape. And under ---+ okay. The easy answer to that one, I think, is that it is. A strengthening dollar is a positive to the corporation. The impacts that were taken here, we have a couple of business units, one in the UK, one in France, that we do not take hedge accounting treatment for. And so we have some mark to market effects that go through each quarter. Because of the precipitous decline in the Euro, those mark to market, on hedges, those mark to markets were fairly significant in this quarter. So those are primarily accounting impacts, not cash flow impacts, and when the sales that are offset by those hedges materialize, the margins will be realized. But under normal hedge accounting ---+ or under GAAP hedge accounting treatment, those effects would have been retained on the balance sheet and not displayed, and then you would have seen a positive effect. If that helps at all. That is correct. Yes. You're right. <UNK> had to explain that to me about four times. Yes, it does. Certainly not to that degree. We almost always have discrete tax events flowing through, but those will be at the tax line, not in other income and expense, and interest expense, as this one was. This was unique in that regard. There is certainly nothing major planned between now and the end of the year.

2015_ESL

2015

ANGO

ANGO #Yes. So continued double-digit, stronger on the free cash flow standpoint versus third quarter. But you are right: it was down, I think, about $1 million. I think we are at $12 million and it is $11 million this quarter. So AR, unfortunately, yes, there is an item in that a lot of our revenue ---+ a little more than usual came in the last month and a lot of it in the last 2 to 3 weeks. That, unfortunately, causes AR to build because of the timing. Had it come more evenly during the quarter, you wouldn't have had as big end AR and that is probably the biggest contributing factor to why operating cash flow was a little lower. Also, on the inventory side, we did meet our goals of reducing ---+ start reducing some of the safety inventory, but we had to build for some of these product launches some inventory, which increased ---+ which reduced the reduction of inventory in the quarter. So that was probably the two factors. If those had not happened, probably cash flow would have been better by about $3 million, which would have been more towards where we were thinking about, which was mid-teen operating cash flow in the quarter. Yes. You should see some benefit in AR inventory. We have the Midline launch that is happening, so we are building inventory for that. So you will have some inventory from that and there are some other products we haven't talked about where I know we are building some inventory. So I think the bigger benefit is the safety inventory comes out will be in the second and third quarter as we finish moving all those lines. Well, we normally don't give those kind of numbers, but that is probably right: $12 million to $14 million. Hopefully closer to the higher end, but it could be in that range. We are looking to see ---+ I think we have gotten over the initial product launch growth rates and now we are really more focusing as much as possible on utilization, procedure development, and site development instead of new account generation. And so a healthy consumption in growth is around that 20% level. And I think we get there and continue and continue to develop our clinical development and we will see progress. And if our clinical development hits and accelerates, then we could start seeing the hockey stick we hope to happen in the later part of the five-year plan we have. So I think we are on a ---+ we needed that new product. It has worked well and I think we are feeling a lot better going forward. Well, we just have to keep blocking and tackling. When I look at ---+ we set ourselves our $50 million goal. That is 5,000 procedures with a little bit of ASP attrition. It is not 1 million procedures. It is not 100,000 procedures. It is 5,000. And we are running maybe 600, 700 procedures right now. We need to get to 5,000 procedures. And I don't see that as an incredible mountain when you look at 14,000 filter removals or 80,000 right atrial mass extractions, or you see the amount of IDC work being done. So even if the product is niched, which I don't think it will be, 5,000 procedures is not a lot to ask. So what we have done is we have gone out strong getting the accounts up and running. And where our focus is right now is making our accounts successful, billing the networks within the hospitals, building the clinical data pathway for people to have experience on what are the effective procedures and how to build their programs and practices. And so it is taking increased time and effort from the sales force, which is classic and appropriate market development activities that we are going to down the path of right now. So we have gotten over the initial hurdle ---+ not hurdle, but the initial euphoria of, hey, we got all these people signed up and now we are in the hard work of getting the procedures going, delivering great education, and building a marketplace. So then, of course, from a reimbursement standpoint, there is no specific code for it yet. But it does offset some other procedures and I believe the cost of the ---+ the hospitals believe it is more than cost neutral, if not an official. But there will be a point in time in the five-year period that CMS may put a code on it and that is always a risk if that results in ASP erosion. But we think AngioVac is saving the healthcare system a significant amount of money dealing with some of these complicated patients and procedures. And although that is always a risk, we are going to do everything we can to continue the value that AngioVac brings. So it is standard classic disruptive medical device market development activity, and I am very pleased that our team has gotten on top of it. Yes. Just one thing to build on Joe's point, and Joe talked about it a lot during his discussion, is one of the items a little bit in the way was the size of our PV bag. And all the changes Joe talked about allow us to get the reps a little better focused on both AngioVac and EVLT. And we think that will help drive the practice development that Joe is talking about as we go through 2016. Yes. Exactly. I mean, to that point, I know there ---+ just as a follow-up to <UNK>'s comment. AngioVac has ---+ we have seen now this great uptick again. And we have wanted to put a commensurate amount of sales focus on that and EVLT and have started the process of building additional specialty into the PV sales bag, because it was just becoming too many priorities and we got to that tipping point. So we have a plan in this year to create that greater focus and energy. And we think it should very positively contribute throughout the years. I will make the first comment. They do that every year, so it is in there. It was in there last year and the year before. And our periods haven't changed the annual plan and the ability to run hasn't changed. So no, I don't think ---+ I think, yes, people work around a plan to accomplish for a deadline, but they do that every year. The one thing that, Jeff, did impact it is we did have higher capital in Nano and it did a lot of it come in in the last month and that affects the AR. Well, we have tried to steady the ship over the last year, year and a half, and focus on ---+ we have so many moving parts within the Company. We have gone through distribution consolidation. We are in the midst of a plant consolidation. We have been doing integrations. We have been doing Oracle integrations over an 18-month period. We have been doing some finance remediations and building a very strong financial team. And so when you are doing that and you are building your foundation, to make a lot of changes is really disruptive to the business. So we have been focusing on pure execution and, even in light of that, the Morpheus kind of hit us between the eyes. But regardless, that is a thing of the past and that is reflective of the past. And the things we are doing today are at what we would believe a much higher standard of rigor. Regarding acquisitions, there is a lot of things we are looking at, but they would be much lower in magnitude as far as things that we can tuck into the bag and things that we can enhance our current portfolio. I've mentioned multiple on times, it is not in our near-term focus to do large transactions. And regarding divestitures, that is always an option if we feel it is necessary. Our current goal is to execute on our plan and we are very mindful of the ebbs and flows that we provided investors. And we are really intent on creating consistency and delivering the numbers, hopefully above the ones that <UNK> are mentioning. But regardless, I obviously cannot comment on any future transactions, but our view is that we want to really focus on building consistency because our current products are in enormous marketplaces. We are seeing ---+ this year, NanoKnife grew 27%. AngioVac grew 22%. BioFlo grew I think for the year 30%. And if we just steady the ship and continue to focus on the growth drivers, interestingly, the growth drivers are getting bigger. And as they get bigger, they contribute a greater percentage of the revenue, the mix goes up, they are all margin accretive, et cetera, et cetera, et cetera. So we are not looking for easy fix to get to our five-year plan. We are looking to execute on the investments we have made and to deliver. Sure. You mean from a cost standpoint, Jason, or do you mean from a revenue standpoint. Yes. It ended up being about $1.5 million. We had $3 million of Morpheus last year. We converted half of that to non-Morpheus products. So you lose about $0.01 to $0.015 from all that. And the other ---+ it's probably more towards the $0.015, when I think about it, because we did give price breaks to our customers as they converted to keep them ---+ give them BioFlo at a non-BioFlo price. So it was probably about a $0.015 hit in the quarter from Morpheus. Well, you never know. I mean, we have put them through a lot and the sales force put a lot of energy in. We don't expect it, but you never know, <UNK>. What we have done is we have given them ---+ we have replaced a lower end non-thromboresistant catheter and we have given them a high-end thromboresistant catheter at the same price. Now at some point, we need to move them off that lower price, but ---+ which would probably, if anything, be where the rub point is. But we have done everything possible to ease the transition. But I would ---+ I think a lot of the ebbs and flows are over. Yes. And <UNK>, we have assumed in the first half a continued 50% conversion. We haven't assumed that it will continue to atrophy. Morpheus is a product that is designed for interventional radiology. And it is designed to have a certain type of placement feel and a certain stiffness. The whole name of Morpheus is it is kind of stiff and then it morphs into this softer tip. And so radiologists are really concerned about how it feels and they like to have a stiff catheter. BioFlo, in its nature, is a little softer. And it wouldn't be the preference ---+ forget about the whole antithrombic pharmagenic. It wouldn't be the preference of an interventional radiologist because it is not as steerable and it is a little softer than our Morpheus PICC. And so when you take frustration, when you take some back order, you take change, and then you take the fact that they have tried it. They said hey, we want something that is stiffer. That is probably the biggest reason why the IR customers who already didn't convert to BioFlo, before when we offered it to them, didn't do it this time. But there is also a lot of the business converting from ---+ there are some IRs who are willing to do it and obviously a lot of business already converting from IRs to bedside nursing. That was much easier to convert over. But the biggest objection is for an IR has been the placement and feel. Yes, well, we have seen ---+ first of all, the market is pretty aware that we are working on a next-generation microwave. And so some of the capital budget has been pushed out and that is one of the areas that <UNK> has identified. And also, we had a pretty poor RF quarter. We have been seeing ---+ we are not the only microwave player out there and there is some other players with new systems, too. And when accounts are converting over from RF and the microwave, it is not necessarily always 100% to us. And that is why we have been racing to this next-generation system. So we had a pretty weak RF quarter, as that has being cannibalized by microwave. I think in the hepatobiliary community, there is a growing awareness and understanding that NanoKnife in addition to standard-of-care therapy is a value-add. And I don't think they ebb and flow on any one piece of data, but it is a pretty small tight-knit global community. And I think there is an increasing awareness that this adds value. We have been ---+ and it is what has been, I guess, driving the overall awareness throughout the entire year. We started off from a utilization standpoint a year ago seeing an uptick. And it is maintained through the year. So I think there is a slow, gradual, general understanding that data is being more well understood. I don't see us having the aha moment, where everyone goes, oh, now I get it. But the data being there is just another step of validation. You have seen in the past us put data out from Dr. Raj at the University of Miami, which was some of the earliest survival data on pancreatic cancer. And that was very exciting and an early set of awareness. So oncology moves in decades and I think we are seeing a slow building realization and awareness. And I think the data helps and will continue that momentum. But I don't think it is a short-term pop. I think it is a general growing, very positive awareness of the benefits of the technology. Well, I think vascular access is going to have a good year. We have ---+ if I had more people, I would be doing more evaluations. I think the business is going to have a good year. I also think PV is going to have a good ---+ actually, it is kind of tough, because I am choosing between this. But I think PV is going to have a pretty strong year as well. I think last year, we learned some lessons regarding the sales force. I think this year, we are doing a better job. And I am pretty excited about how that organization is going to be. I think our international team had a terrific year this past year in 2015. I do feel there is a little bit more pressure for them in 2016. So ---+ and while they have some NanoKnife opportunities now in registration and that is exciting, I think that is probably an area where it will be hard-pressed within the ---+ to repeat at the levels they did in 2015, given the FX and other challenges. But I think real winners this year in the year will be led by VA and overall growth rate. And then PV. And then I think second half of the year when the new microwave system comes out, it will give a shot in the arm to the oncology team. And we have high hopes for our international group, but again, they did a great job, helped us get across the finish line this year. And given some conditions that are there, it might be hard-pressed to repeat that. Yes. I will just build a little bit on, <UNK>. Oncology is probably going to have the widest variation because we did have a very strong capital year in NanoKnife. As I said in my comments, if we meet that, do a little better than that, because of the CFGs, because of reimbursement, it could be a good year in oncology. But we have seen a trend of every other year in capital, so we are very wary of that in building our oncology revenue guidance. Is that helpful. No. The fourth quarter was down 6%. And for the year, (multiple speakers). Thank you, <UNK>. We did a really ---+ we did a pretty extensive deep dive over the last 90 days. What we had said regarding delays in procedures and deductibles we believe is true. We believe that there have been a push off of procedures. But we have also experienced, especially from the last 90 days, and given the environment for EVLT where there is just a lot of activity in varicose vein ablation, and also given the opportunity for AngioVac and the amount of growth that we are looking for and the market development activity, we actually started to see a little bit of diminishing returns from our sales force. We know that the PV is a very diverse bag. And it was doable to launch an AngioVac-type product when it was much lower revenue. But if we want to reach our goals, if we want to continue to grow in EVLT and AngioVac, we need to invest in the sales force. And we did. We launched a program that within 12 months, we are going to be able to, if we reach our goals, split off a separate fluid management sales force, which is a different type of call point and different kind of salesperson. And which, if you are looking at our salespeople, it is ---+ some people, it is 40% to 50% of the revenue in their territories. And if by in the next 12 months, we can take that revenue out of their territories and have it in the new organization, we are going to be free up massive amounts of bandwidth to be able to continue to grow AngioVac and EVLT. So I think the learning for this quarter is that, yes, we have seen some challenges in elective procedure delays. But we have also realized that the organization has a lot on its plate and we've took steps that have already been now in place since June 1 to fix it. There is a couple ---+ there are situations ---+ and that will happen going forward ---+ where initially, they will do one. And then they will either ---+ sometimes accounts will have one. They may have up to four or five. In this quarter, there might have been one or two that had more than one. But I think, as time goes on ---+ again, I don't want to get in the habit of reporting this information. Our competitors do not report it for us, so I don't need to educate them. But I do feel, for investors, I wanted to start giving you a shape as to what the activity was, which, for me, if I have 50 salespersons and I am putting 20 out a quarter in the first couple quarters, I'm very pleased with the activity, given each of them require clinical training and a lot of work. So I think in those first 40, I think most of them are going to be individual accounts. But I think going forward, we will see 1, 2, 3, 4, even 5 to a single account as we convert them. We don't really have any new updates. There is nothing new to update. We are very excited about the relationship and we are working very closely together to meet our goals. I have nothing that I am aware of that would change that objective. Yes. What is in the SEC, what is in the filing is pretty self descriptive. We have no other comment than what is in the filings. No. If there is, it will be there. But no. Well, our objective is to answer all questions and meet whatever questions that would be had. But there is ---+ I really can't speculate on something like that. Yes. I guess I will just build on it, <UNK>. I mean, it is too early in the process to know where this is going to go. We have in our litigation cost had a little more discovery costs, which was in that litigation line, and acquisition and restructuring and integration. But it is just way too early to know where this is going. So we can't really comment. Right. I would think at some point in time in the future, that is the right thing to happen. I think the product deserves that. I can't ---+ I haven't been able to and I can't predict now, but it should have one. And I hope if we have progress on it, we can update everyone. Yes. I think so. And we are also ---+ this quarter, as I mentioned in my comments, we resolved an inquiry on a letter of file that took a long time and a lot of heat loss, which pretty much put those type of activities on hold. So with that behind us and I think there is a good opportunity for us to have some dialogue on the very impressive and very broad amount of activity in the marketplace with the FDA. From a Bio Life Tech perspective, it is still ongoing. We've won pretty much as much. We are waiting for a one last decision and when that decision is rendered, we would have ---+ we would feel that we are done with the US. We need to recoup some damages we hope to get and then we will start the next step of the process and go and find them everywhere else in the world we can. That is a goal. But it is not something I would look forward to any time in probably your or my lifetime. But regardless, yes, I think they are ---+ they have benefited greatly from us and they have impaired our business. And we are going to finish what we were doing in the US and then we are going to launch an effort in their biggest markets to pursue our ---+ what is rightfully ours. I think one more and then we have to go, <UNK>. Well, from what we could see from what is reported by competitors, there is not ---+ especially in the beginning part of the year, there wasn't a substantial amount of growth in the segment. And I think it does ---+ I think the beginning part of the calendar year was very slow in the marketplace for elective procedures. And we are now seeing an uptick, as I made in my comments, in the end of last quarter and now ---+ so we hope that continues. We hope to recoup some of the slowness in the second half of this calendar year that we saw in the first half of the calendar year. Thank you very much for everyone for being on the call. We have gone ---+ we continue to improve the business. We have a great team in place. We've focused on fixing some of the core fundamentals and I think we are real close. As I mentioned earlier, I think patience will be rewarded. And again, I appreciate your attention and time. Thank you.

2015_ANGO

2018

EGRX

EGRX #Thank you, <UNK>, and good morning, everyone. In 2017, Eagle continued to develop best-in-class injectables for patients and caregivers and drive value for shareholders. Since going public in 2014, we have delivered significant year-over-year growth in both revenue and EBITD<UNK> We were profitable in '15, generating EBITDA and non-GAAP EPS of $7 million and $0.41, respectively. EBITDA then grew to $64 million in 2016 and now to $96 million in 2017, reflecting an additional 50% growth. And during the same time frame, our non-GAAP EPS rose from $0.41 in '15 to $2.79 in 2016 and now up to $4.34 in 2017. I'd also like to point out that we've experienced profit margins ---+ expanded profit margins over the same period due to our significant revenue growth coupled with our operating leverage. The company's EBITDA margin for '17 was 40%, up from 34% in 2016 and 10% in 2015. I think you'll agree that our historical performance has been extraordinary. Based on our ability to provide growth from our current assets in our portfolio and the opportunities to leverage our balance sheet, 2018 could be another year of continued growth for Eagle. Combined with the strength of our pipeline and some key upcoming catalysts, we expect the business will continue to deliver strong results. I'd like to recap a few highlights of the year before we turn to a discussion of what's ahead in '18. First, we delivered record revenue of $237 million, primarily on the strength of our bendamustine formulation, Bendeka, for which, we received milestone and royalty payments from Teva, and have license rights to SymBio in the Japanese market. We also advanced multiple pipeline programs, including the fulvestrant clinical study, which we began enrolling during the fourth quarter of last year, and we are very pleased to report that last week, we completed enrollment and randomization of subjects ahead of the schedule at our 12 sites. And are on track, if successful, to file an NDA early in the fourth quarter of this year. We received tentative FDA approval for PEMFEXY, our pemetrexed injection, the first company to do so using the 505(b)(2) pathway. We announced positive results of an initial study of RYANODEX for the treatment of nerve-aging induced seizures and seizure-related brain damage. And we expanded the pen portfolios for our bendamustine and dantrolene formulations to strengthen our protection of these product families for existing and potentially new indications. Our strong cash position during the year enabled us to strategically buy back more than $44 million in Eagle stock in addition to the $37 million of buyback in 2016 for a total of $81 million, reflecting our continued belief in the potential of our business to deliver value over the long term. I'm also excited to report that we have agreed on a path forward with the FDA for an additional clinical trial for RYANODEX for exertional heat stroke. The trial will be conducted in August of this year, during the Hajj pilgrimage, similar to the study we conducted during the Hajj in 2015. We are confident in our ability to run the study and are excited that we can now proceed with our work on EH<UNK> We anticipate similar positive results and hope that, this time, conditions on the ground will allow us to recruit more subjects. We believe we have collected a very strong data set over the years for this life-threatening condition and that the new Hajj study will support earlier data. If all goes as planned, the study will be started and completed within a week. The Hajj this year will be held starting on August 19. If successful, and depending of the FDA's review time, we could potentially go into market with an EHS product for most of the 2019 season. And as we begin 2018, I am pleased with the overall momentum in other areas of the business as well. Our priorities for the year are as follows. We intend to file our most advanced programs. I am pleased to announce that we filed an ANDA this quarter for the first of 2 assets in 2018 and are awaiting FDA acceptance of the filing. If accepted for filing, we will provide you with more details about the product. An additional asset is being developed, and we anticipate a submission during the second half of the year. The combined branded sales of these 2 products are $500 million and growing. With our fulvestrant trial now fully enrolled and randomized with 600 subjects, we are on track to file an NDA early in the fourth quarter of the year, pending the outcome of the study. This product has worldwide branded sales in excess of $1 billion. Our work with RYANODEX continues on multiple fronts. In addition to exertional heat stroke, which I just discussed, our efforts to develop an IM injection and other potential indications are moving forward. We expect to be able to update you on these efforts in the coming months. And lastly, as we evaluate our opportunities, we will focus on optimizing our financial position and utilizing our cash strategically. To that end, we solidified Eagle's Biologics business. We have been very pleased with the acquisition of Arsia and took the opportunity to settle the $48 million of potential milestone obligations in exchange for $15 million in cash. Our total investment in Eagle Biologics is $45 million. Drs. Langer and Klibanov have signed long-term consulting agreements with us and will continue to advance their work, which holds tremendous promise for Eagle to develop biobetters in the fastest-growing sector of the industry, and they will continue working with us across the full range of Eagle products. We also intend to continue purchasing Eagle shares as part of the board-approved share repurchase plan. Since August 2016, we have completed the repurchase of approximately $81 million in Eagle stock, an additional $94 million remains authorized, and we plan to continue to opportunistically purchase shares. We believe 2018 could very well be yet another transformative year for the company. With that, I'll turn the call over to <UNK> <UNK> to further update our fourth quarter and full year financial results. <UNK>. Thank you, <UNK>. As <UNK> mentioned, we posted a record 2017 on multiple fronts: revenue, EBITDA and EP<UNK> Let me begin with a review of the quarter. The fourth quarter 2017 total revenue was $46.8 million compared to $81.1 million in Q4 2016, which included a $40 million milestone payment from Teva. Product sales were $10.4 million compared to $9.1 million in the prior year quarter, driven by increases in Bendeka and RYANODEX, partially offset by a decrease in Argatroban. Fourth quarter RYANODEX product sales were $4.6 million, up 20% on the year-over-year basis. RYANODEX dollar market share rose from 53% in 3Q to 70% in 4Q. And Ryanodex unit market share rose from 29% in 3Q to 48% in 4Q. Royalty income increased as well, to $36.4 million, as a result of the increased market share on Teva sales of Bendeka as well as an increase in the royalty rate from 20% to 25%. On the expense front, R&D expenses decreased $6.8 million to $9.4 million for the quarter compared to $16.2 million in the prior year quarter, largely due to lower levels of API purchases. SG&A expenses decreased $4.2 million to $13.4 million in the fourth quarter of 2017 compared to $17.5 million in the fourth quarter of 2016. The decrease was due to the expiration of the Spectrum promotion contract at the end of June 2017 as well as a reduction in marketing expenses. These reductions were partially offset by the increase in personnel-related expenses associated with the expansion of our sales force during the second quarter of 2017. Net income for the fourth quarter was $9.1 million or $0.61 per basic share and $0.58 per diluted share compared to net income of $57.3 million or $3.75 per basic and $3.52 for diluted share in the 3 months ended December 31, 2016, due to the factors discussed above. Adjusted non-GAAP net income for the fourth quarter of 2017 was $15.6 million or $1.05 per basic and $1 per diluted share compared to adjusted non-GAAP net income of $17.2 million or $1.12 per basic and $1.05 per diluted share in the prior year quarter. Turning now to our full year results. In 2017, we grew revenue 25% to $236.7 million compared with $189.5 million in 2016. Total product sales reflecting all Eagle products increased $4.7 million to $45.3 million during the year compared to $40.6 million in 2016, driven primarily by a 50% increase in RYANODEX sales to $17.5 million. Royalty income increased to $153.9 million compared to $99 million in 2016 due to increased sales of Bendeka and an increase in the royalty rate from 20% to 25% effective in the fourth quarter of 2016. License and other income was $37.5 million in 2017 compared with $50 million in 2016. License and other income reflects payments received for achieving certain contractual milestones in connection with Eagle's Bendeka licensing agreement with Teva as well as an upfront payment in 2017 associated with the SymBio collaboration covering Japanese rights for bendamustine products. Gross margin expanded to 76% in 2017 as compared to 71% in 2016, despite a significant decrease in the continuing contribution of milestones to the overall revenue. On the expense front, R&D expense increased to $32.6 million in 2017 compared to $28.3 million in 2016 as a result of our development efforts to advance multiple product candidates, including fulvestrant, for which we commenced a clinical trial in the fourth quarter 2017. Excluding stock-based compensation and other noncash and nonrecurring items, 2017 R&D expense is $27.6 million. 2018 R&D expense is expected to be in the range of $46 million to $50 million. This reflects ongoing expenses for the enrollment of fulvestrant and Ryanodex EHS clinical trials as well as API outlays in anticipation of the 2019 launch of fulvestrant if approved. Since we were able to complete enrollment in the fulvestrant study ahead of schedule, a larger portion of our full year 2018 R&D spend will be expensed during the first quarter of 2018. Excluding stock-based compensation and other noncash and nonrecurring items, R&D expense in 2018 would be in the range of $39 million to $43 million. SG&A expenses increased in 2017 by $18.1 million to $71.4 million in 2017 compared to $53.3 million in 2016. The increase in SG&A expense is related primarily to: number one, increases in personnel-related expense due to the expansion of our sales force throughout 2017; number two, marketing expenses associated with prelaunch EHS disease state awareness initiatives; number three, increased external legal expenses; and lastly, staff additions incurred to support expansion of the company. These increases were partially offset by the exploration of the Spectrum promotion contract at the end of June 2017. Excluding stock-based compensation and other noncash and nonrecurring items, 2017 SG&A expense was $56.9 million. 2018 SG&A expense is expected to be in the range of $61 million to $64 million. Excluding stock-based compensation and other noncash and nonrecurring items, SG&A expense for 2018 would be in the range of $45 million to $48 million. For the full year, the company recorded a net tax expense of $21 million compared to a benefit of $28 million in 2016. The tax expense in 2017 was favorably impacted by the recognition of federal R&D tax credits and the impact of employee stock option exercises. These favorable impacts were partially offset by an adjustment to Eagle's net deferred tax asset to reflect the impact of recently enacted federal tax reform legislation. The tax provision in 2016 was impacted by a reversal of a valuation allowance, which had been carried against the company's net deferred tax assets. We anticipate the tax reform will positively impacted Eagle's tax expense beginning in 2018. For 2018, we estimate a combined effective tax rate of 24%. Net income for the year ended December 31, 2017 was $51.9 million or $3.44 per basic and $3.27 per diluted share as compared to net income of $81.5 million or $5.24 per basic and $4.96 per diluted share for the year ended December 31, 2016 as a result of the factors discussed above. Adjusted non-GAAP net income for 2017 was $69 million or $4.57 per basic and $4.34 per diluted share compared to adjusted non-GAAP net income of $45.9 million or $2.96 per basic and $2.79 per diluted share in 2016. For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures, please see the table at the end of today's press release. Our adjusted EBITDA for 2017 was $96.2 million compared to $63.9 million in 2016, reflecting an increase of over 50%, and is particularly noteworthy considering that the company earned only $38 million in milestones during 2017 and $50 million in milestones during 2016. Our EBITDA converts especially in the cash flow. For example, in 2017, our cash flow from operating activities, excluding the increase in net accounts receivable, was $71 million. In 2017, we completed the $75 million in share repurchases authorized by our board in 2016 and expanded the program by $100 million during the third quarter of 2017. Through December 31, 2017, we had purchased $5.8 million as part of the expanded program. As of December 31, 2017, the company had $114.7 million in cash and cash equivalents and $53.8 million in net accounts receivable, $40 million of which was due from Teva. The company had $48.8 million in outstanding debt. With that, I'll turn the call back over to <UNK>. Thanks, <UNK>. To recap, 2018 could very well be another significant year for Eagle, with multiple potential filings and additional revenue opportunities. We filed an ANDA for our first of 2 assets in 2018, with the second filing planned for the back half of the year. With our fulvestrant trial now fully randomized, we are on track to file an NDA in early Q4 of this year. And importantly, we continue to work with our RYANODEX portfolio, which, we believe, has the potential to treat multiple hypothermic conditions. There remains a high-clinical need in the market to treat these conditions that have not been adequately addressed. We are encouraged by our agreement with the FDA on a likely plan for exertional heat stroke, and remain hopeful that our ongoing discussions with FDA and our clinical work will allow us to continue to advance RYANODEX for these important indications. With that, I'd like to thank you for your continued support and open the call for questions. Operator, please go ahead. Thanks, <UNK>. Thanks for asking the question. Okay, that's a lot. Let's start at the beginning. So the RYANODEX design is very similar to what we did in '15. So in essence, what we will have is it's 2 groups randomized, half will receive standard of care, which is cooling and fluids, and the other half will receive standard of care plus RYANODEX. The primary endpoint is identical as to last time, the Glasgow Coma Scale, so no difference. It's basically once again standard of care versus RYANODEX. Are we surprised with our conversation since July. I would say, no. Look, at the end of the day, I think, when you get right down to it, there was a desire for more data compared to what we had in the past. So we're going to back and essentially conduct a similarly designed study as we had before. Does that answer the question well. Well, look, I don't know the answer to that fully, <UNK>. But what I will say is, I think, we can all take quite a bit of sense of accomplishment that the outcome of the study, the design of the study, is pretty similar to what we did before. So there weren't any major significant changes. We are still randomizing patients' standard of care versus RYANODEX and using the same primary endpoint. So as I said, I think, it just comes down to wanting more than what we had. I think it's really nothing more complicated than that after the 8 or 9 months that we've been discussing this with them since the CR<UNK> And on ANDAs ---+ yes, go ahead. So on the ANDAs, there are 2 products, as we've mentioned in the past, combined. Their sales are $500 million and growing, right. So it's a growing collective market. These are 2 markets where there is only one competitor in each of the markets, and so there's only one player. So call it whatever you want, a branded generic or branded product. These are 2 markets combined $0.5 billion, each of the 2. There's only one competitor today. One will be litigated likely and one will not. As for other filers, we don't know. It's hard to tell. We may be the only filers in both, but there's no way to know until the product is accepted and we get a little deeper into it. But there are no other current players in these 2 markets. That's correct. I think, <UNK>, we're still thinking through all of the possibilities for RYANODEX going forward. What we do know is that there is a real need for RYANODEX in both disease states, right. As we look at it, what exactly is what we define as DIH, it's very interesting. What we believe that all of these disease states and others that we have not discussed yet with the investors, there are a number of diseases that the medical community believes is caused by this calcium overload. And essentially to us, as we look at all the research that's being done around the world, and specifically in the patients that we're looking at in EHS and DIH, that's really hard to discern a differences between ---+ a difference between the disease. So for instance, if you have someone that you suspect of having exertional heat stroke, which is 104 degrees and some confusion, we'll call cause that exertional heat stroke, but we also don't know if they have traces of amphetamines in their system. And so as we continue to look and we continue to research, we feel very confident now in the path forward for exertional heat stroke. Going back to the Hajj now in August and hopefully getting that product filed this year and on the market early next year depending on the review time, we'll continue to monitor our thoughts about the amphetamine process. We're clear that eventually the product ---+ our product, RYANODEX, will be used in both. And we'll just see now how we decide to go forward with them, and we'll report back here you know over the next weeks. Not necessarily. Let's ---+ I think we need some time to be able to respond better. We do have our clinical trial open. We have some of these music festivals coming up as soon as late March, where, we think, we have a lot of subjects to collect in the hot weather. And we're going to continue to look at that and see how we're going to handle the label. Clearly, we need a product on the market that treats both the symptoms of calcium release in malignant hyperthermia, which we have exertional heat stroke, and then to these people who predispose to the same disease state once they take amphetamines. And again, we'll report back more detail as the weeks progress. So we'll report, <UNK>, on how we're doing with the Biologics business regularly. You'll see news flow coming out of the Eagle over the course of this year about what we're doing. This technology ---+ there's 2 very important aspects to this acquisition. First, the technology in viscosity reduction of biologics can be used in so many ways that will benefit patients and our shareholders. We have the ability with this technology to help branded companies with first-time biologics lower their viscosity. What does that do for them. We're seeing situations where we're having discussions about reducing the number of injections. We're having discussions about how to take subcu ---+ IV drugs turning them into subcu drugs. And we also have the opportunity, as we discussed in the past at great length, is going to the biosimilar market and taking some biosimilars and giving those individuals a chance to have a leg up on their competition and take these IV biosimilars to a subcu route. We can also go to biosimilars that have multiple injections and reduce the number of injections as a way to improve the products in the biosimilar space. We continue to work on molecules in-house on our own for a proof of concept and to have animal data and tox data and then take it forward to biosimilar companies and branded companies. So far we're very pleased with the progress we're making and the reason that we decided to buy down those milestone obligations now. And we believe that this technology and this capability will be a significant leg of Eagle's growth as we start to get to the later stages of the current products that we spoke about today in the pipeline. And so these are products that will come to the market 4 or 5 years from now. But hopefully, starting this year and going forward, we'll start to sign deals. We see milestone payments and so forth as a way to bring value into the company in the near term. Very, very excited about this acquisition. Couldn't be more pleased since we made it. And then second to that, what we now have is, what I will refer to as, a stake in the ground in Cambridge, which is just for our industry, just a remarkable place to do business. We have some very talented PhDs. And we have access to some very talented people at MIT. And quite frankly, they are helping us with our entire pipeline and our portfolio. They've helped us with fulvestrant. They are helping us with IM version of RYANODEX. Dr. Klibanov are about the most brilliant minds in our industry. And having them helping us and consulting with us regularly has been just wonderful. And so we're thrilled with this acquisition. And as we sit here today, I'm very confident that we will see significant value coming out of this acquisition in the years to come. And you'll start to hear more about it as the year progresses as well. This is <UNK>. Thanks for the question, Tim. What <UNK> was referring to is that our position at the moment is we're a somewhat obvious asset gatherer, given the environment and given our balance sheet and given our presence in hospital infrastructure, and so we do look a lot of opportunities. As we mentioned, when we last spoke the hurdle rate is quite high. And it's high because, candidly, it needs to compete with buying back our own stock, which at these levels, in our view, is quite compelling. So we continue to look at assets that would fit our infrastructure, either late stage or commercialized. But candidly, if our pipeline develops the way we hope and expect it to in 2018, we have our hands full from an operating perspective. So Tim, I think, the bendamustine market did rather well in '17. I think the Teva team from a marketing standpoint did a truly excellent job positioning bendamustine against the other competitors that we've been speaking about coming into the market. Bendamustine just happens to be a great drug. Its safety profile over the years has been really very important and very significant. Its price point is really very positive. And at the end of the day, patients perform very well on bendamustine. And so the volume ---+ I think if I recall the range that Teva provided at the early part of '17 that we are all a little bit surprised about by the time they came in at the very upper end of that range. And volume on bendamustine for the year was down just very slightly, far succeeding our earlier projections. And so I don't see any reason to believe that bendamustine is not going to be a mainstay in CLL and NHL and do very well till the end of the time that we have the product on the contract. And so we're very pleased with what they've done. I think we all should be. And so yes, they're doing a great job. It's hard to say, Tim, because it's an odd study to run from the standpoint that we can't hang around the Hajj and keep dosing patients until we get to a certain number of patients. It's 4 days. We got to 34 patients last year in about 1.25 days until the stampede happened. I remember speaking to our team in that first day, and we thought that the pace of recruiting would have gone over about 120 had we not had the stampede. I would say this time around, if we would get 70 ---+ 60 or 70 patients, we'd be very pleased. But it's out of our control. We'll just have to run the study the same way we did last time, hopefully, to work out the same way, take out a unusual event that did not occur again in '16 or '17. If '18 is a clean year, we should meet more than enough subjects to do what we hope to do. Thank you everyone. The one last item that I would just remind everybody to focus on before we break on this particular call is the fact that we have completed the randomization of our 600 subjects for fulvestrant. That's a product that is going to be or already is over $1 billion worldwide. And the fact that we've gone from 2 injections to 1, that we've reduced the drug from 10 mls to 5 mls, that we've all but eliminated the pain in what is one of the most painful drugs to be delivered, I think, in oncology, that we may be taking the warning off the label and that we may have a unique J-code just what we did with Bendeka is potentially, if not the largest opportunity in the history of the company, just about the largest opportunity. Now we have to await the results of the study, and we'll have that in the summertime. But we do have all 600 patients enrolled. And as soon as we get these results, obviously, if we pass that clinical trial, the opportunity for the company that we think we can then get the product to the market by around mid-next year is very significant. And I think you'll hear from us, and as we speak with the investors, over the next few weeks and months, we'll be focused in on fulvestrant and the value that, that could bring, again, not only to Eagle, but to patients. We're just thrilled about having the safer product potentially if we do what we hope we do, and let's see how we go. But we've made a major accomplishment in dosing and randomizing those 600 subjects as quickly as we did. And we're just very excited to see the results and hopefully move the asset forward. And with that, I'd just like to say thank you for everyone attending. I appreciate and look forward to speaking to all of you over the next number of weeks. Thank you.

2018_EGRX

2017

CAH

CAH #Thanks, <UNK>, and thanks to everyone joining us on the call today In my comments this morning, I'll first provide some context around our third quarter performance Then, I'll review the expectations we detailed a couple of weeks ago for our full fiscal year At this time, we don't have any updates to our FY 2018 or FY 2019 early thoughts we provided on April 18, so I won't say anything more, other than our leadership team has a strong sense of optimism and accountability We are managing the company with discipline and for the long-term Please note that, with all of my comments, I'll begin with GAAP, and then provide the comparable non-GAAP figure The slide presentation on our website should be a helpful guide throughout this discussion, as it includes our GAAP to non-GAAP reconciliation tables Starting on slide 4 with our consolidated company results, our third-quarter GAAP diluted EPS was $1.20 and non-GAAP diluted EPS was $1.53, an increase of 3% and 7%, respectively Note that both the GAAP and non-GAAP diluted EPS for the quarter benefited from a lower effective tax rate and fewer outstanding shares as compared to the prior year Total company revenues grew 4% versus the prior year to $31.8 billion Consolidated GAAP and non-GAAP gross margin dollars increased by 2% and 1%, respectively GAAP gross margin rates were down 8 basis points for the quarter, while non-GAAP gross margin rates were down 15 basis points, primarily due to generic pharmaceutical pricing Consolidated company SG&A increased 5% from the prior year Since we have lapped our significant acquisitions, the growth is mainly driven by the costs associated with our pharma IT system refresh, new Medical segment business wins, and Cordis infrastructure expense, partially offset by assumptions around incentive compensation As you would expect, we continue to be disciplined in our expense management Both GAAP and non-GAAP operating earnings declined in the quarter versus the prior year by 8% and 4%, respectively Moving below the operating line, net interest and other expense was $41 million, a 7% decrease over the prior year This decrease was driven by deferred compensation income, which has an equal offset in SG&A expense, so there is no net impact to EPS from this favorable variance For the third quarter, the GAAP and non-GAAP effective tax rate was 32.3%, down 4.6 and 4.3 percentage points, respectively, versus the prior year This improvement was due to a few favorable discrete items in the quarter Diluted weighted average shares outstanding were 318 million, 13 million fewer shares than the third quarter in the prior year During the quarter, we did not repurchase any shares and, as of the end of the quarter, had $443 million remaining on our board-authorized share repurchase program During the quarter, we had net operating cash outflows of $198 million We ended the quarter with a cash balance, including short-term investments, of $1.6 billion, with $514 million held outside the United States While we don't typically provide cash flow forecast or guidance, we do expect to generate significant cash in the fourth quarter Consequently, as we shared with you on April 18, about $1.6 billion of cash on hand will be used during the first quarter of FY 2018, when we expect to close the purchase of the Patient Recovery business from Medtronic Next I will cover segment performance, beginning with this Pharmaceutical segment Revenues grew 3% to $28.4 billion due to performance from the Specialty Solutions business and growth from Pharmaceutical Distribution customers Segment profit for the quarter decreased 7% to $611 million This decrease was driven by generic pharmaceutical pricing, the final quarterly impact of the loss of Safeway, and the investment in our pharmaceutical IT platform This was partially offset by solid performance from Red Oak Sourcing During the third quarter, we began to see planned incremental expenses associated with the first few phases of our pharma IT refresh project This multiyear project is on-time and on-budget It will enable us to maintain the excellent service our customers have come to expect from Cardinal Health, provide us with the ability to expand in a cost-efficient manner, and better facilitate our ability to go-to-market as an integrated enterprise Finally, our Pharma segment profit margin rate of 2.15% for the quarter was down 25 basis points versus the prior year, largely due to generic pharmaceutical pricing A couple of other points to note on the quarter, our Specialty Solutions and China businesses saw double-digit bottom-line growth Now, I'll move to our Medical segment results Revenues for the quarter grew a robust 9% to $3.4 billion, driven by contributions from new and existing customers Medical segment profit increased 16% to $148 million, reflecting solid performance from naviHealth, supply chain services, and Cardinal Health consumable products The quarter was unusual, in that we saw a decline in Cordis profit This decline was mostly related to increased SG&A expenses to support our investment in an international infrastructure This investment will benefit us as we integrate the Patient Recovery business The increased SG&A expense was partially offset by the net impact of the Cordis inventory adjustments Let me explain the third quarter inventory adjustments in more detail First, this year benefited from the absence of the inventory step-up which we recorded in the prior year This benefit was largely offset by an increase to an inventory reserve in the quarter – in the current year This reserve is an estimate based on information often provided by third parties, including under-the-transition service agreements and from various service providers During the period, we received more detailed information for this reserve and have adjusted it accordingly As both <UNK> and I have mentioned in the past, the exit from the transition service and manufacturing agreements could result in some lumpiness to the Cordis earnings, but we fully expect this to diminish as we move forward We expect Cordis to return to growth in the fourth quarter and are working hard to ensure we have the right infrastructure for the long-term to support our customers and their patients Segment profit margin rate increased 26 basis points to 4.34% due to the same factors I just mentioned on the segment profit dollars Turning to slide number 7, you will see our consolidated GAAP and non-GAAP reconciliation for the quarter The $0.33 variance to non-GAAP diluted EPS results was primarily driven by amortization and other acquisition-related costs I'll now update you on our assumptions for the fiscal year We expect full year 2017 revenue growth to be in the mid to high single-digit percentages, which is a change from our previous outlook of high single-digit growth One item of note, the actual closing date for the Medtronic transaction we announced on April 18 involves multiple parties, including regulators Because of this and other factors, we need to quickly be ready to execute the best possible financing to secure attractive terms associated with the acquisition This means that we could issue debt in the fourth quarter and, if we do, we would see up to $0.05 of financing cost, which is not included in our current fiscal 2017 EPS guidance We will let you know when we access the debt market and be transparent on the incremental costs To reiterate, as we shared with you on April 18, we expect our full year non-GAAP EPS to be at the bottom of our $5.35 to $5.50 range, and this served as the base for our fiscal 2018 early outlook Moving on to slide 10 of the presentation, the corporate assumptions around tax rate, shares, and CapEx will be at the low-end of the range, and acquisition-related intangible amortization will now be about $389 million, or $0.81 per share, which does not affect our non-GAAP earnings You can turn to slide 11 to see our Pharma segment assumptions for the full fiscal year We now expect mid to high single-digit percentage revenue growth for 2017, a change from our previous outlook of high single-digit growth This is largely related to the loss of brand sales associated with the retail network changes at CVS/pharmacy, which they disclosed in late 2016. Additionally, we now expect full year Pharma segment profit to decline low double digits versus the prior year Note, this tightening of the range is primarily due to the previously mentioned generic market pricing, which, while less deflationary than what we saw earlier this year, is still lower than we modeled for the second half of the year All other Pharma segment assumptions remain unchanged On slide 12 you can see there is only one change to our Medical segment assumptions, which is we now expect a high single-digit percentage increase in revenues versus the prior year, up from our previous assumption of mid to high single-digit growth Let me close with this I am confident we are well-positioned and are working on the right things at the right pace for both the near term and long term Thanks And with that, operator, let's go to the questions Question-and-Answer Session Thanks for the question As far as the deflation goes in the quarter, we're not going to specifically comment on quarter by quarter deflation rates, other than, as you know, we did update to be – that deflation for the entire year we now expect to be in the low double digits So, again, as I emphasized before, it's definitely lower than we had modeled in the second half, but it's improving Yeah, thanks First of all, I think one of the biggest things to think about how it will improve next year is if you actually have to break down the individual items and take a look at where the various items are going And as you do that, what we see in that is there's a very small subset of items that have deflated significantly this year, items you probably might be aware of over the last couple of years at launch that had limited competition, either because they were hard to make or there was raw material issues or those types of things, that were relatively high priced towards the beginning of the year, or higher priced in terms of generics go, and then they deflated significantly during the year And what we believe is that subset, that small subset of items which are very material, have really reached probably near the bottom of where they'll be And so the impact of those items we don't see reoccurring next year, and that has a significant impact on the overall deflation rate for next year And then when you combine that with all of the other efforts that we have in terms of pricing, sourcing, working with our customers on penetration and things like that, that's why we feel confident about where the overall deflation rate's headed Thanks for the question, Ricky As you can imagine, back on April 18, while we weren't completely closed with the quarter, we had very good line of sight into what the quarter was going to look like So when I talked about those discrete items, I was taking into account what we expected to see for really the entire full year So those were given with the knowledge of what was going in the third quarter, so there would be no update – I'll go through the details, but there would be no update to those four discrete items just because of the actual results in the Q3 are what we see happening in Q4. Those four items were, first and foremost, the largest was tax and reserve adjustments And, as you can see, in this quarter this year we mentioned as one of the drivers for the quarter that tax was a positive for us versus the prior year And we knew that when we gave you some insight a few weeks ago that that would be the largest So of the greater than $0.50 of discrete items we expect to incur this year that we'll not incur next year, tax and some reserve adjustments that I've talked about was the biggest one The second bucket – and the next three are all similar in size – would be compensation You heard me mention that today So that will be an adjustment year-over-year Investments in the business where we were very disciplined this year, particularly early on in the year as we knew how things were shaping up to be, very careful in that area and to manage our SG&A expense And then in P-Mod, which is our Pharma Distribution IT refresh project, we know and have known that as we roll this out, that we're going to be incurring some incremental expenses over the next couple of years, particularly next year is a larger year for us in P-Mod expenses And so those are the four that add up to the greater than $0.50, with the tax and reserve adjustments being the largest Yeah As far as the brand one related to the CVS piece, again, this was all contemplated in the guidance that we had We had some insight into that, and is low-margin brand sale And it doesn't really have any pull-through impact to us on generics as far as it goes to CVS So we feel very comfortable that all of that sales decline is already modeled into our outlook for 2017, as well as our early thoughts on 2018. As far as generic deflation goes, I'm not sure what more I can talk about on that other than, again, we see it getting better We feel like we're positioned incredibly well with Red Oak Sourcing and our pricing teams, and it's definitely getting better Not quite as good as we modeled, but definitely getting better Thanks, <UNK> A couple things on that I think, we always have a portion of our contracts that are renewing every single year And when we talk about renewals, we're really talking about those large renewals that are out there and to your point So there's always independents that are renewing and other acute hospitals and stuff And so we're constantly looking at our contracts and trying to make sure that they're fair to both the customer and to us And so where customers are looking for improved branded pricing or improved generic pricing, we're, of course, going to look at things like, okay, then you need to commit to higher percentage of your generics from us You're going to need to buy more OTC, HBA products from us You may need to accelerate your terms and pay faster And so we constantly look, as we model, to make sure we're doing all the right things to pull the levers to be fair to both the customers to meet their needs in the marketplace as well as making sure that we protect our profitability Yeah So brand inflation, just a couple comments As I mentioned earlier, I did say it was just a little bit less than where we expected it to be within the range of the 7% to 9% that we gave in the last quarter And so it's still tracking within that range, but again, a little lower than we had originally modeled for the quarter in the second half And that being said, it's a small driver for the second half of the year And quite honestly, we have been at – over 85% of our branded agreements are now non-contingent to inflation I would expect that, if not by the end of FY 2018, definitely during the year, or by the end, we will be at closer to 90%, if not even slightly over 90% by the end of the year So, I think what we're – we're seeing a couple things One, we're making ourselves less and less dependent upon it And because it's already gone down from low double digits to more high single, I think the risk of it going significantly lower in the future, I think, is lower also And so I don't see that as a big driver, one way or the other, for 2018 and, honestly, even probably 2019 and those years going forward, unless there's dramatic changes in the environment Yeah A couple things Remember, when we're talking about an entire year rate of low double digits, and it was significantly lower in the first half of the year, so, as you could imagine, what we'd expected it to improve a little bit more, to average out to low double digits for the year And so, again, it is improving, and the low double digits is an average for the entire year And you do remember, probably back on one of the other quarter calls, we said we started seeing it get better in the December quarter There was a lot of noise in there for launches And, as I said, we see it getting better in the second half, just not as good as we had modeled The only thing I would add is, my whole comment around going from 85% to at least 90% is all around the success of those agreements, and we're already seeing that rate increase So you can assume that we've been able to work through some of the conversations with some of the manufacturers, and are continuing to have very productive dialogue with other manufacturers, and that's what's leading to us being able to increase from over 85% to 90% timeframe And as far as working capital goes, Bob, there's nothing fundamental that's changed in the net working capital In other words, no big vendor term changes or customer mix changes or anything It's more just the timing around some inventory builds related to some of the IT changes that we're doing and a few other projects that we have going on that we think we'll work through here in the fourth quarter and see significant cash flow in the fourth quarter But no fundamental changes going on in the net working capital <UNK> <UNK> - Credit Suisse Securities (USA) LLC <UNK>, is there a new business number or a backlog number, anything like that, for naviHealth we can point to? And again, even if there was, just because the agreements take time for the results to pop out, we might indicate what's in the pipeline, but it would still be hard to predict what the savings are until you actually work through the process with the customer Yeah, just a couple things Related to the transition service agreements, transition manufacturing agreements, we actually have them going both ways And so both companies are highly invested in each other's success here So I think that will be an important thing as we work through those, and I think that's important A couple other learnings is, on the Cordis piece, the U.S piece has gone really well, in terms of infrastructure, has gone right according to plan And remember that this Patient Recovery business is largely U.S , and so we feel really good about our back office capabilities in the U.S And as <UNK> mentioned, ex-U.S, we are definitely going to be able to leverage what we're doing with Cordis on the Patient Recovery business And then just two other quick things is, I think we've done a very nice job in managing the R&D mix in terms of expenses and managing that Don and team have been able to manage that well, really held onto sales momentum and actually created some And just to wrap it up, from my point is that we did mention too, that the Cordis business would return to growth in Q4. No, I wouldn't think so I would say that the repricing has been normal in the brand and specialty The only reason you heard a little bit of a hesitation is they're all kind of bid as one basket, right? And so if you just look at a customer who was buying brand from us in one year to the next, I wouldn't say there's been anything unusual at all from any erosion on that That tends to be – it flows right off of the WACC manufacturer price, whereas the generics is more of a market price that adjusts up and down on a daily basis So they're very different markets, but no, nothing of concern in the brand or specialty market that I would call out That's hard to do Let me see if I can help a little bit Again, the low double digits is an annual rate, and so if you start with a higher double digits number in the first half of the year, you have to see second half has to be better, and again, we are seeing it better than the first half, but not quite as good as what we had expected Again, if you just take a look at the curve is – what we're saying is better means it's less steep on the curve, and so the declines are less in the second half Now we've always, historically, typically get deflation and we've just seen over the last few years some unique sets of items seeing significant inflation that have offset that So I think it's hard to just look at the deflation as one single component To me, the key is that curve being less steep, but at the same time, using Red Oak and our customer mix and our other initiatives to continue to drive down costing even more so that we can begin to either maintain or grow our margins That to me is one of the keys that we're clearly working on Yeah, that's really the news that CVS had given at late in calendar 2016 around some of the contract changes that they had And so we saw that hit us early right in the quarter, and so we saw the impact in the March quarter, we projected it into our Q4 and through next year So this all contemplated in everything that we've given you in terms of brand sales and our impact on the revenue line and the bottom line, and so it is low-margin brand sales and so we don't see it having a significant impact to it But again, everything that it does have and any impact is already contemplated in all of the 2017 and 2018 guidance that we've given to you guys

2017_CAH

2016

NP

NP #Thank you. Good morning and thanks for joining us on Neenah's 2016 second-quarter earnings call. With me today are John O'Donnell, our Chief Executive Officer, and <UNK> <UNK>, our Chief Financial Officer. John and <UNK> will discuss business activities and financial results, and following these prepared remarks, we will open up the call for questions. But first, we would like to start off with a few summary comments and reminders. Yesterday afternoon, we reported earnings with consolidated sales of $246 million, up 16%; operating income of $34 million, up 22%; and earnings per share of $1.21, up 26%. On an adjusted basis, EPS of $1.26 increased by more than 30%. These results include the acquisition of FiberMark, which occurred on August 1 of last year. FiberMark results, including associated synergies and integration costs, have been reported within each of our segments. Integration and restructuring costs, primarily related to the acquisition, were $1.4 million or $0.05 per share in the second quarter. These costs have been shown as an adjustment to earnings to aid in understanding and improve comparability between periods. There were no adjusted items in the prior year. Adjusted earnings are a non-GAAP measure and have been reconciled to corresponding GAAP figures in our press release. Also, on October 31 of last year, we divested our wallcovering mill in Germany and results for this business are shown as discontinued operations. In the second quarter, we recorded a net charge of $400,000 to discontinued operations to reflect final settlement of closing down [Lahnstein mill]. Finally, as a reminder, our comments today may include forward-looking statements. Risks and uncertainties that could cause results to differ from these statements are noted in our SEC filings and on our website. With that, I will turn things over to John. Thank you, <UNK>. In the second quarter, our teams again delivered record results, with double-digit top- and bottom-line growth, strong cash flows, and improving margins and returns. Like last quarter, results were positively influenced by the FiberMark acquisition, as well as very good performance in our heritage businesses. Operating margins, excluding one-time costs, topped 16% in each of our segments. Margins were held by lower input costs, operating efficiencies, and synergies from the acquisition. Our strong earnings, coupled with working capital improvement, generated cash from operations of more than $40 million, which we used to invest in our US filtration capital project, to reduce debt, and returned to shareholders. As always, we are mindful of deploying capital in ways that will maintain our attractive return on invested capital, which remains over 12%, and has increased modestly even with the acquisition and higher organic capital spending. I will comment on our progress of a few key initiatives before turning things over to <UNK>. Technical products continues to be an important growth engine for Neenah, supported by growing filtration and performance material businesses. In our filtration business, we are increasing our global presence and market share in transportation filtration. Our capital project to repurpose a fine paper asset and add advanced solvent saturating capabilities is on track to start up as planned in early 2017. This will provide needed capacity to support growing demand for our products not only in the US, but also in Europe and Asia. Customers remain very supportive of our expansion and we're working with them on initial qualification plans, as well as future projects. As with most defensible technical businesses, qualification periods can sometimes be lengthy, so while the project facilitates our continued strong topline growth in filtration, bottom-line growth will be reduced due to the low machine utilization and start-up costs in 2017. We will talk about this in our call in November. Going forward, we expect asset utilization to ramp up in a disciplined fashion, fully consuming the added capacity within five years. Looking more broadly, this investment establishes Neenah more firmly as a global filtration player. It provides an attractive financial return. We are excited about the long-term growth prospects we see in transportation filtration as a result of increasing demand for high-performing filters and opportunities to grow our global share, focusing first in North America and then in Asia. As you may have read, we recently added <UNK> Cook to our Board of Directors. <UNK> was previously Chairman and CEO at Donaldson Company, a leading global manufacturer of technology-driven filtration systems. We welcome <UNK> to the Board as his broad business experience and industry knowledge will be invaluable as we continue to grow our filtration business. Technical products results were bolstered by performance materials, and in particular, tape, which enjoyed double-digit organic growth and is our biggest backings market. As I mentioned in our last call, we are managing our backings capacity more globally, continuing to leverage our R&D investments and the unique manufacturing capabilities of our global footprint. This is helping us to grow share in Europe and Asia, as well as with our customers here in the United States. Turning to fine paper and packaging, this business continues to deliver consistent earnings and cash flows. Our teams have outperformed the market in commercial print and retail, adding new products and distribution. Premium packaging is a key growth category, and the FiberMark acquisition expanded our packaging presence by 50%, with new capabilities in premium folding cartons and box wrap complementing our strong base in high-image labels. With a target addressable market of $450 million in beauty, alcohol, and retail verticals, we see attractive opportunities to grow and ultimately expect premium packaging to transform fine paper and packaging into a larger growing business. Let me finish with a brief update on the FiberMark acquisition. Our teams have done a great job integrating this business. As a result, we expect to achieve planned end-of-curve synergies of $6 million this year, one year early, offsetting a softer topline than initial anticipated and helping us deliver the financial returns we are committed to. Through the first six months of this year, we have delivered over $3 million of synergies, with integration costs of just under $2 million. Additional costs of $1.5 million are expected in the second half to complete our plan and our teams continue to look for opportunities to deliver even more value. With that, I will turn things over to <UNK> to review quarterly financial results. Thank you, John. I will start with technical products today. Quarterly sales of $127 million were up 19%, due to acquired sales and strong organic volume growth, led by filtration and tape. Partly offsetting these higher volumes were lower average selling prices, primarily due to mix, but also due to decreases for grades with price adjusters that are tied to input costs. Currency had a small positive impact in the quarter as a result of a slightly stronger euro this year. Operating income was a record $20 million, up more than 30% from just over $15 million last year. Higher profits resulted from increased sales and lower input costs that more than offset impact of price adjusters and higher SG&A, the latter mostly related to the acquisition. Results in the second quarter also included $200,000 for integration costs. Turning to fine paper and packaging, second-quarter sales were $114 million, consistent with the pace of prior quarters and up 8% from 2015, due to acquired volume and organic growth in packaging. In the second quarter, we continued to gain momentum in packaging. Our growing pipeline of sales helped increase second-quarter sales 10% above the run rate of the past two quarters. In our premium print categories, list prices were maintained, though average selling price was lower due to an increased proportion of nonbranded volume and more competitive pricing on these grades. Operating income was almost $19 million after excluding integration costs of $500,000. This was also a record and up 9% from the prior year. Higher income resulted from lower input costs, manufacturing efficiencies, and volume growth that more than offset increased SG&A and lower net selling prices. As we mentioned in May, about half of the SG&A increase is related to the acquisition and the remainder is due to timing of spending that is expected to moderate in the second half of this year. I'd also note that we have now successfully transitioned all fine paper grades off the planned filtration asset with no loss of business or impact to the customers and with minimal added cost. Total consolidated SG&A spending was $24.4 million, down $2 million from the first quarter, but still up from $20 million last year. About two-thirds of the increase reflected incremental SG&A from the acquisition, with most of the remaining increase due to timing. For the full year, we continue to expect to average around the $24 million per quarter that we have previously communicated. Unallocated corporate costs, which are part of SG&A, were $4.6 million, compared to $4.9 million last year. Results in 2016 include noncapitalized costs of $300,000 related to transitioning the fine paper machine to a filtration asset. We continue to expect to incur approximately $3 million of these noncapitalized costs this year, with most of the expense occurring in the second half of the year. Net interest expense of $2.7 million decreased slightly from $2.9 million last year. Debt was $219 million at the end of the quarter, down $20 million compared with March. Our balance sheet remains really strong, with a debt to EBITDA ratio of less than 1.5 times and over $125 million of borrowing capacity on our credit lines. Our effective tax rate was 34% in the quarter, in line with last year's second-quarter rate. As a reminder, we are recognizing benefits from R&D credits in each quarter of this year, following the permanent approval of this credit by Congress last December. We expect our book tax rate to remain in the low 30%s, with a cash tax rate of around 20% through 2018, as we consume R&D credits of more than $25 million. Turning to pension items, our US defined-benefit pension plan remains in great shape, so over 90% funded on a PBO basis. Cash payments for all postemployment benefit plans are projected to be $14 million this year, or about $2 million more than expense. While up from last year, cash contributions in 2016 are well below previous years, as we have offset higher cash tax payments with lower pension contribution. Cash from operations was a record $40 million, reflecting our strong operating earnings and a decline in working capital. Capital spending was $17 million in the quarter and just under $30 million for the first six months. We expect full-year capital spending of up to $75 million. That's up from our prior $65 million estimate, as we have moved forward timing of spending related to the filtration project. In 2017 and beyond, we expect capital spending to be back in our 3% to 5% of sales range. In addition to spending on this important organic project, we used cash in the quarter to pay down $20 million of debt and return almost $6 million to shareholders. Our capital deployment priorities remain unchanged. We look first for attractive organic investments and value-adding M&A that can provide the highest returns, while also ensuring we continue to provide a consistent, meaningful return of cash directly to shareholders through an attractive dividend and share repurchases. With that, John, you want to take it back. Sure, thanks. Three months ago, I described the first quarter as a steady-as-you-go start to the year and we continued this solid performance through the first half. While the economic environment and market demand hasn't been particularly robust, our competitive positions are strong and we're executing in the areas that can provide added growth for many years. These include building, literally, our US transportation filtration presence, expanding in premium packaging, and strengthening our global position in performance materials. At the same time, our teams are delivering on our acquisition commitment while maintaining focus on the basics, maximizing topline growth opportunities while managing costs and asset returns. Looking at the second half of the year, our annual maintenance downs will occur, as usual, in the third quarter and we anticipate an incremental cost impact of up to $4 million. As a reminder, we experience seasonality in technical products, with typically 10% lower sales in the back half of the year. Input prices are projected to trend modestly upward and, as mentioned earlier, noncapitalized expenses for the filtration project will also increase as we anticipate $2 million of spending in the second half and we will complete spending on integration with $1.5 million in the back half. These items will be partly offset by up to $4 million of lower SG&A spending. In addition to organic initiatives, M&A will continue to be part of our long-term growth strategy. Our bias is finding and growing defensible performance-oriented businesses. And we will continue to be selective and disciplined in our approach. We recognize that the size and timing of acquisitions are difficult to predict, but to save you the question, our efforts remain active with dedicated resources and our pipeline remains solid. As always, we will communicate any progress or change in status when it is appropriate. In the meantime, our strong balance sheet and sizable cash flow provide us the flexibility to act not only on M&A, but on a variety of actions that can provide value for Neenah shareholders. Neenah has become a specialty materials company focused on profitable niche markets, and we remain very excited about our future. We have a sound strategy with leading positions in our core categories, a wide array of capabilities, and a strong financial position. Most importantly, we have dedicated and talented employees that have proven they can execute again strategic initiatives that drive value. I believe our consistent results over the past consecutive quarters are the best illustration of the improvement in value our teams can deliver. Thank you for your interest this morning, and at this point, I would like to open up the call to questions. No, <UNK>, this $3 million is the same that we have guided every time we have guided. There is no change in Appleton. The spending ---+ the capital spending is more this year, but in total we have always communicated that we expected to spend between $70 million and $80 million, and so our total spending is consistent with that, too. We are just spending it sooner. Yes, if you look back through Donaldson's history of growth, you will see a very impressive track record there. So while his pedigree is very impressive, you should talk to him in person. He is even more charming. <UNK>, that's a great question, and this might come across as a little flip, but it will be zero at the beginning and full in five years. The market is going to determine a lot of it. I can tell you 2017, because of the long qualification, typically up to a year in qualification, six months to a year, 2017 is going to be a slow start if you're looking at the revenue-generating capacity that comes off of there. Our expectation is that we will have a nice slope after that. The initial bump ---+ we are going to capacity balance our global system, so we will be moving some of the demand that has been satisfied from Bavaria to the US in 2017, most likely beginning in 2018 as well. That will free up capacity in Bavaria to support the continued growth with our key customers in Europe. As a reminder, we have a 42 share there, so we want to make sure that we continue to outperform the market in Europe. So there will be bumps and what we will try to do as we go through this process is keep everyone up to date on that loading. What I am encouraged by is the customers' enthusiasm. What I want to be able to see is their approval of the qualification of our products and of the orders coming in, then I will feel a lot more confident, but I am optimistic. How about that. In 2016, or 2017, rather, because of the start-up costs and the extended qualification period, we expect there to be a loss on the start-up. So what we have done is we've basically looked at the financials. This is a good returning project over its lifetime, but we need about 30% capacity utilization to break even. We don't expect to be at 30% in the first year. Okay, thank you. I feel like I should ask a few more questions since we are out here, but I won't. But I will note that for those listening that may attend conferences that in the second half of the year we will be presenting at the Jefferies Industrials Conference in New York next week, at KeyBanc in Boston in September, and finally at Baird's Industrial Conference in New York in November. So that concludes our call today and we will look forward to updating you in November. Thank you.

2016_NP

2016

LPSN

LPSN #If we start over in Asia, you've got a mobile first world. So, they're already mentally there, about how mobile should work and mobile engagement. Europe is pretty similar to the US. And so we pretty much see if you look at it, there's an even bucket of pipeline building in each of the big regions that we have our offices in and our sales operations and partners. So, I feel pretty good. Right now we're very focused on the telco space and I'd like to see that we bring up some large telcos in each region around the vision within the next quarter or two. So, that's kind of where our focus is. But Europe is actually, I think, quite different even now in the last two years. There's a lot more aggressive competitive behavior and companies there are being very innovative even against their US counterparts. So, I feel very good about what I see globally right now. Yes, it actually did play out. We're at 57% of the number of customers as of the end of the first quarter. So, yes, that did play out to our expectations and we stated we want to get the majority over. And I think there was an earlier question. Our target is to move better than 75% of our customer base over and we are working diligently in Q1 and Q2 and Q3 on the midmarkets and enterprises. No, our goal right now is we're trying to space them out to the best of our ability in the best way we possibly can. The only thing that would come up a little bit is Q4, when you get to that, October, late October or early November timeframe where customers want to lock things down. So, our goal is to make as much progress as we can Q1, Q2, and Q3 knowing that that potential lockdown from our customers will happen in that late October or early November timeframe. I think we're trying to bring as many as we can. Obviously it's focus, right. We know once we move everyone on LiveEngage then we have a new company in many ways. We're very focused on accelerating that, but as to balancing bookings and stuff like that, but the focus and number one goal is to get everyone on it, because once they are on it, we know we got a very stable base, a committed customer and then they can grow into the vision. So, if we can accelerate it, we'll put more into it. It's just we're moving as quick as we can. Our renewals are pretty well spaced out throughout the year but Q4 is a little bit heavier than Q3 and Q2. So, it is a little bit of a balancing act, but as we talked about it a little bit earlier, one of the comments earlier, our goal is to migrate ---+ upgrade these customers, sorry, mid-contract, not to do it on a renewal date. So, that is our goal and that's what we're focused on. Yeah, <UNK>, that's a very good question, one we look at internally quite a bit and it's a measure, of course, we use internally. So, as we move throughout the year and we have stated that we're going after the larger customers in Q1, Q2, and Q3, starting with midmarkets and going to the enterprises. So, I'm not ready to give a timeframe or an actual percentage, sorry, on revenue, but obviously if you get north of that 75%, a good number of our customers, our larger customers will be in that bucket. The second piece, and this is an important one, is if I have a financial services company, it's known as one company, maybe at a parent level. But we might be in ten lines of business. And our goal is to move over those lines of business onto the LiveEngage platform. So, that may not count as a customer count but may have an impact on revenue. So, it's an important distinction to make as we're doing our analysis and counting internally and obviously reporting to you guys externally. But the key here in 2016 is to get as much revenue onto the LiveEngage platform as possible. We spent 2015 moving the small business customers over, getting some learnings, understanding the product, and forming a product roadmap. And as we into 2016, it's a focus on midmarket and enterprise customers and those customers generate obviously a decent chunk of our revenue. . Thank you.

2016_LPSN

2018

ARI

ARI #It's always a little bit tough to predict, <UNK>, just because we don't go into the year with any preconceived plans, so to speak. We very much look at it on a deal-by-deal basis. I think that being said, given our increased size, given our ability to be a little bit more in control of situations as we're pursuing transactions, and also given some of the relationships we have formed with, I'll call them, partners both in lending as well as those who lend capital to us, I do think it'll be a little bit more weighted toward the first mortgage side of things, which, if you ---+ as you know, if you look at the trend over 2017 and the early part of 2018, that's sort of been where the portfolio has been moving, and I think you'll see that trend continue. Yes. Look, I think a lot of it depends on what you're actually lending against. And obviously, a first mortgage on a construction project or heavy redevelopment project is going to have a different and higher return than some sort of more stabilized asset or one where there's, at least, perceived to be less risk in the execution of a business plan. I think what we announced in the ---+ for the fourth quarter of 2017 and what we've done in the first quarter of 2018, I don't think there's been a lot of movement in spreads, so to speak, in terms of what we've been able to do. But I do think, if you looked at the market broadly, it's probably 25 to 50 basis points tighter for first mortgages generally and that tends to be driven more up by what's perceived as a little bit more stable or a little bit less risky. I think on the mezz side, again, it's deal-by-deal but there's certainly more competition in the world today, not to say there hasn't historically been competition. But again, I think that competition is 25 to 50 basis points on a transaction, no more than that. And again, I'll remind you and everybody else listening, right, at the end of the day, our business is finding things where we're comfortable with the risk-adjusted return, and we might be able to get paid a little bit more because we've been able to figure things out from a structuring perspective, been able to dig in on the diligence side and get comfortable with what the true risk is and what the business plan execution will be. And I think to the extent your view is that we're generating slightly higher spreads on what we're doing, I think it's ---+ because, at the end of the day, we're still just trying to find, in a fairly large market, a handful of transactions where we think we can generate excess return by being a little bit more creative on deal structure. Again, sort of my standard refrain. The portfolio is definitely lumpy. Deals sort of have a life of their own, and ultimately, you're talking about private placements that are tied to legal work, diligence work and everything sort of coming together. That being said, if I look at our pipeline now and what I expect to happen between now and the end of the first quarter, there are some things that are fairly lumpy that I would expect to happen between now and the end of the quarter. That will, I think, quickly get the numbers back in line with what you're historically used to seeing. But then I'll just add my standard disclaimer that I think it's pretty tough to think about this business on a quarterly basis. Yes, it repaid. Correct. Yes. I mean, operationally, again, it's, call it, a low 80s percent leased asset. It is covering debt service but not by a wide margin. I think there are ---+ there's still work to be done in terms of the leasing and overall marketing strategy. And I think given the size of the asset and given where retail may or may not be headed in this country, I think it's one that we spend a lot of time focusing on from an asset management perspective. I think there's some interesting conversations going on that could change our view. But at this point, I think it is one ---+ the 4 is reflective of something that is very much on the radar screen, work still to be done, and we'd like to see a little bit more leasing progress and a little bit more leasing success as we move through the year and one ---+ I think it's one that we'll be monitoring closely from an asset management perspective throughout the year. That's right. I mean, I think, again, back to my earlier comments, we've certainly done more that puts us senior in the capital structure. I think if ---+ you'll see some things later on this year where I think we'll probably, on certain large transactions, will move higher in the capital structure, lower in terms of nominal loan-to-cost or loan-to-value at the time we originate something. But I don't want to draw too many bright lines in the sense that fundamentally, the business is about looking at things from very much a granular bottoms-up perspective and seeing if we could find a place in the capital stacked on any transaction where we think we're being paid appropriately for the risk we're taking. I think that generally speaking, our originations today is reflective of the fact that we are 9 years into our recovery cycle, which is certainly long-dated. But it's equally reflective of the fact that overall economic activity is actually very strong and that is being reflected in the operating performance of a lot of the assets that we are either looking to lend against or are which the ---+ or which are the logical comps for the assets that we are willing to lend against. So I think it cuts both ways and I think we're just trying to make sure that whenever we're looking at transactions, our underwriting and our analysis is reflective of what we perceive to be both the most current as well as the most relevant information to the situation at the time. I think to the extent we're able to look out 2 years, I think we've always taken a fairly ---+ and this goes back even 4, 5 years ago, I think we've always been fairly pessimistic in terms of where cap rates go, where residual values go, where prices per square foot go, where prices per key go. So I think we retain our skepticism and pessimism, which I think we're supposed to do as lenders. But I don't think that view has gotten any more negative in terms of what's going on right now. I think it's generally consistent with the approach we've always used historically because in some respects, it feels like, at least for the last 3 years, we've been talking about the fact that this is a long-dated recovery and we need to be thoughtful about how quickly things might change. Yes. I think it's unrealistic that we're getting paid off in April. I think if you'll recall, at the time we took the impairment, this is a 50 condo unit project. I think there were roughly 24 or 25 unsold condos at the time we took the impairment. Today, we're down to 17 unsold condos. So again, chipping away at it sort of unit-by-unit, continue to be, generally speaking, pleased with the reaction of those who come in and tour the project. I think the challenge at the asset is really about getting more foot traffic in because I would say the hit rate has actually been pretty good, both in terms of price paid and success in getting people to step up when you ---+ when we actually get the right level of foot traffic. But I think this is going to be one that we sort of just chip away at throughout the year. I don't think there's a concentration. I'd make a general comment that on par, the project was a mix of 2- and 3-bedroom units. I think on par, there's more 3-bedroom units left than 2-bedroom units. So on the margin, slightly higher price point, but it's not as if there's a bunch of value in our remaining penthouse or anything like that. It's all from a price per square foot perspective and nominal dollar value, all within a reasonable range. But if you gave me my choice, I'd rather have more 2-bedroom units than 3-bedroom units. That's not where we are at this point in the life cycle of the project. I don't have it at my fingertips, <UNK>, but we can certainly pull it together and follow up post call. Thanks, operator, and thanks everybody for participating this morning.

2018_ARI

2016

LNTH

LNTH #You're welcome. <UNK>, I'll offer you what we do share publicly from a contrast penetration rate data point. Approximately two quarters ago, we stopped sharing specific contrast penetration numbers. And the reason I offer then which is true and remains valid is that because we are reliant on a single source for those data and because we're well aware that it's survey data, I was uncomfortable with sharing specific numbers rather than sharing trends. And as I alluded to earlier in the call, perhaps I wasn't specific enough, what we saw in the second quarter is that at two levels, which is the total volume of echocardiography exams being performed in the marketplace, as well as the penetration of contrast in that market. Second quarter delivered as forecasted, which in both cases meant that we saw improvements or growth in those two indices. The other two drivers in the market are market share and price. We do not offer specific market share percentages, but as I also alluded to in my comments, we retain and remain market share leader in this marketplace which we're very proud of and we think that a lot of our commercial efforts warrant. Price is not something that we speak to relative to our product. I'm not going to agree that the market will be supply constrained. In fact I think that we worked very diligently over the last several years to ensure that there's a smooth transition to our inbound supply when NRU goes offline. And that coming date has been well-known to us for over two years now. So we're well-prepared for that. Our contracting already exists for years past that. So there will be no change in our pricing dynamic on an inbound perspective when NRU shuts down. On an outbound perspective, we're also highly contracted already out through at least 2017 with our major radiopharmacy customers. So two separate questions I'm hearing there. On the sub-analysis that you're absolutely right. At ACC, we presented data that looked at our 301 trial and looked specifically at the subgroups of females and patients who met the criteria for obesity. And what we demonstrated very convincingly is that the value principle is even more proven when you look at those subsets which by the way are two of the subsets, or two of the subgroups, that are most challenging to image and therefore where the value really demonstrates itself. As I mentioned, we have advanced our discussion for a commercial partner for a commercial and development partner, I have nothing else I can add to that at this time. So I will continue to say, stay tuned. I have not offered a launch date, <UNK>. And honestly, I'm not prepared to do so on this call either. I'll just say thank you everyone for joining today and we look forward to speaking with you again next quarter.

2016_LNTH

2017

STC

STC #Thank you, Keith, good morning. Thank you for joining us for our third quarter 2017 earnings conference call. We will be discussing results that we released earlier this morning. Joining me today, our CEO, Matt <UNK>; and CFO, <UNK> <UNK>. To listen online please go to the Stewart.com website to access the link for this conference call. I would remind participants that this conference call may contain forward-looking statements that involve a number of risks and uncertainties, because such statements are based on an expectation of future financial operating results and are not statements of fact, actual results may differ materially from those projected. The risk and uncertainties with forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release published this morning and in the statement regarding forward-looking information, risk factors and other sections of the company's Form 10-K and other filings with the SE<UNK> Let me now turn the call over to Matt. Thank you, Nat, and good morning, everyone. We appreciate you taking the time to join us today. First of all I'd like to extend a special welcome to <UNK> <UNK>, our new CFO, who joined us in August, and also on behalf of everyone at Stewart. I'd like to take the time to thank Allen Berryman for his many years of exemplary service to the company and congratulate him on his retirement. Finally, before we go into the quarter, I'd like to recognize our employees in the Southeastern United States, and specifically, the Houston area, for the perseverance they have shown in the ongoing recovery from the impact of hurricanes, Harvey and Irma. Every one of us here at Stewart has seen the hardships that people have faced and continue to face as well as the kindness, generosity and humanity that followed. It's truly been amazing to witness. With (inaudible) and while the impact has not been extensive in purely financial terms (inaudible) greater had it not been for the tireless efforts of our team, particularly, here in Houston, and I want to thank them personally for their leadership during the storms. This isn't just about the impact of delayed closings and higher expenses, Stewart employees worked throughout the time in Houston, our headquarters here, they were closed for several days during the storm and many employees were displaced in their homes for weeks, and in some cases still haven't moved back into their homes. And I sincerely thank them for their incredible effort during this time. So now to matters of the quarter. So this morning we reported pretax income of $19 million and a net income of $11 million or $0.46 per share for the third quarter of 2017. We also reported operating revenues of $498 million. Our results were impacted by declining market trends, particularly, refinancing orders. The impact of hurricanes, Harvey and Irma, that I mentioned earlier, as well as the departures of certain retail staff that we previously discussed. On the second earnings ---+ second quarter earnings call, we noted retail staff departures in several specific regions, the departed revenues represented approximately $70 million in annual revenues. Stewart has taken swift, aggressive actions to address these disruptions. Our employees work tirelessly after the hurricanes to quickly restore full operations. We have successfully recruited new revenue-generating associates and stabilized staff attrition. At quarter end we had hired new revenue-generating associates with expected annualized revenues ---+ revenue generation of $20 million to $25 million. Additionally, our second quarter acquisition of Title365 generated new business, which we expect to result in $40 million to $50 million in annual revenue. These combined actions are expected to fully replace all of the departed revenue by 2018 selling season and ongoing recruiting efforts and targeted acquisitions should further bolster our top line. I also want to provide an update on the Title and Escrow production deployment and the timing of any expense savings benefit from it. On last quarter earnings call we noted that the staff departures had put those benefits at risk, given the priority of rebuilding revenue in the impacted areas and refining our technology deployment to ensure the continued delivery of great service to our customers. As a result, we now expect to achieve a full $10 million run rate benefit by the end of 2018 and another $10 million by the end of 2019. It's also important to highlight the recently announced change to our leadership structure, our Chief Legal Officer and Chief Compliance Officer, <UNK> Killea, has been appointed to the additional role of President of Stewart Information Services. <UNK>'s expertise and experience has been invaluable to the Stewart organization, since he joined the company in 2000. In this capacity, president <UNK> will help drive execution of Stewart's strategic priorities. Additionally, we announced that <UNK> Magness has recently joined the company as Chief Corporate Development Officer. <UNK> is a seasoned and well respected industry veteran with over 35 years in the title and real estate business. Most recently he served as President of Old Republic Title Companies. In his role as Chief Corporate Development Officer, <UNK> will play a key role in ensuring Stewart continues to provide the high quality services our customers have come to expect while we increase our revenue going forward. Finally, as you saw in today's release, our board is exploring the full range of strategic alternatives available to Stewart. We have retained financial and legal advisors to assist us with the strategic review process and all options are on the table, including business combinations, the sale of the company and continued execution of our standalone business plan. At the same time, I assure you that we will remain focused on executing our current operating plans and continue to provide comprehensive service and solutions to our customers. We do not intend to provide updates on the strategic review until further disclosure is deemed appropriate or required, and therefore, will not be in a position to address any questions regarding the review, during today's call. So at this point I'll turn it over to <UNK> for more detail on our financial results. Thank you, Matt, and good morning, everyone. As Matt discussed, our revenue and margins were impacted by the departures of certain retail staff, the impacts of hurricanes, Harvey and Irma, as well as market trends, particularly, refinancing orders. The Title segment generated pretax income of $25 million or a 5% margin compared to a pretax income of $50 million or 9.5% margin in the third quarter of 2016. The margin impact of revenue departures, as everyone knows, in the hurricanes is very high because what ends up happening is you lose the small cost of the producers themselves, you're keeping the support in those areas as you're rebuilding those markets. You've got the hiring cost of new people and as all that normalizes the margins return as the revenue production occurs. Let me provide a bit more context on the revenues. On the positive side, the residential fee profile increased 8% to $2,000 as the business mix shifted to a higher portion of purchase of orders. International operations revenue improved 7% as Canada and the United Kingdom continue to perform well. The commercial business continues to perform well and entered Q4 with a strong pipeline. However, we saw revenues decline in Q3 due to several transactions being pushed into the fourth quarter. In addition, while there was a good breadth in transaction type and geography this quarter, we didn't have any large deals close like we did in the third quarter 2016. On the agency side, we continue to sign new agents and are excited (inaudible) bring forward the new technology we are implementing that will provide our agents with enhanced connectivity and user experience. Gross agency revenues were down 5% and net revenues were down 7%. The independent agency remittance rate was 17.5% compared to 18% last year due to a shift in geographic mix. In short, the average remittance rate was almost 20% in those states where we experienced gross revenue declines whereas the average remittance rate was 15% in those states where we experienced gross revenue increases. Given our current agent footprint, we expect the remittance rate to remain in the mid-to-high 17% range over the near term. Title losses as a percent of revenues were approximately 5% this quarter. Our total balance sheet policy loss reserves were $476 million at quarter end and remained above the actuarial midpoint of total estimated policy loss reserves. Moving onto Ancillary Services and Corporate segment. Revenues decreased 45%, primarily due to our divestiture of the default loan servicing business in 2016. Expenses declined 46% more than offsetting the revenue decline during the quarter. As a result, excluding $6 million of parent company and corporate expenses, the search and valuation services business was slightly positive from a pretax standpoint. With respect to overall expenses, employee costs in the third quarter of 2017 decreased 9%, even with the effect of elevated hiring costs as we look to replace the revenue producers. The decrease is due to a combination of volume related (inaudible) primarily in ancillary services, the previously described staff departures and ongoing operational efficiency gains in corporate operations. As a percent of total operating expenses, employee costs for the third quarter of 2017 were 28.1% versus 28.3% last year. Other operating expenses for third quarter 2017 decreased 6% due to reduced outside search fees, driven primarily by lower search revenues from the ancillary services and centralized Title operations. Of note, other operating costs in the quarter included $1.4 million of Title365 integration costs. As a percentage of total operating revenues, other operating expenses were 17.8% versus 17.2% in the third quarter of 2016. On an ongoing basis, we expect that our other operating costs will average approximately 18% to 20% of total operating revenues in any given quarter, recognizing the seasonality of revenues. Finally, our debt-to-capital ratio at quarter's end was 17.1%. I will now turn it back to Matt for a few concluding comments. Thank you, <UNK>. Just before we move into the Q&A, I wanted to take a moment and reiterate the positive steps we have taken to position us well for the remainder of this year as well as we move into 2018. Again, to summarize, we have successfully recruited new revenue-generating associates and stabilized staff attrition. We've also strengthened our executive team with the promotion of <UNK> Killea and the addition of <UNK> Magness. The acquisition of Title365 has been successful and we expect it to have strong positive contribution to our results. We have largely mitigated the impact of the hurricanes at this point and we've refined the deployment of our Title and Escrow production technology and are experiencing a positive feedback on the improved (inaudible). In addition to the system that <UNK> referenced of deploying (inaudible) integrate with our Title agencies, making it easier to do business with us and we expect to see that enable our share to expand next year. And as a result, we remain optimistic about the future of Stewart. And so, we will now take your questions. Again, as a reminder, we're not going to take questions regarding the strategic review. So operator, please open the lines. So nice work stabilizing the attrition. I know that was something you guys were focused on. But on the new recruitment rev, I guess just the run rate of rev, could you guys talk about what regions that is mostly geared towards. And then, if there's any 1 or 2, maybe particular competitors where you're seeing those agents come from. So the regions we talked about, large part of that is in the West as well as some in Arizona as well as Texas. So I think those revenue producers are in those areas. I'd say that the West and Northwest have a large percentage of those. In the terms of where they are coming from, we ---+ I'm not sure we can disclose that information going forward. But again, we are encouraged not only by, yes, the revenue but also, kind of, how people are coming on board with Stewart and the opportunity that they see. So in my mind, these are all experienced producers, some leading our new offices as well that are coming from established companies. And we have high expectations on their ability to drive our revenue and efficiencies going forward. Okay. And then, on just the ---+ on the reserve ratio, if I look at that year-to-date, that's running, I think, about 30 bps-or-so higher, relative to last year. Any thoughts on where that goes, maybe a good range to think about for 4Q and then maybe for next year. Yes, I think as we mentioned, <UNK>, it's <UNK> <UNK>, it's really ---+ we should really be thinking about it in the 5% range. I think there's always some little things here and there. I think we may have had little bit in our Canadian operations this period, but I think 5% is probably the number to keep them on going forward. Okay. And then last one for me. What's the comfortable debt range or leverage ratio for you guys. Well, I think we probably want to stay ---+ I think we had said about 17% currently. I think maybe we can go up a little bit from there, maybe in the 20% to 25% range without a lot of [adjective] from the rating agencies. But I think that's a number to think about, but we can always go back and speak to them as needed. No, they are generally new in the geographies where we have lost staff. Yes, and we have the normal hiring but I think where our more aggressive recruiting has been in areas where we have lost. I mean, that the markets where we did lose staff are strong markets and strong title markets for us that we made the commitment to go back and invest in. And so that's where the bulk of our hiring is coming back in through. Correct. Yes, but as I stated, I think it's ---+ for now it's a good run rate. I think as we continue to look at that business, we may see some things moving forward. But I think that's a good run rate for now. Yes, we think they are. We don't see those changing significantly from what they have been. But I'd say, our commercial margins are pretty much in line with what our expectations are, they have been and should be going forward. A lot ---+ really, all of that would be residential, purchase and refi. Yes, I think any commercial transactions would be a shorter delay, where we're seeing that the bigger impact would be in the residential and residential resale, to be honest with you, would be a majority of that impact. Yes. I mean, I think ---+ hey, <UNK>, it's <UNK> <UNK> here. So I think we the ---+ keeping in mind the seasonality of the business, right, and the time it takes for people to ramp up their books, we're really expecting the producers to start to hit their stride, really as we start to come into next year. I think ---+ and similarly with respect to 365, right, the third quarter is pretty much an integration quarter, so we got high expenses and still trying to get the revenue transition, we'll see some benefit of that. But again, you're really not going to be hitting that $40 million to $45 million run rate until we start to get into early to mid-next year just because of the cyclicality of the business. And 365 has done higher revenues, historically. I think it's just a function of how we hit the ground running and get that business going. Yes, so ---+ I mean, I don't think we've given a percentage of where we are on the rollout per say, but I would say we're well underway. We've done some major states in terms of our deployment and are receiving good feedback. I think, on Q2, we talked about pausing that, revising our deployment, we have methodology and I will confirm that the more recent reports as we continue to deploy, gotten good feedback. So I'd say we're well (inaudible) process and a product that we have much more confidence in. I'm not sure ---+ we continue to look at that, and valid question. What you also saw, kind of, is that it relates to the hurricanes, as while the closings didn't occur and you had all the cost. Obviously, in these affected market, you really did not have any orders and you've seen a pullback, just overall activity in those markets. So there's no, probably, high expectation that basically these are just delayed closings and your, kind of, run rate of orders, you've maintained through that process. So I think it's going to be a little bit of a loss going in Q4 because you do have some that are closing, that were scheduled for Q3. But offsetting that, you have orders that really didn't occur in Q3 because of the damage in those markets. So I (inaudible) revenue was as expected. I think on bottom line performance, it was within expectations. But I think as <UNK> I think referenced, we did have some integration cost. And driving some of those efficiencies just on their systems, and again, some contractor provisions, et cetera. You're definitely not seeing kind of the bottom line impact in Q3 that we would expect going into next year. So still some integration cost and some opportunities as we consolidate systems, some of that's in procurement, some of it is in, yes, the technology platforms, some much of that should be done toward the end of this year and then we should see the margin improvement that we should expect in the next year. No, I think we're on the same trajectory. Obviously, fourth quarter from a residential ---+ so you've got the seasonality that comes into play and so you don't see as significant impact on Q4, we're really looking at the commercial transactions which usually drive our Q4 performance. But I don't think any of those estimations have changed in terms of the efficiency of Title365 or these revenue producers coming on board. Just want to say (inaudible) joining us for this quarter's conference call, and appreciate your interest in Stewart and look forward to hearing from you next time. Thank you.

2017_STC

2015

LPNT

LPNT #But that week fell into the quarter in both measurement periods. Great. Thank you, operator. Our focus remains on executing within the strategic priorities that we described for you: improving quality and service, growing in existing markets and through acquisitions, continuously improving our operating efficiency, and developing high-performing talent. Our acquisition pipeline remains active and our disciplined approach gives us the ability to expand margins in our recently acquired hospitals. We have significant capacity in our balance sheet. We believe there is additional Medicaid expansion in front of us. These are among the factors that give us the opportunity to grow EBITDA and create meaningful shareholder value in the coming years, all while confidently making the communities we serve healthier. So thank you for joining our call today and thank you for your interest in LifePoint Health.

2015_LPNT

2016

VG

VG #Yes, so our, this is <UNK> again. Our strategy is an Omni channel strategy. We have four channels. So inside sales, which is, you know, tele sales and we have our own W-2 employees, our own W-2 salespeople, that's our direct field sales force. Then we have the channel managers who work with the master agents and the sub agents throughout North America, and then we have <UNK>'s enterprise channel. You know, as I said in my prepared remarks, we want to sell, you know, the right product to the right customer through the appropriate channel. And you're going to sell your SMB down to your micro-businesses through your tele sales channel because that's the most effective way to reach those with a, you know, an appropriate acquisition cost. And the enterprise, obviously, services enterprise and the direct field group and the channel is really focused mostly in mid-market up to small enterprise. From a growth point of view, the size of the direct field group is already, well, bigger than that 90 to 100 that you mentioned. We are presently in nine cities with separate sales offices. We think about the expansion strategy. We use the term NFL's cities strategy. There are 32 NFL cities. Again, it doesn't necessarily have to be a NFL theme there but you get the idea that we're going after the large cities. So today we have sales offices in Chicago, New York, Philly, Washington, Atlanta, Dallas, Houston, Denver, Phoenix. And we're expanding in every direction to have a direct field presence in all the major markets throughout the country. And we're going to do that organically and in-organically. Again, because we just can't get there fast enough organically, and there are opportunities to buy others of these BroadSoft service providers in these other markets. And we're going to be very active with that this year. Yes, that will be reflected in costs. It's going to take throughout the year to do that. I mean, we're cutting our data center footprint, and this is separate and apart from our POPs, our termination POPs. We're cutting our data center footprint in, more than half. So you're not going to see a significant impact to margins in 2016, but in 2017 you should see a material difference, which we'll clarify as we execute that change. Thank you. So right now, we're not operating the company towards a target leverage. We're letting the leverage, up to a cap of what's available at a reasonable coupon, within that, we're letting our M&A and other capital allocation, buyback and organic growth strategy, drive that. I think that the current bank loan, as I said, enables us to go up to 2.75 times, you know, I think we're comfortable running the company at 2.75. I think we'd be comfortable running it at three. I think when you start to get above that, you know, it's less about target leverage and it's more about cost of debt. I think when you cross into high yield land, you know, there's a disproportionately higher cost of debt at that point. So at three times, I think we're prepared to let the strategy drive that, and once we're through this acquisition push, that we're making now, you know, it will be more about fine tuning what the target is. Great. Thanks. And thank you to everyone for joining us today. We appreciate your support of Vonage and look forward to speaking to you throughout the quarter as well as again next quarter. Thank you.

2016_VG

2015

HPQ

HPQ #Yes, look, I guess, my strategy there has not changed, since we were talking at SAM several years ago. We're not chasing share for share's sake, and we are very selective about what are valuable units, what we can attach around. And in a very challenging PC market, that is absolutely the right thing to do. There has been some fairly significant headwinds. And so, when I break that down, <UNK>, and I think about consumer and commercial, there is some parts of the consumer market that are not terribly interesting ---+ empty calorie business. And we're not terribly interested in placing units there. But we have been doing pretty well in the premium segment, where we have been taking share in the higher priced bands. And we segment the market, and heat [mack] market fairly significantly. We did anticipate a challenging operating system transition to Windows 10 on two dimensions. One was a free upgrade that was, of course, offered. And the second was the very short transition time, which is normally about three months, which was compressed to under one month. And what that drove was fairly high Windows 8 channel inventory levels, and that will take a little bit of time to flush. I guess, the good news is that the Windows 10 feedback is pretty good, and a great operating system is important for the ecosystem in the industry. So once Window 8 flushes, which may take a little time here in the industry, we should see some stimulation from Windows 10. Commercial, of course, is a little simpler to understand. The compares are tough. This was the peak last year of the Windows XP transition. But that drives higher profitable units for us, and we are clearly focused on that. I might clarify that is not our Windows 8 inventory that has to flush through. We're running nice inventories at Windows 8 so. Yes, so look, I think in general that is an industry statement. Right. If you were to look across, by all reports Windows 8 channel inventory levels are high, and they are on higher side for us as well. But we are ---+ as an industry looking at having to flush through 8 before 10 really takes off. And before we move on, the bright spot that <UNK> mentioned around the consumer, the premium consumer segment. This calendar Q2, we gained 4 points of share with our Spectre X360. So that has been a long time in coming, and a really nice result to continue to have a great product set in that space. Yes, I will start first, and then turn it over to <UNK>. So China remains a very big and important market for us, but it's very competitive. And but I will say our joint venture with Tsinghua, is actually standing us in very good stead. We had an excellent quarter in servers in China, quite a good quarter in storage, and a sequential improvement in networking in China. And so, listen, it's a very competitive market, by local competitors, by international competitors. But we are convinced that our strategy around the JV with Tsinghua is the right thing to do, and we're already seeing some benefits on just the basis of the announcement. And I will say for printing and personal systems, personal systems particularly, the consumer segment is pretty soft. The commercial segment whilst not overwhelming is not as contracted as what the consumer market is. The printing market is ---+ has been softer than traditionally it has been. So we continue to watch the market with interest. We're very interested in the work that <UNK> and the team have done with Tsinghua University. We think that is a pretty interesting model. So let me tell you, Technology Services is the crown jewel of enterprise group. This is one great business, but there is a lag to this. And part of what you're seeing in as-reported revenue is the currency issue. But frankly, as you saw our enterprise group revenue decline in 2012, 2013 and 2014, that has a knock-on effect with technology services attach. The other problem is there was very high technology services attach to our BusinessCritical systems, Itanium for one. So we are recovering from that. What I have to say, is the team led by Antonio Neri when he ran Technology Services, is he has done a remarkable job in creating new products, like Proactive Care, Datacenter Care that are actually filling the vacuum that was left by Itanium, and a downward decline in enterprise group hardware revenue. So you are now ---+ pretty soon just like in storage, you're going to see a shift now to actually as-reported growth in technology services, because the new products are kicking in, the attach rate is at very good levels, and now we have hardware growing again. So we feel pretty good about the underlying financial architecture associated with enterprise group. And Technology Services has not only great financial characteristics, virtually every customer needs to attach Technology Services, so they have that ability to service their hardware in their data center real-time, with the biggest footprint of services individuals around the world. Broadly speaking, our view is not dissimilar to the industry analysts. We think it will be challenging for the next several quarters. We are generally aligned with industry on that. We see it being down high single-digits versus only negative 2% last year driven by the XP refresh. We see notebooks being stronger than desktops. We see opportunity in commercial mobility, in accessories, in services. And the market to me at the moment, reminds me a little bit of the market in 2013, and it really requires a highly disciplined approach to market segmentation, cost optimization, leveraging the 160,000 channel partners that we have around the globe that do an amazing job of adding value to our customer set, and continuing to drive our innovation agenda. We remained disciplined about not chasing share for share's sake, playing where we choose to play, and winning in those segments. And we are in a consolidating market. And inside that consolidating market, we're growing faster than the market. And if we do that in a very disciplined way, we still see opportunity in the longer term for the personal systems business But I think as you said, <UNK>, that the next couple of quarters are probably going to be reasonably tough. But the next several quarters, we think are going to be pretty tough. (Multiple speakers) It's pretty challenging right there, right now, as I mentioned earlier. Right.

2015_HPQ

2016

KRG

KRG #We aren't doing another significant transaction right now, but to your question, we are prepared because we have executed exactly how we laid out the plan when we did those two transactions. And unlike others, when we closed on those transactions we had no hiccups. In fact, we excelled and the Company became stronger because of both of those transactions. So the point that we were making is that we have done deals that have improved the portfolio and improved the balance sheet. When you look at the balance sheet today from where it was, it is significantly stronger and more flexible than it was prior to those two transactions. And I mentioned that we grew our free cash flow per share, mind you, 7.5 times in that period of time. That's why a Company like ours would look at a transaction and it is why we would pursue something like that because it makes a lot of sense. However, if we are looking at a transaction, as we have this past quarter, and we get to the point where we deem that those things would be in jeopardy in any way, then we won't do that transaction, which is why this is what occurred. So I think we are very capable of doing these things, and as I mentioned our operation ---+ our operating efficiency is the best in the business. That's why we're able to do these things. I think we feel very comfortable with our capabilities, but we are most focused on managing risks that ---+ it is around these deals to make sure they're the right deals. Well, goals will always move higher, but we need to hit this one first. We're at 88.3%, we want to be at 90%. We are very focused on it. There's a lot of upside there for us in terms of NOI, cash flow, and earnings growth. Very profitable business in small shop side of our business. That's our focus, is to hit that and try to maintain it. I would say maintaining ratio would be something we would want to do. But yes, we think we can continue to excel here. We think our portfolio is capable of reaching that. But by the same token we don't just put tenants in spaces to try to achieve that goal. We turn down tons of deals every month based on us not being comfortable with a particular tenant. It is really more about high quality leasing than just leasing. On the first phase we are down to very few units remaining, and only a handful. So when you look at that there's a profit sharing portion to this basically arrangement we have with the builder. So we have a couple units to sell, and then we will look at the end, and then there's potentially some additional profits that we will be able to book as it relates to that. Just to point out that we call it any street residential sales, but it has been a fee income stream since 2010. I think it is very important to point out. It is almost like a seven year lease that has been in place that keeps providing additional cash flow every year. So it is winding down, but it has been a great source of earnings and cash flow for the period of time since 2010. Thanks. Good morning. Well I think, Alex, that these things are situational. So everything we look at, we look at on its own merit. So as I mentioned in the call, I think right now our focus is on redevelopment in the portfolio that we have and that we're adding value to, and we're funding in a very efficient way. And the returns are high. That said, it doesn't mean that you don't ---+ when you are focused on that you don't look at anything else. You are always looking at what you can do to ---+ that's going to create the most value per dollar. So I think it is hard to say that we're going to limit anything. I think what we're going to do is we're going to continue to do what we have been doing, which is growing free cash flow, improving the balance sheet, and being in a place where we're very flexible to adjust and adapt to the macro environment. I mean, we are in an environment that is pretty shaky when you look at what's going on in the world. So we got to be ready to adapt and pivot to that, and that is what you think about when you look at anything. When we spend $1, we're going to think about all those things as it relates to that $1. It doesn't mean that we won't ---+ that we would exclude any particular thing, but it means that we're going to be reviewing it with that lens of caution around the macro. So ---+ I think it is fair to say that large scale ground up development right now in our view does not pencil very well. So yes, I think it is fair to say that where we were in 2004 as we looked at the landscape is very different to how we look at the landscape in 2016. So I think that it doesn't mean that we wouldn't do ground up development in the right scenario, but not to the scale and not to the exposure to our balance sheet that we once had. I think the exposure that we have to non-income producing assets right now is the exposure that is the maximum exposure as we look today. It could change, Alex, based on the macro. We're not going to dig our head in the sand. We're going to pivot based on what's happening, and my personal view is that a little bit of caution right now is probably a good thing. Look, I think in my view this a supply and demand business, and supply remains extremely low. However, demand is what I would call moderate. So I think retailers are looking at the landscape and are certainly willing to look across spectrums as it relates to where they want to be, but they are always going be focused on the dirt, the real estate. So when you go back and talk about our Company over time, we have been very good at understanding dirt, understanding real estate. We will continue to focus on that. We want to own assets that are in locations that we will be able to transition. So that is our view of the market is that it is very low supply. So that makes retailers ---+ that puts retailers in a position they will look at various products. But look, when you look at our portfolio we own 121 properties. I think 119 of those are open air shopping centers. That's the business we like. We like being in a business where we have good tenant relationships. We will continue to focus on having great tenant relationships and great real estate, and I think everything else will go from there. Thank you very much. Thank you, everyone. We appreciate your time and look forward to talking to you next quarter.

2016_KRG

2017

IIIN

IIIN #Thank you, Vicky. Good morning. Thank you for your interest in Insteel, and welcome to our second quarter 2017 earnings call, which will be conducted by Mike <UNK>, our Vice President, CFO and Treasurer, and me. Before we begin, let me remind you that some of the comments made on today's call are considered to be forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from those projected. These risk factors are described in our periodic filings with the SE<UNK> All forward-looking statements are based on our current expectations and information that is currently available. We do not assume any obligation to update these statements in the future to reflect the occurrence of anticipated or unanticipated events or new information. I'll now turn the call over to Mike to review our second quarter financial results and the macro indicators for our markets. Then I will follow up to comment more on market conditions and our business outlook. Thank you, H. As we reported earlier this morning, despite difficult comps, Insteel's results for the second quarter were slightly improved from a year ago, as widening spreads and lower operating expenses offset lower shipments. Net earnings for the quarter were up 3.7% from last year while earnings per share increased marginally to $0.39 from $0.38. After getting off to a relatively strong start in January, shipments moderated over the remainder of the quarter resulting in a 6.9% year-over-year decrease and a 5.6% improvement from Q1 as compared to last year's unusually high 23.1% sequential increase. As we have previously reported, shipments for the prior year quarter benefited from the unusually mild weather and the carryover of pent-up demand from the first quarter of fiscal 2015, which was the wettest December quarter on record for the U.S. Although this year's weather was also relatively mild across many regions of the country, the Western states as well as Texas experienced significantly more precipitation during January and February as did certain of our larger markets, including Pennsylvania, North Carolina and Virginia in March. Average selling prices for the quarter were up 2% sequentially from Q1 as a result of the price increases that we implemented to offset the recent escalation in our raw material cost. Unfortunately, the amount realized fell short of our expectations and the timing for the increases occurred later in the quarter than we had anticipated due to competitive pressures that were likely exacerbated by the usual seasonal slowdown. ASPs gradually rose during the period with the March average up 3.1% from December. On a pro forma basis, assuming the higher March ASPs were in effect for the entire quarter, gross profit would have risen $1.5 million from the reported amount to $19.8 million, gross margin of 120 basis points to 19.3% and earnings per share $0.05 to $0.44. Looking ahead to the third quarter, we expect further increases in ASPs driven by the full quarter impact to the Q2 increases together with additional increases that went into effect earlier this week. Gross profit for the quarter fell $0.3 million from a year ago to $18.3 million, while gross margin increased 80 basis points on the lower sales to 18.1% as higher spreads were offset by the reduction in shipments and higher unit conversion costs and the lower production volume. On a sequential basis, gross profit rose $6.3 million from the first quarter and gross margin widened 420 basis points, also largely due to higher spreads and too a much lesser extent lower conversion costs and the increase in shipments from Q1 to Q2. We ended the quarter with less than 3 months of inventory valued at higher average unit cost in the beginning of the quarter, reflecting the recent increases in our raw material costs. We believe the additional price increases that we've implemented will mitigate these cost pressures during our third quarter. SG&A expense for the quarter fell $0.6 million from a year ago to $7.1 million due to lower employee benefit and stock-based compensation costs together with a larger increase in the cash surrender value of life insurance policies in the current year. Our effective income tax rate for the quarter was essentially unchanged from the prior year at 33.9% versus 34% a year ago, while the year-to-date rate fell 50 basis points to 33.8% from 34.3% due to changes in permanent book versus tax differences. We ended the quarter with $40.2 million of cash on hand or over $2 a share after paying the $1.25 a share special dividend in January and no borrowings outstanding on our $100 million credit facility, leaving us with ample liquidity and financial flexibility. Looking ahead, the outlook for our construction end markets remains positive. The most recent reports for the Architectural Billings Index and Dodge Momentum Index reflect favorable trends that imply further improvement in nonresidential building construction in the coming year. Yesterday, the American Institute of Architects reported that the ABI increased to 54.3 in March from 50.7 the previous month. Through the first 3 months of the year, the index has averaged 51.5, which is up slightly from 51.2 for all of last year. In March, the Dodge Momentum Index rose for the sixth consecutive month, increasing to its highest level in over 8 years and the 3-month average was up 23.7% year-over-year. The monthly construction spending data continues to reflect divergent trends in private and public construction and the need for increased infrastructure investment. Through the first 2 months of the year, private construction spending is up 6.5% from a year ago with nonresidential up 7.2% and residential up 5.7%, while public construction spending was down 8.4%. Public Highland Street construction, one of the larger end users for our products, was down 9.4% after rising only 1.3% for all of last year. We continue to believe the federal funding provided for under the FAST Act will begin to have a more pronounced impact on infrastructure construction activity later in the year. We're also encouraged by the recent funding measures approved by a number of states providing for increased infrastructure investment in the coming years. Finally, although the timing and specifics of President Trump's $1 trillion infrastructure proposal has yet to be firmed up, we believe the size and duration of the package that is expected to be proposed would represent a significant catalyst for increased demand for our concrete reinforcing products and favorably impact our business outlook for an extended period. At this time, it remains unclear whether it will be pursued as a stand-alone measure or concurrently with the tax reform or health care bill. I'll now turn the call back over to H. Thank you, Mike. As reflected in our press release this morning, market demand for our reinforcing products was weaker than expected during the quarter as well as compared to last year. While leading indicators continue to reflect underlying strength in nonresidential construction markets with the prospect for further growth, weather and other factors dampened demand in Q2. At the same time, the market for our raw material---+ hot-rolled carbon steel wire rod ---+ has remained volatile over the course of fiscal 2017, although the general pricing trajectory has been trending upward reflecting escalating market prices for steel scrap. During Q2, we announced 2 price increases with the objective of recovering higher raw material costs, followed by a third increase that went into effect earlier this week. While our ASPs have risen, the competitive environment has been affected by weaker demand during the seasonally slower months, resulting in a reluctance by competitors to recover rising costs at the same rate they are being incurred. We expect that favorable seasonal trends together with positive underlying fundamentals in the nonresidential construction markets will support further upward movement of our ASPs through Q3. In late March, a group of domestic steel wire rod producers filed antidumping and countervailing duty cases against 10 countries that collectively supplied nearly 50% of the imported wire rod that entered the U.S. during 2016. These cases will run their course over the next year with final margins, if any, and final injury determinations coming in the spring of 2018. Depending on market conditions, we have typically sourced from 10% to 30% of our raw material requirements from offshore vendors due to the relative unattractiveness of certain products to domestic wire rod producers and to ensure adequate supplies. We are evaluating alternative options in the event that some traditional offshore sources elect to exit the U.S. market during the pendency of these cases. Over the years, we've experienced several rounds of trade actions on wire rod and up to this point, have successfully navigated those events without any material adverse impact on our business. I should point out that Insteel does not act as the importer of record when it purchases material from offshore sources and, therefore, has no liability for assessments of antidumping or countervailing duty ---+ duties that may be levied. Turning to CapEx. Following our earnings call in January, we experienced further delays with the construction and commissioning of the new raw material cleaning and PC strand production lines at our Houston plant. While we haven't experienced any substantial technical or systems problem, the completion of required electrical, plumbing and electronics-related tasks moved slower than we expected. Most of these issues have been resolved, and we expect to process the first coils through the new cleaning line before the end of this week, and we'll be gradually increasing operating hours until the plant is fully satisfying its requirements. As a result of the extended time line related to the cleaning line, we now expect the new strand production line to come online in May and ramp up by the end of the quarter. Aside from timing considerations, we're pleased with the project and confident that we will achieve our objective of operating at the lowest production costs in the industry and realize the projected cost reductions of approximately $5 million per year. The other major product ---+ project that we've pursued over the last 2 quarters is at our Missouri facility, where we have installed a new ESM production line to replace older, less cost-effective equipment to expand our capacity and widen the range of products that we offer to the market. The project has proceeded very well. The line was commissioned and placed into service earlier than projected. The line's currently operating 16 hours per day, and we expect to ramp it up further over the balance of the quarter. We previously indicated that we expected CapEx for 2017 to come in at approximately $25 million while acknowledging that our estimates have tended to be on the conservative side in prior years. As is normally the case, the timing of outlays for certain projects could slide into next fiscal year, thereby reducing CapEx during 2017. We'll provide updated expectations during the third quarter call, but the scope of anticipated projects has not changed as we continue to aggressively pursue attractive growth and cost reduction opportunities as rapidly as our internal resources allow. This concludes our prepared remarks, and we'll now take your questions. Vicky, would you please explain the procedure for asking questions. No. I mean, I think underlying level of demand would pretty closely match up with the spending statistics that we see in the private sector of nonresidential construction and the public sector, with the public sector continuing to drag at flat or even slightly lower spending levels and the private side being better. When you roll all of that together, I wouldn't think that it's more than a mid-single digit, high single-digit market growth expectation. No. I would say we're running at the same level that we have been over the past year. There has been no surge in demand. Well, it's a phenomenon that we've been living with for the last several years, particularly following, I think it was the 2010 dumping case that the domestic wire rod producers filed and won against China. China has been the worst perpetrator in the world market of pushing dumped and subsidized wire rod. And when that product was shut out of the U.S., it went literally into every other market worldwide, and we think contending with PC strand imports that are produced from China using wire rod from many countries. So it's a phenomenon that we're living with, Chris, and I don't expect it to change, neither to get significantly worse or to improve. That is one of the reason ---+ the continuing resolution is one of the reasons why we haven't seen a pickup in infrastructure activity, because it maintained funding at the previous levels and just introduced some uncertainty which has caused some delays in project work at the state and local level. So it's unfortunate where the funds ---+ the increased funding was approved, it was appropriated, just hasn't gone to work yet due to these budget issues. So that ---+ and that's one of the reasons for our optimism later in the year where the higher funding would begin to go to work and have an impact. And then, once this year's resolution is resolved, they're going to have to go to work pretty quickly on our resolution for 2018, which should provide for an additional increase as provided for under the act. I think that's ---+ it's undecided at this point, it's yet to be determined. No. I would say that we haven't seen a significant pickup at this point, but the outlook is positive just considering some of the recent funding measures that have been approved providing for increased spending in certain markets, particularly Texas. The outlook there is real positive and then you are probably familiar with the funding increase that was recently approved out in California ---+ SB1 ---+ that provides for a substantial increase over a 10-year period. That obviously hasn't had an impact yet, but I think the outlook there is positive as well. And then there are a number of other states that have implemented fuel tax increases or other fee increases that should have a favorable impact as well, but I would say at this point, we really haven't seen the upside from those. I don't think that we can't really speculate on that. There are just too many moving parts that make a reasonable answer beyond our capability. As far as ---+ and as far as the top line comp, it would apply, in particular, to our fourth quarter, which was unusually weak last year. We got off to a decent start in Q3, and then we saw volume drop-off over the latter part of the year. Well, there is seasonal element at play where the volume ---+ the absolute volume picked up over the course of the quarter or usually, January is a low point and then we see gradual improvement and that was the case this year. No. Nothing there. Nothing that really stood out. I mean, I think that our comment that overall volumes were unimpressive to us internally would still be a fair one. Yes. We're continually evaluating the best opportunities to grow in that sector, which offers quite a bit of promise to us. So I think over the coming quarters, you'll hear more about it. Okay. Thank you. We appreciate your interest in Insteel. We look forward to talking to you next quarter.

2017_IIIN

2017

OMI

OMI #Thank you, Trudi, and good morning, everyone. Thank you for joining us on the call today. I'm sure you saw our news last night that we have signed a definitive purchase agreement to acquire Byram Healthcare for approximately $380 million in cash. We are pleased with this transaction and look forward to working through the final closing conditions. Byram will give us immediate entry into the direct patient nonacute care market, and it represents a significant step forward for our strategy to expand our services along the continuum of care. Byram is a national market leader in the direct-to-patient home health market and has unique product specialization and expertise. With a seasoned management team and an experienced sales force, Byram has nationwide coverage and strong access to managed care contracts. Today, they have leading positions in the diabetes, neurology, wound care, ostomy, breast pumps and incontinence product markets. Byram is well positioned to grow with a strategic focus on managed care customers and attractive product categories. Byram's revenues topped $450 million last year across their network of 5 distribution centers, 9 sales and service centers and 2 national pharmacies. As I mentioned, this transaction aligns with our strategy to expand along the continuum of care and offers exciting growth opportunities for us. Now let me comment on our first quarter results. Despite weakness in several segments of our business, results for the quarter were largely consistent with our expectations. However, we are not satisfied with these results. The loss of a major domestic customer last year, along with production challenges in our CPS unit, had a significant impact on our results for the quarter. Our teams are working hard to address these areas. As you know, the healthcare industry is changing rapidly. In the last few weeks, we've seen tangible evidence of this as 2 very large manufacturer transactions were announced. We also believe that significant cost pressures will persist up and down the value chain resulting in stepped-up competitive dynamics, margin pressure and additional industry consolidation. However, these challenges also present us with opportunities. For example, we are strategic partners with all of the parties involved in these 2 large transactions. We are well-positioned to help manufacturers address their cost pressures and provide them with superior channel access. As we outlined at our Investor Day, our 4-part strategy is designed to position Owens & Minor for sustained profitable growth, and our teams are actively engaged in implementing these strategies. The goal is to strengthen and change our business model so that we are more relevant and valuable to our partners and clearly aligned with the emerging opportunities in this market. To remind you, the 4 elements of our enterprise strategy are the following. First, we are building the most intelligent route to market by investing in our supply chain to bring scale, efficiency and enhanced connectivity to the flow of medical products from the point of manufacturer all the way to the point of care. Developing a track record of continuous operations improvement is a key element of this strategy, and we're already making strides in lean productivity improvements, safety and overall continuous improvement in our operations. Our second strategy is expanding our services along the continuum of care to help our provider customers follow their patients. This part of the market is growing fast, and our customers asking for our help in managing the additional complexities of their expanding networks. Nonacute services are important to our provider and manufacturer customers and to us. Building new logistics and service capabilities increase our relevance and represent an exciting growth opportunity for Owens & Minor. The Byram acquisition will give us significant momentum in this area. Our third strategy is to become the preferred outsourcer for leading manufacturers. Just like us, our manufacturing partners are facing significant cost pressures, and we remain their trusted partner. We continue to make progress with large-scale medical device manufacturers and initial results with several companies are promising. We recently brought on Stuart Morris-Hipkins as EVP of Global Manufacturing Services to unify our manufacturer strategy in the U.S. and Europe and to accelerate our growth in this important area. Our manufacturers are important partners and we believe industry dynamics and their needs represent additional growth opportunities for us. Finally, our fourth strategy is to drive value through data analytics and services. Because we're in the middle of the flow of goods, funds and information from the point of manufacturer to the point of care, we see great opportunity to aggregate and analyze data for our customers to reduce complexity and to create value at the point of care. Our IT and operating teams are building a roadmap to deliver the data architecture necessary to realize this strategy. Going forward, we have a realistic view of the market, and we are taking steps to control what we can control. In the near term, we have improvement levers and growth initiatives that can help us achieve better performance. We have a broad operations improvement agenda underway, and we are using a disciplined process to implement these initiatives. At the same time, we are executing our 4-part strategy to reposition our business for long-term success. Before I close, I want to again thank Craig Smith, who will retire as Board Chairman later this week at the annual shareholders meeting. Over the last 30 years, Craig helped to grow our company and expand our reach into new geographies and markets. Craig has been a mentor, leader and friend to all of us. On behalf of the team, I want to thank Craig for his service and wish him the best in retirement. With that, Randy will review our financial results and provide an overview of our segment results. Randy. Thank you, <UNK>, and good morning, everyone. Today, I'll update you on our financial and operational results and provide a review of the performance across our 3 segments. But first, I would like to comment on our announcement on the Byram transaction. As <UNK> said, we are pleased that we have signed an agreement to acquire Byram Healthcare, a leading provider in the market, and look forward to bringing this organization on board. This transaction will give us immediate entry in the direct-to-patient nonacute care market with a sizable player. Byram will give us a big step forward in our strategic objective to expand our services along the continuum of care. I would like to brief you on some of the high-level details of the agreement. As we said in the announcement, we are acquiring the business for approximately $380 million in cash. After we complete the transition, we expect Byram will add approximately $450 million in incremental revenue. We estimate the acquisition will have limited impact to our adjusted earnings per share in 2017 and will be modestly accretive in 2018. This is a new market for us, so the Byram team and their collective knowledge and experience are important to us. They bring a strategic skill set and expertise to the table that we highly value. As with most acquisitions, there are closing conditions and regulatory approvals for us to work through, so we will provide more information about the financial projections and the details of the transition plan once we close the transaction, which we expect to occur in the third quarter of 2017. We are pleased with this transaction as it will enable us to add another growth driver to our business. As we said in Investor Day, we had planned to look to M&A as a means to expand our services along with continuum of care, 1 of our 4 elements of our strategic plan. We look forward to working through the closing process, and we welcome the Byram team aboard. Turning to the quarter. Our results were largely in line with our expectations for the quarter, although we experienced some underperformance in certain areas of the business. Despite these challenges, teams across the enterprise have launched a variety of initiatives and they're growing revenues, achieving gains in productivity and efficiency and reducing costs across the company. We believe these projects will provide added momentum as we move through the year and beyond. I'll start this morning with an update on consolidated results and then I'll provide some color on each of the 3 segments. As we pointed out at our Investor Day, the CPS segment is now known as the Proprietary Products segment, which includes the CPS business as well as our global sourcing operations. As we discuss our results, please keep in mind that these adjustments made into our reported results are outlined in our press release. For the first quarter, we achieved consolidated GAAP net income of $18.8 million or $0.31 per share, and on an adjusted net income of $24.8 million or $0.41 per share. Our results reflect our efforts to adapt to the loss of a major customer in the third quarter of 2016 as well as continuing competitive pressures in the market. Consolidated revenues for the first quarter were $2.33 billion compared to $2.46 billion last year. Excluding the impact of the lost customer, revenues for the quarter grew by nearly 1%. GAAP consolidated operating earnings were $35.5 million for the quarter compared to $45 million while adjusted operating earnings were $45.4 million compared to $55.5 million. Excluding the impact of the lost customer, adjusted operating earnings would have declined $2.6 million. The work our teams are doing to transform the company helped to offset the impact of the loss of the larger customer and the underperformance of our CPT business. The effective tax rate for the quarter was 34.7%. An improvement in the effective tax rate resulted in the higher percentage of pretax income earned in the lower tax jurisdictions. The adjusted effective tax rate for the quarter was 35.8%. Asset management metrics included DSO of 22.7 days and inventory turns of 8.9x. During the quarter, the company used cash of $26 million compared to operating cash flow of $45 million last year. The decline was largely due to routine changes in working capital including timing of vendor payments. Now let's look at the 3 segments. Domestic segment's revenues for the quarter were $2.19 billion compared to $2.32 billion for the prior year. Revenue declines reflect the loss of a significant domestic customer, which transitioned away from Owens & Minor late last year. Excluding the impact of the lost customer, revenue for the quarter grew approximately 1%. First quarter domestic operating earnings were $37.3 million versus $41.7 million 1 year ago. Again, this change was largely due to a loss of a customer and lower income from manufacturer product price changes when compared to the year before. We expect that these changes, as well as ongoing competitive market dynamics, will continue to affect our results in the year ahead. Turning to the International segment. Quarterly International segment revenues increased 14% to $95 million, driven by growth from existing customers and new business partially offset by unfavorable currency translation impacts of $8.4 million. Operating earnings in the International segment were approximately $700,000 compared to $1.1 million last year. The decline resulted from onboarding costs associated with new business. As for the Proprietary Products segment, first quarter revenues were $137 million compared to $141 million last year. Decreased sales of sourced products contributed to the decline in revenues. Operating earnings for the segment were $8.1 million compared to $13.3 million in the prior year as a result of lower revenues and production challenges in the first quarter. At this point, based on our first quarter performance and the expected contributions of the company-wide initiatives, we are reiterating our financial outlook for the year of adjusted earnings per share in the range of $1.75 to $1.85. For 2018, we continue to target financial guidance in the range of $2.05 to $2.20. Thank you, and with that, we'll turn the call over to the operator for questions. Well, <UNK>, thanks for the question. I think what we're just trying to allude to ---+ over the past 3 or 4 quarters, we've just been alluding to the fact that there's been broad-based margin pressure as an industry consequence. And we keep pointing it out that it's going to continue to be a headwind as we move forward into the year. So it wasn't anything unique to the quarter. It's just been an area that we've been highlighting for folks. <UNK>, this is <UNK>. I would just add that as you see industry consolidation accelerating and obviously, there're significant cost pressures up and down the value chain, we just think that margin pressures are a natural outgrowth of those 2 factors. Yes, no, I think that's very good question. First of all, consolidated ---+ it's kind of the good news, bad news story. Obviously, consolidation over the long run is concerning. But in the short run, when we look at that transaction in particular, we are significant trading partners with both Cardinal and the other company that you mentioned. We're very strategic partners to both of them. So at the same time, on the surface you might say consolidation is bad. We actually see some opportunities in that. As they come together, they're looking to take out costs. They're looking to streamline their operations, and we're kind of a neutral partner to the manufacturer. So we actually see some opportunities in that. So it's not an all bad news story. Yes, yes. A couple of comments on that. First of all, it's a growth area. As the population ages, more and more chronic disease states and points of care are moving to the home and outside the hospital. So first and foremost, we see it as a growth opportunity. Second, the margins are better. It's a more unique service delivery experience. And so there're better margins there, it's better growth. And we're excited by the Byram transaction because we've bought the #2 player in the industry, an experienced management team with a proven track record for growth. And so this is very much down the center plate of our strategy to move across the continuum of care. Mike, no. We just decided as we moved into this year because of the significant amount of shares that we bought back in the second half of the year that we'd just moderate repurchase. We continue to look at just being neutral to our share count throughout this year. So I wouldn't think that we would halt ---+ or not planning on halting it, but I think we'd go back to more modest levels as we had in 2014 and 2015. Again Mike, what I would point out is, if you look at the 2 big transactions that were announced in the last couple of weeks, we are ---+ we're terrific strategic partners to all 4 of those parties. And again, our view is that the value of a logistics partner is actually increasing. So when those companies come together, in both of those cases, they're very much focused on enhancing their product portfolios and they're looking for ways to drive synergistic value to bring both companies together, and we think we can play a major role in that, up and down the value chain. So not only are they looking for logistics cost reductions but they're looking, we believe, more and more, they're going to look for services at the point of care that can differentiate their products at the point of care. So again, in both of those big transactions, again, on the surface, consolidation looks bad. We see opportunities in both of those cases. Sure, Dave. We've been highlighting a transition in the CPS business for the past couple of quarters. As you may recall, we onboarded a fairly significant customer towards the second half of last year. That onboarding created a bit of capacity issues for us, which has kind of created some challenges from the operational side in the second half. A lot of those capacity issues we've been able to mitigate as we've moved through the fourth quarter and into the first quarter, so I think we're in a much better position now. The performance and the steps that we needed to take to do that created some cost issues for us. As you're seeing, some of those ---+ that impact happened in the fourth and certainly in the first quarter. I think as we look towards the balance of the year, you'll begin to start seeing some gradual improvement in that business as we continue to improve our service levels and our delivery levels with our customers. I think one of the impacts, though, on a year-over-year basis, we did have a third-party customer that we did some special manufacturing for first quarter of 2016, so that did have a bit of a benefit. We had it in the fourth quarter and into the first quarter so it was a little bit of a difficult comp. Nevertheless, though, we did have some challenges that we were working through second half of the year and into the first quarter, but we do see that improving as we go through the remainder of the year. We haven't provided operating margins directly for the CPS business. It's kind of a combination of our sourcing and our CPS business so a little hard to talk about operating margins per se. But we do see second half of the year us moving in a much more positive direction and ending the year on a positive note. Yes. Good question, Dave. We're excited about that. Again, we see the value of a very robust supply chain increasing in the industry. Now when I look at the healthcare industry vis-a-vis other industries, it's behind. And one of the areas we're very excited about is the ability to bring end-to-end connectivity to the supply chain from point of manufacturing to point of care. We think we're in a great position to do that. And that information and data can be used to reduce costs, reduce complexity and that's music to the ears of both the provider customers we serve and the manufacturers we serve. So first and foremost, the outcome we're looking for is end-to-end connectivity and a better data architecture to capture that information. The second thing we're looking for is more and more information about the use of products at the point of care. And so again, there's a lot a focus on patient outcomes, improving patient outcomes, preventing readmits to the hospital, a lot of other players are focused there, but we think we can bring valuable new information to what's happening at the point of care. And the third thing I'd say is that the combination of those 2 things we think provides the opportunity for us to invent new services for both new manufacturers and providers. So it's probably ---+ of our 4-part strategy, it's the least developed at this point. But our teams, our operating teams and our IT teams are working through the first component of that, which is the end-to-end connectivity and the data architecture to bring that data to life. Sure, Dave, and it's a great question. And I think this leads to why we're so excited about adding not just the new line of business but a very experienced management team with the breadth and depth to manage these resources as we go forward. For the most part, these ---+ we engage in managed care contracts across the spectrum. It's a nationwide enterprise so we have contracts with various entities across the country. To ---+ specifically to your question, we have about 30% to 35% of the business is related to Medicare, Medicaid. So not a large portion. And as you may know that with some of the shifts going on, that should be reduced over the coming years. We see this as a tremendous asset in that sort of direct-to-patient billing market and expanding our ability to complement what we do with the acute care center and go all the way to the home. So we see this as a nice adjunct to our business as something complementary as we expand down the continuum of care. I think what we were alluding to in that is just as a supplier to us with the consolidation of Covidien into the Medtronic. Medtronic became a significant supplier to us. And as <UNK> mentioned earlier, Cardinal is one of our major suppliers, so we see this as continuing a very solid relationship with one of our major suppliers. Okay, great. I'll just try to stick to the 2 questions here this morning. Just to go back to the acquisitions. Could you maybe talk about the growth and margin profile of Byram. Just trying to get a better sense of how we should think about the accretion or the modest accretion you guys touched on in 2018. You mentioned it being the third player in the market. Curious if maybe the first player in the market would be a good comp for us to use. Just to correct you, I think we mentioned it's the #2 player in the market out there. Byram, as an asset, has been growing in the mid-teens top line for a while and has margins well above our own margin. So again, as <UNK> pointed out earlier, we should see some nice benefits to this as we move forward. And I think as we sort of move ahead here, we would see a continuation of that. So I'm not sure that when we look at this asset, that we see any difference in the performance going forward. And we would continue to see very nice top line growth and continue to expand in the market. All right. So then I guess, just to be clear, that there's nothing structurally different than the #1 player in the market that would preclude it as being a good comp as far as the growth in margin profile. I think the #1 player in the market is Edgemark ---+ or Edgepark, excuse me. And that's kind of fairly embedded in Cardinal's performance so I'm not sure you have a lot of the ability to see through that. But I think there is a fair amount of growth in this area. I think when you just look at the direct-to-patient market and then the nonacute space, that's one of the reasons we've been looking to expand into it. It's one of the more significant growth areas in healthcare today. Great. And I guess just to follow-up on the domestic margins, pretty good performance in the quarter despite the competitive pressures you mentioned. And I know there's got to be some incremental investments based on what you outlined at the Analyst Day. I was just hoping on the Domestic business you could maybe help us think through the cadence of those margins as we progress through the year, in particular, wondering how we should be factoring in any incremental investments quarter-to-quarter. I think when we think about our business, what we tried to do this quarter was just give you a sense of what our margins were excluding the impact of Kaiser and ---+ on a going forward basis. And I think that's why even though revenue on an aggregated basis was down year-over-year, excluding that impact, we were up about 1%. Some of our costs were down on an aggregate basis on a direct comparison. The percentage of revenues, obviously, were up as a result of the lower revenue. So I think when you start looking through that towards the second half of the year, you can continue to see opportunities for us to start to see some ---+ or return to growth. I think what we were trying to allude to, obviously in any transaction, year 1, you get a tremendous amount of transaction costs embedded in it so kind of ---+ it's a bit of opaqueness to the overall performance in that first year. And given that we had given 2-year guidance on Investor Day, we wanted to give people the impression that there is certainly going to be some accretion associated with this. But depending on the timing of the close, we'll probably have limited benefit in 2017 and then transitioning up given that we'd sort of see that first full year of operations trail into 2018, that there would be modest accretion in 2018. So I think you're probably underestimating what the broader margins of this asset would be. But I think that when you look at how that gets integrated into our business, it's just a lot of the transaction costs and the nature of whether we do it beginning of the third quarter or it trails off into the tail end of the third quarter. And, Steve, we'll provide more guidance on this. Obviously, we just announced the transaction so we'll provide more guidance going forward on this. But the other thing I'd say, too, is we're very excited about this new platform, and we want to get it off to a good start so we're analyzing some of the investments we want to make to accelerate their growth. So I think, as Randy said, the margin profile is better than what you outlined. But we also want to make sure we take the right steps to continue on the great track record of growth that they've had, even accelerate that. So we'll provide more guidance on that as we go forward. Yes, I think your characterization as a bolt-on strategic acquisition is better. We obviously see some synergies particularly on the distribution side. But our primary focus is going to be bringing them into the fold, accelerating growth. So it's not a big ---+ we don't see a big cost-cutting agenda early on with this. If anything, we want to take this strong management team, their track record for growth and accelerate that, so our focus is more on that. Thank you for participating on the call today. We're very excited about the acquisition of Byram, and we're encouraged by the work our teams are doing to drive operating improvements and to execute our strategy. We look forward to sharing more detail about the acquisition on our next call and on the progress of our strategic agenda. Thank you, and have a good day.

2017_OMI

2016

UFPI

UFPI #Thank you, <UNK> and good morning, ladies and gentlemen. Thank you for joining us this morning. The people of the UFP family are impressive and they continue to build on record-breaking results. Sometimes they make it look easy, but we know better. They work hard. They roll up their sleeves to meet and exceed goals, whether for safety, production, sales or anything else they can measure which adds value. To quote a guy named Wayne, they don't take breaks, they just break records. Thanks to them, the third quarter continued the trend of beating 2015 for the best third quarter in Company history. Running quickly through our focus areas, net sales for Q3 were a record at $826.7 million, up 8.4% over 2015 as we saw good growth in the retail and construction markets, which was offset slightly by a very small decline in industrial sales. We did notice a softness in industrial sales during July and August versus 2015, which we believe has been impacted due to durable goods order declines, strength of the dollar against foreign currency, as well as our continued focus on driving more value-added products and less commodity. We continue to analyze this area to make sure we aren't losing ground. Next, we look at our profitability. Gross profit for the quarter was 14.3%, down 20 basis points from Q3 of 2015 due in large part to a higher lumber market. Net earnings were $27.8 million for the quarter and earnings per share were $1.36, up from $1.26 in the third quarter of 2015. Year-to-date net earnings are up over 30% over 2015. Now we've talked in the past about how difficult it would be to beat the last half of 2015 and I'm very proud of the effort that our people put forth to achieve that very difficult goal in Q3. EBITDA itself is up year-to-date to $162.5 million versus $137.3 million a year ago and is now 6.8% of net sales versus 6.1% a year ago. Moving to inventory, inventory levels in total are at $369.9 million. Excluding the inventories of our newest acquisition, idX Corp. , inventory is 114.1% of current month sales versus 122.6% a year ago, which is a very good improvement. The lumber market has remained relatively stable through the quarter and is approximately 16% to 17% above levels a year ago. Accounts receivable are 90.7% current, which is a slight decline in percent current, but our writeoff percentage is very low, less than 0.06 of a percent of sales for the quarter. While these metrics look good, we are looking ahead to 2017 and preparing for the next phase of growth. I would like to briefly review some strategic initiatives and the actions we recently implemented to achieve them. First, we appointed a longtime UFP leader, <UNK> Mordell, to head up our international operations as we continue to grow and expand our existing footprint and try to drive sales to more of our multinational customers. We plan to consolidate our existing internal international efforts under <UNK>'s leadership and accelerate the growth and profitability in the new group. Second, in an effort to consolidate our fragmented efforts towards e-commerce sales, we have created an e-commerce profit center where experienced UFP veteran, Ron Klein, will lead the effort. Our goal is to drive sales in conjunction with our customers' e-commerce initiatives and to streamline the consumer purchasing process. We are very excited about the opportunities in each of these major areas of expansion. One of our other major initiatives is new products and we continue to be pleased with the results. New product sales through Q3 were $248 million, up from $213 million in 2015. Our new Deckorators products have shown excellent acceptance in the market and we expect double-digit growth of these products in the year ahead. Our new research and testing facility is up and running and gives us new and more convenient capabilities to achieve our goal of becoming the packaging solutions provider to our customers. And we expect the design and development professionals at idX to continue their innovative solutions while giving other UFP facilities the trends for new product development. The last of our initiatives I will talk about today involves recruitment, retention and training of our employees. We have increased our recruiting presence in many of our local markets and we continue to modify and enhance our retention tools to make sure that our people have opportunities to advance and provide a great living for their families. And we are very excited about our unique UFP Business School, which started with its inaugural class this fall of 10 student interns who we hope will build long and successful careers with UFP. If the program is successful, we hope to be able to help many more high school and junior college graduates find a more cost-effective education with a terrific career path. As you can tell, we are working hard to pave the way for continued success in 2017 and beyond. While our operations continue to meet our customers' needs for the balance of 2016, we have turned our strategic attention to achieving our future growth and profitability targets. A significant part of that strategy involves acquisitions. The acquisitions that will drive additional sales and profits include the recently completed idX acquisition and the Idaho Western acquisition completed in Q2. We also have a pipeline of acquisition targets and opportunities, which includes the previously announced but not yet closed acquisition of assets from Robbins Lumber Company. We remain committed to our target sales growth objectives of 4 to 6 percentage points greater than positive GDP growth with return on investment at or above our cost of capital. Now I'd like to turn it over to <UNK> <UNK> for more details on the financial information. Thanks, <UNK>. Before reviewing the financials, I should briefly address the impact of the lumber market this quarter. Overall year-over-year lumber prices were up 10% and southern yellow pine prices, which represent our highest volume of purchases, were up 20%. As a reminder, commodity lumber prices impact not only our cost of inventory, but also our selling prices and working capital. I will start the financial overview with the highlights of our income statement. Our overall sales for the quarter increased 9% resulting from a 5% increase in unit sales and a 4% increase in selling prices due to the lumber market. Reviewing by market, sales to the retail market increased 15% resulting from a unit increase of 9% and an increase in selling prices of 6%. Our growth this quarter was driven by our sales to big-box customers, which grew by 20% over last year and new product sales, which grew 19%. Our sales to the industrial market decreased 1% due to a decline in unit sales. We believe this decline is due to a general softening of demand and as a result of our operations being more selective in the business that we take attempting to focus more on value-added sales opportunities. We believe we continue to take share of targeted business and added almost 200 new accounts and almost 50 new locations of existing customers this quarter. Our overall sales to the construction market increased 10% due to a 6% increase in units sold and a 4% increase in prices. Within this category, our unit sales increased by 9% to residential construction while sales to commercial construction grew by 4% and manufactured housing grew by 5%. Moving down the income statement, we are pleased to report our third-quarter gross profit increased by 7% despite having some tough year-over-year comparisons due to the low level of lumber prices in 2015 and the buying opportunities we have that enhanced our profitability. Our increase in gross profits this quarter was primarily driven by favorable improvements in our sales mix to higher-margin products, including new product sales growth and organic unit sales growth to our retail and construction markets and leveraging fixed costs. SG&A expenses increased year-over-year for the quarter by $6.3 million or 9%. Accrued bonus expense comprised about $12 million of our SG&A this quarter and was up about $2 million over the same quarter last year. Excluding bonus expense, our core SG&A was about $62 million, right on our target and increased around $4 million, or 7% compared to last year. The increase in our core SG&A was primarily due to higher compensation costs, an increase in sales incentives and certain employee benefit costs. Lastly, I want to point out that our effective tax rate was 32.5% this quarter compared to 35.4% last year. This decrease was primarily due to the timing of when Congress approved certain tax credits. Last year, the research and development and certain other tax credits were approved in the fourth quarter and Congress made it permanent. As a result, we recorded a reduction in income taxes of about $1.2 million in the fourth quarter of 2015. In 2016, we've been able to accrue for this benefit all year long. Obviously, this will make for a tough comparison in Q4. These factors resulted in a 9% increase in our net earnings from controlling interests this quarter to almost $28 million. Moving onto our cash flow statement for the year, our cash flow from operating activities improved by $15 million to $136 million this year so far and was comprised of net earnings of about $83 million, non-cash expenses of approximately $32 million and a decrease in our working capital since the beginning of the year of almost $21 million. Investing activities primarily included capital expenditures of almost $36 million for the year with expansionary CapEx of almost $12.5 million and amounts spent for our previously announced acquisitions of Idaho Western and idX Corporation during the last quarter, including payments to retire all of the debt and certain other obligations of idX. Finally, with respect to our balance sheet, we used surplus cash from our balance sheet to complete the acquisitions I just mentioned leaving us with current net debt of about $89 million. Our balance sheet remains strong and we believe we could add over $250 million in debt to continue to grow our business and still feel comfortable with our leverage and capital structure. Finally, our trailing 12-month return on invested capital has increased over 14%, driven primarily by improvements in margins resulting from strategies to enhance our sales mix, better working capital management and increased capacity utilization. That's all I have on the financials, <UNK>. Thank you, <UNK>. Now I would like to open the line up for any questions you may have. Yes. I think there's a number of opportunities that we see with the idX acquisition. As you pointed out, on the manufacturing side and the sourcing side, we think there's a lot of ways that we can work together to help one another, particularly on the design and the development and the project management piece as we expect to learn an awful lot from them that we can apply to our other operations, kind of help take us further into the value-added product mixture. And then finally with respect to the distribution, we will definitely keep the majority of their locations and we are going to let them operate their business because they have been successful, but we are also going to continue to look at ways to improve that and we think there are some opportunities there, but we will be getting into those over a relatively mid-term period rather than immediately in the next 12 months say. I think what it does is it creates an entirely new product arena for us, <UNK>, and as we look at it, we are excited about that opportunity. It's also something that's transferable to other customers than the ones that they currently serve that we have contacts with. So I think there's some great opportunities for us to share both customers and product, and we expect them to help us, as I mentioned before, with innovation. Yes. I really wouldn't see it, at least for us, getting too heavy into the residential space. There may be some products and some features that I think will translate well to our retail customers. So you may see some of the things that we will take, their great design and engineering efforts and we will be able to take those and move them more mainstream through our retail customer base. I think our original thought was that we wouldn't expect much of an impact from them in Q4 and then we've talked a little bit and publicly talked about what their EBITDA contribution would be for 2017 and we are comfortable with that model. Correct. Yes. Actually, hopefully, slightly better than that if you base it on 2017 EBITDA. Yes, the purchase price, excluding cash purchase, is about $150 million. And it's in the cash flow statement under the business [conventions]. Yes. I think there definitely is a seasonality aspect to it. Typically, I would say mid-November to probably January timeframe tend to be their slower time period. Right now is probably one of their busier time periods, so ---+ and then with respect to historical, they've shown steady growth over the years. Obviously, the downturn had an impact on them, but they've been able to grow their business steadily over the last seven years or so and we expect the growth to continue in line with the rest of our Company's expectations. Yes. The $62 million was our target that we talked about in previous quarters for the business, excluding idX, and we finished right at about that number. I think that's a pretty good number for Q4 as well with just qualifying that Q4 is the quarter where we true up a lot of our actuarial reserves and go through that year-end process. So sometimes the number can move and be a little more volatile in Q4, but I think that's a reasonable target for Q4. Looking forward into 2017, I would expect at least an inflationary-type increase on the core SG&A number. Yes. It's really hard to answer a question like that. So many products and so many customers that we serve. You can really see though that the weak demand is coming through because I can see the new sales that we've added from the 50 new locations we are selling to from existing customers and I can see the 200 new customers and the sales that were contributed from that, so the balance is just lower demand from existing customers. Once again thank you very much for your time this morning. Our goal as a company is to achieve the highest possible approval rating from our shareholders and you know we will continue to give an incredible effort to achieve that goal. We also would like to ask our stakeholders for a little assistance in creating as positive a work environment and an economy for our people. Apparently there is an event happening on November 8 with lots of candidates vying for your vote and whether you believe that one candidate should be disqualified or the other candidate is unqualified, or if you believe that free speech is free or that free speech depends on who the speaker is, remember that the right to vote is important and we hope that you will exercise your right and support candidates who you believe will support policies that don't increase our costs and which promote freedoms of individuals and businesses. Thank you again for your support. Have a great day.

2016_UFPI

2016

TRIP

TRIP #Thanks, Latoya. Good morning, everyone, and welcome to our first-quarter earnings conference call. Joining me today are <UNK> <UNK>, our CEO, and <UNK> <UNK>, our CFO. Last night after market close we distributed and filed our Q1 earnings release as well as made available our prepared remarks on our Investor Relations website located at ir. tripadvisor.com. In the release you will find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed on this call. Also on our IR website you will find supplemental financial information which includes certain non-GAAP financial measures discussed on this call as well as other performance metrics. Instead of reading our prepared remarks on this call, <UNK> and <UNK> will provide a couple of thoughts about the quarter and our recent progress and then we will jump right into Q&A. Before we begin to like to remind you that this call may contain estimates and other forward-looking statements that represent the Company's view as of today, May 5, 2016. TripAdvisor disclaims any obligation to update these statements to reflect future events or circumstances. Please refer to our earnings release and our filings with the SEC for more information concerning factors that could cause actual results to differ materially from those expressed or implied by such statements. And now, <UNK>, I will turn the call over to you for opening remarks. Thank you, <UNK>, and good morning, everyone. Thank you for joining the call. The first quarter 2016 was pivotal for TripAdvisor, as we continue to rapidly build the best end-to-end user experience in travel. First, some comments on our hotel segment. We are excited to be mostly complete with our instant booking rollout. Phase one was getting hotelier and OTA partner adoption in 2015. Phase two was executing the global product launch. And we are now in phase three, which is perfecting the booking experience and educating users about their ability to book on TripAdvisor. And finally, phase four is all about delighting more users, achieving higher conversion rates, driving direct business and repeat behavior and plugging the monetization leak. We are pleased with our continued progress, although we recognize there is still a lot of work ahead of us. In our non-hotel segment these businesses are performing well. They are aimed at big market opportunities and are tailor-made for mobile devices. We are hard at work in improving our products, creating the best end-to-end user experience at all stages of travel planning and trip taking. We are focused on doing what is in the best interest of our business for the long-term. <UNK>. Thank you, <UNK>. Our first-quarter results were in line with our internal forecasts. And I want to reiterate that our growth outlook and margin commentary for the full year remains intact. In our hotel segment we saw significant revenue growth deceleration due to our global instant booking launch with a corresponding impact on EBITDA. Both were expected and communicated in February. In our non-hotel segment revenue growth was masked this quarter as we shift towards a transactional model in vacation rentals, which results in a substantial portion of bookings made in Q1 being recognized as revenue when the stay happens later in the year. This increased seasonality of non-hotel is another driver we communicated in February. As we have discussed, 2016 is an important transition year. We are executing on a long-term strategy and in the near-term we expect decelerating growth in the first half and improving growth rates in the back half. With that we will now open it up for questions. Thank you, <UNK>. Indeed in the US we have seen, since the launch in the US, improvement that we have been able to make in the monetization of instant booking. And the most important lever for us has been to work on the supply both in terms of the number of hotels available in instant booking as well as on the content that we provide for those hotels. So we have been working hard on that throughout the year and we saw ---+ we continue to see improvements in our ability to improve that monetization in the United States. In the rest of the world where we have just rolled out in the first quarter, not surprisingly we see that that monetization is less good than it is in the US today and like it was in the US early days. So we are seeing that we have a larger gap outside the US between meta and IB than we have in the US. And that is to be expected. And when you just roll out you have a few teething problems that we are working hard on to improve and expect to improve over the year. In terms of some of the underlying repeat metrics, we have seen in the US, because that is where the data is most relevant because we have a longer series here, we see ---+ month on month and quarter on quarter we see improvements in repeat rates. Not just what percentage of bookings is repeated, as you said in your opening, but also the percentage of first-time bookers that come back in any period of time. That percentage is improving quarter on quarter, month on month. What we also see is that bookers that do come back then tend to convert better. We also see that bookers that come back tend to convert better than meta clickers that come back and click again. And so, we see a couple of very important trends here that we believe are indications that the thesis is at least starting to work in the US. Now as I said before, outside the US it is very early days and we have that path to climb in the rest of the year. The largest driver of it is instant booking. That is the most significant driver here. And if you unpack instant booking impact, the largest driver there is just that monetization difference that I described just before. And then there is a secondary impact which is the revenue recognition component of it as well. So instant booking as a whole is the most important driver. Then sort of the mix between desktop and phone and how we comped last year is a secondary much smaller impact. And then lastly there is also a bit of currency, 1% to 2%, of currency as well which negatively impacted. But instant booking is by far the largest driver. This is <UNK>. Thanks, <UNK>, for the question. So there is actually quite a few components and it is great to finally have the product rolled out almost everywhere because that is a lot of heavy lifting that takes a bunch of resources. But it is now about making sure everyone in all of our markets understand that you can book on TripAdvisor. And we started this approach over a year ago on desktop US and we found it has taken a while to get that repeat rate up. But we have seen that kind of steadily climb. And that is kind of the signs that we are looking for and we are now on day 1 or day 30 for a bunch of our other international markets. So, as that grows, and we can kind of count on it growing globally, it is fundamentally taking the audience that is on TripAdvisor, helping them, guiding them where appropriate down the instant book path. We see that when they do go down the instant book path they tend to come back more frequently than if they went down a meta path. But we are very cognizant that pricing is a critical factor. And where the instant book price isn't the best, we have meta available everywhere. And as I have said before and for the avoidance of doubt, we expect our meta business to continue to be strong for ---+ in that kind of forever timeframe. We want folks to ---+ travelers to be able to come to TripAdvisor, find the best price. If instant booking has that great price and the great experience that is going to be with that initial booker is going to book. And as we have a credit card stored, it is going to be where the repeat booker might well prefer to transact out of ease-of-use, out of the simplicity, out of offering a great price and a past great experience. That takes a while. In terms of the actual kind of interface of instant booking what we can do on the site and how we can do more promotions to help drive awareness of the fact that you can book on TripAdvisor, I think you see a lot of change on the site on a frequent basis. And you see a number of different marketing programs that we have launched on the site in many countries. We had a sweepstakes running; we have a Viator attraction coupon running right now ---+ just lots of different ways to subtly and, frankly not so subtly, remind people/let people know that Trip is a great place to complete your booking. Well, actually I am glad you brought up the mobile because that happens to be a piece we are particularly proud of this year. There is no question that as our traffic shifts from the traditional desktop platform to the phone we have been facing a monetization headwind, because the phone had just monetized. I remind folks that was one of the reasons we launched instant book a while ago because we saw this coming. We want to make sure we are the best platform to be able to plan and book your trip. And so, as you look at the phone we are in the US certainly fully rolled out with instant booking, we are building that repeat usage, we are vaulting the cards, we are getting more and more repeat booking. So our revenue per hotel shopper ---+ not only is our hotel shopper growing nicely on the phone, but the revenue per hotel shopper had that very nice lift in Q1. What really changed. Well, it wasn't IB roll out per se because we were already rolled out on the phone. It was the better ---+ some combination of the better experience, better pricing, better content ---+ all the things that we work on from a supply perspective, better optimization of the user experience, so all the good work that the UI team has been doing. And the fact that folks are comfortable booking on the phone on TripAdvisor because they have experienced it in the past. So that was a nice 20%-plus lift. And as we look forward, and as we start to see that in some other markets, we are excited about closing the gap on phone to desktop as we know phone is a huge percentage of where our business will be. Yes, thanks, <UNK>. The conversion rates meta versus IB in the US, a quarter ago we said they were comparable. There are many puts and takes throughout the quarter also dependent on what happens to meta itself. But I think as a broad statement that is true. IB conversion rates are in the US also still lower. As we say comparable, it means that they are at least closer in approaching compared to outside of the US. I will give it to you, <UNK>, for the hotel partners. And we are really quite pleased with our hotel partnership. I don't detect much concern left frankly in most parts of the world regarding midsize folks or even large folks coming onto instant book. That logjam, if you will, was broken last year and we have frankly more hotels interested in popping on IB now than we can kind of get through our system, if you will. So, from a supply perspective that is the plan. We want to connect with every hotel that is on our side so that it can be instantly bookable. We will get there. We have more and more chains coming online, we have more and more independents coming online. But with our OTA partners that is not a gate to teaching people that they can book on TripAdvisor; it is an optimization of giving our travelers the choice of where they want to book and to leverage the better pricing through the different channels. We don't share that number, but the trend is obviously positive as we continue to vault a good portion of the credit cards as we move forward. I'd back it up a level and remind folks one of the awesome things about the TripAdvisor business is that we had such reach, such scale, that 130 million ---+ million shoppers a month, oh my goodness, it is just ---+ it is phenomenal. But a lot of those shoppers were folks that had come in, taken a look and leave and all we would know about them is their IP address. And we built a wonderful business over a decade and a half doing that, but with IB ---+ sort of ---+ with instant booking, because we are now taking the transaction, all of those folks, if they weren't already members, are now becoming members as part of that process. And we get to remarket to them, remind them that we exist, build more of the transaction loyalty. So again, that pays dividends for quite some time and obviously is a significant benefit of shifting or augmenting our meta model to be transactional. I couldn't possibly answer from the perspective of what goes on inside of their companies and how they are choosing to bid on TripAdvisor, sorry. We point to a meta auction in the first quarter and say, it was a very healthy auction. We have nice competition across our partner set. We in turn launched some additional capabilities to our partners in terms of enabling them to retarget using our platform. So it is a great opportunity; a number of partners have started to take advantage of it. It is, again, just another piece of ---+ another sign of commitment that we have that we are showing our partners to the meta auction is building in this type of technology that allows them to bid more effectively and get the type of traffic that they want from our platform. So again, I couldn't comment on our partner specifically, but I can tell you that the meta auction is quite healthy right now. While there has been some movement on VR side with some of the other companies, I don't see the competitive landscape as having meaningfully changed. I have no particular reason to think being part of Expedia, the HomeAway companies will be behaving meaningfully differently. They are changing their business model, but I am ---+ it's a little hard for me to see a meaningful change in our cost of traffic acquisition or our margins there. What I would add is what you see is that some of the smaller players are subscale at the moment. And the reason why we are making some of these acquisitions because we see great scale benefits in adding some of these smaller players onto our platform. So we are one of the sort of big players in the vacation rental space. We view it as a great alternative lodging type. As you know ---+ as you well know, it is perfect for a certain type of traveler looking in a certain type of location and we aim to ---+ and we have been quite successful at fulfilling that need. To the question on sort of macro conditions, there was ---+ what we believe to be a small [admitted] impact from Brussels and the overall macro issues aren't something that is keeping us up at night. Thanks, <UNK>, two excellent questions. So, I absolutely think attractions is a phenomenal business for us going forward. We are so well positioned because of the number of folks currently using the TripAdvisor app in market. And then you combine that with the supply that Viator already had before we made the acquisition. And then the tremendous efforts that that team ---+ super kudos to that team for picking up that much more supply on a regular repeatable basis. And we are by no means done but we have now aggregated, we think, the best supply footprint around the globe. Match that with the best demand footprint around the globe and we think this is an awesome, awesome business to be in. It is a pain in the neck to aggregate all of the individual suppliers, many of whom aren't using a lot of technology, with a lot of individual pieces along the way. Again, one of the reasons why we entered the space via the supply piece via an acquisition. But now that we have it, now that a lot is bookable online instantly, now that we have learned how to match it with the TripAdvisor demand, not only on the phone for instant booking for attractions but now on the desktop for instant booking on attractions. And you look at a business with a margin profile that is quite similar to hotels and like, wow, all the ingredients are there. And that's not to say that we are the leader in every single market. It is not to say that it is straight sailing from here to there; we certainly have competition. But it is a natural fit for what travelers currently turn to TripAdvisor for. We have a global reach and we have global supply in a nice margin business with some competitors, but it is not like we are coming from behind in any shape or in any sense. So, that is my short thesis to the $1 billion business, because it is a market that, as you know, is phenomenally sized by itself. To the second question on sort of instant book versus meta and the longer-term mix. Obviously we expect instant book share to grow as we continue to roll it out, as we drive more repeat usage. But I really don't foresee the time when meta is an afterthought and it is just instant booking. I think there will be a large segment of the consumer base that has loyalty to a brand direct or an OTA, or another OTA, one of our other clients. And they are very comfortable keeping that booking path, if you will, and TripAdvisor hopefully will facilitate that preference, be it directly with the brand, in instant book for the brand online or any of the OTA partners. And we would hope that a number of OTA partners around the globe would wish to participate in our instant book marketplace as Priceline and Getaroom and others have. So I don't model out a specific, but I do expect IB to grow and I would never expect meta to disappear. Thanks, <UNK>, for the question. So restaurants, a large component of our traffic is currently on restaurants. We have been investing over the past year in kind of building up the usefulness of the product, both expanding the number of restaurants that we have all around the globe. We have a lot of restaurant reviews and info and engagement with restaurant owners around the globe. And we really haven't paid all that much attention to it product-wise prior to ---+ from a monetization wise prior to Fourchette ---+ to us purchasing La Fourchette. So we feel on the restaurant reservations basis, the model that OpenTable has, we have the model enhanced with discounts in other parts of the world and geographically it tends to be shaping up as OpenTable is super strong in their set of markets and TheFork or La Fourchette is super strong in our set of markets. And it is hard for one to make an inroad into the other in any direction. But that is not the only thing that we or, I presume, OpenTable can do in the restaurant space. So we have a lot of traffic, we have a lot of eyeballs, we have a lot of app downloads, we have a lot of users engaging in learning about restaurants. We look at it as not only how can we help users find the best restaurant, how can we help users come back to TripAdvisor more and more often, leveraging the fact that they may only ---+ or noting the fact that they may only travel a few times a year, but they are actually eating out several times a month. And how can we leverage that ---+ sort of that restaurant use case to drive overall adoption and engagement of our app. And those plans have been in place and that is in part why we continue to invest in that category ---+ not just the reservations piece but the whole restaurants as part of the TripAdvisor solution. Sure, two good questions. Thanks. So, on the marketing side, we do believe that we can make significant inroads in any particular market by focusing on the audience that is already in travel research and purchase mode. And we have 100 million plus of those already on our site in any given month. So, that is a lot of traffic and we really want to hone that message. So I wouldn't put ---+ or at least we don't think of our on-site promotions as kind of small or kind of not being able to move the needle for us in terms of awareness. US is where we are sort of choosing to focus now because the product is the most mature, the pricing is the best and we have had longer to tune the user experience. So, I would say steady as she goes from a marketing perspective on teaching folks to do ---+ to trial instant book as we improve their ability to come back and use instant book again. In terms of price, we don't ---+ as you know, we don't take the booking ourselves from a charging the credit card perspective. We are taking all this information and we are sending it along to our instant book partner, be it the independent hotel, the brand or the OTA. So, we don't have the ability, or we choose not to create the ability to offer a price discount ourselves. We have no interest in having our OTA ---+ we are looking to offer the best price that is out there on the Web via the TripAdvisor instant book strategy. So no matter who the OTA is, no matter who the individual hotelier is, come put your pricing in our instant book environment and therefore we will be able to offer it as the best. And if we don't have the best, well, our meta offering, if you are a meta partner, can also show an even better price than IB, and you do see that on the site sometimes. Pricing, as any OTA will tell you, is a long tail game. There is no one magic bullet. No one site out there has the absolute best pricing anywhere. But that is the Holy Grail that everyone looks for and we are no exception to that. We think our model is extremely well-suited to being able to offer consumers the best pricing, period, full stop, via meta and great pricing in almost all cases using our instant book initiative where we have stored the credit card so we are building you the convenience to come back because you will always find the best price. But that takes a while and we wouldn't be trying to do that by offering sort of price discounts on our end because we are not the merchant of record. Sure, <UNK>. So, Google has been doing a lot over the years, quite a few years now in the travel space. What can I say. They continue to try to get into the travel space. They have a phenomenal ability with their search engine to direct traffic to their own products, even when their consumers demonstrably do not like that. To this particular product, the new mobile offering, I'd say way too early for anyone to have a meaningful opinion on it. It is not really kind of likely, in my opinion, to have a big impact on the transaction components of a site. It is way up in the discovery set. But time will tell whether they continue to invest in that. On the RevPAR, we tend as a business not to track our financials on RevPAR. We look at how ---+ we look at our top of funnel metrics, how many people can we get in the store and how quickly can we convert them as fundamentally RevPAR isn't something that we have any control over. Hey, <UNK>, this is <UNK>. As you know, we are not giving explicit guidance for the full year, nor for the second quarter. However, we did three months ago and we are reiterating that. Describe the pattern of the year, and what we described is in the first half of the year we expect revenue deceleration and you have seen that in Q1. And in the back half of the year we see revenue growth rates expand again. And that is as much as we want to comment on the profile for the year. In terms of HouseTrip, we have not disclosed a purchase price for HouseTrip, which in itself indicates that it wasn't very material. And the impact it will make will be helpful for our vacation rental business but not significantly material for their overall financial results for the year. Certainly. Yes, we do see a meaningful difference in IB adoption on desktop versus phone. Not surprisingly instant book is used a lot more and represents a higher percentage of our phone revenue. Our credit card vault rate, as we call it, how many store their credit card after the transaction is much higher on the phone; credit card usage ---+ vaulted credit card usage rate is higher on the phone. Again, all kind of after-the-fact evidence that having instant book on the phone, as people move more and more their transactions to the phone, is a good thing to have ---+ we believe a requirement to have to be a credible offering in the future. So, yes, we see a difference and, yes, it is kind of as expected. The second question, is loyalty programs a threat. Yes, every program that tries to drive a consumer to go straight to a booking site that is not TripAdvisor is taking customers that we would like to service and make them loyal somewhere else. We note they have been around for a long time, some of the biggest players don't have them and seem to be doing great. So obviously I have no inside knowledge, but I would assume those programs would continue to grow in terms of visibility. And everyone has some set of reasons why a secret deal here or there as to why one might want to go back to the site. TripAdvisor has our set of reasons why you want to come to TripAdvisor, namely the incredible content, the candid photos, the room tips, the being able to compare all the prices, because nobody want a secret deal on a particular site if in fact that is not better than what you can find elsewhere. And of course through instant book or through meta we can allow our clients to offer their special deals or their special offers to our audience as well should they choose. We don't think the dynamics around consumer loyalty have changed all that much over the past set of years. So while it is on the horizon it is not something that I think will materially change behavior over the next several years. So, I am not entirely sure the question ---+ I can tell you what you do and then ---+ I will tell you what we do and then I will ask you for a follow up if it is not clear. So we currently, for our online marketing campaigns, leverage retargeting as we buy TripAdvisor traffic that left TripAdvisor and is on other third-party sites and we buy them back with banner ads and search retargeting. From a what we offer our clients ---+ if a visitor is on a site, for instance, Expedia, and then are visiting TripAdvisor, we allow the client to bid differently in the meta auction in order to determine ---+ in order to reflect the fact that that visitor may be worth more or less than the average visitor they get from TripAdvisor. And that is rolled out in more and more partners are adopting that just as a way to optimize their bidding strategy exactly in the same way that TripAdvisor looks to optimize our bidding strategy when we acquire traffic to our site. So much the same sort of on a conceptual basis for how that is done. Did that ---+. Go ahead. The third-party ad tech platforms that we use to acquire traffic to TripAdvisor. No, I mean I don't ---+ the platform that we have developed is for our clients to use re-buying or remarketing to the traffic that was on their site and is now on TripAdvisor. Criteo or anyone else, they can't do that, they can't offer that, that is something that we had to offer ourselves. And then since we buy traffic elsewhere on the Web we are not trying to get into the business that Criteo is in by way of a broad ad tech platform. We have a huge audience; we will offer to our CPM clients the ability to buy ---+ to spend on TripAdvisor and buy a banner ad for Hilton, for instance, that is placed on TripAdvisor and is also placed on a third-party site to a visitor that was on TripAdvisor. So we do offer that. It is a growing part of our business, it's a nice part of our business. It doesn't really affect our reliance on other ad tech platforms one way or the other. I am not sure I quite followed on the partnership piece. When we kind of add content to room descriptions, room tips, we're doing that ourselves. If the content you are referring to is more pricing and more availability of rooms, well that is our supply footprint for hotels or attractions or restaurants. And we have our teams going out and getting more and more supply. With that supply comes just more choice in rooms and tours and attractions. So with our partners ---+ well, you can ask a follow-up if I am missing the point on that one. We don't really comment on partner contracts with respect to things like the booking.com contract. You have seen more and more suppliers be added to our instant book offering over time and we continue to add partners every single quarter. So we have a lot of flexibility to deliver the product that we want to our customers. Was there something in the partner contracts I missed. The phases are meant kind of as guideposts. We're certainly already doing a little bit of phase four right now because we are trying to get people to do more and more repeat bookings. That is great, we have been improving the experience, educating folks, which is phase three, we were starting that in phase two. So, they are fuzzy, but we articulated them because, hey, everyone had seen IB in the US. But we wanted to remind everyone the clock is just now starting to run on the rest of the major countries throughout the world. That is great. And this phase coming forward, is it less about intro, less about roll out and now about honing that user experience and driving the behavior that we want. Certainly if you want to combine three and four the phase lasts forever. If you want to split them out, phase three will be a while. Yes, thanks for asking that question. We made a comment in the prepared remarks about our vacation rental business. What we outlined is, and this is happening both in instant booking and in vacation rental, is as we move our business models ---+ and we have talked about instant booking. But if we look at vacation rentals, we are moving our business model and vacation rental, we have progressively over the last year. So if you look at Q1 2015, we had a small portion of the revenues recognized on stay and other elements of revenue but recognized on book or on subscription. And as we migrated over the year, now we are in Q1 2016, we see the substantial portion of our revenues is recognized on stay. So that has a significant impact particularly on the seasonality of our business. Q1 is a quarter in vacation rentals in which are lots of bookings for later in the year for Q2, but specifically for the summer in Q3. And so, what you see if you compare the year-on-year growth rates is what you see is that the total of 14% year-on-year growth for non-hotel, which is not just vacation rentals obviously, is suppressed by that impact. And as we look at ---+ out for the full year, we believe the growth rate for non-hotel will be significantly north of that 14% for the whole year, because of that seasonal ---+ additional seasonality that has been built in with this change of business model. I will take the first question. We have not broken out the relative impact of IB in other. However, if you look at businesses where we have been booking at stay or at consumption for a longer time like attractions for instance, attraction doesn't have a big impact on that growth rate impact. But it is really localized to instant booking and vacation rentals. But we don't want to give any further breakdown beyond that. And this is <UNK>. With respect to pricing initiatives that some of the big hotel chains have put on with kind of special rates, we can absolutely see a case in point or an example set where those brands choose to push their special pricing onto the TripAdvisor meta or ---+ and/or IB platforms, such that they want the exposure of some great rates. And our perspective is if it is a rate that is available to travelers then we are happy to show it. So, our model sort of encourages travelers to find the absolute ---+ well, I mean if you wind it all the way back, folks are coming to TripAdvisor because they love the site. It offers that great user experience, the full trip. They have more content, more choice, pricing is a key component of that. They find the things ---+ the place they want to stay and the things that they want to do; they make the bookings on TripAdvisor if the price is great. And brands play into that if they are giving us their best pricing, they find what they want to do, they book those pieces on TripAdvisor to have the great trip, to share the experience back on TripAdvisor to therefore become more engaged with our site and, again, more likely to share their experience with their friends about how TripAdvisor helped them and start their very next bit of travel planning with us. Having the price from the brands is ---+ or the best price from all components is one of the many things that we need to do right in order to earn that virtuous cycle. Great. Well thanks, everyone, for joining the call. The first quarter 2016 was pivotal for TripAdvisor. We still have a lot of work ahead of us, but we are making great strides towards our goal of building that best user experience in travel. I want to thank our employees around the globe for their continued hard work and we look forward to updating you on our progress next quarter. Thanks again.

2016_TRIP

2017

KMI

KMI #I will give you a few updates on our performance and our key projects First, we had a very good first quarter, with DCF per share at $0.54, and that's better than our beginning of the year guidance Right now, we are seeing that and calling that as timing, so we are still forecasting to be on plan for the full year But overall, strong performance for the quarter On our Trans Mountain project, we have made progress on the project itself, and also on our effort to either joint venture the project with a partner or to include it in an IPO On the project, we reached a really significant milestone We increased our cost estimate, and that increase put us above the contractual cap So cap was C$6.8 billion and our revised estimate is C$7.42 billion, and that, being above the cap, gave our shippers the right to turn capacity back to us At the investor conference in January, we expressed our confidence that the market still had a very strong need for the project And in fact, when all was said and done, all 708,000 barrels remained under long term contract But now, have the increased tolls, and those increased tolls include our return on the additional capital that we will spend We ended up with only 3% of the barrels turned back, and those were taken up in an open season over the course of a week or a week and a half The contracts are 15, but primarily 20 year terms ---+ predominantly 20 year terms Now this is a remarkable development, when you consider that these contracts were signed five years ago, and at $90 a barrel oil environment, and when the Canadian and the U.S dollars were at parity A lot has changed since then, including the circumstances of many of the producers in the oilsands, as well as the project costs itself Our shippers and our commercial team worked very hard and fast to place the barrels with new customers, and existing customers who wanted more As those who wanted less looked for places to assign our capacity So message here is that even at the higher cost the demand for the project remained strong, and that's huge We have essentially reconfirmed the value and need for the project, with a 2017 line-up of shipper needs, and based on 2017 market conditions We also received during the quarter, our environmental approval from British Columbia, and we now have written agreements on the satisfaction of the B five conditions, which were put forward for heavy oil pipelines crossing the province So good regulatory development, and an extremely good commercial development as well So that's on the project On the JV, our IPO front, we have advanced on both tracks simultaneously, which is what we told you we would do in January We believe this approach provides the best opportunity for us to secure acceptable financing terms for the project Our key considerations here are value and control of project governance Both of these processes are well advanced and we expect to update you by the end of the quarter on the resolution Recall that for our plan, we assume the JV partner picking up 50% of the capital, but we did not include anything for our promote payment, which we would expect to get, and coming up with our target 5.4 debt-to-EBITDA metric So in other words, we could do better on that target, to the extent we get to promote that we expect to get I know everyone is interested in what the value is going to be, but we have avoided putting a marker out there for the sake of maintaining a strong negotiation position, but I will say this, this is an attractive return project, and is consistent with the 6.7X EBITDA multiple average that we have for the backlog as a whole As we announced earlier, we completed our Elba JV transaction in the first quarter, and it was at the value that we put in the plan for 2017, and that included value in excess of our capital spend, recognizing the value that we created in originating the project On the backlog, I will be brief, this quarter it stands at $11.7 billion, $300 million lower than last quarter As usual, there are multiple moving parts, small project additions and removables and some cost changes, but the main development is that we placed into service our <UNK> Morgan export terminal, a liquids terminal dock and cross channel line project for one of our refinery customers on the ship channel, the Houston ship channel We expect to update the backlog for the Trans Mountain outcome next quarter, so the project cost will now be approximately $5.7 billion, and the ownership level is of course, expected to change One more project update before moving to a few commercial highlights On our Utopia pipeline project, our project team has done an excellent job of acquiring right of way, and finding routing alternatives where necessary in the wake of an adverse court decision last year on eminent domain in one of the Ohio circuit courts We are pleased with our progress, and we ---+ again we began the tree felling process in the first quarter This joint venture project is under a long term contract and is expected to be in service in January of next year Now a few commercial market updates, starting with the gas segment Experienced slightly increased transmission volumes year-over-year, but gathering volumes were down I will start with gathering; we are generally seeing a leveling off of volumes in our key basins during the first quarter, but the comparison to first quarter last year reflects the declines that took place throughout 2016. Generally, our volumes are in line with what is observed in the basins in which we operate, although we are running a little bit ahead in our Bakken's gas assets, with one exception, and that's the Haynesville, where we are down on our <UNK>Hawk asset, where the basin is flat to slightly higher That's a function of the fact that our primary customer was not active in 2016. That's beginning to change, and we have added a new customer, that's actively developing its acreage, so we expect some improvement there Recall, that our gas segment is 55% of our segment Earnings before DD&A and gathering, processing is only 18% of that number On the transmission volumes, we are up 1% year-over-year The winter was weak, it was weak last year too, but we had a cold March in 2016. Power demand was down year-over-year What I have read predicts that gas will still exceed coal's share of the power market again this year, but some gas to coal switching did occur on our assets in the first quarter Also we saw higher renewable, including California hydropower contributing to the year-over-year decline Overcoming this though, were exports to Mexico, which were up 16% year-over-year on our systems and now averaging 2.8 BCF a day ---+ averaging 2.8 BCF a day for the first quarter Recall, that the vast majority of our margin here is secured by reservation fees, which are not affected by usage, but the volume information helps give a view on long term value for the capacity I failed to mention also that LNG exports were up on our system year-over-year by half a BCF a day We signed up an additional 400 a day of long term firm transportation commitments in the quarter A 100 of that was existing but previously unsold capacity that brings our total in the last three and a quarter years to 8.4 BCF of new sign up of which 2.2 BCF is existing previously unsold capacity We recently announced two developments related to the Permian First, we announced a non-binding open season for a 1.7 BCF newbuild pipeline from the WAHA hub in West Texas to Agua Dulce in South Texas, our Gulf Coast express project Last week, DCP announced its potential participation in that project as a partner and a shipper, and we are working with them over the next 90 days or so, to try to finalize that arrangement DCP's assets in the Permian would provide good upstream connectivity and our Texas intrastate network would provide excellent downstream connectivity to Mexico, LNG at Corpus Christi and utility in industrial markets along the Texas Gulf Coast Gas production is growing in the Permian and increasingly, East Texas is becoming a premium market We think the project makes a good deal of sense, but we are in the early days and we have not put it in the backlog The second development related to the Permian is, we have a binding open season on our EPNG system for capacity to the WAHA The open season package includes 150 a day of existing capacity, but it also reflects our ability to expand the system, by as much as 900 days more, to meet incremental demand The expansions would be relatively inexpensive, and would again, demonstrate the value of having existing infrastructure that we can build off of at attractive returns This project with a fee takeaway capacity at WAHA, including the potential Gulf Coast express pipeline in our Midstream business, and we continue to work both of those opportunities over the coming weeks The overall summary on gas is that we continue to expect long term benefit in the sector from increased LNG, Mexico exports, power and industrial demand, which should drive the demand from transportation storage infrastructure for the long term Shifting to our products segment, refined products volumes are up 1% year-over-year, even though we experienced some weakness in Southeast U.S Crude and condensate transportation volumes are also up 1% year-over-year, notwithstanding declines year-over-year in the Bakken and Eagle Ford basins KMCC in particular continues to show the benefit of its superior connectivity, both on the supply end and the Eagle Ford, as well as on the [indiscernible] in the Greater Houston area, and holding up very well in the face of declines experienced in the Eagle Ford as a whole on a year-over-year basis In our terminals business, our liquids terminals utilization climbed to over 95%, as we continue to benefit from the strong positions we have built in several liquid hub locations And this team has been gradually been migrating it's business increasingly to the liquids part of the business We are now at 80% of our segment earnings before DD&A coming from the liquids part of the business, and increasingly, our development activity is in the hub positions that we have built in Houston, Edmonton, New York and Chicago over the years We have kept our Jones Act vessels under charter on renewals that we have experienced, on [indiscernible] renewals We had the discount to do that, but we expect to be slightly ahead of our plan on this business, and we currently have all of our vessels under charter We continue to make good progress in our base line terminal expansion at our Edmonton hub, and as I mentioned, we put our <UNK> Morgan export terminal project in service on the Houston ship channel In the CO2 business, we came in slightly ahead of plan for the quarter, with pricing offsetting lower crude production volumes Also of notice, that we achieved record CO2 volumes during the first quarter Our demand was up, but so were our third parties' They had a good strong demand for CO2 off of our system So again, overall, a strong quarter, with strong financial performance, continued progress on our project execution and on our joint venture plans for our key projects And with that, I will turn it over to Kim Yeah So I will start with the open season It's closing shortly again, it's non-binding The DCP discussion started early, even before our announcement of the deal that continued up until ---+ well that will be continuing on But widened enough that we did a joint announcement of their participation And again, the rationale there is, we get upstream connectivity with their processing assets and pipes in the Permian And then we have downstream connectivity from all the market that we connect to, on what we think is the best intrastate system in Texas, connected to LNG, Mexico, et cetera You know we are ---+ I think there is enthusiasm for it, but again it's non-binding Producers I think are increasingly turning their attention to finding additional routes out of the Permian Sometimes that takes some time to ripen But certainly, there is interest in it, and will also cultivate interest on the demand side as well And on the demand side, one of the things that we can do and have talked to people about is, we are a buyer of gas in Texas, because we have a lot of sales gas customers in the state of Texas, and so one of the things we could do, is buy the inlet to this piece of pipe, and that may serve as a bit of a bridge for some of the producer markets out there So any parts of your question I have missed? Yeah, we haven't come out with cost yet But I mean, it is a 1.7 BCF newbuild project So you are looking at north of $1 billion I think we build as we started We ended the year kind of where we started with some declines early and then picking up I think, some developments that have been encouraging, is the rig count has been up a good bit The other thing is, and these are related, is that acreage has been changing hands down there So it's going from people who were not actively developing to people who are actively developing, and that's a positive indication for the basin too Those are the key things really I mean, we are running both of these processes simultaneously And the reason for doing that of course, is to get to a value point that reflects a fully negotiated deal or a fully marketed process and it's not fully marketed or fully negotiated until it's done And so, we are not there yet and so we haven't [indiscernible] yet Okay Yeah so, the open season on El Paso has 150 a day of capacity that's existing, that comes in a bit over time, as the contract rolls off But that's 150 without moving a muscle We have got that capacity available and we can do it today We can get another 900 of expansion, and the first, if you want to think of it this way, the first half of that roughly is relatively small CapEx It's back pressure valves and things like that, that we probably do on a ---+ and a few pipe modifications I mean, the interstation modifications, and we can probably do that under our blanket certificate, could do that relatively quickly, and that's a nice pickup And again, underscores the value of having piped an inactive basin that we can make some adjustments to The second half of that expansion, to get up to that 900 a day of incremental, would require compression So that's a little bit pricier, but again, not much There is not significant, little bit of pipeline built on maybe, but it's not a significant investment, but that would require a 7c In terms of getting ---+ once you get to Texas, gas will be flowing south and east primarily, east to Corpus and south to Mexico We are expanding that network with a crossover expansion that we have got in service, and we put in service in September of last year So we have got ---+ and it is a network So you have got options there, and it doesn't cost as much to expand that as needed for takeaway But my guess is, and Tom you can opine, there may be some expansions ---+ if people who want to take significant volumes to Houston, we may need some expansion That will be a problem We will be happy to have that problem, but ---+ And the other takeaway ---+ there is other takeaway When you get to WAHA, that's a significant hub and there is significant capacity coming online from WAHA to Mexico So that's the other value adding component of the EPNG projects Well, it's an intrastate project, so it's not a federal process So if the demand is there, and it's there in a hurry, we can move more quickly Yeah, it is a competitive environment, but I feel like, we have got the best downstream connectivity here, and we touch all the major markets, including all the big growing markets, and I think that's a real advantage I mean, Agua Dulce ---+ getting to Agua Dulce didn't use to be a very big deal, you were just in South Texas If you are in Agua Dulce and connected to our system, and you can go to Mexico or you can go to Corpus Christi or you can go to Houston, then you have really got something Now, we need to ---+ we are working to sell for the upstream piece, and that's where DCP, I think, is a very nice fit But there are others out there too, who we could coordinate with, to make sure that we can get the gas to WAHA and of course, EPNG expansion fits very nicely with that So we think we have got a very good offering I am sure that the other competitors would say the same thing, but I think that you look at the upstream and the downstream and we have got a very nice offering Plus, we'd like to buy some of the gas Thank you, <UNK> It's early to be talking about that We have got a non-binding open season that's closing, and I think while the shipper interest, certainly producer interests, this is a maturing situation, as they are looking at takeaway capacity out of the Permian in their own production And so I think, frankly, we are ways off there, in terms of maturing or ripening the project I think we have got a good offering I think DCP can bring volumes to themselves We can bring purchase requirements to it I think there are a lot of things that are compelling about it But I think we are ways off Now on returns, we have been using as a starting point, 15% unlevered after-tax returns and in projects where we are building off of our network, we have been pretty effective at getting those kinds of returns And this has some of those characteristics, when you look at the downstream network and you look at upstream potentially on EPNG On the other hand, where we have secure cash flows under long term contracts with good credits, we certainly talked with our business unit presidents about don't say no to those, if they are just ---+ because they are just a point or two off, bring them to us, let's have a look at them and see if on a risk adjusted basis, we are comfortable with them So it's not a hard and fast, it's a totality of the circumstances kind of a valuation I will go with the last question first So no, there is no suspension of any process We are going full speed ahead on both processes here election, as you pointed out, we do have our federal and also, our provincial approval, and that includes the EA and then also the environmental approval And it also includes, reaching agreement with British Columbia on benefits of their five conditions, which are primarily, benefits to BC, as well as risk reduction associated with marine and land response There are also many other benefits of this project to British Columbia, that we think are recognized, and think and hope would be taking into account, for creating a lot of B There is economic development There is benefits to the First Nations and the communities along the route that we have entered into a mutual benefits agreements with And we have got a lot of detailed plans and protections that we put in place, and that the British Columbia and federal governments have put in place, to mitigate any perceived risk from the project Now we are ---+ also, this is a federally sanctioned project Now we are watching, we are certainly following developments very closely, and the B ---+ the government in B can certainly have an impact on the project, but it's probably a little premature for us to pine [ph] on those exact impacts at this point We have a lot of momentum on both the federal and the provincial level from all the work that we have done and that those governments have done to address the concerns that have been raised, and to make sure that there are benefits that are shared with the broader public So we think we have got good strong support behind us, both at the federal and the provincial level Yeah, again, we are not changing our outlook and notwithstanding the strong first quarter performance, we are not changing our outlook for the full year In terms of the debt-to-EBITDA metric changing, I think the main mover there is probably getting the financial arrangements in place for the Trans Mountain project We are just a few weeks into the second quarter here, and I think there are some promising developments there The rig count is one thing we have mentioned Our Haynesville producer becoming more active on the gathering part of it We are happy to be up 1% year-over-year on crude and condensate and refined products volumes But it's just a little early for us to calling anything different on our EBITDA at this point I don't think so They are very different projects As I said, the Trans Mountain return is consistent with the average return ---+ the overall return in our back ---+ the overall multiple of EBITDA in our backlog, which is about 6.7 times So they are not ---+ they are really very ---+ they are very different projects, and so, I don't think you can analogize much, except to say, that we got compensated for the work that we did in originating and developing the project at Elba, and we expect ---+ as we did on Utopia, and we'd expect the same to be true on Trans Mountain I think that's not a decision we are confronting yet We fully expect that the two track process is going to produce successful results for us, so that's what we are basing our decision making on right now Well first I will say, we feel very strongly that it was not appropriate to initiate those proceedings, because not all of the facts around those assets were fully taken into account in the section five process We are also in discussions with our customers right now, and we did not expect that the ---+ anything other than ---+ at most, a de minimis impact on the margin for those assets No, we would like to ---+ we have existing assets that serve the Permian EPNG of course, we have the line on the Texas intrastate, so that line is fully utilized and constrained and difficult to expand So we are already there, and we are absolutely looking to expand our presence there I should have mentioned too, NGPL serves the Permian and brings the gas northbound to Chicago, and their opportunities on that system as well, to take advantage of the developments there I think, Tom correct me on this We got orders on the projects that were time critical already, before the quorum disappeared early in the year And so now, I think where we are is, we are not going to find the time critical issue, so long as they get quorum by midyear, thereabouts or even late 2017. So it's not constraining us right now, <UNK> <UNK> That was really to set a date that was out there, kind of at the end of the timing thinking So it was just a negotiated date, and it was put out there to be kind of at the end of the timing Possible No, the agreement doesn't change No, the agreement does not change Tom, do you have a feel for that? That's still consistent with our expectation? The upfront, giving a significant portion of the proceeds upfront Yeah, very early to tell Again, <UNK>, it would be ---+ if the demand is there at a high enough rate, you wouldn't have to fill the whole pipe Tom, our purchase business is over 1 BCF a day, that's the whole portfolio, right? 2.5 BCF a day and Eagle Ford is declining So it would be a nice ---+ at an attractive price, a nice way to fill in for that, and the purchase part of portfolio, the Texas intrastate Too early to tell what that mix will be So it's very difficult to ---+ really, it's effectively impossible to break the expansion from the existing Trans Mountain system It's effectively a twinning of that system, with some blind reactivations in it, and common facilities at the terminals and at the dock So really the way we would be selling this, either at JV or an IPO is with the existing system as well And in the IPO, potentially with a broader offering of our Canadian assets as well I think it goes back to what Rich said earlier We would look to have enough coverage over our dividend to be able to continue to fund the equity portion of a growth capital plan So we are looking at ---+ we are going to be looking at all of that, as we come up with our guidance to the latter part of this year ---+ in the latter part of this year The timing is this quarter, and we haven't been more specific than that <UNK> We are running both processes simultaneously, and again, the point there is, that we want to get ourselves to a fully negotiated JV side or fully marketed on the IPO side to kind of see what our value is We would expect that the FID would come close in time, with the conclusion of those processes

2017_KMI

2017

NWE

NWE #By April 30, we'll file the report, and in that report, we're instructed to tell them what our plans are. Just a word about our planning philosophy. Our goal is long term, least cost, least risk. It's an iterative plan, updated every several years. Typically we have action items in terms of resource acquisition of some sort, action items in terms of operational issues, study issues, things like that. Many of the comments from third parties were from particular advocacy perspectives, and that's entirely appropriate. We heard comments about the need to consult, which we do, and we agree. We heard comments about looking to a range of solution. There were questions about whether or not we had factored in full optimization of the hydro system. Questions about how we were looking at the shortfall, in relation to peak, being our own peak and not necessarily a system peak. And questions about whether or not we were making the right assumptions about capacity shortfall, and questions about how we were thinking about timing of the introduction of new assets. As I mentioned, a question about whether or not the range of options looked at in the plan was too narrow And as I indicated, we've gone out with an RFP. Of course, the point of an RFP is to test real resources in the market, and to identify that entire range of options. We think these are actually very good questions. Of course, we would have liked the opportunity to address those questions, when the plan was filed. But we're very, very appreciative that we will have the opportunity to discuss each of those with the Commission. First on the Montana side, we are certainly inviting build transfer options, and the plan does identify values in utility ownership. We do expect to see that proposal, but we are not ourselves submitting a bid. The South Dakota plan, they don't file, or they don't release a comment on the plan. But again, based on the third-party evaluation, which concluded the methodology was reasonable, the conclusions were appropriate, we call that a very good reception. I cannot and should not speak for the Commission. We take responsibility for our part of the regulatory relationship. We respect the Commission and the Commissioners as public servants, and we respect them individually. That's the approach that we want to take. We also, and I think this is where your question is going, recognize that our regulators in all three states and at the federal level, but because of the portion of our investment that is in Montana, certainly in Montana, we recognize that their decisions are perhaps more important than anything else, in our ability to invest in serving our customers. We've got about $4.3 billion of assets, utility assets dedicated to serve our Montana customers. We are stewards of that. They are stewards of that as well. Our responsibility is to treat the Commission with respect, which we do, to provide them as much information as we possibly can, and we are human. We don't have access to every bit of information they might want, but to do the best job we possibly can. Beyond that, I'm very ---+ Our approach has been, again, to try to be as forthcoming and constructive as possible. Where we make mistakes, we want to own that. I've certainly been in a position to apologize where we have, or where I have made mistakes. We'll continue to do that. Couple of background items. Obviously, Commissioners in our states are elected, and we're just coming out of a campaign season. So they have all had to take positions, it's particularly a reality in Montana, you have to take positions as part of a campaign. Currently, we're in a legislative session, and as is usually the case in Montana, there tend to be fairly significant utility-related issues, and the Commission typically is quite involved, advocating its view, as are we. And again, we've tried to be very respectful and appropriate in how we've advanced our positions. Third, I mentioned that we had just a fantastic year last year, from a customer satisfaction perspective, and that included in Montana. But we have had a winter the likes of which we have not seen, starting in late December into January in Montana, closer to what used to be a normal winter and that's a surprise. One of the challenges of course in the way investor-owned utility rates are set, is you're recovering all those $4.3 billion in primarily ---+ paying for those assets, primarily fixed cost, through volumetric prices. So as those meters spin more and more, that does have real impact. And we've tried to communicate to our customers that we understand their situation, try to work with customers individually and just across the board, to manage through that, and that's the approach that we need to take consistently. Which one is that. The property tax. The two areas that the Commission ---+ two of the areas the Commission has been quite interested in are the supply tax tracker on the electric side, and the property tax tracker. As you know, around the country, tracker mechanisms, either statutory, or in regulation, or by order are very, very common and used for exactly this purpose. So we obviously strongly support continuation of the trackers. The tax tracker is important in Montana, simply because the centrally assessed property taxes that we pay are extremely high, and we agree with the Montana Commission's concern about the level of those taxes. In fact, one of the things that the Commission has ordered us to do is to begin to break out the tax amount on our electric and gas bills, it's essentially a line item. And that actually adds ---+ it creates customer awareness about that impact, but I think that also adds to customer frustration. Our ---+ both electric and gas, as you saw this in the deck on the gas side, are significantly below national averages. That's something we're quite proud of. But as part of those rates, the tax bill in Montana is significant. But we do need to be able to track and recover. It's worth noting that essentially you, as shareholders, have some fairly significant skin in the game, because between rate cases, we only recover 60% of the change in that centrally assessed tax. Now, I mentioned, we've got a great tax department. They work very hard every year to manage that Montana tax bill, and ultimately, that is a benefit. It's a benefit to you, it's a great benefit to our customers, and that frees up other resources to commit to serving customers. It's a very important mechanism for us, particularly because the impact of Montana property taxes on the Company and on our customers is so great. It will impact us quite negatively. <UNK>. I think what it does is it's certainly likely to accelerate the need for rate cases. Indeed, same thing. Both cases. No. That's going to depend on the projects, size of the projects, nature of the projects. But we certainly ---+ and we want to communicate very, very closely with our regulators in all of our jurisdictions, about our plans. I think just you may be aware moving forward with an RFP is a very small component of our overall needs for this. Again, we'll have to demonstrate it's in the best interest of customers, as we go through that process. But primarily here, and you might remember, <UNK>, on previous calls we've always shown in this fifth year a big drop-off in our capital spend. You may have heard me talk about in the past we're going to try and smooth this out a bit. But we did decrease a bit, some of the spend in terms of generation, both in South Dakota and Montana and it has moved out a little bit, it's more a function of timing than anything. That's just the tax adjustment mechanism. We had a $1.5 million adjustment, which was effectively an amount that was associated with A&G costs that ultimately the Commission felt should be incrementally removed with the removal of Kerr from our profile. So those costs wouldn't be able to allocated elsewhere. I think there are always lots of pending open dockets. I think we've talked about the key Montana dockets. We have $125 million that's in the plan. I believe that's approximately $100 million for Montana and $25 million for South Dakota. I think again, I reiterate the amount of spend we had in South Dakota was also reduced because of the amount of wind that ---+ it's getting more credit, if you will, in the SPP process. That's reduced the amount of spend in South Dakota. And also, think about this, that $100 million of spend, because you pushed some items out of 2021 into beyond, that's also why you've had a reduction in spend here, it's more of a timing issue. To answer your question directly, $ approximately $100 million of Montana spend to $25 million of South Dakota spend. I think that reduced in this plan, I think we had more than $100 million in Montana in this plan. One could argue that was either reduced or deferred. Probably the best way to answer that, <UNK> is, we haven't reduced our $1.3 billion plan here. The goal for the workshop really is to gain, actually I would say a mutual understanding. We want to understand much more directly their questions, and we want to be able to answer those questions, as best we can. At this point there's no resource, no specific resource that we are planning to file a request for approval for. <UNK>, that all comes into play in our consideration on a going-forward basis. Takes into consideration rate cases and rate case outcomes on a going forward basis. It takes into consideration the ability ---+ the amount of cost control we can put in place. It takes into consideration the growth in terms of these projects, primarily in this plan from the infrastructure standpoint, and the T&D side of our business. It takes into consideration all of that. The best that I can say really is our goal very much is to work constructively with the Commission. I absolutely believe that Chairman Johnson has the same goal. Beyond that, I really can't speak for the Commission. We respect the office, respect the Commission. I'd add too, <UNK>, a lot of the questions asked today were questions that would be great questions for the Commissioners themselves. We can't answer them. Thank you very much for the good discussion. We hope you have a great weekend, look forward to seeing many of you in person, and visiting with most of you next quarter.

2017_NWE

2016

LAD

LAD #Thank you. Yes, <UNK>, this is <UNK>. One is looking at current trends, it is kind of equal to where our overall fixed margins are coming in, a weighted portion of that is going to go towards the body shop, which has a gross profit margin of about 20 or 15 basis points lower than our CPN warranty work, so as we improve that business and get that back on track, it is going to weigh down our overall GP margin, but what we guided for the year is really consistent with what we saw in the quarter, and no real changes that we are anticipating on that. This is <UNK>. I am pretty confident that we would have had a reduction in days supply if it wasn't for the stop sales, so it is definitely at least 100% of the four days, because we know that in many of our Honda stores, we have 20% to 30% of our inventories that are frozen because of CRVs and Civics and Fits. I think that is a combination of both, I think that certified is the area that we are feeling it the most, we were down $240 per unit, and I think that is a function of a greater supply, but I think ultimately that is the top of our waterfall effect, and that is where we have to be able to capture those core products that eventually lead to the highly profitable value auto, so we are willing to sacrifice that in the short term. Yes, <UNK>, <UNK>. We are not breaking out that comp at this point in time, I think that again, it is store by store, and trying to break it out by division. <UNK>, is it fair to say that they were comparable in the two divisions, the difference was is that the throughput at Lithia was a little softer than the throughput at DCH that was robust, but they are also coming off now their second year of being able to find those cost advantages, and I believe that DCH will continue on that, and I think that Lithia will again capture that $0.17 or so opportunity that was really out there. That hasn't quite been responded to, but will in coming quarters. Thanks <UNK>. Thank you for joining us everyone, and we look forward to updating you again in July.

2016_LAD

2015

GES

GES #Thank you, <UNK>. First, let me say how excited I am to be here, and how honored I am that <UNK>, Maurice and the Board of Directors have placed such faith in me to nominate me the first CEO in Guess. 's history that does not bear the <UNK> name. I accepted the position because I love and believe in the power of the Guess. brand, because I cherish the opportunity to work alongside <UNK> in writing the next chapter of this Company, and because, frankly, everywhere I look in this Company, I see opportunity. I am very happy about the future of Guess. . Thank you, <UNK>. And good afternoon. During this conference call, our comments may reference certain non-GAAP measures. Please refer to today's earnings release for GAAP reconciliations or descriptions of such measures. Moving on to the results, net earnings for the second quarter was $18 million. Diluted earnings per share was $0.21 compared to diluted earnings per share of $0.26 in last year's second quarter, and includes the negative impact of roughly $0.10 due to foreign currency movement. Earnings per share declined 19% including the negative foreign currency impact of roughly 38%. Second-quarter revenues were $546 million, down 1% in constant currency and down 10% in US dollars versus prior year. Total Company gross margin increased 70 basis points to 36.3% primarily due to higher initial markups in Europe and America's retail, lower markdowns in America's retail, partially offset by the impacts of currency. SG&A as a percentage of sales increased by 80 basis points versus prior year. Expenses in the quarter include charges for legal matters that negatively impacted earnings per share by roughly $0.05 and was not contemplated in our previous guidance. SG&A dollars still finished roughly in line with expectations when we guided the quarter, as we incurred lower expenses in other areas to offset these charges. Operating earnings for the second quarter was $26 million. Our operating margin decreased 10 basis points to 4.8% including the negative impacts of foreign currency of 170 basis points and charges related to legal matters of 130 basis points. Other net income was $4 million and mostly consisted of net unrealized gains and realized gains on foreign currency hedges. Our effective second-quarter tax rate was 37%, up from 35% in the prior year's second quarter due to the mix of earnings distributions between different taxable jurisdictions. Before we move to segment performance, please note that we renamed the North America retail and North America wholesale segments as Americas retail and Americas wholesale to reflect the growing representation of business from Central and South American countries in the segment in addition to US, Canada and Mexico. Revenue for the Americas retail segment decreased 2% in constant currency and 5% in US dollars. Within the quarter, we saw definite sequential improvement both in traffic and comp versus Q1 and finished the quarter with comps flat in constant currency and down 3% in US dollars. This performance was despite continued softness due to significantly lower traffic to our tourist stores. E-commerce, which continues to be one of our top priorities, had yet another strong quarter and delivered top-line growth of 20% in the quarter, marking the 16th consecutive quarter of growth in the US and Canada. In terms of product we were pleased by the overall performance of our womens' category, as we posted positive comps in constant currency. An improved trend in denim and strength in dresses and woven tops drove the women's performance. On the accessory side, we saw footwear and bags continue to comp positively but watches remain soft. From a brand perspective, we continue to be pleased with the performance of the <UNK> product line which achieved double-digit comps for the quarter, and are happy with the sequential improvement in the performance of the Guess. brand. In Europe, second-quarter revenues were up 4% in constant currency and down 15% in US dollars. The quarter benefited from a $15 million early timing of shipments versus expectations. This timing difference resulted in a $0.05 favorable impact on earnings per share for the quarter compared to our expectations. Retail comps were roughly flat for the quarter. This was slightly below our expectations as we had a slowdown of traffic and comp in the earlier part of July but saw a strong recovery of trend in the last week of the same month. From a country perspective, we continue to be pleased with the performance in Italy, Iberia and Germany, as all these markets grew in the quarter. In Asia, second-quarter revenues were down 6% in constant currency and down 12% in US dollars. We were encouraged by the improving performance in mainland China where we achieved double-digit comps in our retail stores. However, this was more than offset by weakness in Hong Kong and Macau due to the decline in tourist traffic as well as softness in Korea in the aftermath of the MERS crisis. In America's wholesale, which includes our businesses in the US and Canada, as well as in Mexico and Brazil, second-quarter revenues were down 9% in constant currency and down 15% in US dollars. The decline in constant currency for the segment was primarily driven by softness in our US wholesale business. Royalty generated from sales by our licensee partners were down 5% at $25 million, driven by softness in watches and bags. Moving on to the balance sheet, accounts receivable was roughly flat in constant currency and down 15% in US dollars. Inventories were $335 million, down 3% in constant currency and down 15% in US dollars versus last year. We ended the quarter with cash and short-term investments of $471 million compared to last year's $467 million. Free cash flow for the six months was $32 million, compared to a use of $2 million in the prior-year first six months. This improvement was driven by changes in working capital and lower capital expenditures. In summary, with six months of the year behind us, both including and excluding the impact of currency, we have been able to improve our gross margins and operating margin on the P&L while improving our free cash flow. Our Board of Directors has approved a quarterly cash dividend of $0.225 per share on the Company's common stock. The dividend will be payable on September 25, 2015 to shareholders of record at the close of business on September 9, 2015. With that, I will pass the call over to <UNK> who will take you through the outlook for the third-quarter and full FY16. First of all, thank you very much. Regarding your question, I think being present in 90 countries and also with global, I will consider Guess. similar to Inditex in this respect, that it is a truly global company. So, I see opportunities in several countries where we are not really present at this moment, such as, for example, China, such as Russia, such as Turkey. We have a presence, but we don't have an important presence. I believe that there is a customer there for Guess. and there's a customer, as well, that can be very appealing to the Guess. family. This is one of the opportunity, but I see, as well, opportunity, for example, in China, as I mentioned before. China, for example, we can grow a lot our business in the next coming years. As I mentioned in my speech, we will try in more than five years to do at least $700 million in total in Asia. Then, a part of that, I see opportunities, as well, on improving the supply chain. I see opportunities, as well, on people, on the talent inside the organization and hiring the right people, as well, from the outside to improve our operations and our way of doing business. In US, I think for all our formats, Guess. , GUESS Factory, G by GUESS and <UNK>, I believe there is plenty of opportunity for development not only from a real estate point of view but also from a product point of view. This is something that we are addressing at this moment. And we believe, as I mentioned on my speech, it's about basically everyone concentrate ---+ the operational people concentrate on sales and in product. This is what we are going to try to do and how I think that we can have a lot of opportunities in the US market. First of all, of course, we will try to concentrate or trying to improve our supply chain. As a preview, I can give you some measures that I will consider for future development of our supply chain. First of all will be the replenishment. We will try to improve our replenishment inside the stores. We will try to, as well, improve our suppliers' proximity to our main markets, which at this moment are the US or North America and Europe. And then suppliers that will be, for example, in Mexico, even in the US for the North American business. And in Europe, we'll try to reinforce the suppliers in the Mediterranean area and Turkey, as well ---+ Mediterranean, Turkey, and Eastern European countries for supply in our second-largest market, which is Europe. Then, also, we will try to reinforce the fabric, kind of creating a fabric platform. And then, also, we will reinforce the open to buy. As important measures that are going to cover for the next coming days and coming weeks, is to improve our supply chain. Regarding the flat organization that you were mentioning before, without any doubt I'm coming from a very flat organization and I'm going to try to, as I mentioned, as well, in my paper, is I'm going to try to improve that flat organization that we are having at this moment at Guess. , centralizing all our functions in LA and the other two centers of responsibilities at this moment that we have, one in Europe and one in Asia that will be the executors of that strategy. This is <UNK>. Just the second part of the question that you were talking about on the European wholesale shipments, as we talked about in the prepared remarks, about $15 million shifted out of Q3 into Q2, and that effectively will manifest in Q3. There's nothing else that's very material that is in our guidance. And regarding timing that you were mentioning, as you may know, I'm coming from an Inditex background so I will try to do it right now. It's not possible to do it right now but definitely you will hear from us in the coming few weeks and few months. This is <UNK>. I think you were asking about double-digit comps in Europe, and that's the trend we've had so far in the third quarter. Remember, this is a markdown period so it's not surprising that it's going to be a bit more promotional. We are a bit more promotional than last year because we have a bit more inventory that actually carried through from the sales period in July. That's why the margins have been impacted, because we are a bit more promotional. But it's quite normal. <UNK>, this is <UNK>. You were a little bit difficult to catch but I think you are asking about gross margin cadence in the guidance that we have included. So, let me just give you what we've actually talked about in the prepared remarks and give you a bit more color on that. In the third quarter, we actually are coming up against currency headwinds. There's a little bit of promotional activity in Europe that we talked about, as well, that is affecting us, and that's why we think that the gross margins should be slightly down in the third quarter. However, as we've talked about on previous calls, on the full year, we still expect our gross margins to improve, driven by the improvement in markdown rate as we actually get into the back half of the year, the better average unit costs that we're going to be able to leverage in the back half of the year, and the strategic price increases that we're going to be doing towards the back half of the year. This is, of course, offset partially by the currency and is quite material as a headwind, especially as we're moving into the back half of the year.

2015_GES

2015

K

K #Good morning <UNK>. Thanks, <UNK>. Great question, so let me just clarify one thing. On Kashi, the Kashi wholesome snack bars actually grew in the first quarter, which is a sign of the strength of the brand, particularly when you have great food going up against it. On the Special K business, if you look at some of the softness in consumption we've had in our US snacks business, it does largely come down to Special K. There's some good news in there. If we look within wholesome snacks, Special K bars is a primary source of weakness within that category for us. We've come out with new Special K bars here at the beginning of the year. We've lost some distribution and some retailers, but where we've maintained the distribution, the velocity's up strong, which would suggest we've got good food that's delivering upon the promise of Special K and we have more innovation coming in behind Special K in the middle of the year. If you come to crackers, similar story. We've renovated Special K Cracker Ship offering. We've lost some distribution on those products, but where we've maintained the distribution, the velocity is up strongly again, which also suggests we have great food out there. I think what we're seeing is a transition. The good news is where the food's in play, we're seeing good velocity. Now our job is to rebuild the distributions based on having great food in the marketplace. I think that's fair. We're essentially on plan in our US snacks business in the first quarter. I think the upside had more to do with some great performances in the international businesses and seeing a bit of trends come out of our US cereal business. Good morning <UNK>. There is a couple factors driving that. If you look at the consumption data versus the shipment data, there's two reasons for difference there in the first quarter. One has to do with strong growth in the nonmeasure channel. I realize that Nielsen covers most of the business, but there are some large customers and meaningful channels that are not inside that data. So we've seen some very good growth in those businesses. Secondly, a lot of what's happening is driven by the phasing of innovation year on year. So last year, innovation went out in the first quarter. This year innovation for snacks is much more mid year, and what's happening there is we will see that innovation going Q2, that will give us more of a consumption drive and more of a shipment drive as soon as we fill the pipelines for that innovation. Last year, innovation went in in the first quarter, suppliers ships in Q4, so we actually burned through inventory in Q1. We get good consumption coming from behind that innovation in Q1 last year. A little bit of a timing issue within the year that's driving what you're seeing there. We do expect better results. I would caution on some of the April data because the shift of Easter can distort one week versus another, but we do expect to see improving consumption trends in our snacks business over time. So historically when we've benchmarked the Company to our peers, we've actually come away a little bit leaner quite frankly than a lot of our peer group. Clearly we have a new model with the 3G model and Kraft and Heinz. We are watching that closely and learn and reapply what works. We're not going to blindly follow those actions. As you're thinking about our business, we're doing Project K, reinvesting for growth. As we talked back at CAGNY, we only need low single-digit growth to drive mid single-digit operating profit, and we believe that's the right way to sustainably grow and drive these businesses over time. To answer your question, we continue to look, to learn, but we're going to drive Project K for now and then see if more ideas come to us based upon what we see in the marketplace. A great question. As we shared with you earlier in the presentation, we've made some pretty important structural changes to better address the growth opportunities in Latin America, and they're quite simple. First is high-frequency stores. Traditionally we've had pantry size boxes of cereal going through most of our direct accounts. 50% to 70% of all food sales go through HFS as I mentioned earlier, only 20% of cereal sales. And for us less than 20% of our snacks, so that is the biggest opportunity. To be able to drive volume growth, <UNK>, in HFS, we need to have the right size, the right pack at the right affordable price, and that's what we've now put in through the core of our cereal brands to address high-frequency stores. And as we ramp up Pringles, having Pringles also in affordable sizes for high-frequency stores is going to be absolutely critical. I think so. I think it's making sure that our products are affordable and accessible where consumers and shoppers shop every day in our region. Yes, so you're right. Our gross margins were flat in the first quarter, and we have said guidance for the full year is that our gross margin will be up slightly. Our Project K is a little bit lower in the first quarter versus how it will play out over the next three quarters, and our rate of productivity savings in the balance of the business. So excluding Project K also gets a little better as we go through the balance of the year, <UNK>, so that contributes to slight gross margin improvement as well. We're making good progress on Kashi. As you mentioned we are renovating some of our core foods today. The good news is that we have a strong team in place in California, and we are making progress both on the renovation front which we expect to have for Kashi largely this year, but also on the innovation front bringing new foods to market. You look what's happening to Kashi, we have seen a significant loss of distribution over the last year, but our velocities are stabilizing. And as we bring in new innovation mid year, we expect to start to improve our distribution as we go forward. So mechanically, we're going to see a decline in Kashi this year. That's really loss of past distribution as opposed to a weakness in the underlying brand or foods, and as we start to rebuild through innovation I think we will start to see the business return to growth. That's probably more a 2016 discussion than a 2015 discussion. The good news as we go talk to retailers about the innovation about what we're doing on the brands, there's real excitement about what we're doing, and we're seeing improving support from retailers as well as we go forward. Thank you. Thanks for the question. We are executing the largest restructuring program in the Company's history taking out a very large amount of costs and reinvesting that back in the business to drive long-term growth. You've seen that through our investments back in sales capability, investments in our food. You've seen our top line trends starting to improve with growth across our international business and some of our US businesses, so we're on track with our plan to return to stable growth over time. We believe that's the best way to create value for shareholders. Thank you. Curt we always will do what we think is the best way to create shareholder value, and we are ---+ our beliefs drive exactly like programs to achieve that outcome, and that's what we're absolutely focused on as a company. I think you're seeing improving trends in this quarter, and that's our goal as we go forward. So appreciate the question. Gary, I think we better wrap it up, please, if we can. Okay that's it. Thank you. We will be around to answer questions over the next day or two if anybody has follow-ups. Thanks.

2015_K

2018

INCY

INCY #Thank you, Kevin. Good morning, and welcome to Incyte's Fourth Quarter and Year-end 2017 Earnings Conference Call and Webcast. The slides used today are available for download on the Investors section of incyte.com. And I am joined today on the call by <UNK>, <UNK>, <UNK>, Dave and <UNK>. Before we begin, I'd like to remind you that some of the statements made during the call today are forward-looking statements, including statements regarding our expectations for 2018 guidance, the commercialization of our products and the development plans for the compounds in our pipeline, as well as the development plans of our collaboration partners. These forward-looking statements are subject to a number of risks and uncertainties that may cause our actual results to differ materially, included those described in our 10-Q for the quarter ended September 30, 2017, and from time to time in our other SEC documents. I'd now like to pass the call to <UNK> for his introductory remarks. Thank you, Mike, and good morning, everyone, thank you for attending this call. So there are really 3 themes to discuss on today's call. First is Jakafi commercialization trends, the near-term newsflow events that we expect and our decision to report after non-GAAP accounting measure starting in Q1 2018. So first, the number of patients taking Jakafi continues to grow very nicely, and Jakafi net sales for the full year were close to the upper end of our guidance range. As we told you last quarter, Jakafi sales in Q3 included some inventory build, and this has now been corrected in Q4. And <UNK> will speak about this in more detail later. <UNK> will cover our 4 upcoming clinical and regulatory catalysts, namely Jakafi in GVHD, FGFR in cholangiocarcinoma, baricitinib in rheumatoid arthritis and the ECHO-301 trial with epacadostat in advanced melanoma. You will also see that our SG&A guidance for 2018 includes an estimate of our global prelaunch costs for epacadostat. Dave will also cover our decision to adopt non-GAAP accounting measures and detail our framework for what will be included and excluded from these figures. Okay, so with that preamble, let me say a few words about the significant progress we made over the course of the last 12 months. In 2016, we surpassed $1 billion in total revenue for the first time, while this year, we surpassed $1.5 billion in total annual revenue, representing growth of almost 40%. Using the graphic of Slide 4, I'd like to highlight 5 areas we believe to be crucial to a successful and growing biopharmaceutical company. Each of these areas are important and contribute to our long-term success in a different way. First, the dynamic top line supporting our future growth objective; then an expanding number of different sources of product-related revenue; the breadth of our clinical development portfolio; adding to our discovery capabilities; and obviously, the geographic reach of our organization. You can see that over the course of 2017, we progressed in each of these area. Not only did total revenue grow to a record level, but we added an additional source of royalty revenue with Lilly's ex-U. S. , launch of Olumiant. We have also added 2 clinical candidates to our later-stage development portfolio, and we added an additional drug discovery platform with our bispecifics collaboration with Merus. 2017 also saw Incyte establish a footprint in Japan as we rounded out our geographic expansion. I believe that we are now in an excellent position to execute on our upcoming development and commercialization plan. On Slide 5, you see our strong growth in product-related revenue comes from 4 sources: sales from Jakafi, sales from Iclusig and royalties from both Jakavi and Olumiant. <UNK> will discuss Jakafi in a few minutes and <UNK> will provide a quick update on Olumiant. So let me briefly touch on Iclusig. We are pleased that that Iclusig sales have not only supported our rationale to invest in Europe, but it's also fair to say that sales are growing more rapidly than we have initially expected. In Q4, for example, sales of Iclusig grew at 51% over the same period last year, and I believe that this speaks to the quality of our European organization and should bode well for the future. In addition, for the year, we have recognized $152 million in Jakavi royalties from Novartis, representing 37% growth over last year and adding significantly to our top line momentum. Slide 6 illustrates the growth in our development portfolio and emphasizes our later-stage candidates. Since last year, we have progressed itacitinib, our JAK1 selective inhibitor and added MGA012, the PD-1 antagonist, into our later-stage portfolio. We also worked hard to expand the development scope of our existing portfolio candidate. And as you can see on the right-hand side of Slide 6, we have moved many of them into trials in multiple additional indications. So I'd like to finish by segment with what makes Incyte a special place to work and why we are so excited about the years ahead. Incyte is not only a company of rapid revenue growth, as seen by the almost 40% growth in our top line, but it is also a company with an expanding portfolio and with enhanced discovery capabilities. As illustrated on the right-hand side of Slide 7, we have a multitude of opportunities as we seek to transform Incyte into a sustainably profitable biopharmaceutical business over the next several years. We therefore believe that we have both the geographic reach and the financial resources to be able to bring our new therapies to patients that need them. With that, I'll pass the call to <UNK> for an update on Jakafi. Thank you, <UNK>, and good morning, everyone. The three charts on Slide 9 are intended to give you the full picture of current Jakafi trends. Our Jakafi business grew very well in the fourth quarter, as measured by the continued and consistent growth in patient demand as shown in the figure on the left side of Slide 9. Total patients on Jakafi are up 22% over the same period last year. Reported net Jakafi revenues were $302 million, up 27% from Q4 of last year. Net sales in Q4 were impacted by a reduction in inventory held by distributors. As you recall, we exited the third quarter with inventory build and we exited the fourth quarter back in the normal range of inventory. This correction in inventory amounts to approximately half a week of product held at distributors, which equals approximately $12 million of Jakafi net sales. The right-hand panel plots Jakafi net sales by 6-month periods. This washes out these quarter-to-quarter inventory fluctuations and provides a normalized picture of Jakafi growth. Jakafi sales in the second half of 2017 were 31% higher than the same period last year. Slide 10 illustrates the annual revenue progression of Jakafi over the last 6 years, which shows remarkable trend of strong growth. For the full year 2017, Jakafi net sales grew to $1 billion 133 million, a 33% increase over the full year in 2016. We are also seeing strong and consistent growth in a number of patients on therapy, and the chart on the right of the slide shows this annual growth very clearly. We estimate that there were approximately 11,000 patients taking Jakafi in the United States during the fourth quarter of last year. The largest of proportion of patients taking Jakafi have myelofibrosis, but the proportion with polycythemia vera continues to rise. And as the PV proportion in the patient mix rises, so does persistency, which of course has a positive effect on revenue. Today we announced our net product revenue guidance for Jakafi for 2018, which we expect to be in the range of $1.35 billion to $1.4 billion, the midpoint of which represents more than 20% growth over 2017. Based on strong demand for Jakafi, the continued appreciation in the medical community that earlier intervention leads to better patient outcomes and increasing persistency, we have recently raised our long-term net product revenue guidance to a range of $2.5 billion to $3 billion. This long-term guidance includes the potential for new indications, including GVHD, which <UNK> will address next. Thanks, <UNK>, and good morning, everyone. Before coming to Jakafi in graft-versus-host disease, I'd like to begin by reminding everyone of our development portfolio. <UNK> highlighted our 6 later-stage product candidates that have progressed beyond proof-of-concept development. But it's important to remember that we also have earlier-stage product candidates against 10 discrete targets, the majority of which have been created by in-house efforts and through our discovery alliances. The 3 newest candidates, which are expected to enter the clinic this year, are examples of that. The antibodies against TIM-3 and LAG-3 come from our discovery alliance with Agenus, whereas the dual AXL/MER inhibitor is the product of a 3-year effort from our world-class medicinal chemistry team. So back to Jakafi in graft-versus-host disease, and a reminder that the first pivotal trial for Jakafi in graft-versus-host disease is expected to read out in the first half of this year. REACH1 is a single-arm trial in patients with steroid-refractory acute graft-versus-host disease. And if the trial is successful, we expect to submit a supplemental NDA later this year. The incidence of graft-versus-host disease has been growing due to an increase in the number of allogeneic transplants. Unfortunately, approximately 50% of these transplant patients develop graft-versus-host disease, and mortality rates in GVHD patients can be very high. In the first year, mortality rates can be between 25% and 75%, depending on the grade. So the unmet need here is very clear. A few words next on the ECHO-301 trial, evaluating epacadostat in combination with pembro in advanced or metastatic melanoma. As you should all know, the ECHO-301 trial is fully enrolled and we are expecting the PFS results in the first half of this year. We are already planning our global prelaunch activities for later this year, and pending the PFS results, of course, intend to submit an NDA seeking approval of epacadostat in the second half of 2018. Melanoma is a sizable opportunity for us, with over 20,000 metastatic melanoma patients in the U.S., Europe and Japan each year. It is important to note that PD-1 monotherapy is the standard of care for first-line melanoma. Let's move on to our FGFR1/2/3 inhibitor. FIGHT-202, our study of patients with cholangiocarcinoma has been enrolling very well and we expect to be able to present initial data from the study this year. The trial has 3 open-label arms. Group A is recruiting 100 cholangiocarcinoma patients with FGFR2 translocations. And it is these patients where we expect to see the benefits of 54828. Recruitment of the 20 patients needed in each of the other 2 arms has been completed, and we expect these arms to act as negative internal controls in the study. If the study meets its primary endpoint with good durability of responses, we expect to submit an NDA seeking approval of 54828 in cholangio patients with FGFR2 translocations. Cholangiocarcinoma is an orphan indication and has significant unmet need. In the second-line setting, post first-line chemotherapy, overall response rates to second line therapy are approximately 10% with only a 2-month progression-free survival. I'll finish with a quick update on baricitinib. Lilly confirmed in December last year that it had resubmitted the rheumatoid arthritis NDA, which the FDA subsequently accepted as a Class II resubmission. This results in a review time of 6 months, during which we and Lilly expect the FDA to call an advisory committee to discuss the data publicly. Beyond rheumatoid arthritis, Lilly has already initiated a Phase III program of baricitinib in atopic dermatitis and expects to initiate a Phase III program in psoriatic arthritis later this year. Lastly, Lilly has also stated that the results from the Phase II trial of baricitinib in patients with systemic lupus erythematosus are expected to be presented at a medical meeting later this year. With that, I'll pass the call to Dave for the financial update. Thanks, <UNK>, and good morning, everyone. Our financial performance for the fourth quarter was very strong. We recorded $444 million of total revenue. This was comprised of $302 million Jakafi net product revenue, $19 million in Iclusig net product revenue, $48 million in Jakavi royalties from Novartis, $5 million in Olumiant royalties from Lilly and $70 million in milestone revenue. For 2017, we recorded $1.5 billion of total revenue. This was comprised of $1.1 billion of Jakafi net product revenue, $67 million of Iclusig net product revenue, $152 million of Jakavi royalties from Novartis, $9 million of Olumiant royalties from Lilly and $175 million in milestone revenue. Our gross net adjustment for Jakafi for 2017 was approximately 13%. Our cost of product revenue for the quarter and the full year was $22 million and $79 million respectively. Our R&D expense for the quarter was comprised of $297 million of ongoing R&D expense and $150 million upfront payment under the license agreement with MacroGenics for a total R&D expense of $447 million, which includes $23 million in noncash stock compensation. Our R&D expense for the full year was comprised of $955 million of ongoing R&D expense, $12 million related to a in-process R&D asset impairment, and approximately $359 million in upfront consideration and milestone expenses related to our collaboration agreements, for total R&D expense of $1.3 billion, including $90 million in noncash stock compensation. Our SG&A expense for the quarter and the full year was $98 million and $366 million, respectively, including $11 million and $43 million in noncash stock compensation for the quarter and full year, respectively. For our expense related to the change in fair market value with contingent consideration for Iclusig royalty liability for the quarter, we recorded $10 million and $8 million, respectively. Moving on to nonoperating expenses. We recorded a $22 million unrealized loss on our long-term investments in Merus and Agenus for the quarter, and $24 million unrealized loss on these same investments for the full year. Our net loss for the quarter and the full year was $150 million and $313 million, respectively. Recall, these amounts include expenses related to our collaboration agreements of $150 million for the fourth quarter and $359 million for the full year. Looking at the balance sheet, we ended the year with $1.2 billion in cash and marketable securities. To summarize, we\ Yes, so this is <UNK>. So as far as Q1, yes, you'll see the impact, certainly of the donut hole. So our gross to net will be at the highest point in Q1 or beginning of Q1 as compared to the rest of the year. Let's speak about the launch cost for epacadostat on the SG&A number for next year. So the way it will work is that we will have an expansion of our commercial team both in the U.S. and Europe, because that's the 2 areas where we will have the first launches. Japan will come later, and it's ---+ melanoma is a fairly small opportunity in Japan. We will have an increase of our activities with medical affairs, so there is a number of medical affairs infrastructure and cost that would be incurred in this one half of the year related to the launch. And then there are a few other things in terms of expanding in some countries in Europe that will be also necessary. I mean, the way you can think about it is that the timing is such that if we have a submission in the second half of the year, we will have an approval, let's say, somewhere early maybe in the U.S. and a little later in Europe in 2019. And that's what we are getting competitively prepared for in the second half of 2018. So the calibration of $125 million is based on the current plan that we have. Thanks for your question, this is it <UNK>. So there are 4 core components to the biomarker program for the ECHO-301 study. Those include PD-L1 status; the expression status of IDO1; tumor mutational burden, as you mentioned; and also RNA sequencing. I'll remind you that PD-L1 status was, in fact, the stratification factor for patients randomized into the study. So those data are available at the time of patient entry and first dose. The other 3 components of that biomarker program are all data sets that are not required at randomization, but we have activities with Merck ongoing now to generate all of those data. They were all planned upfront in terms of being core components to the biomarker program. And as you know, we don't discuss any statistical plans around that, so I don't want to get into those details. I think what you should think about when you think about that biomarker program rolling out over the year, is that, obviously, L1 status will be available upfront, and that will be an aspect of the data that we'll consider at the time of primary analyses. The other 3 components, IDO1 expression, tumor mutational burden and RNA sequencing will read out over the course of the year, probably beginning first in the first half of the year; and for some of those analyses, extending into the second half of the year. Any decision to present those data, of course, will be dictated first by considerations with our collaborator, Merck, and our principal investigators, but obviously they'll also be dependent on the timing of data availability, the correlative efficacy analyses and the timing of those results and, finally, meeting frequency itself. Hi. This is <UNK>. So in terms of your first question in ECHO-301 and the PD-1 control arm, in this case pembro, you're correct, we used KEYNOTE-006 primarily as the modeling control arm. In addition, the regulatory labels reflect the data from KEYNOTE-006 as well as the New England Journal publication related to that. It's felt that PD-1 monotherapy in this setting results in a progression-free survival of around 5.5 to 6 months, and that's been pretty consistent in all their data sets, including the ones I just mentioned, and their publications and their label. There's every expectation that given that the study enrolled 700 patients globally that the demographics will absolutely reflect similarly on what were seen in their registration study KEYNOTE-006, there should be no differences. I'll also remind you that we did a very close comparison of our ECHO-202 data set at ESMO last year and caused all the demographics and the prognostic factors to make sure they were both similar to KEYNOTE-006 and CheckMate 067, and they were. If anything, our rate of liver metastases was a little higher in the ECHO-202 population, so there's no expectation in any demographic difference. The only thing that will have changed over the years is post-approval therapy availability, but they won't affect the primary read-out for this half of the year. For your CAR-T question, I'll hand over to <UNK>. Yes, <UNK>. So it's an interesting space, to be frank. And we're interested in how various aspects of our I/O portfolio may be able to help augment CAR-T therapy. IDO1 is probably one of the most interesting ones, and there's certainly data that have been presented at medical meetings and published that reflect the impact that IDO1 activity can have on attenuating autologous cell therapy. And some of the most elegant work in that respect has been done in preclinical models of diffused large cell lymphoma. As you know, when autologous cell therapy is active and engages in their antigen targets, that leads to expansion of the T cells, a tremendous amount of interferon gamma is produced and it would make sense to have counter-regulatory mechanisms engaged to try to dampen that response. We and others feel that IDO1 could be one of those more important mechanisms. So exactly how we go about doing that then is a question around collaboration. And obviously, we're not in a position get to talk about that other than to say that it's an area of interest to us, it's an area of interest to several other CAR-T players, and I suspect that we'll find a way to work together to bring that sort of a study forward, recognizing, of course, the unique patient safety considerations one has to have in the CAR-T space. So <UNK>, <UNK> here. So yes, on the press release, I would say it's not clear yet. I think you have to take into account the materiality obviously. You have to take into account the fact that we have a partner with Merck, so it will have to be decided together. And you have to take into account what data will be available at the time of the first analysis. And as you ---+ as <UNK> was describing, there are different options there. I think the goal would certainly be to protect the publication, so that is always a trade-off between what can be said from a study prior to its publication and what needs to be kept for the first scientific publication. So I think what you have seen in the industry, in general, is that the usual way to do the first press release is to look at the materiality aspect, what's important to communicate, and that's probably the frame we will be using for our own press release in the case of 301. Now on the fedratinib, we can speak ---+ maybe we can speak about it, let me say a word and maybe <UNK> can add something. I think the key question we have to ask ourselves here is what's ---+ how is this product going to add to the existing [option of] Jakafi. And in many ways, from the safety standpoint, we can see that there are differences. And we are also looking at what are the options for patients after they have stopped the treatment with Jakafi. And as you know, there is a lot of data showing that the type of resistance to the JAK inhibitor is such that in fact, you can retreat with a JAK inhibitor after that, and that's what we are looking at. So, <UNK>. Yes, so as far as competitiveness, <UNK>, we actually don't see it as competitor. We do believe that there is a need, an unmet medical need, if patients for some reason no longer respond to or come off of Jakafi. But the profile, as <UNK> was saying, of fedratinib, as we know it and has been published, doesn't really seem to be that safe and effective drug that you're looking for. <UNK> talked about we're developing our combinations with Jakafi in myelofibrosis, including PIM, our JAK1 inhibitor, and our delta [program], and we think we can improve upon that. We're curious about Celgene's purchase of this company. But nevertheless, we'll see what their filing strategy is, whether it's going to be for patients with platelets less than 100,000. But there, we're also confused because we actually have dose and schedule in our label for patients that have between 50,000 and 100,000 platelets. So I'm not really sure where they can go there. In the second-line setting, if a drug does come there, we think that starting Jakafi earlier for myelofibrosis patients and not saving it for later could be a very good thing for patients in terms of their survival. If I ---+ let me take the R&D guidance. I mean, most of what you see is coming from the advancement of the late-stage portfolio. So epacadostat is part of it, and itacitinib in GVHD, where we are running a Phase III study. You also have to take into account the baricitinib new indications that are emerging because that's a place where we are co-funding a certain percentage of the cost of this study, so that has an impact on the guidance for this year. And then for the earlier-stage type of project, as you described it, from GITR or arginase or OX40, in fact, we are not anticipating these projects to be in the very large-scale type of clinical trial yet in 2018. And so it's not what's driving most of the cost. I mean, the fact that there are more projects in the portfolio is, in fact, obviously, increasing the activity, so it's increasing the cost. But the way the R&D budget is sort of evolving from '17 to '18 is a few projects at a later stage, a full year cost on epacadostat and GVHD, and some baricitinib new indications. Geoff, this is <UNK>. I'll take your tumor mutational burden question. I think we're still in the early days as to understanding exactly how and when tumor mutational burden can predict response to checkpoint blockade or how it would be therefore relevant, let's say, to a doublet like epacadostat plus PD-1. The cut point is likely going to matter. I think it's likely to be histology dependent in some respects. And I'd point to melanoma, the data that we have in the public domain thus far suggests that, in general, it's a tumor histology with quite of a high tumor mutational burden relative to other tumor types. So the typical cut point you have around 10 mutations per mega base, well that's over half the population in melanoma. In fact, it might be closer to 70%. We'll be evaluating tumor mutational burden, including the degree of mutations as part of the correlative efficacy analyses. I think there's some interesting questions that we'll try to address as to how TMB may relate to other factors, such as IDO1 expression. The available data suggests that it actually doesn't relate really well to PD-L1 levels. So we'll be testing that with respect to IDO1 activity. And I think there's an interesting question as to whether or not combinations of these biomarkers may, in fact, be superior to any one biomarker, and those will be things that we'll start to explore in the 301 study. And importantly, there'll be things that we'll also explore in all of the studies of the ECHO program. So if you take a step back, our ability to ask some of these questions and get some preliminary answers in melanoma will also be true in non-small cell lung cancer, in head and neck cancer, in bladder cancer, renal cancer, et cetera. So I think it's a very exciting time for the space. And certainly, the ECHO program is a very interesting one in that respect. Yes most of that growth really comes from continuing treating patients in MF earlier and PV as we penetrate that market to a greater degree, and patients staying on for longer. GVHD is part of that, ET is part of that. But in fact, most of the growth still comes from MF and PV. <UNK>, it's <UNK>. In terms of the primary analysis, obviously progression-free survival will come before overall survival. They are co-primary endpoints in the study. The actual analysis is conducted, as you know, by Data and Safety Monitoring Board. And it is common for them to look at overall survival at the same time, particularly to make sure the trend is in the right fashion, et cetera. Whether they will release that data to us or not, as <UNK> said, upfront is uncertain at this point in time. It'll depend on maturity and other things. The actual overall survival analysis and final analysis will obviously come much later, and that's the other co-primary endpoint. In terms of the relevant comparator beyond the comparator in the actual study, the nivo IPI data in melanoma has a progression-free survival of around 11.5 months, but it has to couple that with its tolerability profile with a high rate of Grade 3 for adverse events and a high rate of discontinuations. So all of those are relevant when you do risk-benefit analysis and comparative assessments. Obviously, it's always good to be in the same territory in terms of efficacy, as you then build in the tolerability profile and make decisions related to therapy. But the regulatory comparison is PD-1 monotherapy. The dominant clinical use in the U.S. and Europe in first-line is PD-1 monotherapy. <UNK>, it's <UNK>. It's really a point of data availability and meeting cadence, as <UNK> used the term earlier, in terms of matching that. So obviously we'd sit down with the partner, Merck or BMS or AstraZeneca, and decide what meeting to target or when to present. But I think you can expect over the course of this year at the major medical meetings, Phase I/II updates from ECHO-202, ECHO-204, for example, in some of the settings you mentioned, because that data will become available and be presented at those meetings. The second question you say there are still, within those studies, some datasets that were ---+ or some histologies that were added later, like hepatocellular cancer, like MSI-high colorectal cancer, like diffuse large B-cell. As those become available, again we will look at the data with our partners with our investigators and use historical controls to make go/no-go decisions. As to timing of that, it really will be over the course of this year and may continue to next year as well. I'd just remind you, at the present time, we have 9 ongoing Phase III's with epacadostat, so those ---+ we'll make careful decisions related to those histologies. So Ian, it's <UNK>. Thanks for your questions. Again, just to be clear, Lilly is running the resubmission with our input that say a Class 2 resubmission and in the 6-month review now, for which both us and Lilly expects an adcom at some point. As part of that resubmission and one of the key advantages was the ability to submit a much larger dataset. So obviously, longer follow-up in the Phase III studies, the use of marketed data particularly from Europe and markets like Germany, and then registry data. And Lilly has been clear that there are no new safety signals seen in any large the same dataset. In terms of the confirm background rate of venous thromboembolism in RA patients, there are many places you can go for that data. It's around 0.3 to 0.8 per 100 patient-years. The most often quoted number is 0.5 for 100 patient-years. The rate of venous thromboembolism in both the 2- and 4-milligram treatment groups in our studies with baricitinib is around 0.5. So our argument with Lilly has been that this ---+ could be in keeping with the background rate in rheumatoid arthritis. I think you point to the particular analysis around only looking at the studies during the placebo control period, where events were seen on the 4-milligram arm and not the 2-milligram arm. And that has to have an exposure adjustment done for it. Because if you don't do that at the end, you do get to a rate that is potentially higher, and there are many caveats to that. And obviously, that will be the substance of what's debated during the resubmission and potentially at the adcom. In terms of ECHO-301 and the learnings from biomarker analysis that <UNK> outlined, along ---+ in terms of PD-L1, IDO1, the tumor mutational burden and RNA sequencing, obviously, we always learn from our studies regardless of the outcome. If there are particular subgroups that are enriched in terms of efficacy endpoints, that is something we would always look to applying into other studies, with a caveat that <UNK> mentioned around particular ---+ that histologies could have differences. We will have time to do that because all those Phase IIIs have just started over the last couple of months. And so that is something we can potentially use should there be a dataset to pursue there. So it's <UNK>, I'll take that question that you addressed to <UNK>. So as <UNK> said when we outlined the biomarker plan, we're not commenting on the regulatory specifics around it or the statistics around doing that. In addition, we don't have the data yet to make that analysis. So I'm going to leave the answer to that as stated. In terms of PFS data availability, as <UNK> said, in the press release, we'll do what's required for disclosure, balancing the need to do full presentation at the scientific meeting and a full manuscript. So if you're looking for deep granular data, you'll have to wait for the actual presentation, and hopefully a manuscript that follows or even potentially at the same time. The press release data will be top line level data. Katherine, this is <UNK>. I'll try to take your question. So obviously, we did see the Nektar announcement and actually know the compound quite well and followed it closely. I think at a high level, it tells us 2 things about the space. One is ---+ and they're both quite important. The first one is that PD-1 monotherapy or even PD-1/CTLA-4 antagonism is not driving sufficient benefit. There is a need in the field to build on those regimens. And even though they've had a very important place in setting the field up where it is right now, there is a lot of clinical benefits still on the table, and I think this collaboration reflects that. Second is that combination therapy is absolutely going to be the rule, it's not going to be the exception. And I think both of those things are, frankly, reflected on our own portfolio, our own development program around epacadostat and other agents. Mechanistically, the Nektar product is designed to increase the proliferation of immune cells, effector cells in the tumor. And as you know and as we've even discussed a little bit on this call, that's going to lead to interferon-gamma production, and the tumor will commandeer regulatory mechanisms to try to attenuate that T cell response. So, and even in the case of an effective I/O 2 receptor beta activation, you're going to have a PD-L1 and likely IDO1 expression increased as a consequence of that. So in fact, if the Nektar product could show activity and ultimately be successfully developed and have an important part in the treatment landscape, I don't actually see it conflicting with an epacadostat program or other agents. It actually reinforces the need to have truly maximal level of regulatory coverage at the level of the T cell. And I think, in that sense, epacadostat PD-1 antagonism is ---+ has the potential of being a foundational regimen, irrespective of whether IL-2 and the Nektar product is active or not. I mean, obviously, I mean the data, when it's available, will tell us what we have. I think based on all the assumptions we have from different tumor types and across a number of indication, we know that IDO1 inhibition is an important mechanism. So 301 will tell us, as we've said, what we can observe on the overall population as you described it, it will ---+ and <UNK> was speaking about it, it give us information also from the subpopulation or the subgroup standpoint. And when we have a lot of that in our hand, I mean, it will guide us how we go to the next step. <UNK>, it's <UNK>. Thank you for your question. So firstly, it's a compound that came from our own chemistry group. It's a really good compound. We understand its pharmacokinetic and pharmacodynamic profile really well in terms of phosphate elevations. And we've dosed that to the maximum allowable there. And we feel that gives us potentially good competitive advantage versus the other FGFR inhibitors, in general. In terms of picking cholangiocarcinoma, and at the time we started there was only one competitor there and we basically have been able to jump past them with really good clinical trial execution. So we feel in terms of cholangio, we're ahead. The FGFR2 translocation population, which occurs in about 5% to upwards of 15% of cholangio populations across the world, it's felt to be a driver there, an oncogenic driver. So the ability to inhibit that with a good compound whose PK and PD we understand, would then, hopefully, translate to clinical efficacy in terms of response rates and durability of response. There is 2 other populations, as you point out, that was studied in the same study, which is other FGFR alterations. That's done to see if perhaps there is some effect there for one, but also from a regulatory standard to demonstrate the negative control, and that's why it includes nonalterated patients at all. So the likelihood in those latter 2 populations is potentially some small effect in the alteration population. And then in the non, very little to none because of the targeted nature of the therapy. As a package then, given the number of patients and our ability to execute, that could form the basis of an approval package in the United States and potentially even in Europe given the unmet need and the way the study is conducted. It has enrolled really well. As we said, we will get data this year. And then we'll look at its ability to form a regulatory submission package over this year and potentially early next year. But we're very, very pleased with how this program has gone to date. Yes. So the FIGHT program in general includes metastatic bladder cancer study that's driven by FGFR3 translocations. And then the third study within that suite of studies is in a rare myeloproliferative neoplasm that's driven by an 8p11 translocation, where it's FGFR1 driven actually. So all 3 of those we're running sponsored studies. There are a host of other areas where FGFR biology may be important, which we're exploring either in small studies on our own or with investigator collaborations. But it's really around FGFR as a driver. What I've discussed to date is all monotherapy and approval strategies, but there's obviously then opportunities to move into combinations, particularly in earlier-line settings, for example, in bladder cancer or potentially in cholangio if we wanted to do. But it's all around the FGFR biology. So I'll go first and then hand it off to the rest of the guys. So as far as real world goes, we talk about persistency all the time, we know that persistency for both myelofibrosis and polycythemia vera patients gets better all the time. But the best evidence is really turning to the clinical trials, where in our RESPONSE study, 80% of the patients were still on drug at 2 years; and from our COMFORT trials in myelofibrosis, 50% of patients is running on 3 years. Real world data may be less than that, but we know because of the growing total number of patients on Jakafi at any given time continues to grow nicely, that persistency is growing as we continue to add new patients to that. What Celgene was talking about, I think, was just saying that of the patients who are eligible to receive Jakafi for myelofibrosis, that maybe 10% to 20% of them came off of drug because of intolerability or loss of response, and then another percent that weren't able to get the drug because it was ---+ they had less than 100,000 platelets. What I said before was in fact that, in fact, we do have dosing and scheduling for patients between 50,000 and 100,000 platelets in our label, and that was a result of an sNDA that we sent to the FDA after our original indications. So that doesn't hold up very well. Plus we didn't talk about fedratinib, it actually has just as much thrombocytopenia as Jakafi does and maybe perhaps even more Grade 3/4 thrombocytopenia. So that didn't make very much sense. And I'll turn it over to <UNK>. It's <UNK>. In terms of the Data and Safety Monitoring Board, we don't comment on either the frequency or timing of meetings. In terms of the event rate, we are absolutely confident in that the PFS analysis will take place in the first half of this year. Ren, this is <UNK>. I have to be really careful about trying to pick favorite children amongst a pretty interesting crop. But I think one of the areas that people aren't paying that much attention to and I think it's very important to us is the early development work that we're doing in combination with rux in myelofibrosis. There's some very compelling preclinical data and translational data that we've generated along with some of our academic collaborators, including at Moffitt. And I think those data support very well a strategy to try to improve the clinical benefit that MF patients received on ruxolitinib, and that could include things like the allele burden itself. And so we have a very exciting group of trials know that <UNK>'s team is executing that includes JAK1 combination, PI3-kinase delta combinations, PIM combinations and, potentially soon, also bromodomain inhibitor combinations. And that's a collection of science in a space that we understand very, very well. And from a regulatory standpoint, we could move on aggressively. And you can appreciate what that can mean both to our longer-term revenue prospects in myelofibrosis. It runs a very stark counterpoint to where fedratinib is and what Celgene is trying to do with a slightly inferior JAK2 inhibitor. And also, it has its own fixed dose combination potential since we're talking about oral therapies on top of rux. So there's a lot of work to do and it's still all potential and no data, but I'm excited by the prospects there. Okay. Thank you. Thank you all for your time today and for your questions. So we look forward, obviously, to seeing some of you at upcoming investor and medical conferences. But for now, we thank you again for your participation in the call today. Thank you, and bye-bye.

2018_INCY

2017

UFCS

UFCS #Thanks, Paul. This is <UNK>. We are still looking to grow in 2017. The past, as you said, we've probably been growing around 10% or a hair more. And I would say we still hope to be able to grow at about half pace. So the 4% to 6% range would be pretty satisfactory in this market cycle I think. Yes, we did not dividend this year, Quinton. Our plans are sometime in the very new future is to continue that. It's down slightly. Year over year it was less. There was a significant drop from third quarter to fourth quarter. But year-over-year it was down about, I believe it was $5 million. This now concludes our conference call. As a reminder, a transcript of this call will be available on the Company website at ufginsurance.com. On behalf of the Management of United Fire Group, I wish all of you a pleasant day. Thank you.

2017_UFCS

2018

POWL

POWL #Thank you, and good morning, everyone. We appreciate you joining us for Powell Industries conference call today to review fiscal year 2018 second quarter results. With me on the call today are <UNK> <UNK>, Powell's Chief Executive Officer; and <UNK> <UNK>, Chief Financial Officer. Before I turn the call over to management, I have the usual housekeeping detail to run through. If you didn't receive an e-mail of the news release issued yesterday and you'd like one, call our offices at <UNK>-Lascar, and we'll get you one. That number is (713) 529-6600. Also if you'd like to be on e-mail distribution for press releases for Powell, please relay that information to us. There will be a replay of today's call. It will be available via webcast by going to the company's website, powellind.com, or there will be a telephonic replay ---+ will be available until May 16. And the information on how to access these replay features is provided in yesterday's earnings release. Please note that information reported on this call speaks only as of today, May 9, 2018, and, therefore, you're advised that any time-sensitive information may no longer be accurate at the time of replay listening or transcript reading. As you know, this conference call includes certain statements related to the company's expectations of its future operating results that may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. These risks and uncertainties include, but are not limited to, competition and competitive pressures; sensitivity to general economic and industry conditions; international, political and economic risks; availability and price of raw materials; and execution of business strategies. For more information, please refer to the company's filings with the SEC. Now I'd like to turn the call over to <UNK>. Thank you, <UNK>, and good morning, everyone. Thank you for joining us today to review our fiscal 2018 second quarter results. I will make a few comments, and then I will turn the call over to <UNK> for more financial commentary before we take your questions. The second quarter of fiscal 2018 was highlighted by a significant increase in orders when compared to the run rate of new bookings over the last few quarters. The increase was largely driven by improvement in our base business and primarily from the U.S. domestic market. The quarter included 2 projects over $5 million and 1 larger project over $10 million awarded to Powell from the power generation market. Also during the quarter, our aftermarket services group experienced strong bookings and revenue growth. Over the past few quarters, demand for services, parts and brownfield project support that largely declined during the downturn has continued to show increasing activity across our businesses. Data activity remains robust. We've begun to see increased inquiry levels across a variety of end markets, including ongoing strength from the utility distribution, commercial and municipal sectors. We've also seen a slight pickup in smaller infrastructure upgrade projects in the downstream oil and gas refineries as well as petrochemical manufacturers, including fertilizer and ammonia plants. In our core oil, gas and petrochemical markets, the U.S. and Middle East continued to be our most active geographical areas, while Canadian and offshore activity levels have yet to see a return to historic levels. In terms of project size, we are now starting to see planning for projects of increased scope and scale that we have not seen since the decline of our market several years ago. We are supporting several larger scale projects with engineering designs and cost estimates. We are tracking the final investment decisions by our customers on these projects and any future awards will likely be later this calendar year or into 2019. Operationally, we have started to add to our workforce in the U.S. to meet increased demand while our operations in Canada and the U.K. remain stable. All of our teams continue a strong focus and attention on providing a safe workplace for our employees, customers and supplier partners. Continuous learning and promoting best practices across the organization are even more critical as several of our operations have started to increase manufacturing activity. We have and continue to leverage investments we have made in process and systems to increase the utilization of our resources and also maximize production capacities. Utilizing a common process and tool set allow us to continue to move complex substations or a lineup of switchgear between engineering teams to ensure we are able to meet customer need-by dates. These same tools also give Powell an increased flexibility to share capacity across multiple facilities. This increased capability is a strategic advantage to our model in North America, and we will continue to leverage and benefit from this unique capability as the market improves. As we move into the second half of 2018, our focus continues to be on cost control and project execution as we start to incrementally scale up our labor force in advance of the impending increase of business activity. In addition, our commitment to research and development, coupled with proactive investments in property, plant and equipment, continue to enhance service and product quality, production efficiency and safety, and we continue to advance strategic opportunities to add value. For example, several quarters ago and in advance of improved market activity, we announced the consolidation of our service organization under a common leadership team. Our teams have begun to renew our existing U.S. and international service center capabilities to determine how additional service centers, located in key geographic regions, will improve our response time to provide critical electrical repairs in our customers' facilities. As a result, we have opened a new service center in the U.S. during the second quarter and started selective hiring to correlate with the increasing order flow. In summary, we believe the challenges we have faced in the past and the preemptive efforts put forth in response to those challenges will position us well as market demand improves. We have the most talented employees in the business. They are motivated in good times and bad and continue to be committed to our customers. We appreciate their support toward Powell's future success. With that, I'll turn the call over to <UNK>. Thank you, <UNK>. Revenues decreased by 3% or $3 million to $102 million in the second quarter of fiscal '18 compared to the second quarter of fiscal '17, but were up 13% or $11 million over the first quarter of fiscal '18. Here are some comparisons to last year's second quarter. Domestic revenues decreased by 5% or $4 million to $72 million. International revenues increased by 3% or $1 million to $30 million. Our international revenues include both revenues generated from our international operations as well as export revenues from our domestic operations. The increase in international revenues resulted from an increase in export projects. Gross profit as a percentage of revenues decreased to 12% in the second quarter fiscal '18 compared to 15% in the second quarter fiscal '17. Gross profit decreased by $3 million to $12 million. Selling, general administrative expenses were $16 million, unchanged from last year's second quarter. However, SG&A as a percentage of revenues increased slightly from 15% to 16% due to lower revenues. We recorded a benefit for income taxes of $1.8 million in the second quarter. In the second quarter fiscal '18, we recorded a net loss of $3.3 million or $0.29 per share compared to a loss of $800,000 or $0.07 per share in the second quarter of fiscal '17. New orders placed in the second quarter of fiscal '18 were $142 million compared to $100 million in the first quarter, resulting in a backlog of $300 million compared to a backlog of $260 million at the end of the first quarter and $228 million a year ago. For the 6 months ended March 31, 2018, revenues decreased 11% or $23 million to $192 million compared to the same period a year ago, primarily due to a reduced project backlog at the beginning of the current fiscal year. Gross profit as a percentage of revenues decreased to 12% compared to 14% in the first 6 months of fiscal '17. Gross profit and margins continue to be negatively impacted by our reduced volume, resulting in under absorption of our manufacturing facility cost, and the continued effect of competitive price pressures. Gross profit and margins were also negatively impacted by cost incurred on oil and gas project for which change orders have not been finalized. Selling, general and administrative expenses were $32 million, unchanged from a year ago. SG&A expenses as a percentage of revenues increased from 15% to 17% due to lower revenues. We recorded an income tax benefit of $2.8 million for the first 6 months of fiscal '18. For the 6 months ended March 31, 2018, we reported a loss of $9 million or $0.78 per share. For the 6 months ended March 31, 2018, cash used for operating activities was $11 million. Investments in property plant and equipment totaled $2.8 million. At March 31, 2018, we had cash and short-term investments of $69 million compared to $95 million at September 30, 2017. Long-term debt, including current maturities, was $1.6 million. Looking forward, we continue to expect a net loss in fiscal '18. However, we anticipate our second half results to show improvement over the first half as new customer orders have strengthened as anticipated. At this point, we'll be happy to answer your questions. Pete, it's <UNK>. So we just had OTC here in Houston recently, the big Offshore Technology Conference. It was one of the lowest attended shows in a while. The weekend before, the Houston Chronicle ran an article, and I'm sorry, I can't remember the author, but I thought it sort of summed up. The theme of the article was offshore's ready when shale gas falters. I don't know if that answers your question. We're certainly engaged with the majors, kind of watching what they're doing. If you look at the Gulf, a couple of these folks are looking at big investments and some have gone to tiebacks versus sort of the topsides piece. So hard to say, I don't think it's in the near term, at least 12 months for lack of a better answer. And I just continue to see weakness in the near to midterm. Pete, when you look at it, we have shown some growth in our gross margins over the last 2 or 3 quarters, it's been slow. It will continue to improve based on our current outlook, that when you're looking at the mix of projects in our backlog, there is a wide variety of price levels that we're seeing. So it's going to be, as anyone that's followed Powell, a little bit bumpy as we continue forward. There's going to be some quarters that we'll show progress and then there could be some that we actually fall back some. So it really is much on the price side as it is on the cost side right now. The majority orders are what I would call, Pete, base business, sort of the ---+ I always kind of say 1 to 3, but maybe in the second quarter, a few more of the 4s up into the 5s. A healthy mix of what I'll call new ---+ call it greenfield or expansions. But also something we didn't see last couple of years in the downturn was that brownfield business that sometimes you notionally expect, it started coming on last fall during the start of our first fiscal and became stronger in the second quarter. So it did make up good portion of that increase. <UNK>, I don't have an exact percentage, but they are spilling over into '19. There are a lot of short cycle orders, be it smaller nature. We've been talking last couple of quarters about the auction and the overall size of the job we're pursuing. The second quarter is sort of an epitome of that. A lot of small project work, very happy to have it, also creates a lot of challenge for the operational teams because you don't get the same leverage as you did when you have a larger project. So a lot of work to do for the teams. A fair amount helps fill in some of the gaps as we see Q4, but definitely booking into Q1 and Q2 deliveries for next year ---+ over next year. Well, we've been talking a lot about it sort of watching what's happening, and a lot more active conversations on supply chain and doing what we can to protect on inflationary causes into the contracts and making sure that we understand our costs when the contract comes in to when we actually are going to do the materials buy, so actively spending more time as a team looking at that. Sure. So in the second quarter, <UNK>, my comments were really more tailored to the manufacturing side. The service center I mentioned is new. We're preparing to hire as we kind of work that strategy. But the adds in the second quarter really more of the manufacturing facilities. So it's a mix of some additional fixed cost, folks are in the factory, full-time folks as well as some contract work to handle the short-term increase on the assembly side in our factories. No. Most of the adds, <UNK>, were here in Houston and focused on our media voltage product lines. So we watch them very closely because they can have an impact, of course, on the whole delivery cycle. If you look at the second quarter, we've taken a lot of smaller projects and we've committed deliveries and then the big project comes in a roll on it and what seems to happen all along is big projects they will come along. And if we're fortunate to win, there's always a phase of consolidation on delivery schedules. So from a scheduling standpoint, they can impact the company dramatically and it's critical that we keep them on the radar in terms of our funnel meetings. None of the ---+ really over the last couple of quarters, they ---+ it starts with budgetary estimates and they ---+ companies do their refinements to the engineering firms as well as the owner during their own refinements of what their returns are going to be on the project. So the last 6 months, it's kind of 1 and 2, and now we're picking up a few more to do the estimates on. None of them are officially funded, but the amount of work sometimes leads to, okay, it's getting more real. And from that look out, it's looking like late this year, the next year that we really got to be cognizant of when this might be funded and balance our chances of success in the award and how we plan our production capacities. Well, so historically in our peak times, I would tell you a large project would be in excess of $20 million, $20 million, $25 million, maybe upwards as high as $50 million. During the last couple of years in the downturn, a large ---+ what we would call a large project has shrunk, to kind of more to the $10 million to $15 million level. The really large megaprojects after the LNG wave, which came after the petrochem wave of '14 and '15, those all just in our core markets disappeared as well as the offshore market, which was the earlier question. As far as the margin structure, the larger projects tend to be more complex. They do fit our model better because we have a very strong advantage with our engineering capability. So sometimes these projects have a little bit of work to do, and that is where Powell shines because of our ability to aid the engineering house of the end user and getting the project over the goal line for final design and implementation. So they tend to be a little bit more competitive, but they're also tend to be a little bit more complex and then fine. And again, that fits us pretty well. A couple of big picture events have been happening over the last year or so. One is there's been some consolidation announcements of deals in the refining and in the chemical industries, most recently Marathon looking to buy the old Tesoro. And I wonder if that along with changes in the rules at the EPA have had any ---+ or do you envision them having a positive effect on your end markets going forward, either the consolidation of the industries or the EPA rules. So Rich, it's <UNK>. Yes, we've been watching the consolidations. Very familiar with both Marathon and Tesoro and the example you cited, both know Powell. We've done work throughout their ---+ both of their corporations. I don't know if the consolidation presents any sort of new opportunities, some of the work that's been ongoing for the last couple of quarters again that we didn't really see on that core refining market for Powell was that infrastructure upgrade. That has come back, not in spades. We're not back to where we'd like to be or where the market was historically in its peak, but that definitely has come back the last couple of quarters. And so it would be interesting to see what happens on the consolidations and how they manage the different feedstocks that they produce. And will that take certain streams in or out. How will that affect the pipeline of distribution markets. I mean, some of that will be interesting to watch. One of the growth aspirations by some of these folks, Motiva is another one here in the Gulf Coast that just had separation with Aramco and Shell, and there's a new set of folks that's kind of driving that strategy. So it is very ---+ it's something we do watch and talk about. It's ---+ those gyrations can have ---+ affect on our planning. As far as EPA rules, any time the government comes out, there was a big desulfurization. There's been a couple of those over the last 10 years. Every time that comes out, that typically requires quite a bit of power on the distribution side within the facility, and those can have an upside effect in our markets. <UNK>, so yes, we're tracking that, of course. It's a big consolidation on the supply side with our competition. I do not believe ---+ I certainly don't know sitting here today the official word, but we're still doing business with both as independent entities, ABB and GE separately. I think it's next month or so is sort of the rumor in the industry as that kind of progresses. And I'm just deciding what I think I hear from the field. So pretty sure that's not closed as of today. <UNK>, clearly, we're watching whenever there is a merger or acquisition like this size. There is the opportunity for businesses that would be duplicate or would not fit with the new owner's strategy. But at this point in time, until ABB actually have that control of those assets, there is not any official word as to what there may be wanting to do with some of the GE assets. But it is something we're watching and something that we will try to stay close to. That is the rumor, but we're not a part of the process, so I don't know whether there's any changes to that or not. Thank you, operator. The second quarter presented some encouraging signs for Powell by way of increased bookings. As we enter into the second half of this year, we will continue to invest in our workforce, our facilities and our research and development programs as we prepare for the uptick in project activity over the coming quarters. Powell's financial position remains strong. We look forward to an exciting future for the company, emerging from this downturn and leading Powell into a period of higher level operational performance. Thank you for interest in Powell and we look forward to speaking with everyone next quarter.

2018_POWL

2015

TTI

TTI #Yes. The areas where the next few quarters are impacted is not tied to seasonality. We're always going to have, as we've said before, that second quarter impact of European chemicals business, but some of the lumpier projects we have are really just the timing of when the work takes place. Yes, there's your typical components where if we wanted to pre-pay, it's going to cost some money. So I think the way you should look at that is ---+ and why we get to expand this a little bit more ---+ is we've thought through the capital structure all year, as most companies do in this environment. As we've thought through it, we progressively have continued to feel better about where we are based on the year-to-date results. So every time we update the analysis in our thoughts, as a Management team, we're feeling better about it. We're not certain where the bottom is, how long it's going to be. But under every scenario we look at, we're in good shape with our balance sheet through those stress-testing actions. So clearly this is a positive proactive ---+ two elements, we want to be conservative and we want visibility of paying down the $90 million. We want visibility to extending maturities and the headline of having about $50 million due in 2017 and nothing else until 2019, you will delay that balance sheet metric with our operating performance. I challenge the audience to give us other companies that sit in that position. We think there's going to be opportunities next year. We want to continue to build out the areas that we've highlighted as being strategically important. This gives us more capability to do that. Well, again, we've got two different capital structures and clearly, on the TETRA side, the area we've invested the last several years has been tied to Fluids and I think that would be the most logical. Anything that leverages our technology expands our technology, gives us more regions, <UNK> and his team have a nice long list of ideas that they're running through a process to validate and quantify and that's an ongoing process, not an annual event only. That's the area that we would focus. On the TETRA side, we've the CCLP balance sheet and currency and we'll continue to look for opportunities there, realizing we want to be conservative on the leverage. We'll look at the balance between reinvesting and the balance sheet and the distribution and the yield that we're getting on our distributions and as we always do, have a good discussion at the Board level of how to integrate those thoughts. I'm very pleased that you asked that question. We're prepared for the response. Thanks. Good morning, <UNK>. <UNK>, we prefer not to talk about margins specific to any product or any project. <UNK>, we've seen building and quoting activity remain attractive, but we're also seeing customers reluctant to pull the trigger and actually issue purchase orders. We think that the bookings that we had in the third quarter are going to be a low point and we expect that there's some opportunities to close on some of those open bids and proposals that are out there. But again I'll go back to my earlier comments in that only 10% of our margins or our gross profits are coming from equipment sales and we have the ability to flex the cost structure just like we've done in every other division in TETRA out of our Compressco business. I think as a tangent to that, we want to emphasize there are parts of our compression services business that continue to be very strong on the large horsepower and the team is focused on how we invest in there and how we continue to grow. So we're very cautious on the capital, but the capital that we deploy is very high return and we'll continue to do that. The last comment, <UNK>, is that Tim has mentioned in the past that when he went through this downturn in 2008/2009, it's the exact same pattern that he's seeing right now. So this is consistent with what we expected coming into this downturn. It's about half and half. It is. That's the way you should think about it. We've got more liquidity for general investment on high return projects and the question we always get is, as the GP of the sponsor, TETRA, investing in CCLP and our answer is always the same. It's a function of the project and the ability of CCLP to fund it on its own and we looked at that through the eyes of all of our alternative investments. But I wouldn't read into it that the reason, the driver, the catalyst, for doing it was to greater focus on that issue. That's not the intent. And I'll add that we talked about CSI Compressco looking at buying assets of operators or midstream companies that might want to divest all those assets and then we come in and back-fill it with a long-term contract. If a scenario like that presented itself and CSI Compressco needed incremental capital to do it, we'll be available to support them in that respect. But from an organic growth, running the business month to month, quarter to quarter, they've got more than adequate liquidity to do that. Thank you. As always, great questions, appreciate the following. Obviously, we're really pleased with the quarter. We're very pleased with our new financing with CSO and look forward to a long and strong relationship. As I said, after the second quarter, I'd be remiss if I think thank all of our team for delivering. They've worked hard, made tough decisions, executed excellently and it was a great effort. We'll look forward to catching up in early 2016 to review the fourth quarter and talk about 2016. So, thank you.

2015_TTI

2016

PSB

PSB #Thanks, <UNK>. Thank you. That's a good question. And the acquisition market and especially the markets that we are in really do have some of the most compressed CAP Rates. If you think about Seattle, Northern California, Southern California, and then Dallas, Austin, and South Florida, we are seeing pricing that is well beyond the peak in all of our product types. And now we're seeing rent rolls come out that where you have peak pricing and peak occupancies. So you know like I said we are still disciplined. We are looking for those opportunities. But it's even at a lower cost of capital, the cap rates are outpacing some of the pricing we feel we could see make accretive purchases. There isn't and what we've seen in DC, because we do look at everything, and if we found something that would work well in our markets, we would certainly buy, but some of the more distressed assets that have come to market have been very, very large tenants and configurations that don't really slice up well for our formula, but we are looking at everything. Sure, <UNK>. Good question. We knew that expiration was coming from month-to-month in advance, and it was pretty obvious to us that we were going to break it down. First of all, if we had wanted to compete for a 50,000 foot user, there was way too many options, and that market is ultracompetitive with TIs in the $60, $70, $80 range with a year of free rent, et cetera, et cetera. And by the way, there aren't any users anyway for that kind of space. So for us it was very obvious very early that we were going to break it up. As I mentioned in my comments, most of our deals are under 5,000 square feet. That's our sweet spot, and we are confident in Westpark, Tysons, in those markets that we'll be able to re-lease that space relatively quickly in that market. You mean a big 50,000. In our view it's a lose-lose. The rent gets compressed. Let's say markets for the sake of discussion are mid-20s range, that would go down to low 20s. Let's say market for a bigger user like that on a five-year deal is say 1 to 2 months of free rent per year, and without question TIs, and has been well documented in all kind of research, would be anywhere between $50 and $80 per square foot to do a deal like that. So you may end up giving, in aggregate, 6 to 8 months of free rent on a five-year deal, maybe you stretch out to 5 1/2, but it would be significant free rent $50 to $80 in TIs, full commission, so on and so forth, and lower rent as well. So if you do a smaller, say 3,000 or 4,000 square foot space, assuming a normal deal, which we do these all the time as I mentioned, you're talking below $10 in TIs, maybe a month in free rent, might be a three to five year term, depending on the situation in the space, and you get higher rents. And you may or may not pay a broker fee because often times those smaller users are represented by brokers. Materially better economics to go small. <UNK>, I don't think that there will be significant change to our G&A run rate. It's running kind of in the 3.2 to 3.4, 3.5 range per quarter including LTIP. And I would expect that to continue. Maybe it's on the tighter side of that range going forward. We exclude that just because we believe that excluding it gives a better perspective on the true operating trends of the property and the compensation for the expense of the people that run the assets and manage the assets is included in cost of operations, always has been. So from an accounting standpoint, we have to kind of match that with the LTIP expense, but we believe to show the true operating results of the property, that that's the best approach. I would tell you that the Board looks at the dividend and kind of the outlook of the dividend really on a quarterly basis to be ---+ and they're always aware of where we are. Our focus is to keep the dividend where it needs to be from a tax standpoint, so I would tell you that we're pretty close to paying out 100% of taxable income as required. I don't see any change in the dividend philosophy going forward. Well it is a one time item. In the first quarter we had about $1.8 million of snow costs that were incurred and we had in the second quarter, I think $10,000 of snow removal costs so it was all heavy burden in the first quarter for snow removal. You're welcome. Thank you, <UNK>. Thank you, Shelby. Thank you everyone for joining us, and we appreciate your interest in the company and we will talk to you in the near future. Take care.

2016_PSB

2016

UFCS

UFCS #Thanks, <UNK>. Good morning, everyone, and welcome to UFG Insurance 2015 fourth-quarter and year-end conference call. It is my pleasure to report: 2015 was a strong year for UFG. Our current and long-term 2020 vision goals we first communicated in 2014, including increasing ROE and written premium, providing best-in-class service, and being a best place to work, continue to take hold, as shown both by our progress and profitable performance. For the 2015 year, operating income was $3.46 per share, net income was $3.53 per share, and our GAAP combined ratio was 92%. This compares with operating income of $2.13 per share, net income of $2.32 per share, and a GAAP combined ratio of 97.8% for 2014. We are reporting year-over-year improvement in operating earnings and net income of $1.33 per share and $1.21 per share, respectively, and 5.8 points of improvement on the combined ratio. For the full year of 2015, we reported a solid return on equity of 10.5%, compared with 7.4% in 2014, in spite of reduced investment returns and lower level of earnings from our life segment. We closed 2015 with a book value of $34.94 per share, up from $32.67 per share at the end of 2014. In the property and casually segment, we benefited throughout the year from modest rate increases, a lower base of catastrophic events, favorable claims activity, and favorable reserve development on our prior accident years. I will let Mike address more specifics with respect to P&C market conditions and performance in a few moments. For the first time in UFG history, we've reached a $1 billion in total revenue, thanks to the hard work and dedication of our employees and agents, the continued execution of our strategic plan, and the loyalty of our customers. This milestone included a 11.7% year-over-year increase in written premium, driven by organic growth and rate increases. It might be suggested that our strong premium growth within the current competitive marketplace might be leading to adverse selection. We believe it is our focus on the actions in support of our 2020 vision that are key to our organic growth. Our approach to continuing into 2016 remains steadfast. Focus on executing our strategic initiatives, including expanding our geographic footprint, and agency plans and penetration, and leveraging expansion of our product portfolio, while maintaining true to our core underwriting discipline in the diminishing rate environment. For specifics in terms of growing our book of business profitably, we continue to pursue more association business, and to expand our product offerings, including organically building the specialty business. As we discussed in the third quarter, we exceeded our original target of between $15 million and $17 million in specialty lines, and ended 2015 with $21.2 million in written premium. We are targeting additional opportunities in growing small business products, including expanding our service center. These are generally accounts with less than $10,000 in premium, and include a complete package. We have expanded our west coast business utilizing United Fire and Casualty products, we added $1 million in new business premium associated with our geographic expansion into the state of Ohio, despite not writing new business there until August 1. We anticipate more premium growth from geographic expansion on the horizon. In this business, the value of sustaining long-term profitability, agency and customer relationships can't be understated. We value our partnerships with our agency force, in growing our business in geographic regions, and target product lines we see. We meet with a council of agents throughout the country for regular feedback, so we can understand how we can continue to improve or evolve our product offerings and service. We listen, and we follow through. Along with geographic expansion, our strategy includes pursuing new agency appointments to achieve our goals, where appropriate. We still, however, will sever our ties when we don't believe our profitability goals are achievable within a reasonable time frame. Our 2015 property and casualty loss, and loss adjustment expense, ratio was 61% compared to 66.5% in 2014. Along with disciplined underwriting, our investment in loss control has yielded positive results in strengthening our customer relationships and claims experience, another factor indicative of our loss ratio improvement. We believe these investments of time and resources are key factors in minimizing frequency and severity of losses, as well as offering our customers the opportunity to hold the line on escalating insurance costs and minimizing disruption. Moving on to our life segment, for the fourth quarter we reported a small net loss, as compared to a $2 million of net income of $0.08 per share in the fourth quarter of 2014. For the full year, the life segment reported net income of $4 million, or $0.15 per share, compared to $7 million, or $0.27 per share, in 2014. As we have reported all year, the low interest rate environment and a lower asset base due to declining deferred annuity deposits has impacted our investment returns in this segment. We are not chasing production, and continue to appropriately price our annuity products, while not creating a long-term disadvantage when interest rates improve. During 2015, with the actions we have taken, we have increased our annuity spreads by 32 basis points. We will continue to deploy excess capital from the life business to support the expansion of the property and casualty business as appropriate. Strategically, we have implemented various initiatives targeting growth in traditional life business, including expanding product offerings such as our graded benefit whole life and qualified care rider as mentioned in prior quarters. During the fourth quarter, we had a strong sales of our single premium whole life policies, contributing 54.1% of the increase in premiums earned, and 29% for the full year of 2015, compared to the same period in 2014. We are not satisfied with our performance, and continue to look for areas where we might expand our products, territories and agencies, along with managing expenses and improving productivity to strengthen profitability in this segment. With that, I will turn it over to our Chief Operating Officer, Mike <UNK>. Thanks, Mike, and good morning. Reinforcing what <UNK> and Mike have already stated, 2015 was a good year for UFG with respect to financial performance. Our stockholders' equity increased 7.5% to $879 million at December 31, 2015, from $817 million at December 31, 2014. Return on equity year over year as we reported this morning in our press release improved 3.1 percentage points. Further adjusting ROE to exclude the impact of unrealized gains, our adjusted ROE was 12.6% as compared to 8.9% in 2014. For the fourth quarter, we reported consolidated net income, including net realized investment gains and losses, of $30.9 million or $1.21 per share, compared to $34.8 million or $1.38 per share for fourth-quarter 2014. For the full year, consolidated net income, including net realized investment gains and losses, was $89.1 million or $3.53 per share, compared to $59.1 million or $2.32 per share in 2014. As <UNK> and Mike covered the discussion on premium and elements of our losses, I will provide more detail on the impact of loss development. Losses and loss settlement expenses increased by $13.8 million, or 12.2%, during the fourth quarter, compared to the fourth quarter of 2014, and $12.8 million, or 2.4%, for the full year. As has been historically consistent reserving practice for UFG, we are conservative in setting initial reserves. As a result, we often have favorable reserve adjustments that vary from year to year across our book of business. Favorable reserve development for the fourth quarter was $16.3 million, compared to $24.2 million in the fourth quarter of 2014. The impact on net income for the quarter in 2015 was $0.41 per share, compared to $0.62 per share in 2014. For 2015, our quarterly favorable development impacts across our property and casualty segment mirrors the annual story, which I will detail momentarily. For the full year of 2015, the property and casualty segment experienced $40.4 million of favorable reserve development for prior accident years. Three lines accounted for the majority of the favorable development. The largest single contributors for favorable development were long-tail liability with $23 million, followed by workers' compensation with $22.1 million, and auto physical damage with $4.4 million. The favorable development is attributable to reductions in reserves for reported claims, as well as reductions in [IBNR], combined with continued successful management of litigation expenses. The favorable development was partially offset by adverse developments, with the majority coming from three lines, which include property at $5.6 million, assumed reinsurance with $8.1 million, and commercial auto liability with $2.8 million for the year ended December 31, 2015. There were other miscellaneous amounts favorable in adverse, however, no other single line of business contributed a significant portion of the total development. The improvement in our underlying book can be seen when we look at calculating an adjusted accident year loss and loss settlement expense ratio. For the fourth quarter, by removing the impact of catastrophes at 2.2 percentage points for 2015, and 1.2 percentage points for 2014, along with removing the impact of favorable developments of 7.3 percentage points for 2015, and 11.9 percentage points for 2014, the quarterly loss and loss settlement expense ratio would be 58.8% versus 63%, resulting in a quarter-over-quarter improvement of 4.2 percentage points. On an earnings-per-share basis, this would translate to an adjusted earnings per share for the fourth-quarter 2015 of $0.93 versus $0.78 for 2014. Looking to the full year of 2015, likewise removing the impact of catastrophes at 3.8 percentage points, and 6.5 percentage points for 2014, along with removing the impact of favorable development of 4.7 percentage points for 2015 and 7.4 percentage points for 2014, the annual loss and loss settlement expense ratio would be 61.9% versus 67.4%, resulting in a year-over-year improvement of 5.5 percentage points. On an adjusted earnings-per-share basis for the full-year 2015, this would translate to $3.25 versus $1.95 for 2014. Following Mike's comments with respect to catastrophes, our book of business remains primarily in regions of the country that are susceptible to seasonal weather, including winter and spring convective storms. As a result, I caution our listeners that we may experience volatility in our results from quarter to quarter and year to year. At December 31, 2015, our total reserves remained relatively flat, and within our actuarial estimate. Moving on to the expense ratio, the fourth-quarter 2015 expense ratio was higher by 2 percentage points compared to fourth quarter of 2014. Increases in various employee [vested] costs, including pension amortization and profit sharing, impacted the year-over-year comparison. For the full year, the expense ratio at 31 percentage points was flat, as compared to 31.3 percentage points in 2014. Due to the slight improvement in interest rates at year-end 2015, our pension and post-retirement benefit amortization in 2016 will be less than the amortization in 2015. Consolidated net investment income was $26.6 million for the fourth quarter, which was a 3% decrease as compared to $27.4 million in fourth quarter of 2014. For the year, consolidated net investment income was $100.1 million, a decrease of 4% as compared to net investment income of $104.6 million for 2014. The decreases are primarily due to the lower reinvestment rates, along with a lower invested asset base. During the fourth quarter of 2015, in conjunction with our regular portfolio review of investment assets, we determined it was appropriate to record an other than temporary impairment of one energy and resource sector fixed maturity securities. The impairment was $1.3 million pre-tax, and impacted our life segment results. There were no material realized gains and losses for the quarter or year to date in 2015, or 2014, on our $3.2 billion base of investment assets. We continue to feel the impact of lower investment yields on the majority of our investment portfolio, and we expect a continuation of low interest rates into 2016. The weighted average effective duration of our fixed maturities securities portfolio at December 31, 2015, was 5.2 years, and our overall portfolio yield was 3.2%. With respect to capital management, during the fourth quarter we declared and paid a $0.22 per share cash dividend to stockholders of record on December 1, 2015. For the full year, we declared and paid dividends of $22 million. We have paid a quarterly dividend every quarter since March of 1968. Under our share repurchase program, we may repurchase United Fire common stock from time to time on the open market, or through privately negotiated transactions. The amount and timing of any purchases will be at management's discretion, and will depend on a number of factors, including the share price, general economic and market conditions, and corporate and regulatory requirements. During the fourth quarter, we did not repurchase any shares of our common stock. In the year ended December 31, 2015, we purchased 79,396 shares of our stock, common stock, for $2.4 million at an average cost of $30.51 per share. We are authorized by our Board of Directors to purchase an additional 1,528,886 shares of common stock under our share repurchase program, which expires in August of 2016. Subsequent to year end in February 2016, we entered into a new credit agreement with KeyBanc, which provides for a $50 million, four-year, unsecured, revolving credit facility. The new credit agreement also allows us to increase the aggregate amount of the commitment by up to $100 million. Although UFG does not have any debt on our books currently, we felt having access to a line of credit for various corporate purposes is a prudent capital management decision. The terms of the new agreement provide for lower fees on the unused commitment amount, as well as access to an overall larger credit line. With that, I will open the line for questions. Thanks Paul. This is <UNK>, Paul. You know, we're a, it's possible. I guess everything is possible. If you will recall, we first got rate increases, I think in the fourth quarter of 2011, and so by virtue of us getting rate increases though very minimal in the fourth quarter of 2015, those policyholder's have had rate increases for quite a number of years and it goes to say that possibly going forward we might still be able to continue with a little bit of rate increase. Mike mentioned that commercial auto, we're still able to get some rate increases, some areas of the country with storm susceptible property, we were able to get some rate increases. Some smaller accounts were able to get some, and personal lines were able to get some rate increases. Rate increases on larger accounts have become very difficult, and so we had a pretty small overall rate increase in the fourth quarter even though it was positive. If our trends continue, we're probably going to move closer to flat, but even if we were to remain at this rate level for the rest of the year, we would be very comfortable that a combined ratio would still be very good at the end of 2016. Anything to add, Mike.

2016_UFCS

2016

MDC

MDC #It's been our practice historically that we really don't give out a lot of guidance. We try to give a few points, to be helpful. I think really, there are risks out there, <UNK> highlighted them earlier. We'd be remiss if we didn't acknowledge that a consumer looking at his 401-K or stock portfolio, that could have an impact on our consumer. I don't think we've seen that yet. Really at the end of the day for M. D. C. , I think the message is we're going to work on the returns on assets here for 2016, and that can be accomplished by pulling a number of different levers. But we don't really have any other guidance to offer for you at this time. But right now, we're feeling pretty good about the market. Thank you very much. Appreciate everyone joining the call today and we look forward to speaking with you again after our first-quarter earnings conference call.

2016_MDC

2017

FTK

FTK #Thank you, and good morning. Our press release was distributed last evening and is available on Flotek's website. In addition today's call is being webcast and a replay will be available on our website as well. Before we begin our formal remarks, I wish to remind everyone participating in this call, listening to the replay or reading a transcript of this call of the following. Some of the comments made during this teleconference may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, and other applicable statutes, reflecting Flotek's views about future events and our potential impact on performance. Words such as expects, anticipates, intends, plans, believes, seeks, estimates, and similar expressions or variations of such words are intended to identify forward-looking statements; but are not the exclusive means of identifying forward-looking statements on this call. These matters involve risks and uncertainties that could impact operations and the financial results, and cause our actual results to differ from such forward-looking statements. These risks are discussed in Flotek's filings with the US Securities and Exchange Commission. Now I would like to introduce Mr. <UNK> <UNK>, Flotek's Chairman of the Board, President and Chief Executive Officer. <UNK>. Thank you, <UNK>. Thank you all for joining today's call which is being hosted from our new global research and innovation headquarters in Houston. Joining me today is <UNK> <UNK>, our Chief Financial Officer who you just heard from; <UNK> <UNK>, Florida Chemical President and Executive Vice President of Research and Innovation; <UNK> <UNK>, Executive Vice President Performance and Transformation Officer. I will begin by giving a summary of our quarterly results and attempt to add some color regarding current operations as well as a sense of our future followed by <UNK> who will share our fourth quarter highlights and provide additional financial context. <UNK> will then talk about our work with data and analytics and I will end with some corrosion remarks before taking your questions. Before we get into the numbers, I will just briefly mention that during the fourth quarter of 2016 we confirmed the strategy ---+ strategically repositioning of our enterprise [playing] to the strengths of our core businesses in energy, chemistry and consumer and industrial chemistry. We are in the process of divesting our joint technologies and production technologies segment, and as <UNK> will explain these businesses are now classified as discontinued operations. Given for some the complexity of this accounting treatment, if we do not answer the questions in the type of detail you would like we will be glad to take one-on-one calls next week to give you further explanation. All of the results we will share today are for our continuing operations which consist of our energy chemistry technologies and consumer and industrial chemistry technology segments. Flotek's revenue was up 9.7% sequentially and down 2.6% year-over-year, a remarkable outcome in the face of a 43% drop in completion activity in 2016 according to the US EIA, which also followed a 38% drop from the previous year. For the full year, revenue was $262.8 million compared with $270 million from 2015. Results were in line with expectations we outlined in December 2016. In 2016, a key part of our business strategy focused on expanding our global footprint. For the first time in Q4, we shipped products to China, the Ukraine and Iraq extending the reach and application of our technology to potentially key growth markets. We see a meaningful opportunity for Flotek to continue to expand globally. As part of this global opportunity, I was recently appointed to the Board of Directors of Anton Oilfield Services Group based in China, an important business partner for Flotek. Anton has operations in the Middle East and the Americas in addition to China and it is worth noting that Schlumberger also holds a significant investment in Anton. I see this Board position as complementary to my responsibilities at Flotek as it enables me to help guide the way our technology is used in a region that is currently witnessing intense innovation and growth in the oil and gas sector. It also gives me a new vantage point to observe the challenges and needs of producers in these key regions and extend our network. This partnership is mutually beneficial and I am honored to be included on their Board. Turning to our businesses, we reported continued strong results from energy chemistry technologies which includes our patented suite of complex nano-Fluid products. Sequentially quarterly revenues increased 22.4%, primarily because of a 12.4% increase in CnF sales volumes. Margins in the fourth quarter were lower by 4.1% resulting primarily from higher freight costs and field services costs associated with the start-up of our new PCM service line, increased citrus terpene costs and a product mix. Margins are expected to recover during 2017 as the Company implements price increases, product reformulations and optimizes our PCM service offering. Although year-over-year energy chemistry technology revenue decreased 11.9%, gross margin increased 1.2 percentage point. Most notably CnF sales volumes increased 14.7% year-over-year which is impressive as this took place during the worst industry activity slump to-date. This means the energy chemistry segment as a whole clearly outperformed the broader completion market as key sales volumes rose despite US well completions plunging by more than a third in 2016. CnF has and will remain a consistent and significant percentage of revenue. Flotek clients are reporting success raising EURs or expected ultimate recovery using our patented chemistry technologies that facilitate better flows in conventional and unconventional wells. A growing number of operators in the Permian Basin of Texas has spoken to investors recently about their successful use of nano-Fluids and their plans to use them in a larger number of wells. More specifically, we would like to congratulate two of our clients, Brigham Resources and Silverback Exploration for their recent asset sales in the Delaware Basin. Brigham in particular worked with us to determine the optimum concentration amount of CnF by changing only the CnF concentration in their completion recipe for multiple wells. All other variables in the completion technique including perforation design, proppant concentration, flow back rates, et cetera, were held constant while testing concentration of CnF up to 2.5 gallons per 1000 gallons of fluid pumped. Though an economic analysis in this case proved that more is not necessarily the optimum strategy, Brigham observed their maximum return at 1.5 gallons per 1000 and it was clearly evident that the CnF was superior to other industry products and was a significant contributor to their expected ultimate recovery uplift. To quote, Eric Hoover, Brigham's Executive Vice President of Operations ---+ Flotek's nanotech technology was a game-changer for us in the Southern Delaware Basin. Without a doubt it was an important driver in making our Pecos County acreage a huge success. Silverback has also been one of our premiere clients and we would like to congratulate them as well on their recent transaction of selling their acreage in company. Their COO Steve Lipari sent me a note thanking us for the collaboration between our two organizations. Steve specifically felt that our prescriptive chemistry approach used in their completion program was important in maximizing their expected ultimate recovery. Silverback took the time to use chemical tracers to help validate our chemistry prescriptions and were also open to using CnF in non-traditional applications in their completion process that will benefit us and our clients in the future. Their technical curiosity created a true chemistry experience that benefited both of us. Consumer and Industrial Chemistry Technologies or CICT reported record revenue of $74.6 million, up 32.3% year-over-year. Importantly, we received ISO certification for food grade activities and added two small distillation units to expand our capacity and variability to manufacture high flavor compounds. Increased costs for raw materials drew down our quarterly gross profit by 32%, but our gross profit for the year increased by $1.7 million or 11.9% from 2015. Drilling technologies had the best quarter of the entire year with revenue up 5.6% from Q3 to Q4 though as part of our ongoing plans to transform our business, we have an active divestiture process under way and are now treating the business as a discontinued operation for our financial reporting purposes. <UNK> will have more on that in just a moment. Revenue for our production technologies segment increased 5.3% sequentially to the highest quarter of the year while gross margin for the year was down 12.1%. Quarterly margins grew by 4.4% on increased revenue and improved pricing. This segment is also treated as a discontinued operation for financial reporting purposes. I would also like to note that despite our decision to discontinue these two segments, our team managed to deliver special results for the quarter exhibiting the utmost work ethic and professionalism. The Flotek store continues to drive transparency in the market for accurate pricing of prescriptive chemistry solutions. We are pleased to tell you that about 30%, 40% of our energy chemistry and revenue now comes through the virtual store. The store brings us closer to our clients while offering them greater control and direct benefits. When I reflected on 2016, I am proud that despite the most significant activity downturn ever in both depth and duration, Flotek has done remarkably well by continuing to grow sales volumes of products during each succeeding quarter of 2016 at a pace that has outperformed changes in activity levels in the broader US onshore market. I will now turn it over to our CFO <UNK> <UNK> to deliver our financial results. <UNK>. Thank you, <UNK>. As <UNK> mentioned in the fourth quarter, we began a strategic repositioning to focus on our core businesses and energy chemistry and consumer and industrial chemistry. The Company is executing a plan to divest our drilling technologies and production technologies segments. We have retained an investment bank adviser to assist us with the sale and will update the market once we have additional information to share. Effective December 31, 2016 the Company classified the assets, liabilities and results of operations for these two segments as discontinued operations. Beginning with this Form 10-K and going forward, Flotek is reporting the results in two business segments, energy chemistry technologies and consumer and industrial chemistry technologies as continuing operations. I will refer you to our 10-K filing made available yesterday afternoon for additional historical financials on each of our four reporting segments. For the full year 2016, we reported total revenue of $262.8 million, compared with $270 million in 2015. For the fourth quarter, we reported total revenue of $70.6 million compared with $63.9 million in the prior-year period. On a sequential basis, revenue was up 9.7%. Our strong top-line growth was primarily driven by the strength of our energy chemistry technologies business which reported a 22.4% sequential revenue growth with major account increases from significant clients. Our consumer and industrial segment was down 19.9%, sequentially, from the seasonal impact on flavors and fragrances and lower terpene sales in light of the high demand from our energy chemistry clients. Turning to revenue from our discontinued operations, drilling technologies revenues increased 5.6% sequentially to the highest quarterly revenue for the year. But margins declined on lower international revenue. Revenue from our production technologies segments increased 5.3%, our highest quarterly revenue of the year. Our full-year 2016 operating margin was negative 2.8% and was negative 7.9% for the fourth quarter due to product mix of sales, higher average raw material costs and higher field service and delivery costs in the energy chemistry business as well as lower revenues and product mix of sales in the consumer and industrial chemistry unit. Additionally, our R&D spending for the full year 2016 was $9.3 million, compared to $6.7 million in 2015. This increase was due to the opening of our global research and innovation center. Our selling, general and administrative expenses as a percentage of sales increased to 30.5% in 2016, compared to 26% in the prior year. The year-over-year increase was primarily due to higher professional and legal fees and increased headcount in our energy chemistry technology segment. I would like to note that our corporate SG&A spending is not allocated to discontinued operations and we do envision reductions following the sale of our drilling technologies and production technologies businesses. For the full year, Flotek reported net income from continuing operations of $1.9 million representing earnings per share of $0.3 on a fully diluted basis. Flotek's strategic repositioning which includes the sale of our drilling technologies and production technologies segments will allow our business to move forward and continue toward profitability in 2017. For the fourth quarter, Flotek reported net income from continuing operations of $3.9 million, representing earnings per share of $0.7 on a fully diluted basis. Our fourth quarter net income included a gain of $12.7 million before taxes from a legal settlement related to disgorgement of potential short-term short swing trading profits from a shareholder. Flotek recorded income tax expense of $1.2 million yielding an effective tax rate of 39.3% for the year ended December 31, 2016, compared to an income tax expense of $3.5 million, yielding an effective tax rate of 32.7% in 2015. At December 31, 2016 Flotek had accounts receivable of $47.2 million, compared to $35.5 million at December 31, 2015. At December 31, 2016, [days] revenue and accounts receivable was approximately 63 days. For both of the years ended December 31, 2016 and December 31, 2015, the provision for [now four] accounts was less than $1 million. At December 31, 2016, inventories for continuing operations totaled $58.3 million versus $50.9 million for the prior year. Our inventory turnover is currently approximately 3 times ---+ 3.0 times per year. For the fourth quarter, capital expenditures totaled $3.3 million bringing our total capital expenditures for 2016 to $14 million, down $2.4 million from 2015. We are continuing to invest in new strategic growth initiatives while maintaining prudent management of our cash position. As a reminder, our financial statements report the continuing operations of our energy chemistry technology and consumer and industrial chemistry technology segments. The Form 10-K provides a description and analysis of our discontinued operations as drilling technologies and production technologies in the foot notes and also in management's discussion and analysis. We will continue to provide updates on the sale of these two business units. In 2017, we are focused on monitoring capital expenditures, protecting our liquidity and growing our core businesses in energy chemistry technology and consumer and industrial chemistry technology. <UNK>, back to you. Thank you, <UNK>. And now I would like to introduce our Executive Vice President Performance and Transformation Officer <UNK> <UNK> to share safety updates, some efficiency metrics and give more context around our data and analytical initiatives, an area that he had spearheaded and done a phenomenal job since joining the Company over five years ago. <UNK>. Thank you, <UNK>. As we look through this downturn, we understood that our clients were going to require more out of every drop of our chemistry. This was a key focus on data and analytics this past year and I would like some updates on what we have accomplished to the benefit of our client. In June 2014, we developed a data analytics visualization software application. The introduction of this type of digital open record of data is still growing in acceptance by the industry but it will be an increasingly important differentiator for us as we advance new, cognitive computational technology to [incumbent] key insights and trends about our client's wells and our how our chemistry can better enable and protect their reservoirs. We feel strongly that open source data will be at the forefront of innovation for our industry and we will continue to accelerate improvements of our chemistry design for our clients. As a testament to the industry's growing acceptance of this data movement, Core Laboratories and Baker Hughes both shared related remarks in recent earnings calls acknowledging that E&Ps want service and equipment providers to deliver on the vast promise of data analytics to enable them to make the right decisions and investments at the right time to quote Baker Hughes CEO, Martin Craighead. These comments serves as affirmations to our own strides in data and analytics over the last few years, which has uniquely positioned us ahead of the curve with respect to meeting client demands to address productivity looking beyond cost as the end all and be all in this industrial. I will now give you an update on our new research and innovation center which has allowed us to accelerate the pace of our prescriptive analytical chemistry business approach. Our patent portfolio has continued to grow with four more patents granted surrounding our polymer activities last year bringing the total to more than a dozen. Our total filed or pending patents now number more than 70 including 40 unique CnF formulations demonstrating our commitment to continuing to be the leader in a specialty chemistry sector. Clients innovations were also up significantly due in part to the collaborative capabilities of this new unparalleled global research and innovation facility. Since we completed construction, we have secured six new clients due to business to the center. We have also held four events that brought together key industry leaders, academics and leading minds for a monthly Pursuit of Knowledge Institute series and have completed construction of our Canadian Research Center in Calgary. We have also developed and continued active partnerships with eight universities and educational institutions. Turning to our health, safety and environmental efforts, we have maintained an excellent best-in-class safety record. Flotek's total recordable incident rate has consistently declined over the last few years falling 64% to [0.78] in 2016 from [2.19] in 2012. This total recordable incident rate or TRIR as you know is the number of recordable accidents per 200,000 hours worked. Our TRIR is much lower than averages for other economic sectors tracked by OSHA. I would also like to mention the lost time and light duty injuries plunged to essentially zero in 2016 from [5] in 2015 as we further build-up upon our strong safety culture. While we are very pleased with our performance and the dedication on safety shown by our employees, we continue to hold monthly safety meetings and reviews with all of our managers. Our executive leadership is very involved in our continued review and enhancements regards the safety of our employees as well as the environment. We also transformed our process to improve employee efficiency at the same time increasing the number of gallons of prescriptive chemistry per employee by 20% and exceeding our employee retention levels from 2015. And with that I will turn it back over to you, <UNK>. <UNK>, thank you very much. Before we take questions, I would like to add a few concluding thoughts. With numerous shale oil producers and oilfield suppliers now forecasting a low double digit growth rate in 2017, Flotek is uniquely positioned for an activity rebound, especially in light of our August acquisition of International Polymerics IPI, a leading supplier of natural polymers such as guar that complements our work with citrus based nano-Fluids. IPI has also brought us a strategically located staging center in the Permian Basin that will help our cost curve as we serve the many independent and innovative E&P companies in the fast-changing and most active area in the US shale industry. What we have seen among our large and small independent clients, as well as privately funded companies, is a trend of embracing technology sooner than their larger counter parts and thereby becoming more illustrative of what the industry is capable of being. While an oversupply of pumping equipment currently exists, pumping companies that have recapitalized are differentiating themselves extensively with technology such as with our prescriptive chemistry. Additionally, a looming shortage of small mesh proppant is having an effect on the type of fluid being used in completions which will increase demand for other solutions as companies seek to lift IRRs and EURs are expected ultimate recoveries. As the playing field continues to evolve and activity levels begin to rise, we are positioned for growth and have initiated a double-digit price increase effective this quarter. As we announced on January 30, Michelle Adams worldwide Vice President of IBM Watson Platform, has joined Flotek's Board of Directors bringing a wealth of first delicacy expertise in innovation, entrepreneurship and sustainability. We are excited to have her on our Board and inspect to leverage her unique background in technology and cognitive learning. Michelle becomes our eighth Board member and will serve on our governance committee. I am confident that having an executive of Michelle's stature join our Board is as tremendous statement about our future business opportunities as cybersecurity and technology are now considered to be must-have competencies insides the boardroom. I am also pleased to tell you that since the announcement of the Flotek store, we are in more direct communication with exploration and production operating companies. With the opening of the Flotek store and the launch of our pre descriptive chemistry management business offering, we are becoming increasingly involved in the entire lifecycle of the well. We are investing an additional subsurface characterization competences to design, execute and analyze applications of chemistry in oil and gas wells drawing on disciplines including geology and geophysics G&G, photography and reservoir completion and production engineering. We continue to strengthen our team. William Hill recently joined Flotek as Director of Geology. He was most recently at BP America and has over 35 years of varied geoscience experience. Flotek is succeeding in a tough market because we treat our clients' reservoirs and their capital like they were our own, meaning we do not prescribe a gallon more of fluid than we would if it was our own well. We earn their trust by letting the results of our products speak for themselves as many of our clients have attested to and that is truly special. For the first quarter 2017, we are anticipating continued improvement in completion activity. In addition, we are experiencing continued strong demand in energy chemistry and are focused on delivering improved margins through strategic pricing increases and process efficiency. In consumer and industrial chemistry, we continue to expect yearly growth and our net revenue and gross margins and expect to make substantial progress on the divestment of drilling technology and production technology businesses this quarter. As always, we are focused on maintaining strong liquidity to fund our business. We also recently posted a new video series called Catalyst for Change ---+ Conversations with Flotek's Directors featuring our Board members, which can be found on our website's Investor Relations page. Today's shareholders are expressing more interest in learning more about, hearing from and understanding the Board of Directors' capabilities, as well as their positions on Company decisions. Therefore, we created this video series to proactively showcase our Board members as they share their thoughts on Flotek's business and corporate citizenship, which is very important to us as a Company. To that end our social responsibility work which we see as part of our broader sustainability efforts continued this past year. In January, Flotek foundation made donations to food banks that helped the funds an estimated 1.3 million meals for families and children experiencing food insecurity, most notably in the communities surrounding our work in energy centers such as Pittsburgh, Oklahoma City, Dallas, Houston, Midland-Odessa and Denver. This was a result of a hunger initiative we held in September which was supported by our clients as we donated a certain percentage of sales revenues from that month to local food banks. For more information about these efforts, we encourage you to visit our website Makingadifference.com to see other examples on how we are creating change in the communities in which we operate. We would like to take this opportunity to thank our employees around the global who believe in making a difference each and every day, not only for our clients but also for our shareholders, communities and environment. Thank you for your continued interest in Flotek. We will continue to work hard each day delivering, improving financial and operational results and do all we can to maximize our significant and unique opportunity. And with that, operator, we will now open the call to questions. Hey, <UNK>. Yes, no. Great question and I am sure others have the same thought and it will take a bit of an expanded answer, but every company in every industry that has transformational technology or a product wants a direct path to the end-user. For full appreciation of that technology and for many, many decades in this industry that was just not the case. And what we had was probably the most amazing brands nullification that I have ever seen. When we sold our technology through the distributed networks, there must have been 55 different plus brands names that represented complex nano-Fluid, and that was just not a sustainable business model because you become dependent on that distributor's interests, pricing and technology sharing with the ultimate end-user. So we felt after a lot of examination that in May of 2015, when we made that decision it would certainly transform us and we did not really realize how much it was probably also going to transform this segment of the industry. What we had observed ---+ not in any way intentionally ---+ but what certainly what we had observed was some dilution of chemistry and really kind of a lack of interest of getting the right prescription of the chemistry into the well. These hydraulic stimulation jobs are very complicated ---+ a lot of equipment, a lot of manpower. Quite frankly, sometimes whether you are pumping a 1.5 gallon per 1000 or 1 gallon is probably not the highest on everyone's mind. That exposed us to companies like [<UNK>ny Lee], [<UNK> Blevins], companies that consult on the well side to ensure quality assurance and gave us a better appreciation as to how the chemistry itself should be applied. And from that as I mentioned in my earlier remarks, with a tighter relationship with these E&P clients, it has led to greater value for them, as I mentioned two in particular, Brigham and Silverback and greater value for us because we had a direct way to communicate how we would change the variability of certain chemistries to get to the optimum prescription, and in some cases that might be less chemistry but in all cases it was designed for what is best for the reservoir. Along with that, came price transparency that the industry needed. And so now I think as a lot of folks on this call know, more and more of the overall additives whether it is proppant, whether it is acid is he now decoupled from the way those services were provided for decades and at the end of the day it creates the opportunity for the most efficient technology to be conveyed to the end-user. And so it took us really I think about two years to make CnF synonymous with Flotek chemistry. And now what our vision is is where we want to be is when clients want the best prescriptive chemistry system, not necessarily the cheapest but when they think of one company and that is Flotek and the Flotek virtual store created that opportunity. Hopefully, that answers your question for you. Well, you hit on certainly three of the alternatives you can have when you have that flexibility and that luxury and we consider all those. I think most of our stakeholders on this call envision Flotek as a growth company. And a dividend program even a special one, I think they kind of feel like if we can put the money to work, whether it is an acquisition or whatever that is probably their preference. We are very pleased with the balance sheet that we have. We have identified that in the near future it will become even stronger and I think that speaks well to our flexibility as this industry continues to change, but I think the take-away is ---+ the folks who know us know that we look after this capital that it is ---+ as though it is our own money we have put into this and we are very respective of that be assured we will do everything we now how to put it to good use and it will be one of those nice problems to have but thanks for pointing that out. Hi there, <UNK>. Yes. So great question. There is absolutely in my now four years experience in this industry, more ---+ I will call it chatter between clients than ever before. What used to be regarded as very tight hole information, now really through social media a lot of these younger engineers communicate to their friends in the industry ---+ and everybody talks about the Permian Basin because it is the most active. But social media really is driving a lot of informal sales on our part and I am sure other companies that they are sharing their experiences, whether it is a Flotek product or whether it is the amount of sand they are putting in per lateral foot, these folks are just sharing that information. The other thing that is happening is there is been ---+ and, again, folks on this call know this ---+ there is more and more lease swapping that is occurring where clients may have the desire to industrial a longer lateral but that would require going into someone else is lease so they will swap that and then immediately that person who swaps it becomes informed of how the completion is being done that otherwise they may not. That just was not happening two or three years ago. Still there is vestiges of the kind of old traditional oilfield, even though you have got social media going, at the same time these companies and you mentioned Noble in many cases operate like different companies. Although their pay checks all have Noble on it, the Midland effort is different than the DJ basin effort, but what is kind of coincidentally is more and more of these companies that have acquired companies I have seen in the last 45 days have acquired companies that have been using Flotek chemistry, and obviously we think that is a good thing. Still those acquiring companies have to feel confident that the companies they acquire had a good total benefit analysis and so it is still a process, but the industry certainly has changed not only for us but I am sure others in large part because of the lease swapping and also of all things social media. Well, sure. We sold a small part of downhole technologies in the northern part of the United States. And by accounting rules, you have a year to divest once you do this discontinued operations accounting treatment. So by accounting, we have to have it completed by the end of the year but practically we have a professional advisor that is running the program. Our expectation is by the end of the first quarter, early the second quarter, have a resolution that is satisfactory to us, to our shareholders, to the potential buyer for both of those entities. So we will keep obviously everyone informed. We have felt that having both of these as evidenced by their performance in the fourth quarter as ongoing entities should create a larger value of the divestment, as opposed to shuttering them and saying ---+ okay, take what you want. And we think that will be the case. We will see. But, again, I think the next 60 to 90 days will be very important for that process. Okay. Well, I don not want to run the risk of putting anyone to sleep on this call because it is somewhat complicated. I will let our good man, <UNK>, speak to it at a very high level and then we will go from there. This is an issue that comes under section 16B of the Securities Exchange Act of 2000 - of 1934 and it relates to affiliates of the Company. Those would be folks that would have potentially have inside information. So if there are any transactions in the Company's stock with affiliates as they are defined by the SEC, then there is a ---+ it really turns out it is a mathematical computation and we do disclose these our potential short swing profits. We do not know if there are actual short swing profits. So the rules require any possible potential profits that are recognized be disgorged to the Company and that has what has occurred in this case. Does that help. Sure. Hi <UNK>. Well, as much as we would like to tell you from competitive reasons, we are not going to give the exact delta of what we think will be the outcome of this double-digit price increase, along with our increasing cost of raw material. I just do not think that would be prudent on our part. But safe to say that the net of that will improve our margin and this whole pricing of the terpene in itself is a bit of a challenge. Although we have got long-term contracts when you are buying 50% of your citrus oil from Brazil that in itself and, <UNK>, you can add some additional color. But we just want to be really kind of mindful of the competitive balance in trying to answer your question but still being respective of, you know, the pricing model but go ahead. Hey <UNK>. Obviously, the citrus oil markets have been a little bit volatile here over the last 12 months, given the crop reductions that we have seen certainly in Florida as well as Brazil during the current cycle. We do see Brazil's crop coming back up next season. There will be a little bit of a delay in the price relief, but we do have, as <UNK> indicated, short and long-term contracts to position us well on those raw materials. That being said, we will feel some of the increase. To <UNK>'s point that increase will be more than passed on in our pricing increases of our finished products. So, again, not getting into the specifics of what those numbers are, we do see the ability to pass the increases on to our customers and CICT as well as ECT. Yes. So I think I kind of urge everyone on the call these quarterly variances will fluctuate in the case of when it is going through a distributor on whether they have contracts with certain clients that may have run out and other clients are coming in and there may be a lag there. In terms of someone that is coming through the Flotek store, it may be ---+ what their completion program looks like at the time, whether they have caught up to the drilling program. I think as we have tried to telegraph for some period of time, this industry now truly is a just-in-time industry. There's people are ordering this week for completions for next week, at the most in two weeks. So it is not like there is a increase in stocking that has to be worked off. It is pretty much more from an operational standpoint, as I mentioned, whether certain completion programs have run down, if it is going through a service company or whether the completions have caught up if they are going through the Flotek store. So I would not spend a whole lot of time on the way that fluctuates. You know, what we are most interested in is nothing would make us happier two quarters from now to have A, B, C, D and E and that is what we are striving for, not so much whether A is slightly up or slightly down in the quarter, that will all take care of itself. Hopefully, that answered it for you, <UNK>. Sure. You know, we have had a policy we really hate to get into looking at this on a month-to-month thing and just prefer not to do that. I think the comments really kind of speak for themselves of the demand that we see. I think at the end of the week, the EIA report comes out as to what the completions looked like in January and we see every reason to believe. And I think that is one of the benefits of the Flotek store is we have greater visibility out than what we had before. And so with a level of confidence from what we can see the first quarter will be a very nice quarter in terms of ---+ as has happened in the past us having a level of activity that should be greater than what the completion activity increases. I do not think there is any reason that would make us think anything differently than that as we have done throughout all of the 2016. Sure. Thank you. Thank you, operator. We like to again thank everyone's interest for being on the call, wherever you may be calling in from and coming in through the website. We appreciate your confidence and like I say continued interest in Flotek. We will look to see some of you in the near future and talk to you again at the end of April. Like you all to have a great day. Thanks for joining Flotek.

2017_FTK

2016

SON

SON #It has been extremely busy. We continue to have a steady stream of customers visiting and engaging with us in projects. We have got new products coming ---+ new products ---+ let me just call it new revenue coming out for bar type wraps and flexibles. We got a new package coming out for coffee in both plastic, rigid plastic, as well as flexibles. We have opportunities coming through in pet treats. Of course, we talked a bit about the plastic can. That should be midsummer. Also have a new composite can pack that is coming out from a major US food company. So very pleased with the level of activity and what's coming through. Global RPC was up about 1.4%, netted down for days. So that is actual volume being up, and it was driven by Europe and by Asia. Domestically, it was down a little bit, as we saw continued erosion from powdered beverage as well as frozen concentrated orange juice, I believe. That's ---+ I'd be guessing if I told you anything. Double digit. Yes, double-digit-type growth there. We did see some decline in Asia, but it was very, very modest on a same-day basis. And decline in Brazil. Certainly a decline in Brazil. Yes, I can tell you that we are working diligently to achieve that movement, as I mentioned earlier, to become more of a consumer and more of a protective solutions business. And all I can tell you is that there is a lot of work going on and looking at a lot of different types of opportunities. Yes, <UNK>, again, we instituted that share buyback not because the share price was at a low point, but because we wanted to take two years of dilution basically out of the market. We remain committed to that. We believe that dollar cost averaging is the way to do that. We just got into a [10-5b] issue in the first quarter that took us out of the market, so our goal now is to dollar cost average across the rest of the year and remove the shares. Now, if we get the real valuation that the Company really should be priced at, who knows. Maybe we will stop. But right now, our commitment is to move forward and continue the process. Well, first of all, on the plastic side of our business, we had a customer-related issue and we had our own issue that impacted that business. So those were just a one-time event. I think from a customer perspective, Easter being the last week of March kind of led into some extended downtime because of just the way that fell. But nothing of real significance. It was just around the holiday. I would tell you that we have numerous projects and evaluating them all. We are focused on flexibles, focused on thermoforming, focused on protective solutions. We have projects in all three. And I am hopeful that yes, they start coming sooner rather than later. But I know you are aware that it takes two to tango, so you have to have a willing buyer and seller and we are trying to ferret it out. And it has to be at the right price. So all those things are in the works. That's exactly right, <UNK>. We had actually had six additional counting days in the quarter just because of bringing one week back to the first quarter because of our 544 schedule. But when you look at the way weekends and holidays fell, we actually only have three additional billing days year over year. And many of our businesses' activities more related to the business working days as opposed to the calendar days. So that's the reason we made that distinction between the two. So we feel like billing days influenced volume more, but certainly our fixed costs are spread over our accounting days. And when you net those two together, the actual impact kind of ---+ it becomes less than you would think when you first hear six additional billing days, because the volumes over three ---+ Calendar days. That's right. The volume's over three billing days, and the fixed costs is spread ---+ there's six additional days of fixed costs. So they more or less come close to netting each other at the EBIT line. Not exactly, but directionally. You'll see that in the numbers. And then of course in the fourth quarter, we will lose five days because of the same calendar impact. Well, I think that what we've said is that that is certainly a goal of ours. In order to get to that level, we are going to have to have some price recovery on major contracts. We need to cover some of the cost that have crept into the system. But we are also going to have to have a couple of years of volume growth. So I don't ---+ I think margin was almost 9 ---+ was 9 point ---+ no, it was ---+ for quarter is 7.9%. So you saw a 1% improvement. I think that last year ---+ or 2014, it actually got up to 9%, if I remember right. So I think it will move toward 9%, but to get it to that 10% level, we are just going to have to see some continued volume growth, better utilization of the assets in place. Both. It is seasonal. This is a normal seasonal uptick time, and we are seeing strengthened export pricing. So both of those are playing an impact. And was there a second part to that. Well, we projected what we would call a normal pattern: up second quarter, up third quarter, down fourth quarter. I suspect that it is going to be somewhere in that range. Right now, I think we've projected about a $10 or $15 movement in total. It may actually be a $20 movement total by the time it plays out. But we will just have to see based upon domestic volume will really drive that, I think, more than anything else. Just a touch. Protective was extremely strong. It was up about 9% net, so forget ---+ not the billing day. It was a 14% with the extra billing days; 9% net. So very strong volume. It was in the thermosafe business as well as the component business for automotive. And again, the business is being run very well. Output is good. So that business continues to grow, and I suspect it is going to be up again second quarter 5% or so. Well, we have a vast majority of consumer-owned contracts so that it will change at, let's just call it, at a quarter end. That's basically the way it works. About half on our industrial side is at quarter end. We have already pushed through a price increase on the industrial side, more or less globally or at least US/Europe in that December time frame. I think if it moderates here at this $10, $15 area, we covered that or we covered that through. If it continues to escalate, we will move to have an open market price increase in paper and tubes and cores. But the contract resins and those types of things will take care of themselves at quarter end. I think that what really it was ---+ the businesses ran very well. The mill systems ran well. This is all net of number 10, so the mill systems ran well. Actually, I think tube and core could have done a little bit better. We are doing some consolidation work in a certain part of the country that had a little bit of drag on productivity. So productivity would have been even better. So the business is running well. The price increase went through. So it is just operations. Operationally, it's performing better. As far as industrial this year, we did project a solid improvement in industrial. We said volume would be up about 1%, and that is ---+ right now, that is what we see. And we continue to believe that is what we should experience for the year, net of the impact of number 10. We are dealing with it, but as I said, the year-over-year impact of number 10 will diminish as we go in the third and fourth quarter, and hopefully we can come to some sort of resolution with that machine that solves the problem, certainly of what we are working on. That's a great question, and that's ---+ a lot of these engagements that we are working on now are around presenting my product in more of a fresh and natural manner. One of the big issues is clarity, is to be able to see the product, the genesis of the plastic can. I can see the product in the can as that. But a lot of our flexible packaging work is putting windows so that the product can be seen as it sits in the package. One of our coffee products is opaque, so that you can actually see the bean or the coffee in the package. So that is really a lot of what we are working with inside the IPS studio is helping customers present their product in a more fresh and natural package. I think as we entered the year, we expected volumes to be up around 2%. And right now, I don't see anything. Is it going to be 1.7% or 2%. It will be in the range. I think that's what we're going to see for the year. I think industrial, certainly on a year-over-year basis, is going to look a little stronger because of last year being weaker, and it's going to bounce back stronger this year. But I think we are continuing to do well in consumer; again, up somewhere around 2%, 1.5% to 2% volume on consumer. Protective, probably a solid 5% on a year-over-year basis. So between 1% in industrial, 2% in consumer, and 5% protective, I think we are going to be in that range right there. For what window I have, I would have to say they're fairly normal. I think at URB, there is several players in URB that are not integrated and they sell into the marketplace. So it is a possibility that if they started running and selling more product into the tubes and cores, it could impact that. But I think the market is fairly in balance, in general. And as demand picks up, what I was really suggesting was that if demand on the tube and core side picks up, you could actually see a very tight squeeze on URB. And you may have someone like that coated mill then just swing into URB because pricing may be advantageous to do it. That was just what I was suggesting. I think that what we see is a $0.04 ---+ and I am going to talk in aggregate, so ---+ About a $0.04 increase. And then the possibility of another $0.04 increase sometime in the quarter. Does that stick. I don't know. Does the first one stick. I know oil is up from the low of, what, $29. So it is possibly there. I think polypropylene is in pretty short supply, so that's a possibility there. So it is $0.04 and then another $0.04 as a possibility. I don't really have strong views on it. My estimate, of course, or my guess would be that the prices would fall. But we will see. Well, I don't know if you heard this, but the way the quarter unfolded, we had very strong volume January, February, and then we had a sharp decline in the first couple of weeks of March. We bounced back as March ---+ as we met through March, and now it is kind of more back at our expected run rate, our expected levels. Again, I can't quantify what caused that. It's like I speculated that the holiday may have impacted it, but I don't have any reason to believe that. Well, I mean, multiples continue to be pretty high across the board. But the way we are approaching it, trying to seek out certain types of opportunities with certain capabilities, many of them privately held, we are trying to look at different types of structures that allow us to take, in some cases, joint ventures. We have the Graffo acquisition in Brazil that we took a majority stake. It got us into the business at a reasonable multiple. It allows us to grow. So we are looking at all those types of opportunities. Now, multiples continue to be fairly high, but we are trying to approach this a bit differently, drive the conversation, and then hopefully come out with a reasonable multiple that allows us to take a real good position or create a good situation for us and the seller. Let me try to answer all these. You may have to come back to me. End-market demand in auto was really kind of built around certainly the models we supply, but we continue to get new business coming online. So we are supplying more parts into auto industry, new parts, and that is really kind of what was occurring inside the business in protective solutions. I am going to skip over the consumer drop-off end markets. I am going to let <UNK> ---+ I am not sure I have a window to that. URB, that machine, could we actually do that. Technically, we could probably do it. But our system in URB is pretty much in balance. We really ---+ not sure we would want to do that, but technically, we could. We cannot do that with the number 10 machine without making substantial investments to change the profile of that machine. And the price cost benefit in display and packaging was really driven around negotiation on services provided as well as an uptick in displays as far as the price cost around corrugated displays with jobs that have already been bid. Did you have something on that. Just to clarify the question on the ---+ Oh, in the March change. It seemed to be a little bit more broad-based and largely related to the holiday pattern. And then just some customer-specific issues that different customers [had faced]. Nothing broad-based. Thank you, again, Shannon. Just in closing, let me again thank each of you for joining us today. We certainly appreciate your interest in the Company. And as always, if you have any further questions, please don't hesitate to contact us. Thank you.

2016_SON

2017

TDS

TDS #Thank you. We would like to thank you all for joining us, and we are around for questions for the rest of the day. Have a great one.

2017_TDS

2015

PDFS

PDFS #Correct. Sure. Actually, in our prepared remarks, <UNK>, we refer to it as Asia because right now the business we talked about the past quarter was for a company that was headquartered in China. But we also see a lot of our Taiwanese customers making expansions into China. So broadly, greater China ---+ we see a lot of activity. Foundry capacity is going in there, greatly at the 28-nanometer node initially. And we believe there are some R&D activity that we are seeing in FinFET nodes. We see that part of the market wanting to move very fast on buildout of capacity, and bring up, and a needing to get to worldwide competitive status quickly. In that regard, I think we have a wonderful offering for them, because we have a proven infrastructure on these advanced nodes from development design for manufacturability to process control and production control. So we are ---+ we started out about a year ago making introductions. We did some pilots in the first part of this year. This contract we signed in Q3 is the first conversion of a pilot into a contract. And we anticipate others as we go through the remainder of this year, and into next year. Our activity started first with the fabless entities, and we see good activity there. We believe that will be the way that China moves into the leading-edge nodes. We will start with the fabless and system companies ---+ or has started, I should say. And then it will also permeate to the foundries. And we believe PDF could be a very important bridge between those fabless and system companies and the foundries themselves. Yes. So of course you know they are stated is about 60% of what their funds are putting ---+ what the China government is investing is going into the [fine] manufacturing. And 40% goes into design, test and assembly. If you took the numbers that they are quoting, and they are gargantuan numbers, right, in the tens of billions of dollars, and put 60% of that into capacity and take all of these things that they are forecasting and to put it into volume, yes, then it would dwarf the amount of capacity that we have under contract today, should we then capture that business. So I think you've got to take a ---+ certainly, we take a healthy dose of realism, right. And say, okay, we have to be careful about how excited we get about this. This is certainly the potential for a lot of capacity to go in there. And if they spend the money they say they are going to spend on capacity on the front end, primarily at 28 and below, it represents a tremendous opportunity for us, and an opportunity that would be as large or much larger than the factories that we have under contract today. It's a great question, and one we asked ourselves earlier this week. And we haven't gotten the math done yet. We are just saying, okay, let's go back and look at what our investment has been on the pilots so far. And now that we're starting to sign contracts, how is this going to look over the next twelve quarters ---+ that we turn the corner, and we are still on invest mode. We got to China in 2006. Right. We made a decision to go to China in 2005. We got there in 2006. And we invested in and engineering team there. We now have 120 folks in China, almost ---+ I don't know what that works out to be. It used to be 33%, but slightly less than that of the company. So we have been investing a very long time in China. So we are not impatient. At the same time, I think we are now starting to turn the corner. I don't think we are very ---+ we are not very many quarters away from that being a meaningful part of our business. That's correct. Well, you could have been in the meetings earlier this week, <UNK>. Yes, it's actually something we are trying to model out. We've got two competing things there. Most of the business is ratable, so you make investment in the field. To see that business, you book a couple-million-dollar contract, and you see in that quarter maybe $100,000 to $200,000. So we are trying to ---+ in the field, as we we're doing the strategic planning, was reporting on where they saw the business opportunity around the world, in terms of Exensio Big Data. And it was quite a number of potential business, potential clients, the customers, on a variety of all of our geographies ---+ Asia, Europe, US. And so we were trying to balance our investment levels to get at that business, versus the profitability we drive off that business, and understand a little bit about that trade-off. If you go to the steady-state, yes, our goal and our reason why we started making this investment is we want to drive profitability off design-to-silicon solutions business, irrespective of Gainshare. We want to get to a model eventually where that covers not just our expenses and our investments, but also drives profitability. We are not there yet, obviously. And we don't know quite how long it's going to take us to get there. Because, as I said, we're balancing investment in the channel versus immediate return. And we are trying to understand that. But for sure, that is the reason why we made that investment. I would certainly think it would be no more than 5%, at this stage, of our total spending, and probably in that range. Yes. That's as a percentage of revenue. Yes, I thought that was a little bit more. Yes, sorry. As a percentage of revenue, it would be no more than 5%, higher on total. I think another way to look at it is the majority of the growth in the R&D line has been design for inspection. So if you compare 2014's spend level with 2015's spend level, the majority of that design for inspection, there was some design for inspection in our 2014 number. And there was even some in our 2013 number. There was some very, very early [are] in our 2012 number. But the majority of that growth has been design for inspection-related activity. Gainshare is ---+ 28 is still the majority of the Gainshare revenues. But just the total amount has fallen. Okay. Well, thank you very much for your attending the call today. We look forward to talking with you after the end of Q4. Have a great day.

2015_PDFS

2015

MOV

MOV #I think we are looking at for it to be somewhat neutral overall to the Company's bottom line this year and so we will make investments against the category. And we believe that longer term it will have a definite ---+ presents a definite opportunity for the Company. You're getting a tremendous amount of interest brought into the category overall and people who may have been ---+ consumers who may have been getting out of the watch market are now developing an interest in the watch category. And I think that's an overall positive for the category, especially long-term. I would think you're looking at end of third quarter, beginning of fourth quarter. We expect to launch our first wearable into the Movado brand before the holiday season. So ---+ and that would be our expectation right now. I think it's a little early for us to probably say that publicly. I would think we'll have more information in that later in the year and as we publicly announce what we're doing in that segment. So the UK is one of the markets where we are seeing traction. Movado is doing well. HUGO BOSS, as I mentioned, is really a great success story. Other places in Europe where we're starting to see some sparks of business building, which we're very happy, for example, Spain. Spain has been a market that for a very long time has been a difficult one. We're starting to see some very strong results on some of our licensed brands in Spain. Germany continues to do well and we see accelerated growth on a couple of our licensed brands, as well as some of our Ebel business in Germany, we're seeing very strong sell-through from our new Wave introduction. And it's very interesting because there's been a shift in the traveling corridors of Chinese consumers. We saw the decline here in the US. We're seeing a pickup in Europe. And also if you think about the Middle East region, we're seeing a pickup in Middle Eastern consumers also in Europe. We're seeing that in Switzerland and particularly in Germany. So one of the things we're being very mindful is how do we capture this traveling consumer with a product that is relevant to them in the locations that they are traveling. So we. ve been able to make some shifts in that regard and I think we're seeing the results. For us, the most immediate opportunity is we have a lot of runway ahead of our current portfolio. And that is our number-one priority. These are part of our Company and we have an obligation to fully exploit these powerful licensed brands around the globe. So that's our number-one priority at this point. Sure you haven't seen that much of a fluctuation in the Swiss franc. It's over year on year. And if you look at it, I think, Sally, it's 200 basis points in the quarter of gross margin fluctuation is just currency. And you have to remember that we implemented most of our price increases very late in the quarter, so they had virtually no impact on the first quarter. And I think the second and third quarter will be more indicative of our year-end gross margins. And we do, as I said in my comments, expect them to improve, predominately due to our price increases. We had not taken price increases in a number of years. And I think we said that in our last conference call, so this is the first time we've taken a significant price ---+ really a price increase at all, in five, six years. We had made a strategic decision, prior to that, to absorb cost increases. And due to the extreme volatility of currency in the fourth quarter of last year, decided that strategically the best thing for the Company was to implement a price increase and we believe it was the right decision. We will see the benefit of that in the second half of the year. Well, as we discussed in our previous call, we were very, very mindful and strategic on how we implemented these increases. And one of the key things was we did not vacate key price points that are important gates for consumers. So prices like $495, $995. These price points we protected. What is very interesting is, in our research, pricing is not the number-one driver of the decision for a watch. Actually design and style, brand, quality, these are the number ---+ the more important attributes in making a decision for a watch purchase. And these are areas where we feel very strong with all our brands in our watch offerings. So obviously there is a risk, but we believe the benefits are greater and some of the things we asked around the globe ---+ many consumers don't remember how much they paid for a watch or if you ask them how much it is, they may actually think the price is higher. So this is a very ---+ it's not an exact science. And I think, again, the strong brand, strong quality, strong design ---+ those are the key motivators for the purchase. Thank you. I'd like to thank all of you for participating with us today and wish you all an excellent summer. Again, thank you very much, and we look forward to talking to you after our next quarter's earnings.

2015_MOV

2015

KSU

KSU #I'm sorry. No change. Thank you. Last but not least. <UNK>. For laughs, <UNK>. If I understand the question, let me see if I can address that. So the current hiring as I mentioned allows for future attrition and extra board activity. So the current hiring path provides for some of that cushion if you will. The productivity gains that we should see with the length of train should decrease the overall requirement, but as <UNK> mentioned, there's some volume that did move because of service. So for me, right size give us cushion on the extra boards for unforeseens or outages and then continue to scale appropriately with the volume knowing that we're going to have some efficiency gains on length of train. I think the key driver, <UNK>, is the reduction in train starts to move the same volume. So you're going to get some incremental revenue on that basis when you can add 25% to the same train. That's a pretty good swing. I would look more that it's going to enable us to handle the growing volume. And so again, as Dave mentioned, running a 25% more trains, that's more trains for about the price of three. And that's also going to help congestion and the overall capacity of that line being able to handle more volume. Lazaro had some good volume this year. Sure, all negotiations are both ways, but it's things. For example, on the longer trains, the 3000-meter trains, we will add additional brakeman, which is something we probably want to do anyway for the overall safety of the operations and the flow of those. So in addition to those numbers the efficiencies you've added additional labor and small additional labor need on some of those trains, but should be more than offset with the productivity gains on the length of train. The other thing too, <UNK>, there's some of the lengths we got because of the locomotive usage that you actually upsized the train and you don't get into the third or the third crewman. So there's ---+ you've got to get out almost to the max to get out to that third crewman. So these first trains we're adding out of Lazaro don't even get to the third crew member. Thank you. That concludes our call for today, so thank you and we will see you next quarter.

2015_KSU

2018

CRVL

CRVL #Thank you, and thank you for joining us to review CorVel's fiscal year 2018 and the March quarter. Revenues for fiscal 2018 were $558 million. Earnings per share were $1.87. Fiscal year earnings per share increased 24% year-over-year. The March quarter revenues were $143.6 million, 7.5% over the revenue for the March 2017 quarter. Earnings per share for the quarter ended March 31, 2018, were $0.47, an increase of 12% over the same quarter of the prior year. The tax law change helped us in the last 2 quarters of our fiscal year and will continue to improve earnings going forward. We've had an unusual increase in the health care costs of our own employee benefits plan but expect that to settle down. Additionally, our case management business has experienced lower margins, primarily due to some internal operations issues with which we are dealing. From a strategic and market perspective, we feel good about our position. Our Enterprise Comp claims administration service is increasingly well received, and our payment integrity service suite continues to produce results that lead the industry. For these reasons, we are optimistic about the development of new business and expect to improve the internal operation's issues that have hampered recent quarter's result. The workers compensation markets for Managed Care as well as for claims management remain active and attractive. Our Enterprise Comp line of full-service claims management solutions has benefited from increasing market recognition of our performance advantage and the technologies that support it. Although disruption in health care and health care insurance is a complex and slow process, it is occurring. In the last decade, the leading player positions in workers' compensation, for example, have changed for the first time in perhaps half a century. Changing the embedded processes and the profitability of disability insurance poses a threat to a number of the participants in the industry, that is, providers, insurers as well as brokers. As with all industry disruptions, the embedded market leaders from prior eras can be in denial during the early stages of a market change. CorVel's strategy, from our inception 30 years ago, has been that information management technology would ultimately disrupt the traditional service model. That change has begun to occur. Insurance prices in the industry have been soft, and self-insurance and even self-administration service models have become increasingly popular. Recently, Amazon, BERKSHIRE HATHAWAY and J. P. Morgan jointly announced they would begin working on new solutions to the management of health care costs. While this is a daunting task, we believe it is most appropriate to presume they will have some success, and it is prudent for all of us to visualize the segments they would see most likely to pursue. Toward that end, CorVel has devoted resources the last 3 years to the task of creating new service workflow in our disability management model. This effort has been broken down into new patient-intake processes, a new workflow tool for the management of claims and the new Return-to-Work process employed at the backend of an episode of care. A large number of component processes have had to be reimagined to create the new model we have now begun implementing. Further, we expect that additional advances in the interface with consumers at the point of service will continue to develop over the next few years. For the last few years, we have produced our claims management administration service using our new service model, and the management of workflow and the gathering of information by the adjuster has been manual. Now we're introducing supporting technology. The initial introduction of the new claims service workstation has been successful. This application is intended to place a software-based workflow management tool on the desktop of claims professionals. This tool could be thought of as a wrapper on the legacy claim systems of our insurer customers. The focus is the real-time integration of all episode of care data consolidated at the professional's fingertips. These inputs are included in the workflow recommendations the applicant presents for the claims management professional. The model has, when fully implemented, produced meaningful reductions in the total cost of disability claims. The change emerging in the delivery of disability management programs will, we believe, become pervasive. To compete in the emerging market requires that we reengineer some of the traditional components of our own prior service models. At times, this adjustment has stressed our operations, which, in turn, has resulted in reductions in the margins in specific subsets of our services. These are internal issues though and within our control to address. The reduced margins impacted our results in both the December and March quarters, which <UNK> <UNK> will discuss later. The Network Solutions segment of our service continuum remains an industry leader in outcomes achieved and is a high value-added service. Our new claims professional workstation further increases the value of these services to the carrier claims operations. I feel we're well positioned in this market, but it is also true that moving market shares around in this sector is not an easy task. As has occurred multiple times in the last couple of decades, new approaches to service are evolving. CorVel is actively updating its software, we are increasing our use of cloud services, and we are evolving new interfaces to the constituents in health care. All of this development combines, at times, to hamper our margins, but it is also opening new areas of opportunity in our target markets. I will now turn the call over to <UNK> <UNK> to discuss our operating results and product development. Thank you, <UNK>. I'll first discuss our operating results. Patient management includes third-party administration services and traditional case management. Revenue for the quarter was $82.4 million, an annual increase of 12%. The year-to-date fiscal year growth rate for patient management was 9.8%. While the fundamentals of our case management business are healthy, results in this segment of the business fell short of expectations. Margins in our patient management services decreased 11% from the same quarter of 2017. We've made significant progress this past quarter, developing and deploying a new suite of analytic tools to facilitate enhanced operational insight into key performance indicators at each level within the operation. It is our expectation that these tools, coupled with adjustments to strategic operating parameters and modifications to management business objectives, will have a direct and positive impact on margins achieved in our patient management services. The effect of the changes being made will be fully realized over the next 2 quarters. The momentum and sales of our TPA services, which built through 2017, was sustained in the first quarter of the calendar year. The outstanding service and outcomes being delivered with our integrated claims management solution is allowing us to continue to increase market share. Revenue for our Network Solutions services sold in the wholesale market was $61.1 million for the quarter, an increase of 1.9% from the same quarter of the prior year. Gross profit in the wholesale business was up 2.4% year-over-year. As <UNK> noted earlier in the call, our belief from the start of the company was that we would have the best opportunity to differentiate our products and services in the market through the application of technology. We see this being truer today that at any time in our history as the pace at which technology advances increases. Our development team delivered strong results again this quarter. Broad areas of focus included: enhancements to our claims management platform, including improvements to our new adjuster workstation called CareMC Edge for the insurance carrier market; continuing evolution of the next generation of our medical review software; and migration of services to run in the cloud. The initial phase of our claims management workstation, CareMC Edge, was released in mid-Q3 2017. With dozens of enhancements since the initial release of the interface, we are beginning to see the vision of The Edge realized, a material reduction in the cost of claims for our carrier clients. In the March quarter, functionality was introduced, which enables better and timelier management of pharmacy utilization, case management services and oversight of claims financial reserves. We are at the initial stages of the product development roadmap for The Edge and are eagerly looking forward to implementation of the enhancements planned for the remainder of 2018 and beyond. Solid progress was made on the first phase of our integrated claims intake initiative. Our goal was the project is to have seamless engagement with our customer's employees at the time of an incident of injury, connecting them with the right professionals as quickly as possible. We begin this process with nurse-staffed call centers that triage patient into the most effective entry points in the clinical process, which provide convenient and prompt access, including telehealth for the patient. We are currently introducing second-generation versions of our supporting systems. These new applications expand our ability to integrate all Managed Care components and also, to continue expanding the automation of our interface to the provider community. We have found that investments in the effectiveness of our patient engagement process at the outset of an episode of care are the most effective means of improving the cost-benefit ratio in health care. At the other end of the claim continuum, our Return-to-Work module remains another key area of focus for us. The efforts underway on our Return-to-Work module will improve the manner in which we can engage all related parties in a disability claim. While initial phases of the project included the collection, storage and use of RTW information by claims professionals, subsequent phases will involve more real-time involvement by the employer to assist injured workers in the return to productive roles. Development of next generation of medical bill-review software continues. In the March quarter, we completed work upgrading our proprietary rules engine to the latest technology. The conversion supports enhanced scalability, configurability and extensibility. Cyber security is a critical area in which we remain diligent. We've realized a modest increase in the allocation of IT resources necessary to proactively address security exploits and comply with regional and international legislative requirements. The cyber security work notwithstanding, the IT group has been able to consistently dedicate more resources to strategic efforts these last few quarters gaining momentum and making a meaningful difference in the services and outcomes that our operations team is able to deliver. We have a rich complement of initiatives planned for our patient management and Network Solutions programs in 2018 and look forward to maintaining and increasing the current momentum delivering on these projects. I would now like to review a few additional financial items. The quarter-ending cash balance was $56 million. Our DSO, that is, days sales outstanding and receivables, was 42 days, down 1 day from a year ago. That concludes our remarks for today. Thank you for joining us. I'll now turn the call over to our operator.

2018_CRVL

2015

KOPN

KOPN #---+ Mostly 3D metrology. Hey, <UNK>. Fourth quarter cash use and operating activities was $2.2 million. Yes. Well, in conclusion, we're delighted with our progress in 2014 and look forward to an exciting 2015 when wearable products will be introduced into the marketplace. Thank you for joining us today.

2015_KOPN

2016

LLL

LLL #Thank you That's a lot of speculation, Rich, but happy to speak. Obviously, what's new is that we have a two-year deal, which is great. It's helped one of the most significant problems we as an industry have faced, which is lack of visibility. So even directionally is a good thing, but you're asking little more. We think most of the movement is going to be in the classified area. I think some of the comments made by Secretary Kendall pointed to that as well. The overseas contingency fund, OCO account, may grow as well. As you know, a lot of the growth will be driven by international events as they unfold and as you know, there's a lot going on all over the place. So I'd say more likely upside than downside there. And we've also been listening very carefully to some of the commentary by those in the building, particularly Secretary Kendall and the acquisition chiefs, in terms of the types of capabilities or investments they are looking for. But they have been specifically asking the industry to be a little more forward leaning on R&D. And as you've seen, we have been trying to respond in that way because there are things that we do that fit some of the requirements they have and it would certainly be good to start to grow a little more organically in that space. So we have been trying to meet those requests and develop more, especially in the classified space, where we are doing very well right now. And that's why you see numbers like our R&D growing a little bit and we hope that we know that will be well spent in terms of our investments in future growth. You could, but I mean you've heard some of the OEM commentary this quarter where things seem to be taking a bit of a breather. We are in operating in a couple of markets, whether it's the training and simulation area, where there is a huge pilot demand because of retirements. And the number if you research it, is I believe it was 0.5 million pilots over the next, could be 10 years or so. And then you have our avionics businesses, which have historically done very well. The problem in that space is that anything that were to come online for sale is typically very expensive and hard to make a good business case for. We've looked at several companies over the years and where we see something that fits well with what we do, particularly something that could be consolidated and a lot of overhead saved, that's usually requisite to be able to make those numbers work. Because they're typically higher growth, higher margin, and other things that we would see in the defense space and they command higher prices. As you know, you have to pay a lot for growth in this marketplace these days. So yes, we'd love to grow the business and we'd love to grow it through acquisitions. But right now, we've seen the better deal for us being investing in our own products and developing things rather than acquiring them right now. And we could also pursue that as a strategy. We are the next gen system. We have equipage there and we continually work on developing more avionics for the general aviation marketplace where we continue to do very well. And for the large transport, that seems to be more regulation driven, whether it's a requirement for a new recorder or a revision to the key test system. But we keep a robust R&D program that will help us with the growth and should the deal present itself, we will certainly be all over it. Okay, with respect to the severance, we incurred about $18 million in 2015, and we expect to incur about $10 million in 2016. So some reduction there for sure. And you're correct, we did have a few or maybe several one-off items in 2016 ---+ I mean 2015, that we don't expect to recur in 2016. I think you see that in the margin expansion that we are guiding to and anticipating which is happening in all three segments. And as Mike said, particularly with respect to Aerospace, we're not satisfied at all with where those margins are presently and that's where we have the most work to do in terms of lifting the margins. We have some small upsides there. I'm not sure I would call it a balance. We said that we are committed to maintaining the investment grade rating, <UNK>. We think we can do that and still grow the business and we now are beginning to see that we'll start to grow operating income and EBITDA. We expect that to happen in 2016 and more so thereafter. So that's going to have a natural deleveraging effect as well. Okay, so each of the rating agencies calculate leverage slightly different and they explain and publish how they do it. But if you look at our debt to EBITDA, we are expecting that we. ll end this year at about 2.8 times. And I think our target is that we want it to be about 2.7 times or slightly under that. So we are trending in that direction. We do have some covenant requirements in our existing debt arrangements but they allow for ---+ they're not a problem in terms of maintaining them. Being investment grade versus non-investment grade is not a trivial decision. I mean you don't flip the switch back and forth between those positions. We've been investment grade since 2009. Even though we're investment grade, we do have a very aggressive financial policy in that we deploy most of our cash and we have a good amount of leverage on the balance sheet. And that's responsible in terms of delivering better returns to our shareholders. <UNK>, that is the trend in this space right now. You're going to see more and more of this. I use the term cross-decking, but some of the big heavyweight ISR platforms to more affordable business jets. This one you saw is very representative of the trend in many countries in how they're looking at their ISR mission requirements. And we sit well in that space in terms of being able to do that missionization work which includes racks and racks of electronics and the precise placement of antennae systems to increasing range for being on station which could mean auxiliary fuel tanks in systems and putting in a refueling capability and the like. All of those things are in our wheelhouse and we have excellent performance to show for it over the years in delivering these systems. So when customers think about that cross-decking model, they call L-3 first as I'd like to say. I mean we do a good job. Part of it has to do with the fact that we make a lot of the subsystems, whether it's data links or the sensors, cameras, et cetera, and we're able to pull through our own products in these models which also helps the whole business. If you get on one of these and it's not only the integration work, but it's pulling through data links in cameras and the like, that is how we intended this model to work. It's being able to pull through L-3's systems and subsystems on these platforms. But given the economics of operating a business jet versus a wide-body commercial platform, I think this is a trend of the future. Sure. Thank you. I wanted to make a comment also to follow up with Ralph's comment on the investment grade. If you look at the way I tend to think of it, is we will always want to operate with a credit facility. I think it's prudent that companies have credit facilities should an M&A come up or any other matter where cash is needed in a short-term. You run the assumption that yes, we'll always have that. Then you get to the question of well, what's the difference if you're investment grade or not. As you may know, that if you're investment grade, you don't have the restrictions on the payment of dividends and share repurchases and M&A. You have that quote, restrictive payments basket issue. So, it's really a question of ---+ we're looking at investment grade versus not, you could look at it as you want a credit facility or not because we would not be able to operate with the cash deployment objectives that we embrace with a non-investment grade credit facility. It just wouldn't work for us and everybody would be unhappy, including me. And so, I think it. s not a far stretch to keep that investment grade rating now and it's typically the leverage ratio that is the operative one that gets more restrictive because of the way the numbers work. And I believe it's, in terms of rating agencies, Moody's is the more restrictive of the three. So, that's the one we're watching. Ralph made a comment also, is that we get back to growth in EBITDA or in margins, that should have a natural deleveraging effect which would give us some more headroom, and we won't be having this discussion. I just wanted to give you my perspective on why that is important. Yes. Hi, <UNK>. Correct, that did not pertain to the Head of State aircraft modification jobs. We're still on track or inline with the estimates that we had from the second quarter of last year there on the Head of State work. But we have a variety of other programs in aircraft systems and there were some adjustments on a couple of international jobs and then some items at our Crestview operation. Those are individually small items and as well as the aggregate, I think it's only $5 million or so. Nothing alarming or particularly unusual there. One this year and the other two next year. Well, we also see that they are the contractor of choice when there's a big job to develop at ISR platform. So some of the things that we've been doing are things we could bring from corporate are one, that we have or could we bring in more business development folks to the international side. Number two, we are developing more international partnerships either with aircraft OEMs or with other equipment suppliers or with other industrial players. So we have a seat at the table in these countries that are going to go forward with these systems. We are the world leader in ISR manned platforms and I believe that that will continue to be a market that will grow. And it's also not one of the more margin constrained marketplaces because again, these are one-of-a-kind platforms and we are not usually bidding to a low price. We are usually bidding to a technical capability and we are not interested in low price technically acceptable in this space. We are interested in developing and delivering state-of-the-art platforms at good margins. So, I again, pointed to the fact that some significant international work had been completed and new work had not been brought in to fill that hole. And also there are under US side, new platforms that will be coming out that have displaced some of the life cycle sustainment that had historically been done across that business. So there are a couple of holes that need to get filled and this is an area where I want everybody focused on getting this business area back on track where from a margin standpoint and from a growth standpoint. The execution to continues to be excellent. Thank you. So in wrapping up, the current geopolitical environment is volatile but presents new opportunities, both in country, domestically, and internationally, and we are well-positioned to capitalize as we move through 2016. We continue to execute our strategy of strengthening our portfolio, investing in businesses that we know well and leveraging our strong cash flow generation to invest in the Company and at the same time, return cash to shareholders. Our investment in R&D and our market-leading positions make us ready to accommodate the short-term needs of the US Government and to adapt and ship according to its longer-term third oil offset strategy. We are seeing benefits from our refined strategy, margins are improving in 2016, as is our top line, and we will be moving forward with these efforts well into 2017. And we're planning on keeping the margin expansion front and center for several years to come until we are satisfied with doing the best we could possibly do across the Company. We're committed to strategic growth and performance and as always, we will work to enhance value for shareholders. Thanks again for joining us this morning and we look forward to speaking with you again in April.

2016_LLL

2017

SEE

SEE #Thank you, <UNK>, and good morning, everyone We have a lot to cover on our call this morning And during our prepared remarks, we will cover the announced sale of Diversey, and the use of proceeds and how we will address stranded and unallocated costs We will review in detail our first quarter results and outlook for continuing operations We will also highlight Diversey results and after our prepared remarks, we'll open up the call for your questions So, let's get started On March 27, we announced a definitive agreement to sell Diversey, our Diversey Care division and our related hygiene business to Bain Capital Private Equity for $3.2 billion The transaction is expected to close early September with net proceeds of approximately $2.5 billion This transaction marks a significant milestone for both Sealed Air and Diversey, and we are committed to a timely and successful separation For Sealed Air, this transaction will give us an even greater focus on executing our profitable growth story and investing in our core business The increased financial flexibility will enable us to return cash to shareholders through share repurchases and dividends, while at the same time, target value-added acquisitions To address the dilutive impact of this transaction, we increased our share repurchase program by an additional $1.5 billion, expanding our total authorization for future repurchases to approximately $2.2 billion We will continue our quarterly cash dividend of $0.16 per share and we will pay down approximately $1.1 billion of debt and maintain our credit profile In reviewing our first quarter performance for continuing operations, you will see that we had a very solid start of the year Sales were a $1 billion, an increase of 3% constant dollar growth Food Care sales of $656 million, had constant dollar growth of 2% and Product Care sales of $377 million, had constant dollar growth of 4%, excluding 50 basis points of rationalization efforts in Europe We are very pleased to see the execution in North America with constant dollar sales growth of 6% and both Food Care and Product Care contributed to this performance with sales growth of 7% and 3% respectively We are also pleased with our EBITDA performance for both Food Care and Product Care Combined, those two divisions delivered adjusted EBITDA of $216 million or 21% of sales, offset by $34 million in corporate expenses This resulted in adjusted EBITDA from continuing operations of $182 million, or 18% of sales And <UNK> will provide more details later on the call on corporate expenses, which includes stranded and unallocated costs associated with the sale of Diversey Diversey, which was recorded in discontinued operations in the first quarter, delivered $582 million in sales, an increase of 2% in constant dollars And if we did not have discontinued operations accounting, adjusted EBITDA would have been $53 million as compared with $48 million in adjusted EBITDA in the first quarter of last year Our comments throughout the rest of this call will be focused on results from continuing operations So let me now turn to slide 5. Our regional performance for Sealed Air North America accounted for 55% of our net sales, and as I just noted, increased 6% in constant dollars Latin America, which accounted for 9% of net sales, had constant dollars growth of 5.5% Mexico, by the way, increased 17% and Brazil was up 5%, which was partially offset by 4% decline in Argentina On a combined basis, Mexico, Brazil and Argentina accounted for 8% of total company's net sales Asia-Pacific represented 15% of net sales and was flat year-over-year with 10% growth in New Zealand and 9% growth in China Growth in New Zealand and China was offset by the 12% decline in Australia, due to the beef market downcycle Australia, New Zealand and China combined accounted for 10% of our total company net sales EMEA, which accounted for the remaining 21% of the total company net sales, was the only region that declined in the quarter, and the 3.5% decline in constant currency was primarily due to timing of Food Care equipment sales, rationalization efforts in Product Care that were completed in May of last year, and a decline in net sales in Russia related to currency because our pricing is indexed to the euro On an as-reported basis, Russia was slightly up versus last year Now turning to slide 6, which highlights volume and price/mix trends by division and region You can see from this slide that on a global basis, volume trends were up 4% in the first quarter We delivered over 7% volume growth in North America with 9% volume growth in Food Care and 6% growth in Product Care I wanted to note that Sealed Air has not delivered volume growth like this since the recovery in 2010 after the great global recession Volume growth in North America was partially offset by unfavorable price/mix of 1.7% In Food Care, unfavorable pricing was due to timing of raw material cost pass-through, which we expect to turn in the second half of the year And in Product Care, unfavorable mix was impacted by continued growth in e-Commerce and fulfillment We announced price increases that began in early Q2, which should help top-line going forward I also want to note that we experienced positive volume trend in Latin America, led by 2% volume growth in Food Care packaging This is the first time since the first quarter of 2014 that volume contributed to sales growth in this region Despite improvement in Q1, the consequences of the selective ban on the Brazilin beef exports is expected to slow down the recovery in this local market and negatively impact our volume in Q2 and Q3. But Latin America continues to be a significant growth opportunity for us And we expect trends to improve as we head into 2018. Turning now to slide 7, and review Food Care results in more details Food Care delivered $656 million in net sales in the first quarter, an increase of approximately 2% on a constant dollar basis Adjusted EBITDA of $142 million or margins of 21.6% was impacted by higher input cost Adjusted EBITDA in Q1 2016 was $139 million The strength we delivered in North America was not only driven by the increased cattle production in the region, but also growth in fresh pork, smoked and processed meats, and cheeses North America accounted for 51% of Food Care sales in the first quarter Latin America, which accounted for 13% of Food Care sales delivered positive volume trends for the first time in several quarters, resulting in 5% constant dollar growth Growth in North America and Latin America was partially offset by continued weakness in Australia as I talked about, and declines in Europe due to timing of equipment sales and Forex in Russia First half sales was a strong year for – first half of 2016 was a strong year for equipment in Europe, resulting in a tough year-on-year comparable in Q1. As we head into the second half, we expect equipment sales to return to growth and the EMEA region accounted for 20% of Food Care net sales, with Asia-Pacific accounting for the remaining 16% of sales For the full-year 2017, we continue to expect Food Care to deliver 3% constant sales growth with continued strength in North America, improving trends in EMEA, and a more favorable global price/mix as the year progresses, due to the timing of raw materials cost pass-through in North America Slide 8 highlights results from our Product Care division Product Care net sales of $377 million increased 4% in constant dollars, excluding 50 basis points of rationalization in Europe, which happened in end of May of last year Adjusted EBITDA was $74 million or 19.7% of sales Performance accelerated through the quarter with all regions delivering positive constant dollar sales and volume growth North America, which accounted for 62% of Product Care's net sales, increased 3% with strong growth in e-Commerce and fulfillment EMEA accounted for 23% of sales, and increased slightly, driven by high single-digit growth in Germany, offset by flat sales in the UK and declines in France, largely related to the rationalization I've referred to Asia-Pacific and Latin America combined accounted for the remaining 15% of sales and were up nearly 10% led by strength in China, Japan and Mexico We continue to grow alongside the rapidly expanding e-Commerce and fulfillment market, and see good areas of stabilization within the industrial sectors Our new products including B+, FloWrap, StealthWrap, Inflatable Bubble and Automated Mailers are also gaining momentum, across all of our end markets as our customers focus on addressing dimensional weight pricing We expect our automated fulfillment solutions to continue ramping throughout the year and further contribute to our performance It is worth highlighting that last week we announced with UPS, the opening of a Packaging Innovation Center in <UNK>ville, Kentucky, on the UPS largest Supply Chain Solutions site We were honored to be selected as UPS partner to help address their customers' packaging and shipping challenges And this clearly demonstrates the power of our innovative solutions and the ability for UPS and Sealed Air to collaboratively work together to add value to customers around the world For the full 2017, we expect the momentum we experienced in the first quarter to continue throughout the rest of the year, resulting in constant dollar sales growth in the range of 3% to 4% Growth within our e-Commerce and fulfillment segment is far surpassing industrial growth And now let me pass the call to <UNK> to review our net sales and adjusted EBITDA, free cash flow, and our outlook for the full year <UNK>? Good morning So there is something that you need to understand is the SEC rules with regards to unallocated costs before closing And unless a given unallocated cost is very precisely put into a division, call it computers and cell phones, there is a cost for computers and cell phone for example which is very clearly set into the Diversey operation But if it is a cost which is allocated as a percentage of sales or things like this, before closing, all of those costs move to Sealed Air to new Sealed Air, and that is probably part of this explanation and we have talked about $25 million of those costs, which in fact are moved to – into our accounting, since they're new to their accounting, and you're going to have – you're going to see those after closing being offset by GSAs (31:48) So that's a very good question We don't have a margin issue as you said, with Product Care because actually we're really very happy with the restoration of margin in that division that we have carried throughout the years But what you have seen is that we have actually – what we have not seen, but what we have had is somewhat flat pricing, but a negative price/mix and you have seen that for the year we said that we're going to have 3% to 4% constant dollar sales growth The reality in the gross profit line is that we're seeing a slight degradation in the first quarter and it's going to be impacting also the second quarter because we have had hefty resin price increases, which we have not been able to immediately offset with our own price increases, which we have started So we already are seeing some price increase – slight price increase in the first quarter which is going to continue in the second quarter but that's one part One part is the slight margin compression that all of our competitors have had in food packaging and in product packaging and things like this because of the speed and how hefty those resin cost increases have been The second thing is the mix And in Product Care, we are growing as we already told you in the previous quarters, much faster in e-Commerce and fulfillment than in our industrial packaging By the way, our industrial packaging is doing much better than it has done We are seeing some lift, we're seeing some restoration of volume which is very pleasant to see in an industrial GDP, which is still not very good, but we're seeing this But what is important to understand is that yes we do have some lower value-added products temporarily in e-Commerce, but we also have and you need to remember that, have launched an equipment line Two years ago, we didn't have any equipment product We have at Pack Expo last October shown our new line of equipments and those are starting to ramp up You can imagine that when your production starts to ramp up, you have lower margins because you'll have to absorb volume variances in your plants and we are by far not at the margins we need to be in our equipment But this is the nature of the beast You ramp up your equipment and when those are going to start kicking with sizeable volume and we're doing – we have a lot of momentum in that sector We are going to improve our margin This is why and I'm concluding with this, this is why I said that short-term our margins in e-Commerce 3PL are lower than our total margin, but this is not going to be the case over time Hi <UNK> So, yeah in regards to our cost increases, once again, remember the cost increases, that was $0.05 in February, it was $0.03 in March, the $0.03 of April in resins has been moved to May, and we'll see if it goes through et cetera So, yes we have been negatively impacted on the gross profit line on both divisions; one because of formula pass through, the other one because of negotiations and it is going to impact also Product Care and also Food Care in the second quarter before we see a restoration But what you have to be sensitive also with regards to the currency, and yes indeed, the currency impact is less, but remember who it affects most It is the Diversey side because they have a higher exposure to non-U.S dollar than the rest of new Sealed Air Having said that, no, we don't see a deterioration of our forecast when you compare apples-with-apples We expect continued gross profit squeeze in the second quarter because of the reasons that I talked to you about On the second comment, which is also a very good question, remember what I said several years ago, there is a catch-up to do So, therefore, the margin increase is going to slow except for the new products and you remember that in Food Care and in Product Care, we have been moving with innovation which is – which are really doing well We are going to update you all during our Analyst Day next autumn about this And as a result of that we believe that we are going to be able to continue to have margin expansion The solutions that we are bringing, adding new value to customers have a very quick and very strong payback for our customers So, we're really pleased with our innovation Hi, <UNK> So, our forecast is our forecast What we have seen, as I said before, is margins squeezed in the Product Care We used to see the sales growth move into the EBITDA and more and we are not seeing this in Product Care for the reasons I have talked about And therefore for the full year, we're not seeing and we're not expecting to have product care have the sales growth dropped to the bottom line and more And the reasons once again are hefty and quick resin increases and the product mix with regards to our equipment in our lower value-add products into the e-Commerce So that's one The second one is that we are – in Food Care, we're seeing growth and we're satisfied with what's going on in there, and we're not seeing the major EBITDA contraction or lower growth than you were expecting Once again, remember what I said before, the ATC (43:59) accounting principles oblige us to take all of those non-directly attributable allocated costs that we have before closing into Diversey They have to come to new Sealed Air that is having an impact So now you don't tighten because those pass-throughs because those are contracts and therefore you respect the contracts But what goes around comes around and as a result this at the point in time, we're going to start to benefit from those and we believe that this is going to be towards the end of the year and definitely into next year With regards to Product Care, those are negotiations because we don't have basically formulas and that has affected some gross profits in the first quarter because of the speed of those $0.05 and $0.03 and potentially some more to come We have announced price increases on – and we have executed on price increases based on resins We also had some benzene and MDI, very hefty price cost increases, and we have already started to implement price increases on our – Instapak product line which is important So, yes, M&A can be part of the game I've been very public saying that we have been doing technology bolt-ons in the past and we're going to continue looking at bolt-on operations So therefore there is no huge M&A being discussed or being looked at at this point in time We believe that we can do a regional bolt-on to reinforce our Product Care and our Food Care divisions Having said that, you have observed I hope the dramatic shift in our volume growth And that helps me to come back and say and remind all of what I said last year Last year, I said that we were expecting to have a total growth of about 3%, which we did not deliver, but I was expecting this to be – the growth of last year to be ramping up towards the end of the year So, when you step back what are you seeing? You're seeing that basically I was wrong by one to two quarters maximum, and I do confirm that I am expecting to see the volume growth and the total growth to firm up because we said 3% to 4% this year, and when you look at specifically to the volume, we have had this past quarter, about the double growth that we have had for a long time because our volume growth in New Sealed Air has been of about 0.8% to 0.7% in the first three quarters of last year, and about 2% in the fourth quarter, so what you're seeing that this growth has picked up So, Q4 volume growth for New Sealed Air was 2% Q1 volume growth for the first quarter was 3.8% and I do confirm that this is a very good and positive trend, which is making me very confident that our strategy was and is the right one, innovation and segmentation is the name of the game And next to that we're going to see how it develops into 2018, but altogether we believe that this 3% to 4% growth in 2017 is going to be coming, which is the major change compared to the past Not more frustrating than for us by the way, but this is a transition time It is a difficult time in 2017. We have done what we felt was necessary to be done for the future of Sealed Air This Diversey has earned the right to fly from its own wings with Bain Capital right now, and I think this is good for Sealed Air and that this is good for Diversey And on the Product Care, having the sales growth not dropping to the bottom line, fully agree with you, we believe that this is transitional also, but it's going to be there in 2017. I'm a very strong believer that you do not buy your way into markets with price, and I have proven that over the past few years What is making us win in the marketplace is our innovation, it is not only on red fresh meat, it is also on cheese, it is also on processed foods, we have customers who are converting to Grip & Tear solutions, we are making progress with OptiDure as we were expecting, we're making progress with our DOT as we were expecting So I would say all good and this is what enables us to have the volume moves that we're having Mostly what we're seeing is, price in the first quarter mostly North America because of the formula pricing It's mostly a timing point situation

2017_SEE

2017

KR

KR #Good morning, everyone Our core business was strong in the third quarter We're very pleased with our ID sales exceeding 1% in the third quarter We were especially happy to see the very strong performance on our fresh departments; the results in produce and meat were terrific, and we continue to see double-digit growth in natural foods Our ID sales results were driven by both, higher spend per unit and strong growth and the number of households Total visits continue to grow throughout the quarter, and our market share was up Our businesses gained momentum and our customers are recognizing the investments we are making We noted at our Investor Conference that over the next three years, Restock Kroger will be fuelled by $9 billion in capital investments, cost savings and free cash flow We recognized that in order for ---+ in order to be there for our customers today, and more importantly, to be where they are going in the future we need to make investments more aggressively and faster than ever before We've already prioritized the way we invest capital by both reducing the amount we spend and optimizing our capital allocation process We now look first for sales driving and cost savings opportunities through both brick-and-mortar and digital platforms; second, we will continue to make sure our logistics and technology platforms keep pace with and scale to those demands that were created through these investments Then finally, we will allocate capital to storing activity; this process has allowed us to use less free cash flow for capital investments <UNK>s <UNK> said earlier, we are aggressively managing OG&<UNK> costs and implementing new programs to reduce our cost of goods sold One example is our recent decision to require on-time and in-fold delivery from suppliers We're implementing penalties when scheduled deliveries are missed within a designated window Overtime, this will help keep cost standby on sharing more predictable operations, but more importantly, it won't share that we have the products on our shelves that our customers want and when they want them We expect Restock Kroger to generate $400 million in incremental operating profit margin over to three years from 2018 to 2020. We also expect to generate more than $4 billion of free cash flow after dividends over the next three years Our goal is to continue generating shareholder value even as we make strategic investments to grow our business Fuel performance was also outstanding in the quarter Our cents per gallon fuel margin was approximately $0.249 compared to $0.179 in the same quarter last year The average retail price of fuel was $2.46 versus $2.17 in the same quarter last year This along with our strong core business results demonstrates the diversity of our earnings The fuel performance in the quarter also created the opportunity for us to make an incremental, a $111 million contribution into our USC consolidated pension plan Funding these obligations proactively overtime demonstrates our ability to meet our commitment to protect employee pensions while simultaneously delivering value for shareholders <UNK>s you know, we announced last month our intention to explore strategic alternatives for our convenience store business, including a potential sale This was the result of review of assets that are potentially of more value outside the company that is part of Kroger; this process is ongoing and there has been a high level of interest <UNK>s we stressed last month, our convenience store management and associates are an important part of our success; we value what they do and thank them for continuing to put our customer first everyday as we conduct this evaluation Over the last four quarters we used cash to contribute an incremental $1.1 billion to company-sponsored pension plans, repurchase 59 million common shares for $1.7 billion, take $446 million in dividends and invest $2.9 billion in capital Our financial strategy is to use our financial flexibility to drive growth while also returning capital to shareholders and maintaining our current investment grade debt rating We continually balance the use of cash flow to achieve these goals <UNK>s of the end of the third quarter, our current share repurchase authorization had approximately $590 million remaining In return on invested capital for the third quarter on a rolling four quarter basis was 12.31% Now I'm going to spend a lot more time talking about pensions this quarter than I normally would This is driven by not only what we've done this quarter but also what we've been doing over the past several years <UNK>bout a decade ago we identified a great amount of exposure on pension plans and recognized then we would need to begin addressing that exposure like we would any big endeavor, one step at a time Our efforts begin in earnest in 2011 when we negotiated and created the UFCW consolidated pension plan The keys for us were capping prior service costs, negotiating a new benefit accrual going forward, consolidating four plans into one and sharing both, professional and more efficient management of the assets going forward We agreed to fund the plan over five years but elected to fund it in January of 2012; this arrangement reduced Kroger's annual multi-employer pension expense and secured the pension benefits for tens of thousands of Kroger associates Including this agreement, we have since made more than $2.3 billion in payments and funding commitments with two objectives in mind; one, to address the underfunding and the company sponsored pension plans, and two, to address the liabilities of various troubled multi-employer pension plans We have adopted this approach in a low interest rate environment to provide greater stability for the pension benefits earned by thousands of Kroger associates and retirees, and to manage these liability proactively or frankly, to avoid kicking the can down the road We have said for some time that we expect our net total debt to adjusted EBITD<UNK> ratio to grow, this is because we're bringing an off-balance sheet item on your balance sheet, we're funding an obligation already on our balance sheet <UNK>s a result, we are updating our target range for this ratio to 2.2 to 2.4 times These obligations whether recorded on or off Kroger's balance sheet have generally been considered when our credit profile has been reviewed but since they weren't funded, did not get picked up at our net total debt to adjusted EBITD<UNK> ratio Our current result of 2.57 times is above this range We expect to use free cash flow and potential proceeds from the sale of assets to get us back in the range Protecting associates and retiree pensions is one significant way that we take care of our associates <UNK>nother is hiring and job creation, Kroger is currently hiring total 14,000 part-time and seasonal jobs, this is in addition to the nearly 10,000 permanent jobs we've already created in 2017. Through Restock Kroger we plan to invest an incremental $500 million in human capital in wages, training and development over the next three years This will be in addition to our continued efforts to rebalance pay and benefits while also focusing on certifications and performance incentives, career opportunities and training On the labor relations front, we recently ratified an agreement with the UFCW for store associates in Charleston, West Virginia, and we're currently negotiating an agreement with the team stores [ph] for the master agreement Our objective in every negotiation is to find a fair and reasonable balance between competitive costs and compensation packages that provide solid wages, good quality affordable healthcare and retirement benefits for our associates Our financial results continue to be pressured by inefficient healthcare and pension costs which some of our competitors do not face We continue to communicate with our local unions and the international unions which represent many of our associates The importance of growing our business and growing it profitably which will help us create more jobs and career opportunities and enhance job security for our associates Turning now for our guidance for the fourth quarter of '17 and all of '17, we expect fuel margins to moderate in the fourth quarter and we're already seeing that quarter-to-date We expect fourth quarter identical supermarket sales growth exceeding ---+ excluding fuel to exceed 1.1% We confirmed our 2017 net earnings guidance for 53 weeks of $1.74 to $1.79 per diluted share and our adjusted net earnings guidance range of $2 to $2.05 a share Both our G<UNK><UNK>P and adjusted net earnings per diluted share guidance includes the effect of the hurricanes The low end of this range is $0.04 above where industry analyst consensus forecast has been demonstrating Kroger's ability to deliver shareholder value in a dynamic transition year Our LIFO expectation has been lower to $60 million from $80 million and we expect capital investments excluding mergers, acquisitions and purchases of leased facilities to be approximately $3 billion for 2017. Before I turn it back to <UNK>, I want to note that in the 8-K we filed earlier today, we reconfirmed our early thoughts on 2018. <UNK>? What I talked about as far as moderation and margins in the fourth quarter was we expect our few margins to moderate in the fourth quarter and we've already been seeing that What happened with gross margins this quarter, the 30 basis points without the fuel modern health and LIFO charge that we talked about in the earnings release, we have become significantly more diligent on lowering our cost of goods and negotiations with our vendors Our sales mix was very strong in the quarter relative to more natural foods and more our brands which helps drive our margin rate up and those did also continued price investments, our costs ---+ our inflation [ph] cost is still above our inflation at retail, if you go back to the chart I used at the investor conference but they are beginning to converge and both of them are now in positive territory I don't want anybody to think we did invest in price in the quarter because we certainly did in a very big way and it's really the factors I talked about I walk-in to the habit of revisiting that chart that were both over zero; so we did have cost inflation, as well as retail price inflation that got past on but we didn't pass all of it I also walk-in into the habit of predicting where gross margins may go on a quarter-to-quarter basis because you never know exactly what negotiations or what benefits may fall on a particular quarter but we do feel good about the results we posted <UNK>s I sit here today, so there is two components of multi-employer expenses; there is one that we may got a sense per hour basis is part of our contracts to third-party plans that we don't manage, maybe trusting on those So those will be whatever the hours we work in the contractual rate per hour; my guess is that you would see a slight increase ---+ some increase in that number I think as you think about contributions to our multi-employer, to the UFCW plan that I talked about we created five years ago, as I sit here today I would expect that to be slightly less next year than this year given the contribution we just made, plus they are having a very nice year from a return on asset basis No, I mean you hit the nail in the head We have been and we'll continue to invest in price and we have a lot of plans in place to figure out what is to pay for that Unidentified <UNK>nalyst <UNK>nd then my follow-up question is, if we to get tax reform and your tax rate go down significantly, how would you look to deploy that benefit to your P&L? Would you just let it flow to shareholders or would you look subsidized investments you might make with that savings? No, I agree with you <UNK>nd we obviously, announced our relationship with Instacart that we in Southern California which will be a prime example of what <UNK> said we're on average smaller stores and smaller parking lots and this is a great solution for a market like that where it's just over the customers want but the physical assets we have wouldn't support it That's very, very much so and as you know, when we merged with Harris Teeter and we solved their insights, it's what caused us to aggressively start doing ClickList and the only changes we made was asking the Harris Teeter team if you had to do it over again, what would you do differently, those things we have done but the patterns that we're seeing would be very similar to what we saw ---+ what Harris Teeter saw before we merged and what Harris Teeter continues to see Yes, sir It really doesn't, as we have more opportunities and negotiate more opportunities; if I could get all of these union contracts if I wouldn't want to do it [indiscernible], like I said in my prepared remarks, it's one step at a time on big endeavor like this; I would prefer to bring them all in balance sheet, manage the assets myself, get rid of a lot of friction cost One of the funds we consolidated, it was unbelievable, the management fees that were aimed, because their assets were so low <UNK>nd as you get a bigger pool of assets going after the same goal, you obviously get better fees, so there is lots of ways it reduced our cost and generally speaking, the rating agencies do get it and understand it; it's ---+ I think I'll allow this for a second and everybody in the room just kind of looked at me like ---+ but we've actually talked, should we start talking about the leverage ratio closer to exactly how the rating agencies do it, so there isn't this disconnect between the two and we just put everything after the way we believe they look at it, they don't tell you everything but ---+ and then it's not; it's volatile as it seems when we add something, so that's something we're kicking around just to take some of the ---+ what seems like a growth in our leverage when it's just moving it from one part to another I think I would just go back to what our strategy is and we would allocate our ---+ those proceeds to support all the pillars of our financial strategy, keeping in mind the contribution to the bottom line at those stores to generate; as well as the need to get our leverage ratio down Well, the expense that we incurred do not penetrate our insurance deductible, so it was contained at less than the $26 million I spoke off last quarter It was in the $20 million to $25 million range <UNK>nd when you think about where the hurricane sit and where we have stores, while it certainly helped the Houston division sales, the overall effect on the total company, given we have 20 to 100 stores and a 100 or so affected in Texas by the storm was relatively negligible to the overall number We've never really tried to look at it as a power struggle and we really appreciate the partnerships we've had with our CBG suppliers Relative to the find for the late trucks, it doesn't do us any good to have folks around our warehouse expecting trucks to show up and the truck doesn't show up or that we have orders in for products from our stores and we get a truck from a supplier that doesn't have all of the goods on it we expected it to have on it <UNK>nd not only are we incurring the cost at the warehouse for those ideal workers, it also winds up affecting sales when we can't fulfill the orders that our stores have asked for and then we can wind up with out-of-stocks or low stocks inside the store <UNK>nd it's really just trying to strengthen that relationship if it's supposed to get here today and it's supposed to be a full truckload, we'll get it to us today and make it a full truckload You know, this isn't within minutes of a window, this is a relatively wide window at this point and I would say the biggest thing on cost of goods is, we've always at the category manager level done a really good job of negotiating cost of goods There have been times when they've made decisions historically that somewhere up the chain in the company we may have overturn the decision they made which causes them to think somebody doesn't have my back when I negotiate really diligently and get us a better cost of goods on our product I can tell you today, the category manager negotiates a price or a product in our store, not in our store; that decision stands there because they are the ones with all the data and information about how that decision is made It's all those decisions are made, we don't just do this, give us the best price or you're out of the store It's all made with a powerful data waiting for 51 behind it to understand consumer preferences and substitute ability and things like that So it's a pretty broadbased approach and I would say those two generally are the highlights Our ship-to-home is an evolving process <UNK> and you know, as we've said in our conference call in the prepared remarks, we had a record Black Friday and Fred [ph] had a record Black Friday <UNK>nd when you talk about TVs, that's a record Black Friday relative to a few years ago where electronics would have been a huge part of their Black Fridays <UNK>nd it's ---+ not every customer wants things delivered to their house, there is still a joy and excitement of going out and shopping for things and we'll continue to offer and overtime offer more opportunities and options for our customers on how they want products delivered but when you think about this year's Black Friday being a record year, I think folks I brick-and-mortar [indiscernible] everything is going to get shipped at home or little bit ahead of themselves

2017_KR

2017

AVGO

AVGO #Great question. Using opportunity to expand a little propaganda here, again, as we've already articulated. The franchise products we're in we are the technology. We are also the market leader in those areas. In those niches, some of them are very large niche, but we are the technology leader and we don't get that by not investing. We invested, as my remarks said and I said many times, very heavily in those areas we are in. We develop products that generally in those franchise areas before anybody else do it out there. And that's why we can sustain it, that's why our margins are the way it is. Because we provide products that allow our customers to differentiate and innovate themselves. So we invest very heavily, and you look at our total R&D, we invest in total $2.7 billion a year as a company in R&D. We're the best engineers out there, and we have the best products in this area. So that's really where we continue to sustain leadership in our existing franchise products. In some of those flights of fantasy somewhat that you covered earlier, I'm not saying it won't happen. I will be direct, let somebody else take another hits (inaudible) and then we'll buy the company if it's successful. You are really trying to pass the data aren't you. It's all a combination really. It is, and you obviously know out there it's also timing of some of the shipments and purchases by our two largest customers. So there's a bunch of ---+ a few factors involved in here. One of which was there's timing this quarter differences in timing. There's the fact that you are right, Korean customer is coming in with a vengeance to try to recover share. And broadly, we're also talking about content increases as each new generation comes in and it's not even the Korean customer it's also the major North American customer. And it's a mix of all these factors. Have I sat down and broken it out in detail, no. We don't try to analyze it to that degree, but those multiple factors mix pull together to basically indicate that the seasonality, the downward seasonality, that we saw a year ago is perhaps less pronounced this year. Well there are opportunities for us in China, but are the focus of our success and our product success in Wireless, especially content increases year on year, is ---+ as you know, we push the cutting edge on technology. Be it wireless Wi-Fi connectivity or RF cellular, we push the envelope and that tends to go very much largely to the flagship class phones. That top of the pyramid where a big part of it has been our major North American customer and the Korean customer, plus a few other guys spread around. That's where our strength is, that's where the demand and we've seen our products come help. As China evolve over time, having said that, the opportunity exists. They will move from feature phones to low-end smartphones to now some premium phones. And we begin to get traction on even those premium phones to the extent that those brands in China use it, and that's why we need the technological engineering edge that we provide in the products. Until then, they need less of it. Except with exceptions like carrier aggregation when we obviously are the leader in providing solutions for carrier aggregation on a discrete basis. But on an integrated basis into smartphones, it's really the flagship phones and now increasingly premium phones making its way into flagship phones that we see the demand. And that transition is happening in China, albeit on a very gradual basis. But we are very patient people, we will wait for it. That's a very insightful question, and we see the SSD controllers for enterprise to be a lot of it will be outsourced. Why, because there are certain IP inherent in those enterprise flash controllers that are very tricky to do. Not dissimilar from the rechannel of hard disc drives, so that will happen. [Klein], because the nature of Klein, it's not so complex technology, IP required is not so extreme. We see that as probably less opportunistic for us, though one never knows. But certainly on enterprise, which is where we are very focused on, we see a lot of need for intellectual property blocks features that few people can do. And we are one of those few people who can do it very well. Well if you talk about switching and routing, it's really more than just chips, or maybe little building blocks of chips. It's really as much an architectural play, especially in the high end top of the rack, in the [what you call leaf] and the spine side of the data centers. And here is where our model just goes beyond selling pieces of silicon, we sell a lot of firmware and software that goes hand in hand to enable those chips to work with multiple OEM customer and multiple OEM customers at the end of the day. So that's a very interesting model for us, and what is overriding all of this is obviously the need for more larger and larger more and more throughput. Especially in data centers, and especially in top of the rack and all the way to the spine. So we have big advantages in this area simply because of the strength of the intellectual property we have in making very complex engineering, very complex SoCs, but also interface very high-speed interfaces or SERDES as we call it. So all that plays to our advantage of being able to do it. And we continue to do that, and we continue to ---+ it goes from 10 gigabit to 25 to 50 to 100, and maybe interest and going on in the future to 200 gigabit to 400 gigabit. We believe we are investing heavily to ensure that we can develop those kind of products and develop it first and better than anybody else. So and with that expansion of features, we benefit from content increases. Simply because you are providing a customer more throughput, and it's not a one-on-one scaling. It's more and more ---+ it's a lot of value for our customers to be able to go from 25 gigabit or 10 gigabit to 100 in the next year or two, and we provide a lot of value in that. And by the way, in broadband, it's not dissimilar. Except that maybe it's not evolving as rapidly simply because it's a much more stable market, ones that you hear about now 4K TVs our video delivery to moving on to high definition HD and eventually moving even to 8K. That would be interesting to see how 8K is going to be accepted since the human eye may not even notice the difference, but people want it. And they want that, we're able to provide that but it might take a bit longer. That's why I said broadband to us is a much ---+ we look at it as a much more stable gradually evolving market, even as OTT, the hype behind OTT and all that comes play which we participate in. But in data centers, it's serious stuff. More and more data are being basically pushed through pipes stored, processed as social media keeps expanding. That's why we our seeing this past quarter and current quarter extraordinary strength in the demand for switching and routing.

2017_AVGO

2017

LKQ

LKQ #Thank you, Joe, and good morning to everybody on the call I am delighted to share the results for our most recent quarter with you I will begin with a few high-level financial metrics before providing an update on our operating segments and discussing a few of the macro trends we witnessed during the quarter I will then turn the call over to <UNK> <UNK>, who will provide some segment-level financial detail, and then I will come back to comment on our updated guidance and make a few final remarks before taking your questions All-in-all, we believe Q2 was a strong quarter for our company and we are pleased with the results As noted on slide 3, consolidated revenue was $2.458 billion, a 6.7% increase over the $2.3 billion recorded in the second quarter of last year Total revenue growth from parts and services was 6.4% Importantly, organic growth in parts and services was 3.8% on a reported basis After taking into account the fewer selling days in Europe related to the timing of the Easter holiday, organic growth was a solid 4.9% on a same-day basis It's nice to see the organic growth begin to pick up from the levels we experienced in the first quarter Income from continuing operations for the second quarter of 2017 was $151 million, an increase of 9.5% over the comparable quarter of last year, resulting in diluted earnings per share from continuing operations of $0.49 as compared to $0.45 for the comparable period of 2016. On an adjusted basis, diluted earnings per share from continuing operations was $0.53 compared to $0.52 for the same period last year Let's turn to the operating highlights As you'll note from slide 6, parts and services revenue for our North American segment grew 5.5% in the second quarter of 2016 compared to the comparable quarter of 2016. Organic revenue growth for parts and services in North America was 2.8% This reflect a nice uptick from the 1.8% recorded in the first quarter and a touch above our expectations coming into the quarter There is no doubt that the mild winter weather patterns, which hit us particularly hard in the winter months, carried over into the spring as our body shop customers have limited backlog of work coming into the second quarter As witnessed for several quarters now, we continue to grow our parts and services revenue faster than the market as a whole According to CCC, collision and liability related auto claims on a national basis were up only 1.7% in the second quarter of 2017, following a 1.1% increase in the first quarter So, our growth of 2.8% in Q2 reflects a 110 basis point outperformance, and gives us confidence that we continue to do the right things to serve our customers Importantly, the growth in our core collision product continues to be stronger than the North American average as whole We also had an excellent quarter in terms of the sale of salvage mechanical parts, and the PGW aftermarket glass business, which we owed for a full year as of April 21, 2017, was a solid contributor to the overall North American organic growth rate during the remainder of the quarter The total loss rates continue to increase, reaching 19% at the end of the second quarter CCC believes this increase is the result of the mix effect and hangover of an older vehicle fleet and a slight uptick in the vehicles one- to three-years old being deemed a total loss It's important to note that cars in both these age groups are not representative of our collision sweet spot of 3 to 10 years So despite this slight uptick in the total loss rate, we don't believe that it had a material impact to our current business Additionally, according to the U.S Department of Transportation, miles driven in the United States were up 1.2% on a nationwide basis in April But miles driven in the Northeast and South Gulf regions were only up 0.3% and 0.6%, respectively So clearly, we are, again, witnessing significant regional differences in some of our key markets where miles driven are trending below the national average During the second quarter, the impact of acquisitions added 2.9% to parts and services growth in North America, with most of that reflecting a few weeks of revenues related to the acquisition of the PGW aftermarket glass business We lost about 20 basis points of growth due to currencies, primarily related to the Canadian dollar We purchased 77,000 vehicles for dismantling at our full-service wholesale operations, a 6.9% increase over the comparable quarter of the prior year The auctions continue to be healthy and we have access to the vehicles, we believe, we need to continue the growth of our recycling operations For our North American aftermarket business, we have been expanding both our total collision SKU offerings as well as the total number of certified parts available, each growing 9.1% and 17.6%, respectively, year-over-year in the quarter In our self-service business, we acquired $141,000 lower-cost self-service and crush-only vehicles, reflecting a 2.2% increase over the second quarter of last year Our self-serve team has proactively managed the fluctuations in the scrap market by quickly adjusting the cost of goods sold relative to the current market conditions and having an operating culture focused on cost management Overall, I'm happy with our operating performance of the North American business During the quarter, gross margins improved 40 basis points compared to the prior year, in part due to enhanced productivity of our salvage operations, wherein the revenue per car increased at a faster rate than the car cost, reflecting refinements to buying algorithms and an emphasis on inventorying more parts per car and also holding the cars a bit longer I'm particularly happy with the ongoing benefits we are experiencing with our productivity initiatives Although you won't see the same year-over-year improvement in margins because the major benefits from the procurement initiative were first realized about a year ago, we continue to benefit from the ongoing savings which are estimated to be about $9 million on a quarterly basis compared to the base 2015 levels With respect to Roadnet, for the month ended June 2017, we were operating at a 97% usage level across our fleet with year-over-year increases of 60% in terms of miles dispatched, 28% for stops dispatched, and 34% for routes dispatched I'm particularly pleased that we have reduced our missed service windows by 53%, which today stands at less than 1%, another validation of our continued commitment of stellar delivery service to our customers Lastly, we integrated three PGW branches into an existing LKQ facility during the first quarter, added another in Q2, and have completed two more early in Q3. We have an additional seven-branch consolidation scheduled for the remainder of the year, which will bring the total consolidations to 13 for 2017, and this will help the cost structure on a going forward basis Moving to the other side of the Atlantic, our European segment achieved total revenue growth of 7.9% Importantly, organic revenue for parts and services witnessed growth of 4.1% on a reported basis and 7.1% on a same-day basis Remember, we lost up to two selling days in many European countries due to the Easter holiday falling in Q2 this year compared to the first quarter of last year Now that Rhiag has reached its anniversary date and it was included in the results of operations for the full quarter, both this year and last year, we are going to report the growth on a segment basis only, just like North America, as opposed to on a business-by-business basis What I can tell you is that on a same-day basis, the organic growth of ECP and Sator were above 5%, while Rhiag was in double digits, which we believe are terrific results for all of the entities Acquisitions added an additional 10% revenue growth in Europe during the second quarter of 2017, but the weaker currencies, when compared to the 2016 rates, resulted in a 6.2% decline, largely due to the significant year-over-year decline in the pound sterling The UK team performed extremely well in light of a challenging macroeconomic environment The stagnant wage growth in the UK, when combined with currency-induced inflation resulting from the Brexit referendum has created a challenging operating environment for our UK business Despite those challenges, our team remains focused on driving market share and continuously creating a great service experience for our customers In particular, our collision offering in the UK provides insurance carriers an attractive value proposition as they face the same dynamics as domestic carriers with increased repair cost and pressure on cycle time Our Netherlands operation recorded some of the highest same-day growth since we bought the business and is reflective of the ongoing integration of the tuck-in acquisitions we've completed over the past few years And the double-digit same-day revenue growth at Rhiag is a result of better-than-expected performance in Italy, and a growing, yet very old car park in Eastern Europe, which creates excellent demand for the types of parts we distribute During Q2, we opened up a total of 13 new branches in Europe, including one new location in the UK and 12 new locations in Eastern Europe Over the past 12 months, we have opened 47 new branches in Europe, including seven in the UK and 40 in Eastern Europe With respect to Tamworth the warehouse, our T2 project, I am pleased to report that ECP is still on plan with the implementation process and is almost finished with system testing Product stocking at T2 started the last week of June And this past Tuesday, we had the very first shipments out of the facility to just a couple of our branch locations We continue to believe we'll be fully operational at T2 by the end of the year and the project remains on time and on budget With respect to Andrew Page, as anticipated during our call last quarter, the UK Competition and Markets Authority, or CMA, has initiated a Phase 2 investigation of our acquisition of this company We anticipate this review will be completed by year-end We remain optimistic and believe that the evidence supports that our acquisition of Andrew Page will not lead to any material lessening of competition But the end decision rests with the CMA and we could be required to divest some or all of the business While the CMA investigation is ongoing, we have been required to operate under what is called a hold separate order, which means we are not able to integrate the companies, and ECP and Andrew Page must continue to operate as competitors in the marketplace As a result, we are very limited as to what we can do to improve the business as we cannot eliminate any of the duplicative expense We know there are solid synergies and customer benefits available if we can put the companies together, but until we get the requisite clearance, our hands are tied and Andrew Page will continue to be unprofitable The overall outlook for our European segment and its strategy remain favorable in terms of our ability to grow both organically and through acquisition According to statistics included in the European Automobile Manufacturers' report, we currently operate in countries representing about 50% of the European car park, including operations in four of the five fastest-growing car parks So, we have plenty of runway to grow And finally, our Specialty segment continued to perform very well, achieving organic revenue growth of about 5.9% during the second quarter of 2017. Truck and SUV sales, which benefit our Specialty segment, remains very healthy Additionally, the performance of our Specialty segment was aided by the strength in the RV market, which is benefiting from increased consumer confidence, the retiring of America's workforce, attractive financing options and lower fuel prices According to RV industry statistics, in 2016, total RV unit sales reached an all-time high, and related accessories represent key product categories for our Specialty segment To help support the growth of this segment, we are in the process of adding a new 450,000 square foot Specialty Parts Distribution Center in California that is expected to come online in the second quarter of 2018. Our corporate development activities have continued in earnest as evidenced by our acquisition of seven businesses during the second quarter Most of these were smaller companies with a combined annualized revenue of about $68 million These include a salvage operation in Pennsylvania, a transmission rebuilder in Atlanta to augment the greenfield capacity we are bringing on in Oklahoma City; three small aftermarket distributors acquired by ECP, including another distributor in the Republic of Ireland; one small aftermarket distributor in Italy, and another small automotive paint business in Sweden In addition, on July 3, the first business day of the third quarter, Sator closed on the acquisition of four aftermarket distribution businesses in Belgium that will help to solidify our competitive position in that market And on July 10, Sator acquired a small garage management software company So, the pace of activity continues to be brisk We will continue to look for opportunities to grow the breadth and depth of our customer offerings through the addition of successful, well-managed businesses to our family of companies around the globe, and the pipeline of potential transactions is robust And now, I will turn the discussion over to <UNK> <UNK>, who will run through the details of the segment results Thanks, <UNK> With respect to our guidance for 2017, we've made some updates based on where we are sitting at the halfway mark of the year Organic growth for parts and services has been narrowed to 4% at the low end and 5.25% on the high end, reflective of the fact that we're sitting at 4.1% for the first six months Likewise, we have narrowed the range for our adjusted diluted earnings per share from $1.84 at the low end to $1.92 on the high end, increasing the midpoint to $1.88 per share The corresponding adjusted income from continuing operations is $570 million to $595 million, while cash flow from operations has been revised up to $620 million to $650 million Capital spending has remained constant at the $200 million to $225 million range The updated guidance reflects an effective tax rate of 35.15% and exchange rates in the back half of the year of $1.30 for the pound sterling, $1.15 for the euro and scrap at $150 per ton As it relates to our effort to bring on a new Chief Financial Officer, the response to our search process was terrific and we have had the opportunity to meet with some incredibly talented professionals over the past few months Whittling down the talent has been hard, but we are in the final phase of the process, and I expect we will have a final decision in the near future In summary, Q2 was a solid all-around quarter accentuated by an uptick in organic growth across all of our segments The overall results reflect the collective efforts of our more than 40,000 employees around the globe, who are working hard to serve our customers each and every day I would like to thank each of them for their dedication Finally, I would like to thank Rob Wagman for his efforts during his 19 years at LKQ As you know, Rob stepped down on June 1, and is now serving as Executive Advisor with a focus on corporate development activities Rob's contributions during his tenure were countless, and I look forward to his continued insights as we move forward And operator, we are now ready to open the call for questions Question-and-Answer Session Good morning, Jamie Sure So, a couple of questions you got built in there, Jamie But all-in-all, we are expecting that the car park and the age of the car park will be a gentle tailwind as we move forward In our standard information that we provide the investment community, our standard investor relations deck, we include a slide, as you know, that is what we call our collision sweet spot of 3 to 10 years And for the first time in many years, the number of cars that fall into that age bracket in 2017 is actually ticking up a little bit Now, it's not significant, so we don't anticipate any major movements here in 2017, but at least it's movement in the right direction, I believe, from about 101 million units to 103 million units Then we get another more substantial uptick in 2018 and 2019. So, there is no doubt that we've sold the better part of 52 million vehicles in this country over the – new vehicles over the last three years, as those vehicles begin to come in to our 3- to 10-year sweet spot, there will be more cars that will need the types of parts that we sell We do the best we can to track the vintage of parts that we're selling We haven't seen a material shift, if you will, thus far But again, we do believe that as the number of cars in a sweet spot grow that that will be a gentle tailwind to our business So, with respect to the European organic, again, the business there is differently because we are adding branches, they get closer to the customer base You have to remember that in the European business, we need to be within 30 to 60 minutes of delivery time between our branches and the customers in order to fulfill their expectations Part of the way we do that is to add new branch operations to get close to the customer base That's how we grow actually our market share, if you will So, some of the growth in Europe comes from, what I'll call, the organic growth of the more mature branches Some of the growth comes from having just more dots on the map, right And so Rhiag – and this is all same day, to make it simple and take the calendar out of the mix, right? Rhiag was just north of 10%, on a same-day organic basis About 55% to 60% of that was the contributions for what we would call the more mature stores And then the balance of it was the impact of those 40 new branches that we've added in Eastern Europe over the last 12 months If you move back to the ECP, where organic growth was just shy of 6% on a same-day basis, about 85% of that came from the stores that we've had for more than a year and about 0.9% of growth came from those seven new stores that we added over the last 12 months The car park in Europe, it's aging a little bit as well, but it's – you've got a couple different car parks in Europe right You have Eastern Europe where the average age of a car is still 9.5, maybe 9.6 years old and then you've got Eastern Europe where the average age of car is over 14.5 years old So there's some very different dynamics based on the geography But the car park is continuing to grow It's growing faster in Eastern Europe than it is in Western Europe That's said, in 2016, the number of auto registrations in the UK hit an all-time high So, there is a good backdrop for our businesses as we continue to move forward So, it's 5.6% to 6% Actually, no real shift, <UNK>, in our, kind of, if you want to think, product line revenue or growth I mean, the reality is the core collision product, think about Keystone (41:43) in a box, if you will, the core aftermarket product grew higher than the 2.8% total Our salvage mechanical parts, engines, transmissions and some of the other big mechanical pieces, right, they were above the 2.8% as well Again, as has been the case now for several quarters, we do have some product lines that are soft We talked about this in the past Aluminum wheels, paint, cooling continue to be soft But again, there has been no major shift in kind of the relative contribution of salvage versus aftermarket or mechanical versus collision Yeah And again, the fact that our organic was at 2.8% and total repairable claims are only up 1.7%, that gives us confidence that we are continuing to, at a minimum, hold our own and likely gaining share Absolutely Yeah Well, so last year, in 2016, Andrew Page hit us for about $0.02 a share As we've indicated this year, we think it's going to hit us for $0.03 a share It's going to take some time Once we get our – the ability to truly mange Andrew Page, it's not going to be an overnight flip, but ultimately we will be able to rationalize the way we believe all those losses and ultimately get it into a profitable situation And so, yeah, I'd call, $0.02 to $0.03 of incremental value potentially next year Correct Now, we anticipate we're going to be able to get it into profitability But again, that doesn't happen overnight, <UNK> So, the key is going to be, we're – we continue to be optimistic, we continue to feel strongly in our perspectives At the end of the day, it's how many of the branches that we've acquired are we going to be able to keep Probably not, because the competitors on the street corner are still the same competitors on the street corner They're just owned by somebody else So, just as we did in the Netherlands, where we brought some of the larger distributors that we were selling to, we brought some of our larger customers, the flip from three-step to two-step, that's really what the acquisition of the four businesses in Belgium were all about They have a good market share and that will allow us basically to get to the last mile for the garage which is what – we were missing that Well, again, nothing happens quite that fast, <UNK> But over the next year, just like over the last year, as we've integrated the Netherlands tuck-in acquisitions, over a year, you begin to move it a little bit and, ultimately, it'll look like the one big seamless enterprise in Belgium So, again, we haven't bumped up against the big French companies in acquisitions kind of head-to-head, so I can't comment directly as to whether they're being rational or not They're good companies, they're solid companies, they've got good capital structures, right Whether they decide to sell is going to be up to their private equity owners With respect to some of the other countries, Germany, Spain, if you will, we believe that given our presence in the marketplace, we will have an opportunity to at least look at those businesses if and when they come to market And we think that with our base of operations, we have as much, if not more, ability to create synergies than anyone else in Europe But we have to wait Again, we can't force somebody to come to market No problem Good morning, <UNK> So, the collision business, relative to the ECP is still relatively small, right? It's running somewhere on the order of £50 million, £60 million But it's growing nicely Collision in the UK, I think, was up about 10% in Q2 over Q2 of last year So, still outperformance from a growth perspective The key there is, ultimately, the insurance companies in Europe are no different than the insurance companies in the U.S And they've got the same pressure to try and get claims costs down And part of the way they do that is through parts, and part of the way they do that is through cycle time I mean, we have, as you know, ongoing pilots and programs with 18 of the larger insurance companies over in the UK, and a couple of them have told us that, as a result of our ability to get them parts and get them parts quickly, they're seeing their cycle times begin to move down So, we think that, ultimately, that bodes well for our ability to create an ever meaningful business in collision parts over – not just in the UK where we are today, but ultimately to bring that on to Continent as well We don't disclose that, <UNK> But if you backed into kind of what Coast was almost exclusively RV, and Stag was exclusively RV So, you're – probably a little bit north of a third We don't comment on any particular customer and the like, because of agreements that we have with some of our customers, at all But the reality is, is we're always looking to expand our distribution of parts I think there is a lot of folks in the marketplace who recognize the power that we have as being the largest distributor of collision-related parts in North America and that there is opportunities for them to leverage our distribution background We are No new news Well, thank you, <UNK> <UNK>, this is Nick As we've stated now going back to the mid 2015, right, we are incurring costs at T2 even though – well, at least up until last Tuesday hadn't shipped a single product out of the facility because we've been paying rent and we're paying utilities, we're staffing up with labor and the like And in the meantime, we're keeping the other two facilities that will ultimately get shut down, they're running full bore So we're still paying the rents and the utilities and the labor and everything else there Ultimately, once we know that T2 is operating exactly as it needs to be and there is little to no risk of any fulfillment issues as it relates to keeping our 200 plus branches stock full on a daily basis, we will shut down two of other facilities And so, we will save the rent and the labor and the like We quantified that the impact of T2 was $0.03 last year, another $0.02 this year, so $0.05 in total We won't begin to rationalize the other two facilities until 2018. So, we won't get the entire nickel back next year, but we will get, we believe, some good portion of that back And then by 2019, there should be the rest of the positive benefits Probably, we can go both ways I mean if you think about what we've done with Rhiag, okay, we bought a really big business, and yet we've added more than 40 additional branches, which is a program that we brought to the table more than what they were doing on their own I always believe that it's not just what you buy that's important, but what you do with what you buy, that's really important, and the ability to add branches is critical We can go into some of those other locations and try and greenfield, if you will, and just add branches Part of it is, though – creating a presence is hard and that would be a long road So, it'd probably be a combination, <UNK>, of both acquired entities to get a base and then to continue to build the branch network, which we can do on our own once we have a base Yeah So, if you take a look at – we narrowed the range based on where we are The reality is, at the low end of the range, at 4%, if North American organic isn't around where it was in Q2, that will cover us for the low-end At the high end, North American organic would probably need to move close to 4% in the back half of the year So, longer looking, we would anticipate that North American organic, obviously, would continue to move up, particularly if we get any sort of normal winter weather pattern in 2018. Good morning, Ben Let's talk on a same-day basis, because that takes the calendar out of the mix On a same-day basis, we think that Q2 kind of serves as a baseline We're cognizant of the fact that as we move though the back half of the year, we get slightly easier comps, because as you recall, the organic growth comps in the back half last year were still coming in So, I would say, a baseline that's slightly moving north in the back half of the year from a North American organic perspective Yeah So, the Northeast and the kind of the Midwest, which are kind of key winter states, continue to be a little bit behind the curve on a relative basis to the overall LKQ footprint as a central region, and the West continue to be a bit stronger Again, people got to remember, this is a big country And what happens in the Northeast could be completely different than what's going on in the Southwest, right And from a cadence perspective, we don't disclose results, Ben, as you know, but we're comfortable with where we're headed into Q3. If the opportunity arises, we're ready to go today The reality is, is we're going to pay off or continue to pay down our debt, because we generate a lot of cash And it's not a question of waiting to do an acquisition to get our – because we want to get our leverage down, it's really waiting for those acquisitions to come to market We don't control the timing there Good morning, <UNK> Yeah So, the reality is we're trying to continue to grow and optimize all of our businesses, whether it's on the salvage side or on the aftermarket side Again, the core products on the collision space are actually performing quite well As <UNK> indicated in his comments, the margins – gross margins in aftermarket were down just a tad And part of that, quite frankly, has to do with – bigger customers get bigger discounts, and as the MSOs continue to get larger and larger and create a bigger piece of the pie, that's actually good for us, because they use a lot of the parts that we sell On the operating side, again, we're trying to do the best we can to optimize our overall cost and whether it's things like the procurement initiatives, which were largely through Roadnet, which is – as I indicated in my comments, we think will continue to add benefits Again Roadnet, it's not salvage versus aftermarket, it's our total parts, North America, but we will be able to get leverage there Yeah, the ECP question, <UNK>, is really going to depend on where we end up with Andrew Page and how many of those 106 branches that we've acquired we'll be able to keep, because assuming if we are able to keep most, all those, the need then to add incremental branches to be able to get closer to the customers goes down a bit In Eastern Europe, where we've added those (1:02:55) branches over the last 12 months, we are in the early days there That's a market where the car park is growing, the age of the cars is really old and so we sell – the demand for the types of parts we sell is really high The organic growth there, we think, is going to be good for years to come and there's the ability to add, call it, 10 to 12 branches a quarter for a long time Could you ask that again? Well, thank you, everyone, for joining us on the call We do appreciate the time that you spent with us Hopefully, this was helpful to everybody, and we look forward to chatting again in about 90 days Have a great day

2017_LKQ

2015

BKS

BKS #Well, I think specifically we really can't guide to the mix and what ---+ how much each contributed. Having said that, we're quite pleased with the comp performance, given last year's very strong performance of books like John Green's Fault in our Stars, with the release of the movie drove really very strong sales. Having said that, we have also called out the strong growth in toys and games and gift, and those are clearly seasonal businesses as well. I wouldn't really characterize the mix going forward. Thank you. Thanks. Great. Thank you all for joining us on today's call and for your interest in Barnes & Noble. This will conclude today's call.

2015_BKS

2015

SCHL

SCHL #Thank you very much, and good morning, Candace, and everyone on the phone. Before we begin, I'd like to point out that the slides for this presentation are available on our Investor Relations website at investor. scholastic.com. I'd also like to note that this presentation contains certain forward-looking statements, which are subject to various risks and uncertainties including the condition of the children's book and educational materials markets and acceptance of the Company's products in those markets and other risk factors and factors identified from time to time in the Company's filings with the SEC. Actual results could differ materially from those currently anticipated. Our comments today include references to certain non-GAAP financial measures as defined in Regulation G. A reconciliation of these non-GAAP financial measures with the relevant GAAP financial information and other information required by Regulation G is provided in the Company's earnings release, which is posted on the Investor Relations website at investor. Now, I'd like to introduce <UNK> <UNK>, the Chairman, CEO and President of Scholastic to begin today's presentation. Good morning, everybody. Thank you for joining us today. In the first quarter, performance in each of our businesses was in line with our expectations. We were pleased, in particular, with the strong performance in the children's book publishing trade business. Revenue for the quarter was $191.2 million slightly ahead of last year and loss from continuing operations improved to $1.46 per share compared to a loss of $1.67 per share last year. As most of you know, the first quarter when most US schools are not in session is usually a small quarter in which we typically report a loss. Moreover, the first fiscal quarter always was a key selling period for our former Educational Technology and Services business. Following the sale of the EdTech business in FY15, we expected our seasonal pattern for revenue and cash flow to be even more correlated to the school year, with sales concentrated in the second and fourth fiscal quarters. The EdTech transaction also affected our cash position at the end of the quarter; as we made approximately $200 million in tax and other payments related to the sale of EdTech in the quarter as expected. Looking ahead, I want to focus today on the compelling opportunities for Scholastic, which are driven by a growing need for high-quality books and learning materials which motivate and engage children in school and at home. As we begin the new school year, the climate for children's books and instructional materials is excellent. According to a study released this June by the Association of American Publishers, the children's books segment exhibited the strongest growth among any segment in the trade category in 2014. The study also showed that the size of the children and young adult market surpassed the adult market for the first time, with children's and YA selling at 843 million units to 746 million units for adults; although, adult books usually fetch a higher price per unit. This data supports the trends that we are seeing ourselves in our engagements with schools and families; our belief that the strong market dynamics and focus on independent reading will continue to support company-wide growth. This quarter our ability to capitalize on these trends was demonstrated by excellent performances in children's books, specifically in trade sales in the US. Together, clubs, fairs and trade provide both the product and distribution capabilities to reach millions of children and parents and get them excited about buying and reading books. First-quarter trade revenue growth of 22% year-over-year was due in large part to sales of Star Wars: Jedi Academy, Captain Underpants and the Baby-Sitters Club graphic novels to name a few, as well as continued strong performance of our Harry Potter and Minecraft series. Looking ahead, we have even more exciting titles in the pipeline for the fall, including: Brian Selznick's highly anticipated, The Marvels; the second book in the Vega Jane series, The Keeper by David Baldacci, which debuted at number 10 on the USA Today bestseller list this week; and Game On 2016, a strong nonfiction title. Further, the highly anticipated Harry Potter and the Sorcerer's Stone illustrated edition hits stores on October 6. We are very excited about this full-color edition, lavishly illustrated by award-winning artist Jim Kay, which lists for $39.99. We also are optimistic for our tie-in books with the upcoming Goosebumps movie. In our International business, first-quarter sales were generally in line with last year on a constant currency basis driven by strong trade sales globally, continued growth in Asia and improved performance in Australia. With the recent acquisition of a book fair competitor in the UK and Ireland, we have added a network of experienced independent distributors who conduct about 7,000 fairs each year. We are also growing our education business internationally in our Singapore publishing hub, where our PR1ME math product was developed. We'll continue to provide other educational product to be sold globally. In education, especially in K-8 literacy and reading, the market is shifting to include combinations of our guided reading instructional programs and nonfiction content supported by digital supplements, which we provide through our classroom magazines. In today's environment of rigorous academic standards, schools are increasingly customizing their classroom curriculum beyond textbooks, so they can keep kids motivated and as they help them develop the higher-level thinking skills they need to succeed in school and beyond. Educators are also recognizing the importance of independent reading as a critical component of a comprehensive literacy solution. This has opened up the market for educational programs that are flexible and easy to implement. Educators are turning to Scholastic as a partner they know and trust to provide the motivating and engaging content that will help raise student achievement. We have now enhanced our approach by offering customizable comprehensive literacy solutions that link independent reading through clubs, fairs and classroom book collections, with our classroom instructional materials such as guided reading, including print and digital classroom magazines and digital subscription programs as well as professional learning and family and community engagement initiatives. Our field sales and marketing teams can shape a collection of digital and print content that best suits the needs of a particular school and couple that with building level or district-wide school improvement consulting for family engagement and learning supports as well as professional learning and program implementation services. For example, we had a recent sale in Houston where we packaged level book rooms with customized classroom libraries, professional learning for educators altogether. To support the significant growth opportunity that we see for this business, which in fact our education segment is now larger than the former EdTech business we sold, we have added top education experts to our leadership team. We are developing new content and services, particularly in the areas of professional learning and family engagement. Our simpler more focused structure has created a nimble operating environment within the Company that enables our children's book education International teams to collaborate on product development, sales and marketing in a cost-efficient way that is key to profitable growth. Our three closely aligned business segments support the excitement of independent reading through clubs, fairs and trade, the power of literacy skills through education and the global access to books and reading through International meeting the needs of children worldwide. We are certainly aware of the significant cash proceeds from our sale of the EdTech business just four months ago and our ability to generate meaningful levels of free cash flow on an ongoing basis as we have demonstrated year after year. We continue to weigh alternatives for the appropriate use of this capital, including opportunities to invest in organic growth and strategic acquisitions as well as to return capital to shareholders. Our goal here is to continue to balance the strategic capital needs of the Company and its operations with share buybacks and quarterly dividends. For more information on our current results and outlook, I will now pass the call to Maureen. Thank you. I will review our first-quarter results and will refer to our results from continuing operations only unless otherwise indicated. First-quarter 2016 revenues were $191.2 million, up slightly from last year. Like most global companies, we were affected this quarter by the continued strength of the US dollar, which resulted in an unfavorable foreign currency impact of $11.7 million. Cost of goods sold as a percent of revenue was 60% or $114.5 million, up slightly due to higher cost of product in International markets using US-sourced product. SG&A decreased versus last year by approximately $4.7 million or 3%, due to lower employee-related expenses. We reported a loss per share from continuing operations of $1.46 versus a loss of $1.67 per share in the prior-year period. Including the results of discontinued operations, we reported the consolidated net loss per share of $1.48 this quarter versus $1.05 last year, which included earnings of $0.62 per share, primarily from the former EdTech business, which is classified as a discontinued operation. This quarter, we had one-time expenses of $0.04 per share, which included $1.4 million of pretax severance as part of our cost reduction program and $1 million pretax charge related to a warehouse optimization project in our book fair operations. Last year, we had one-time expenses of $0.08 per share mostly from costs related to unabsorbed burden associated with the former EdTech business. In children's book publishing and distribution, revenue was $68.1 million showing 15% growth. Operating loss improved by 5% to $57.5 million. Trade revenues grew year-over-year by 22%. As schools and parents continue to emphasize independent reading, we have excellent opportunities to market our robust and varied offerings in trade including early childhood, middle grade series, YA and licensed titles. In the quarter, we had 3% combined sales growth in our children's book club and book fairs. This shows the continued strength of these channels and our strategy to make it easy and affordable for children and parents to choose their own books. However, we do expect a tough comparison for the second quarter in clubs given the timing of Labor Day and the holidays this fall, resulting in a later start for our book clubs. In education, revenue was $50 million, an increase of 7%. Operating loss declined slightly to $2.8 million. As <UNK> mentioned, our enhanced offerings in education is aligned with the need for students to develop higher-level thinking skills, which is driving interest in our classroom books and other literacy initiatives. We are also seeing higher advertising revenues from our digital consumer magazines. In our International segment, revenues decreased 14% to $73.1 million due to FX. Operating loss improved by 10% to $2.7 million. If you strip out foreign currency exchange, International revenue slightly improved in local currency terms and were in line with our expectations. We expect the US dollar to remain strong, which will impact sales growth in US dollar terms. Based on past performance, we expect global demand for our English language books and instructional materials will continue to grow despite microeconomic headwinds in emerging markets. Corporate overhead expense was $16.5 million compared to $20.4 million in the prior year, due to lower employee-related expenses. Note that HMH is reimbursing us for costs associated with the unallocated overhead related to the former EdTech business as part of our transitional service agreement with them. Free cash use was $303.2 million for the quarter compared to $76.9 million last year. The prior-year period includes results from EdTech, which typically had a strong first-quarter earnings and cash flow. We made approximately $200 million in tax and other payments related to the sale of EdTech as expected. Our excess cash position was also impacted by our normal seasonal working capital requirements, as we built inventories in advance of the school year. At quarter end, our cash and short-term investments exceeded our total debt by $244.6 million compared to a net debt position of $183.5 million a year ago. This week, our Board of Directors declared a quarterly cash dividend of $0.15 per share on our Class A and common stock for the second quarter of FY16. The dividend is payable on December 15, 2015 to shareholders of record as of the close of business on October 30, 2015. While the Company has no immediate need for cash, we understand that there's substantial investor interest in our plans to monetize our real estate holdings in New York City. The Soho real estate market is vibrant and interest in our property from real estate investors, retail partners and traditional commercial mortgage lenders remain high. We expect to announce a plan by our second-quarter earnings call in December. We are beginning construction on the new retail site this November. Now turning to outlook, we continue to expect total revenues in FY16 of approximately $1.7 billion and earnings per diluted share in the range of $1.35 to $1.55 before the impact of one-time items. FY16 free cash flow is expected to be between $35 million and $45 million compared to $73.7 million in FY15, driven by EdTech's transaction-related payments made in the current fiscal year and the impact of discontinued operations on this year's cash flow, as well as slightly higher planned technology spend for new enterprise-wide customer relationship and content management platforms. As previously noted, free cash flow guidance excludes the one-time tax payment related to our EdTech sale. Our outlook includes capital expenditures of $40 million to $50 million compared to $30.7 million in FY15 and pre-publication and production spending of approximately $30 million to $40 million compared to $62.5 million in 2015, which included EdTech. I would remind you that our EdTech business had significant amount of pre-publication expenses and very little capital expenditures. I will now turn the call back to <UNK> for some closing remarks before we move to questions. Thank you, Maureen. I want to conclude by referring to the recent changes in our Board of Directors, which resulted in a reduction in the size of the Board as well as the average age and tenure of our independent Directors. First, we had four Directors who did not stand for reelection at this week's annual shareholders meeting. I want to thank them for their long commitment in service to Scholastic. <UNK> Spaulding began his career at Scholastic more than 50 years ago. His work touched nearly all areas of the business including a particular strength in marketing. He had served as a Director of Scholastic for 41 years. Dr Mae Jemison is a Medical Doctor, Professor of Environmental Studies, Astronaut, Author and President of her own technology consulting firm. She had served the Company for 22 years as a Director. Gus Oliver, an independent advisor and managing Director of a private equity investment firm, was our lead independent Director and headed the Board's Audit Committee with great foresight. Gus is the grandson of an original stockholder and Director and former Chairman of the Board of Scholastic many, many years ago. Peter Mayer is a legend in the book publishing business, former Chairman and CEO of Penguin Group for 20 years and the President of his own Overlook Press in the US and Duckworth Publishers in the UK, and an outstanding trade publisher from whom we learned a great deal. I have felt privileged to have worked with these fine people and am thankful for their sound strategic counsel over these past years. I also want to welcome the two new outstanding Directors to our Board: Andres Alonso and Katrina Lane. Dr Alonso has substantial experience in all areas of public education. He is an innovative leader in education reform and was appointed a professor at Harvard Graduate School of Education in 2013 following a distinguished career as Administrator in New York City Department of Education and as Superintendent of the Baltimore City Public Schools. He began his career in education as an English and Special Needs teacher in Newark, New Jersey. A trustee of Teachers College of Columbia, Dr Alonso is also Chair of the Carnegie Foundation For Teaching and Learning and co-Chair of the Public Education Leadership Project in collaboration of the Harvard Graduate School of Education and Harvard Business School. Miss Lane brings significant experience in data-driven marketing technologies ---+ strategies that are relevant to our strategic objectives, as well as a deep management business and operational experience developed during her years of experience as a Senior Executive at a consumer based business. She was appointed Executive Vice President Consumer Marketing and Operations of American Express Company this year and previously held senior leadership roles at Caesars Entertainment and May Department Stores. She began her career as a consultant at McKinsey and Company. Finally, I would note that at Tuesday's Board of Directors meeting, Jimmy Barge was appointed Lead Independent Director. We look forward to working with our new Directors and to their valuable insights and contributions. With that, I will turn the call back to <UNK> to facilitate the Q&A session. Thank you very much, <UNK>. Candace, we are now ready to open the lines for questions. The taxes, you're correct, were $186 million and about $15 million in expenses related to the transaction. That's the majority of the expenses were paid in the first quarter. Well, I'm going to ask <UNK> to answer that. But first, <UNK> ---+ she'll probably say this too. We have very strong fall list. We hope that momentum will continue to the spring but we certainly are happy about the fall reception of our titles. Yes. Just to add to what <UNK> said, we do have a really exciting lineup for the year. We did know going into the year that it was very heavily front-loaded into the fall, but we are expecting to see that continue into the spring as well. Well, Canada has got a strong club, trade fairs and education just as the US. The trade business is particularly strong in Canada. There's several issues with Canada right at the moment. One, Canada buys its product from ---+ largely from the US. Probably 60% to 80% of the product they sell is sourced from the US and they're paying in US dollars. That's going to affect their bottom line and their cost of sales. Secondly, there is once again a work to rule in the Toronto and the Ontario teachers. So the teachers are not permitted to collect money for book clubs or to operate any extracurricular activities during the period where they're on strike. Well, they're not on strike, but during the period where they're negotiating their contract with the Ontario Boards. So this is going to certainly affect the opening of school revenues particularly for clubs and somewhat for fairs in the fall of 2015. I think, you're particularly referring to education probably, <UNK>. We have a steady ---+ we're a strong player in pre-K to 8 literacy in the education segment. We also have a combination of our classroom magazines with digital supplements, which have been growing dramatically in the past five years and now have exceeded 15 million circulation copies per issue, with a wonderful free digital supplements for each magazine that teachers use. So those are, I would say, probably among the highest used digital materials in the schools in the United States because the teachers find them easy-to-use so they turn them over to the kids. The kids are operating themselves. They're taking quizzes. They're getting further information from digital and so forth. So that is a fast product that is growing rapidly, that's moving to the schools. We're also developing with great alacrity a larger suite of products in the guided reading and instructional reading area in pre-K to 8. Finally, we've expanded our services business, which I know you will understand, as an important component of our former EdTech business. We're offering substantially expanded consulting particularly in pre-K to 8 literacy and also in these new fields of family and community engagement and learning supports, which are effectively helping schools engage community support for kids in reading through mentoring programs, community events and so forth. So in all of those areas, we are accelerating our development now that the education business is out of the shadow of our EdTech business and is a real focus for growth for the Company. I hope that answers your question. Well, absolutely. We have a major effort within the Company to do global sourcing of our print product. Obviously, the positive side of the strong US dollar is the lower costs elsewhere. So we're shifting our printing to lower cost areas, particularly looking at India and other areas in Asia. We have a real focus on this, centralizing our global purchasing and ensuring that we're going to the lowest cost areas where there's still quality printing and transportation available. I'll ask Maureen to address the other cost reduction areas. We've been, as you know, in a process of reducing costs across the Company. I think that we have made inroads in terms of consolidating all our back-office functions. We're looking at more consolidations particularly globally where we can decentralize, as <UNK> said, our buying within Asia. Also centralized some of our financial activities and our technology activities. So we've taken over a lot of the International activities that were done locally. We are doing it more globally. So that's reduced cost. I think we have a long history of returning cash to shareholders. We're not in a particular hurry to make that decision. You're absolutely right that we're looking at ---+ we have optimistic views of how our business is going to go this fall. We're certainly ---+ where there's a late opening of schools, that affects our clubs. We certainly want to be sure that we are right and that their fairs go forward and perform as we expect them to. There's every sign that they will. Secondly, we're being very deliberate about the building as we have indicated. We will take that in terms of the timetable for cash returned to shareholders, we'll certainly take that into consideration as well. Maureen, why don't you expand on that. I mean, we have been really focused. As you know, we had a significant tax outflow on the EdTech transaction, paying $186 million of tax on that transaction. So we've been spending time really trying to make sure that we can be as tax efficient on the sale of the building as possible. That has added some complication. Also we've been very focused on developing an architectural plan that would maximize the retail proceeds. That's what we've been working on. As we just said, we expect to announce that plan by our December phone call. We will begin construction on our retail site starting in November. There are different options for looking at the building, <UNK>. So we are considering all of those including mortgages or whatever, so that we haven't made that decision yet. We felt we had a good strong quarter in trade. We're looking forward to a good school year. The fundamentals in our business are strong. We thank you for your support. We'll look forward to talking to you again in December.

2015_SCHL

2017

CLI

CLI #We're doing it as quickly as we think practical. If you came today and we invite you to come and see it, we have transformed the atrium. When we first took over, there wasn't one piece of furniture in the entire building, 1.7 million square foot, not one chair. Right now, if you go downstairs, there are several 100 people, I mean, in the 200 to 300 people everyday sitting, having lunch, collaborating with their portable devices plugged in, as we provide WiFi and power where we can. We have added almost 10 different pop-up tenants, providing things from Asian Street food to empanadas to barbecue to gelato. As you know, you live in Hamilton Park. We have really done a good job of making this a place to be. We think when we add the ferry service, we will get 4,000 to 5,000 people commuting to here because we're attached to the light rail. We also have a number of parking facilities nearby that people could use. Harborside 1 and Plaza 1 is a tenanted been in place for 35 years. We want to take their space and we're going to gut it, new bathrooms, new Wi-Fi, the density that people want today require better A/C units, larger facilities, definitely some elevators. We'll make all those improvements. That should get done relatively quickly and obviously before 24 months lease expired. We will then re-skin that building, right. We may add some square footage to the top of it. At the same time, we will be doing a base retail of Harborside, which will be in conjunction. We hope to get both projects done within a 24-month period. But some of it may lag if we can't find the right tenant, but it will be transformational each and every quarter as we go through it. As you came over to now, you would say, this place looks totally different than it did two months ago. The bad news is Whole Foods is not going to the site they want to go to because the developers are not building the building. Because we've got our ear to the ground and the bad news is Whole Foods won't come to us because they want to go into an existing facility because they [have meals]. The good news is the site next to us Plaza 8/9 is a great site for Whole Foods to go to because it's a three acre site, as you know, and ---+ Second Street and Hudson Street are perfect blocks where people can actually access the area. We will probably do a number of different retailers, looking at some concept restaurants, some other day spas, some other high-end retailing to go in those sites. We have had a number of conversations. We have tours with chef almost every week and we are picking a list now to the one we want. We have three that we have identified currently and we're going up to about eight or nine when we're done. Same-store NOI growth is up just a little bit. No. Concessions haven't changed. Normal concessions on lease-up of new properties but stabilized properties concessions have not changed at all. As you saw, our occupancy is within a few points of last quarter and frankly, it's actually a little bit higher than last year's same quarter. So the market has been very stable with slight growth and we are up a couple of points in Jersey City, and up almost 5 points at Overland. They will be transferred as the Rockpoint transaction. Whatever we want to do will be transferred in because we want to set the stage with smooth sailing with them. Next quarter, we will have a supplement to show what exactly we transferred in. Thank you, <UNK>. It's been a learning process and let's look at the beginning of what we wanted to do. We wanted to set Roseland on a course so we funded out from Mack-Cali balance sheet, which is the right balance sheet, which we felt was appropriate to get it started. Now Roseland is well on its way; <UNK> and his team have done a superb job of producing stocks that will produce revenue, which we laid out in the supplemental quarter by quarter. We're now at a demarcation point, right. We have to look at what we can and cannot fund and we felt that $500 million would do everything we could possibly ever need. I think the $500 million plus the land that we currently have, we could do well over $2 billion of additional construction. Of the $500 million, we were willing to put in $200 million. We wanted someone else to put in the first $300 million. The $300 million became a size requirement for us that got us essentially all the way through the plan as much as we really needed to do that we could plan to do. Now you look at $300 million. We had at least a half-dozen to one dozen people who wanted to give $1 billion, right. They wanted to own control. We thought this was a great deal. It was superb and we looked at what we had, of course, we had it. And I can't tell you how many people came and said I will give you half the money, I'll give you all the money but I get to run the place, right. You become the 20 and I become the 80; we go back to being a subordinate developer. You weed out those participants. Then you look and say strike out all the hedge funds. Strike out all the opportunity funds. Look for somebody who has a core mentality who basically thinks of the business the way you are. I happened to know Rockpoint, from the previous life of a NATO. They had a sterling reputation and they are the easy in, easy out guys; effectively, they don't look for the last dollar per se. They look for basically having the fiduciary responsibility of executing on a strategy. So they came to us and said we love you guys. We will do the $300 million, so I said great. Our big thing was control and we don't want to actually have a more cumbersome system. They said just give us one Board seat and monitoring capability and the major decisions that we would need to make are all within our control and we do not have their consent on anything unless it was a really, really, really huge transaction. Now you don't have to worry about control. Reporting wise was relatively simple and it comes down to the give-and-take on the numbers, as you pointed out. They wanted to get, because of the fund requirements, a dividend, right. We don't really need one so we gave them something upfront. At the back-end, we gathered those monies back in the form of an accurate ---+ on a promote, we get a little bit more than they do. At the end of the day, we look at it as a hedged transaction, as long as we don't drift below what our current NAV is, there is no [call] back. So if we make a 9%, they get a 9%. If we get a 7%, they get a 7%. We make a 3%, they get a 6% on their numbers but we don't think we're going to make it 3%. All things being equal, it's the best of both worlds. The other alternative as we all know was to issue equity with numbers we didn't think were applicable to our capital structure. So as always, this took a little longer and this was one of the things we were a little later than we wanted to, but everything else, as a Company, as a team, was actually delivered earlier. This was ---+ believe me, this was the ---+ we feel very comfortable with the people we're working with and I don't think there is a fit that we could have found that was better. Of all the things that we looked at and the way they interacted with us and how they deal with us has been superb today. So we're actually very happy with where we are now. It should be very slight because given the size of the deal and the size of the Company. It is an excellent question. We will giving further disclosure on something, as we fund the deal, we will lay out the math. But initially, it is a relatively small equity. It's a $150 million in a company that has $3 billion. We pay them essentially 6% on the initial $150 million ; it's $9 million. The earnings for that division actually should be about that, a little less. So we will probably have a little leakage. I don't think its meaningful, I think we catch up, <UNK> thinks that next year, actually, passover in which there is no issue on [under reporting]. So you are astute, as always, obviously you had a goodnight's sleep last night. There is a little bit of a loss on the numbers but it's very minor. It's immaterial, in my opinion, and it really goes away after the 12 to 18 months as earnings pick up. I think they are no different in their approach than two dozen of my current investors. So to use names like Fidelity or Blackstone or Wellington or anyone who is on my list today who looks and says at a certain price, I'm a seller, and I would buy more at a different price. My good friend, <UNK> ---+ Ted Bigman at Morgan Stanley, who said never take it personally when I'm out of your stock because its just business, right. They are not looking at this as something they want to own for 30 years. They have a 10-year fund, 10 to 12 years, on the outside date, they put a minimum hold period for us. We both felt that five years was a good point of view of holding. After that, I think it would be totally, totally commercial. It is in the best interest of the entity and I think we're near to their benefit. Their reputation is stellar on this subject and not someone who ever bothered someone ---+ or someone other than commercial aspect. They don't look at things and say, well, this is what we need to do, we want to own this because it's part of why we want to own it. Just consolidated, <UNK>. No change. (multiple speakers) It will be simple. We will keep it as ---+ we strive to make ourselves easier to understand, not more difficult. If we had done this another way that was totally transparent and totally ---+ not one hiccup, we would have done it, but this is the best we could do. And we think we did a good job on it. It will probably be above a 7%, maybe as close to an 8%. What ---+ it's an interesting deal, <UNK>. We've bought it ---+ it's a restructuring product. To be very candid, people will notice. So the holdings is owned by RXR and Teacher's Insurance. They were overlevered, when we came in. We made a bid and it was agreed by the servicer; another asset gets spun out. We get to basically buy those assets. We think we did it at an advantageous number. The interesting thing about that, I have never had the experience, <UNK> and I find it somewhat comical but we did the tenant interviews and you go meet the guy and see what is wrong with the building. He gives you all the complaints. Normally you go in, the tenant sometimes have a bravado about I'm going to leave the building, right. I'm going to go because they want you to make sure they have leverage. Every single tenant we interviewed in that market says, I am not leaving. You can't get me out of my space. I have got renewal options and every space has four or five different people looking for the same renewal option and if someone does not pass, I get a second option. And if I don't have a second, I got a third, fourth, primarily because of drive time, well, it's mostly CEOs. They operate in 20,000 and 40,000 square foot blocks and they're not moving. It was actually, in some respects, its refreshing if the owned space that people actually really want to be in and would rather die than leave. Yes, <UNK>, I think the ---+ we have a transit-base ---+ we have a Waterfront transit-based strategy. So we bought assets like we did with Monaco on the water and we bought Hoboken last year. We bought two buildings in Metro Park; now, we are buying buildings in Short Hills. These are markets that we think enjoy the same margin as the rest. The suburban label I'm losing ---+ I want to lose is that, oh, you can't make money in New Jersey. But I want people to focus on it's a five consecutive quarters, we produced GAAP and cash roll-ups in the top quartile of all of our competitors. There's a market to be made in this state and providing high-end office space to tenants who are willing to pay the price for it. Pharmaceuticals, investment advisors, lawyers, accountants; there's certain submarkets that work. There are many that don't. We're going to exit the ones who don't. We want to make money on the ones that do. We looked at the opportunity and we looked at the asset in Short Hills and looked at the investment that <UNK> was making in the office ---+ sorry, the hotel and apartments. We looked at the three buildings across the way which is the majority ---+ for the value that we bought and said, you know what. This is a one-time chance to basically owned one of the best markets in the country. And for that, we will suffer the suburban label. <UNK>, it's <UNK>. Just one additional point on that. Unlike New York, we have already paid a lot of attention to that, when we drive rents here, you do not see a commensurate driving of concession packages. When you get to the actual NERs, neither do the concessions go up nor do the expenses and tenants to the buildings go up because they don't reassess based on income and expense like they do in New York. So we're driving here as we move those rents and that's pure bottomline. I do not have the number in front of me. I'm going to give it to you and we will do it ---+ that's going to close shortly, it will be in the press release. The stuff at Short Hills is probably ---+ actually I have to get it. I don't want to do a [back] (inaudible) on the call. I will call you a little later. Madison, just the information is the next market due West and it is in that high wealth corridor. It's a park in which Allergen is just moving to and taking over 0.5 million square feet. We think that park is going to get reinvigorated but I will give you the breakout for the assets on the other ones. I apologize I don't have the numbers in front of me. Yes I think it sounds directionally about correct. There is a tale of two companies, actually. If you look at what Mack-Cali is doing because our earnings continue to go up and net EBITDA goes down for office business, right. It goes down in the 6% by the end of 2017 and continues to go down in 2018 and 2019 as we project out. Roseland, because of its business model, is much higher than that. The two combined equal to the number you project out for us. We need to see where Roseland is going to be. While Roseland continues to produce relative excellent cash flow growth. The key is in a base. As I said earlier, we need to have an epiphany about where I can get revenue at the end of the year, what expenses reduced, and as far as interest savings and the way they basically alleviate the total number of dollars we are having in debt. We have a plan. I don't think I want to lay out much more than that right now, but I tell you it's the number one thing we think about and I believe it's the one way we can unlock further value. And I don't want to sacrifice that as we have talked about it at an event, with the other growth aspects of the business. It is a balancing act and we are definitely attuned to it. Well, one of the things we're doing is we're highlighting obviously what we think the flex business is. It's in an entity so we moved some office assets back into the parks, in which they are self-contained, as we intend to basically sell them as a park so you could expect us to start to think about exiting that business or letting those assets for sale on the upcoming months. It's one way to basically lose the suburban label and another way to transform the Company and basically getting rid of a large number of buildings. They do have excellent margin; it's one of the last things we want to sell, but 's something we look at as things we might sell in 2017. No, there's nothing else in that portfolio. Just Morristown and Bergen County what we gave you for 2017 so far. I am sorry, <UNK>. We increased ---+ clearly, we increased interest expense guidance specifically for the acquisition ---+ increased acquisitions for the multifamily. So that went up fairly dramatically. As Mike said earlier, the timing of the additional sales is going to impact greatly the amount of interest expense we will have in the year. So I'm not sure if that answers your question, but it is within the range obviously and the timing of the sales will have all to do with where we end up in the range. We already have some other sales if you include ---+ I guess Bergen County, which is not in their numbers, you drop down again. So we got down to 2.1 after some of the sales that are already being completed. That is how we got to 2.1 million square feet and the ones that I've contemplated in the first six months gets you to 1.8 million square feet, 1.7 million square feet. Wish everyone a great day. Have a nice time and we'll talk to you in three months. Bye-bye.

2017_CLI

2017

LMT

LMT #Good morning, everyone I'll be making remarks based on the web charts that we included with our earnings release today Let's begin with chart 3 and an overview of our results We're pleased with our performance in the quarter Sales of $12.2 billion and segment operating profit of $1.2 billion were slightly lower than our expectations, but we expect this timing-related shortfall will be more than made up for during the fourth quarter, as we will discuss later Our earnings per share of $3.24 were in line with our expectations, even with the lower sales and profit levels, and were aided by the favorable resolution of several contractual matters that improved our unallocated expense amounts Cash from operations was very strong at $1.8 billion for the quarter, and we continued to return a significant amount of that cash to our stockholders with $1 billion returned in the quarter In addition, and as expected, we had a very strong quarter of capturing new business, achieving a record backlog level of $104 billion We are increasing our outlook for sales, operating profit, earnings per share and cash from operations, reflecting our growing confidence as we progress through this year So I'd characterize the quarter as one with solid performance and improving prospects for the rest of the year and beyond On chart 4, we compare our sales and segment operating profit in the third quarter of this year with last year's results Sales grew 5% compared with last year to $12.2 billion, with most of that growth coming in the Aeronautics business area which grew 14% in the quarter, driven by F-35 volume Segment operating profit was slightly lower this year after adjusting for the large gain we recognized last year when we obtained a controlling interest in the Atomic Weapons Establishment joint venture in the UK And as I said on the prior chart, we're increasing our full year outlook for both sales and segment operating profit Turning to chart 5, we'll discuss our earnings per share in the quarter EPS from continuing operations of $3.24 was lower than last year's amount But after adjusting for the AWE gain that we recognized last year, our EPS was relatively flat On chart 6, we'll compare our cash from operations this quarter versus our results from 2016. We generated nearly $1.8 billion of cash in the quarter, almost one-third more than we did in the third quarter of last year On a year-to-date basis, we have generated almost $5 billion in cash from operations, well on our way to achieving our increased outlook for the year Chart 7 shows the cash returned to stockholders through the third quarter After deducting year-to-date capital expenditures from cash from operations, our free cash flow is almost $4.3 billion through the first three quarters And we returned about $3.1 billion in cash to stockholders, or 72% of free cash flow, fairly evenly divided between dividends and share repurchases Chart 8 shows the increase in backlog this year to a record level of $104 billion You may recall from last quarter's call that we had received both an F-35 LRIP 11 UCA as well as the Multi-Year IX buy of Black Hawk helicopters shortly after the second quarter ended I'm very pleased that with these awards as well as others in the quarter, our backlog increased above the $100 billion mark for the first time And importantly, our $104 billion backlog level includes only a minimal amount of orders for the potential $8 billion SOF GLSS contract we received in the quarter as we will recognize orders under this IDIQ vehicle only when incrementally added to the contract Chart 9 provides our updated outlook for the year We're increasing our outlook for every metric other than the FAS/CAS adjustment We're increasing our sales outlook by $200 million, and our segment operating profit outlook by $20 million In our unallocated items, we expect to resolve certain conditions related to a prior year's property sale in the fourth quarter, which will allow us to recognize a previously deferred $200 million gain And we're recognizing a $20 million improvement in other expenses for the favorable contract resolutions I mentioned earlier Our operating profit outlook increased by $240 million, reflecting both the increase in segment operating profit and the improvement in unallocated items With these improvements in our operating profit, we increased our earnings per share outlook by $0.55 to a new outlook of $12.85 to $13.15 per share Lastly, we are increasing our cash from operations outlook by $200 million to be equal to or greater than $6.2 billion Chart 10 shows our revised outlook by business area for sales We're increasing our sales outlook for Space Systems, RMS and Missiles and Fire Control by a collective $550 million due to higher volume expected in all three business areas, while we're lowering our outlook for the Aeronautics business by $350 million based on an updated forecast of subcontractor production cost that will be incurred in 2017. The net result of these changes is the overall increase in sales of $200 million Turning to chart 11, we show the changes in our segment operating profit outlook for the year We're increasing our outlook for profit for Aeronautics, Space Systems and Missiles and Fire Control by a collective $35 million, reflecting both improved performance and higher volumes We're lowering our outlook for profit at RMS, primarily to recognize the performance issue we discussed in our earnings release The net of these changes is an overall increase of $20 million in our segment operating profit outlook Chart 12 provides a view of how the new revenue recognition methodology, ASC 606, is expected to affect our 2017 results when that standard becomes effective next year We expect 2017 sales under the new methodology will be about 2%, or $1 billion lower than the current methodology, while segment operating profit will be comparable under both the old and new methodologies As a result, we expect our segment operating margin will increase to around 10.3% We explained the reasons for the changes we expect for 2017 in the bullets on the chart Under the current revenue recognition standard, about 70% of our sales are already recorded using the cost-to-cost methodology, and we'll have minimal if any change under the new standard About 30% of our sales are recorded as deliveries occur, and this is where almost all of the impact of the change to the new standard will occur The main drivers behind the lower sales in 2017 under the new standard are programs where the quantities of deliveries in 2018 will be lower than the quantities of deliveries in 2017. And this occurs primarily with our aircraft programs like the F-16, C-5 and Black Hawk programs Profit, on the other hand, is comparable under the two standards We record our profit step-ups based on the same risk retirement events regardless of revenue recognition method, meaning the timing of those step-ups does not change between the two standards While the timing of the step-ups does not change, the amount of inception to-date cost incurred or cost of goods sold when the step-ups occur does change between those two standards The effect on our delivery base sales contracts is always to shift sales to the left, as we always incur significant costs before we begin to deliver our products As a result, some step-ups in 2017 will be applied to higher inception to-date cost, which helps to offset other contracts that had sales and profit shift to prior periods The combination of all these unique impacts combined to create essentially no change to our profit in 2017 under either methodology The important takeaway of the chart is that there is no change to the economics of our programs or cash from operations The only change is to the phasing of sales and earnings recognized under GAAP We provide our preliminary trend information for 2018 under the new revenue recognition methodology on chart 13. We expect our sales in 2018 will increase about 2% over the restated 2017 level Segment operating margin is expected to increase to a range of 10.3% to 10.5% next year Our cash from operations is expected to be equal to or greater than $5 billion after making required pension contributions of $1.6 billion, meaning our cash from operations before making pension contributions is expected to be $400 million higher than it was in 2017. We expect to have share repurchases of equal to or greater than $1 billion, and we expect to retire about $750 million of debt that is maturing next year Our FAS/CAS outlook for next year is essentially comparable to this year at $860 million And this outlook is based on interest rates remaining at their current level through year end, which would be 25 basis points lower than when we began this year It also assumes a 9% return on our plan assets in 2017, holding to the performance we've experienced through the first three quarters, and it maintains our long-term return on assets assumption of a 7.5% return Turning to chart 14, we've provided an update to both the original and new three-year goals for cash from operations Our original goal in October of 2014 was to generate $15 billion or more over the years 2015 to 2017 while we experienced what we called a pension funding holiday over those years I'm pleased that we now expect to generate $16.5 billion over this time period, while absorbing $100 million of pension contributions for Sikorsky that were not envisioned when we developed this goal In October of last year, we said that our new goal was to generate more than $15 billion for the years 2017 to 2019, even though we expect to have significantly higher required pension contributions over this timeframe than we had during the pension funding holiday timeframe Based on our expected 2017 cash from operations of $6.2 billion, we now expect to generate more than $16 billion over the 2017 to 2019 timeframe, while contributing a total of $3.3 billion to our pension trust over 2018 and 2019. Finally, we have our summary on chart 15. We're increasing our full year outlook for all key financial metrics Our record backlog positions us for sustained long-term growth We'll continue to have robust cash flow even with the higher pension contributions in the future We'll maintain our balanced approach to cash deployment And during our earnings call next quarter, we will provide our full year 2018 outlook under the new revenue recognition standard, which is effective for us on January 1. With that, we're ready for your questions John? Question-and-Answer Session Hi, Rich Let me take a shot at both of those, I think So I think the first part of your two-parter was – and good on you to get a two-parter in, by the way But your first part was cash from operations, $16 billion, is that considered the restart of Greece and Bahrain and maybe Saudi THAAD, if I caught the question right So I think the short answer is it includes the effect of all those in our cash from operations outlook And I think maybe the heart of your question is whether or not there could be some upside For instance, if THAAD were to happen sooner than maybe we have it planned or not, or if Greece and Bahrain might happen sooner I think the short answer to that is I wouldn't expect to see a lot of upside improvement, because none of those are on a DCS or direct commercial sale basis So there is no sort of down payment associated with that All those will be FMS payments And at least for the start of those contracts, I would expect most if not all of those to be under progress payments So, if anything, we've probably got a little cash usage in the near-term associated with winning those new orders as opposed to cash benefit You talked about 2019. By that time, Rich, the cash should start to turn around, and we would start to expect to see some positive cash come out of those orders, I would expect, during that timeframe And next I think was the question on F-35 sales and lowering the outlook for this year, and what does that portend for next year I'm going to give you probably a longer than maybe even necessary response, Rich, to the question because I think that's an important question I'm glad you asked it upfront there So I think the very short answer is, no I don't think that portends anything for 2018 sales for F-35. I think we're looking at about 16% sales growth in F-35 sales in 2017 over 2016. And as I look forward to 2018, there's still another mid-single-digit – or 13% probably to 15% growth range in F-35 sales in 2018. So still very, very significant growth In fact, if you take a look at the F-35 growth in the quarter, it's up 20% over the third quarter of last year So that program is growing at pretty good leaps and bounds And so I think that sort of begs the question so why the lowering of the outlook for F-35? And it's a little bit of a complicated answer, so let me try to get into that First off, we're not in a steady state on the F-35 program As I just said, we are growing at a very, very significant rate And I'll just tell you, it's a lot easier to forecast steady build programs where you're incurring the same costs year-to-year, the same number of deliveries year-to-year It's much, much harder to forecast when you're either increasing rate or decreasing rate, as we are with the F-35. And at any given calendar year, we probably have at least three LRIPs with significant costs incurred in each of those LRIPs all at the same time And, more importantly, our suppliers amount of probably 65% or 70% of the total cost in each LRIP And you should think of that as hundreds of thousands of suppliers – hundreds to thousands, not hundreds of thousands, for each LRIP And, frankly, we missed the phasing of this supplier cost this year I think it's important to note that this does not impact the production of aircraft It's just the timing of when we expected suppliers to incur their cost or bill their cost to us We're actually not missing the phasing on our internal costs We are just missing the phasing of our supplier cost And this doesn't change our overall expectations of cost by LRIP or the profitability by LRIPs, simply the phasing of cost by year And in a weird kind of way we actually know the at-completion cost for each LRIP probably better than we know when it's going to be phased by year So, obviously, Rich, we've got to get this dialed in better with our supply chain costs going forward We think we're going to do that We think we have the process in place to do that I will tell you there's a twist coming up this year and probably next year – or 2018 and probably 2019, though, which is the economic order quantity that we expect to start incurring costs on actually this year, and into next year, and 2019, and beyond We're forecasting it's also going to present a bit of a challenge, because there we're actually buying for three LRIPs simultaneously versus three LRIPs uniquely, like our historical data represents So not trying to over complicate things, hopefully, for you, Rich, but just to give you an appreciation for why we don't think that's a long-term issue with the F-35. It doesn't change the economics of the F-35 program We simply missed the phasing in 2017 of our supplier cost Hey, Rob Let me correct you a little bit, Rich (sic) [Rob] You should think of almost all the F-35 as fixed price incentive, firm contracts, not cost plus, but they're all recognized under a POC cost-to-cost if that might have been your question, method of sales recognition, versus a delivery based That's exactly right, Rob So most of it is coming from 2017, Rob I'll say, with the improved performance that we've seen this year, I think, we're up, what, $500 million or so this year over what we initially guided towards So when we came out with that guidance at the beginning of the year, I think, there was always some confusion, at least as I met with investors and talked to some of the analysts myself, as to was our cash going to sort of fall off the face of the earth when we started making some fairly large pension contributions And there, I'm pleased to say that even with those, we still think we can stay at the $5 billion plus level in the years 2018 and 2019. So most of the change occurred in the upper first 2017 performance but I did want to give the indication that still strong cash performance, especially if you consider sort of pre-pension cash flow, our numbers are increasing every year, 2017, 2018, all the way through2019. Yes So I know it's a lot of moving parts and probably a lot of confusion, <UNK>, because we're basing our sales growth next year based on restated 2017 numbers where we've not given and you haven't seen that laid out by business area So it's a little bit of explaining something kind of on faith at this point in time, frankly, because you don't have the data in front of you We'll obviously provide some restated 2017 performance based under the new revenue recognition when we present our data in the January timeframe But given that, what we're looking at is Arrow's probably going to be up in, I would think, high single-digits sales next year And obviously most of that is driven by the F-35 program That's helping to offset both lower F-35 development costs Although the F-35 development program continues, it's dropping probably a $0.25 billion year-over-year So that's a pretty good headwind for us And, as you said, obviously, we've got the lower C-5. What you didn't mention is we've also got next year zero F-16 deliveries We've just got to start on hopefully the Bahrain aircraft there, but actually lower F-16 volume next year for production aircraft than we have in 2017. Missiles and Fire Control, I'll say, has slight growth over 2017. Again, these are all relative to sort of the restated 2017 numbers under the new revenue recognition, but you should think of that as sort of low-single-digit growth And I think where that may be a little surprising is given all the discussion we've had about the potential THAAD awards, especially with the Kingdom of Saudi Arabia and others, really that work is not planned in our outlook to start until the middle of next year And that's a pretty slow build-up of costs relative to our supply chain on the THAAD program So even though the numbers are very, very large, they really don't amount to just a huge amount of sales growth in 2018 versus 2017. RMS next year is about comparable probably as our current outlook for 2017 where we have LCS volume, including, by the way, the LCS ships for the Kingdom of Saudi Arabia, which is the only program of the ones that were announced where we've actually received some funding and we're starting to do some design work and so forth on the LCS variants for use in that ship by the KSA And that's helping to offset really lower Black Hawk aircraft deliveries and volume therefore for next year as we talked about in our prepared remarks And, lastly, Space Systems is probably down mid-single-digits You should think of that as sort of the continuing trend of lower government satellite volume both for SBIRS and Advanced EHF And, again, this is sort of the good news/bad news story where we have the same quantity of satellites that we're producing, because we're now in the fifth and six variants – or fifth and six quant number of SBIRS and Advanced EHF, we're making each one of them for less than the previous satellite So, while the quantities stay the same, the pricing is coming down, and that's a good thing for us, by the way And then that's – so that's a big piece of it The other piece of it is literally there's very, very little commercial satellite volume or much, much lower commercial satellite volume in 2018 compared to 2017 as we wrap up two satellites that we'll deliver out in the early stages of 2018. So that's kind of the around-the-horn pieces, <UNK>, of what's driving the sales volume that I talked about in total at the corporation level Hey, <UNK> <UNK>, look, I think your math is actually pretty close to what I'm looking at I think the one piece you didn't mention in all of that, and I don't know what you have in your model and I don't know what the other folks have in their models, but I'd be surprised if you have a FAS/CAS outlook of $860 million for next year That's actually a little bit lower than this year We incorporated the 25 basis point reduction that we saw through the end of the first three quarters in the numbers I'm personally hopeful that we have an uptick in interest rates between now and the end of the year and maybe that goes away But as we sit here right now, that's down considerably from at least what we were expecting the FAS/CAS to look like in 2018 compared to the $860 million So that's a pretty good chunk I think of the difference from sort of the EPS numbers you were mentioning there I think the absolute segment profit and the operating profit numbers you were talking about are probably pretty close to what we're expecting to see Hi, Rob <UNK> - Credit Suisse Securities (USA) LLC So <UNK>, for you, going back to the 2%, and I suppose this addresses some of what's already been discussed, but you've got this book-to-bill of 1.2. At some point there's a nice sales inflection up, so I'd like to talk about when that's coming; what your timeframe is for that? And then in the backlog, is that $104 billion a gross number or a net number? Is there any dead backlog in there that is pressuring sales that needs to come out? If I understand the last part of your question, the answer is no I mean, the $104 billion is backlog just like any other backlog number we would have presented to you at any point in time, Rob, so no to that question Your book-to-bill question, the 1.2 and the $104 billion, the record number we had in the third quarter, and I think your question in a nutshell is so why doesn't that translate into higher growth in 2018 than just the 2% we're talking about? <UNK> M <UNK> - Credit Suisse Securities (USA) LLC Yes So I think, Rob, we do typically sort of three-ish year plans And if you take a look here, which you can't, but if you look beyond 2018 into 2019 and 2020, we're probably in the 4.5%, 5% CAGR level for each of those two years over the 2018 numbers So I think that's where, you know, some of that at least growth occurs But some of the opportunities within the $104 billion and some of the opportunities that aren't in the $104 billion, such as the $15 billion of KSA – I'm sorry, Kingdom of Saudi Arabia order for the THAAD program, for instance, that <UNK> referenced in her remarks, even when that gets in backlog, that's a long cycle program, so it will take a while Even though we're recording that on a cost-to-cost basis, it's still a long duration, long cycle program So that was the point we were trying to make the comments about This does really, really well position us for future growth for a long, sustained period of time It just doesn't happen overnight, and especially if you will allow me to call 2018 overnight And the other prospect that we've got long-term sustained growth for is the 53K, and it's got one of the slowest starts on a program that large that I have ever seen I mean, we're literally talking two aircraft in the LRIP 1 contract I think it grows to four in the next one I mean, it's a very, very, very slow growth rate So that's one we'd love to get some higher growth coming out of there But that's the reason why I think, Rob, it looks a little like maybe compared to what you were expecting in 2018. I think it starts to pick up probably to where your expectations are much more in 2019 and 2020. I can give a shot at that, <UNK> Again, this is all a little bit maybe taken on faith, since this is new revenue recognition when year heads and all of their modeling is based on the old revenue recognitions But this will be how we come out with numbers in January of next year So, maybe just starting with the same order as I did I think earlier going around the horn I think for Aeronautics, you should expect our ROS probably in the upper 10% range, probably pretty comparable to this year I'm very happy to say that the F-35 program we're expecting to be greater than 10% our overall program margin in 2018. And that's helping to offset really lower C-5 and primarily F-16 earnings, which led to margin growth due to higher risk retirements in 2017. But upper 10s is probably a good spot, frankly, for Aeronautics And about what we've been saying for a number of years is that when we saw the F-35 program start to get to double-digit, we'd start to see Aeronautics get back to closer to where it was margin wise a few years ago So we're sort of right at that cusp here For Missiles and Fire Control, probably about – you should think of about a mid-teens sort of ROS, maybe slightly below the 2017 level And I think that's an interesting one, because I don't think it's easily understood just how many new wins we have, in fact, won out of our Missile and Fire Control business I mean, if I just go around the horn, <UNK> mentioned the Long Range Stand Off, sort of, the next-generation nuclear cruise missile We also won the F-15 IRST We won a large classified contract We won the SOF GLSS we talked about We won the ARTS – I believe it's ARTS 2D (sic) [ARTS-V2], which is sort of a radar threat emitter contract I mean, these are all substantive starts, new starts for us I mean, just to give you some idea there We're in the process of hiring 1,000 engineers for these new programs that we won in 2017. So that's great from a long-term prospect for us, but it sort of hurts the margin in the near-term And that's what keeps us sort of at the level that I just talked about RMS, if you look at the EBIT or the ROS for next year, probably slightly higher than 2017. I'd say maybe in the mid-7%, maybe a little higher than that range in 2018. And then for Space Systems, I think, it's slightly higher than 2017. And that's primarily because we have less commercial satellite volume in 2018 than we did in 2017. And that's essentially at a zero margin business So, as I said earlier, we've got two satellites that should deliver in the early to mid-part of 2018, so there's just simply less cost volume at that lower margin rate in 2018 than 2017, which helps the 2018 margin And, importantly, I think, just to mention ULA, the equity earnings are pretty comparable between 2017 and 2018. I know I just gave you a lot, <UNK> Hopefully that answers your question and makes sense to you Hi, Doug Actually, <UNK>, I think you pretty much nailed it I think you've got the right numbers in your head and that's sort of the way I think about it as well I don't think I've got a whole lot to add other than what you said And, honestly, we weren't trying to indicate that I think if you look at the chart in the web charts that we provided it said greater than $16.2 billion And we tried to indicate that included $6.2 billion in 2017 and at least $5 billion each in 2018 and 2019. So we weren't trying to guide to a lower than $5 billion number in 2019. <UNK>, first off, welcome to the call Nice to have you on board Look, we've looked at pension a lot of ways I mean, we're already funded in advance of what the requirements of our pension plan to the tune of about $7 billion, almost $8 billion or so We are well ahead of the game in terms of pension funding I mean, we look at that constantly And I'll tell you I know I've said this when I've talked to investors in various conferences and so forth If in fact tax reform is initiated, we will clearly look at potentially accelerating our pension contributions, even if it requires taking out some debt to do so, simply because at the numbers we're talking about, let's just for argument's sake say it is actually a 20% statutory corporate tax rate versus 35% That equates to real money when you get the benefit of the 35% deduction on your pension contributions versus a 20% So we would clearly want to accelerate some in that regard if, in fact, tax reform happens Short of that, I mean, unless there's maybe some – we have a couple of fairly significant collections associated with some international contracts right on the cusp of this year, 2017, that could slip into 2018. Depending on the timing of when those things happen, whether it's late December or slips into next year, if all of them happen and we get hit on the head with horseshoes in 2017, we might actually make a – try to get a dent in our pension contributions this year, which, of course, would lower our pension contributions next year sort of dollar for dollar But that's sort of the only thing we're thinking about as we sit here today But in any event, still, I would expect to achieve the $6.2 billion of cash from operations this year If anything, on top of that, we might actually look at that as an opportunity to bring down or draw down the pension contribution, that $1.6 billion in 2018. So we talked about, Sam, the pension contributions We've teed up $1.6 million this year We've said it's $3.3 billion over 2018 and 2019, which would imply a $1.7 billion required contribution in 2019. So that is increasing a little bit there I'll tell you I don't like as a daily course to provide three-year guidance on much of anything So we want to make sure when we talk those numbers, those are something that we can actually achieve So I hope there's opportunity to do better than that If you looked at the last three-year goal we did better than what we came out with in the early, what was it, 2014 timeframe We've just got to make that happen And we'll see what's going on in that regard for the next couple of years We do have a little bit of higher capital expenditures over the next couple of years, which – I don't know if that's something you'd be considering, but probably $100 million to $150 million, maybe $200 million at its peak higher than this year And you should think of a lot of that as some of the new business wins we've just had at Missiles and Fire Control that I'd talked about requires some capital improvements and some additional facilities and equipment there And you may have seen that we're also building a fairly large facility out of our Space Systems company in Denver to accommodate greater capacity and greater sized satellites going forward, because we think that's where the market is headed So sort of those higher pension a little bit, more than in 2018, and maybe a little bit of CapEx is some of the headwind that we're seeing But other than that, I think it should sort of follow suit, as you said

2017_LMT

2017

RUTH

RUTH #Hey, <UNK>, this is Arne. I'm going to take this one from Mike. That's a really question about mix. There are actually two locations in our franchise universe domestically that are widely ahead in terms of comp sales growth. One of them you can figure out these fits together, when you close ---+ with two locate ---+ our franchises had two locations in Downtown Baltimore. They close and they're within walking distance of each other. When they close one the one that's stayed on Pier 5 is having great comp sales, because we're recapturing the vast bulk of those sales. We also have another franchise location for competitive reasons I don't want to say where it is, but they've done a significant remodel, done some expansion in terms of really good local marketing. And they are one of our bigger franchise units and they're running well in excess of 10% comp sales growth. If these kind of set those two issues aside, the large franchisee with the remodel and expansion in marketing and Baltimore, the domestic comp kind of lines up very similar to what we're seeing in company restaurant.

2017_RUTH

2017

TFX

TFX #So it's <UNK> here. Vascular Solutions have traditionally been quite aggressive with product launches, and you will see that they just launched the TrapLiner which is an extension of their core GuideLiner product. So of their, call it, $170 million per year about $50 million comes from this GuideLiner product. The TrapLiner was initially thought to cannibalized a larger portion of the GuideLiner. Having done some of the clinical work in Canada and in Europe, the feedback from the clinicians is that it will be used in conjunction ---+ more in conjunction with the GuideLiner so the cannibalization rates will be slightly lower, so that is a potential for upside. In the longer term, I think with the new products, being freeze dried plasma could be a significant opportunity in the future. We had a strong military call point in the product that will be close to that [call] point. The proposed we have with Ping strengthens that call point into the military, so we think that will be a creative. And their top line sales growth will be reinforced by our international channel, and we think that the potential for some further upside perhaps in the future. So, again, the feedback is a resoundingly positive, we have put the product portfolio of percutaneous solutions which is Percuvance and MiniLap into the hands of our full sales force now and put more resources behind it. In the US we have 24 hospitals using it up to 36 that have been through the back through quarter four which is a 68% [hit] rate which is consistent with our success rate going through VACs. We have 35 trials on-going in North America and 60 on-going globally. We're still very enthusiastic about the product. Feedback from the customers and surgeons continues to be resoundingly positive, and we're just working through the value analysis committee through this year and what we expect to see as we get through those is the revenue to ramp through the year and to have more of an impact in [2018]. Thank you. So, I'll cover the margin side so it's accretive to our overall margin. Now there will be some adjustments as we walk through Vascular Solutions. They count certain expenses below the line that we would've counted in gross margins but their gross margins have been in the 66% range as they have reported them. From the point of view of synergy, clearly we just closed this a week ago, we're working through that. Clearly we have a plan there, but we don't anticipate significant synergies in 2017, but obviously that will ramp as we get through 2018 and 2019, and I think we're pretty consistent by 2019, we will generate between $40 million and $45 million in synergies from this transaction. I'll address Turnpike, so, the Turnpike product we're very excited by it. We love the growth profile of it. We love the margin profile of the Turnpike product. The growth of the Turnpike in Q4 was almost 200%, albeit on a relatively small base. We see this as an additional opportunity in the hands of Teleflex, because a lot of their distribution channel overseas or some of their distribution channels overseas at least, does not sell the Turnpike. They sell a competitive product that they had taken on board as a distributor would prior to the launch of Turnpike. So we actually see the lifecycle of that in the early stages of lifecycle for the Turnpike with many years of accretive growth to come for Teleflex and accelerated by what we can do with our channel overseas. And on a tax rate, our approach in planning for 2017 was to develop our plan based on the prevailing or the current tax codes out there for the US and abroad. We have not yet factored in any potential revisions and so what we will wait to do, is see what is actually coming out in terms of legislation, and once that becomes clearer we will make an assessment of the impact and provide updates. But we thought it was premature right now to incorporate any conceptual proposals into the financial plans. This is <UNK>. I spent a bit of time in Washington two weeks ago and I would say while there's a lot of enthusiasm to get something out there relative to the tax reform, there is still a lot of disagreement under the surface in terms of what that really looks like. So I think the approach wait-and-see is important. There can be a lot of negotiation between now and some final proposal. That's something that we're obviously watching very closely as we talked about the whole Vascular Solutions acquisition. We initially funded that on a revolver and bank term loan, and we're going to opportunistically look to see if there is an opportunity to turn that out high-yield. The extent that either the current administration creates a repatriation opportunity or we are able to create one ourselves internally, would cause us to reassess that financing strategy, because obviously we have over $500 million in cash sitting OUS, and that could help us to delever and perhaps take an alternative path. We're working through the question on repatriation, I guess, by ourselves and we'll have to wait to see what happens with the current administration as far as that. So we are watching it closely, obviously. Okay, so it's <UNK> here again. So, within percutaneous you have Percuvance and MiniLap, so they both address that category of percutaneous solutions. We don't normally give specific guidance for individual product categories, but as a set area we expect it to ramp and to be accretive to our new product revenue that we will ramp up during 2017. On the Intuitive side, we do sell a range of products to Intuitive that our [trocar] is predominantly better sold as part of their platform, and that generates approximately 30 to 40 basis points and growth to our revenue globally. We don't see that, that growth would compromise the Percuvance opportunity in any significant way. Correct. Sure. Thanks, operator, and thanks everyone that joined us on the call today. This concludes the Teleflex Incorporated fourth-quarter 2016 earnings conference call.

2017_TFX

2016

FIVE

FIVE #Yes, with the exception obviously of weather. And we've seen this historically. The range of performance when you look across the regions is still in a pretty reasonable range. I would cage it as you just said. It will be pretty similar to last year in the sense that it's going to be all about summer, Five Below being your summer destination. Our stores are alive and they're vibrant and it's your go-to place for all things summer. That's the message we want to communicate and the marketing team is doing a great job of getting that across in traditional network TV, cable TV, on the Internet, and really trying to reach our core teen and tween customers. I'll take the big picture on that and <UNK> can talk about new store productivity a little bit. It sounds like people on the call are trying to read into things. We see this as 3% comp concept. We are really pleased with the first quarter and we're really pleased with the outlook for the back half of the year. We go into the summer, which is an important time for us. I think as all of you start to see the TV commercials, you'll like what you're seeing. The merchandise is strong. <UNK> and his team have really put together a great summer cadence. And now we're getting ready for holiday from a merchandising perspective. While first quarter was strong, you've got to still remember it's less than 10% of our overall business. It gives us the momentum we need and want but we also want to keep in perspective where we're at in terms of the whole year. <UNK>, anything on new stores. Yes, on the new store productivity, <UNK>, as you look at the full year, when you do the calculation, it's north of 90%. But keeping in mind, though, the timing of new store openings. If you remember last year through the mid point of the year we opened up about 70% of our stores. And this year based on timing it's closer to 60% based on what we've opened in Q1 and what we've guided to in Q2. So, that's a piece of it that rolls into the productivity calculation for the full year. Yes, <UNK>, certainly adult coloring has remained strong. I think the way you've got to continue to think about this business and what makes Five Below so unique is the eight worlds. The merchants do a great job of plussing up or down a world as the trends change. The emergence of the room world is a recent change for us and that continues to get stronger, as you get in our stores and see the new merchandise in the room world. But as far as license goes, as I said earlier, it remains strong for us. Shopkins is certainly one of those properties that we like and we continue to see the trend. Series 5 just came out a few weeks ago and that continues to be a strong license for us. So, we're pleased with license, pleased with adult coloring, but in terms of the broader worlds, this past quarter was really led by candy, style and room. <UNK>, I'd just rather start by reiterating your opening comment ---+ 4.9% comp, 40 consecutive quarters. That is the consistency of this business. When I started a year and a half ago, I think our timeline we outlined for you in March of 2015 is that we planned to launch e-commerce within two years. We're still on that track. What's nice about this concept is that we don't need e-commerce to rebuild our model. E-commerce will be part of our larger digital strategy. E-commerce is icing on the cake. It's another way for us to communicate with our customers ---+ ratings and review, research on our products, be more relevant with SEM and SEO. So, we will participate but we see commerce as convenience. We see it as an opportunity for bulk purchases. But our stores continue to remain our number one priority. And as I shared with you in my prepared remarks, we're just seeing better and stronger results across multiple markets, multiple states throughout the country, and we'll continue to emphasize stores. But we will be prepared and are beginning to build out e-commerce. I think it's just too early to speculate as we haven't even launched the site yet on that. It will certainly remain on track and I wanted to share with everybody we're still on track within the two years I originally outlined. It's certainly offensive. We're not in a situation where we need that to change our model. But, at the same time, Five Below is continuing to get broader and the appeal is getting bigger, and there are certain customers that want to take advantage of an online channel and we need to be there for them, too. As far as the brand awareness we will probably be prepared to talk about that on the next call. We are in-flight right now with our spring brand awareness study. Early reads are that it continues to move positive. I think all the steps we've taken digitally in improving our merch assortment, improving the in-store experience are really helping that move forward. As far as Texas goes, outside of weather, I think they were floating away there this week, we really aren't seeing Texas perform any differently than the rest of our chain. No. I think when we call out areas that are outperforming, take as the assumption better than how the overall chain did. But it really wasn't any specific items or that. I think it's just a great demonstration of the progress the merchant team led by <UNK> has made. We've seen those areas really evolve and they're continuing to get better, and they're resonating with the customer. It's incredible value. Yes. It's really, <UNK>, way too early for that. Certainly we created a budget. It's embedded in our overall guidance for the year. As I've said several times, though, we're going to do this with discipline and prudence. Do not expect to see a big drag on earnings or anything like that due to e-commerce. This is additive and a benefit to our customers. It's not the core driver of our future sales. It's too early on the assortment. Off the top of my head, <UNK>, I don't know that piece. I would say it's less than half but it's certainly probably in the 20% to 30% range, if you're just talking purely exclusive. You get into the candy category ---+ Hershey's and Baby Ruth and all that ---+ that can be bought anywhere. But in some of our other worlds, we source it and it's exclusive to us. It's probably in the one-third range. I appreciate it, <UNK> We'll take all the luck we can get. Thank you, operator. And thank you, everyone, for joining us today. Have a great summer. And don't forget to visit Five Below to stock up for all your summer needs. Thanks for joining us on the call and allowing us to share our first-quarter results with you. Have a great day.

2016_FIVE

2017

CHE

CHE #Thank you, <UNK>. Good morning. Welcome to Chemed Corporation's fourth-quarter 2016 conference call. I will begin with some of the highlights for the quarter, and David and <UNK> will follow with some additional operating detail. I will then open up the call to questions. In the quarter, Chemed generated $403 million of revenue, an increase of 1.2%. Consolidated net income in the quarter, excluding certain discrete items, generated adjusted earnings per share of $2.10, an increase of 6.6%. Our full-year 2016 adjusted earnings per diluted share is $7.24. This is a 3.7% increase over the prior year. This earnings growth is below our historical growth rate, and the slowing relates primarily to a shifted Medicare reimbursement methodology. As most of you are aware, on January 1, 2016, CMS implemented a rebasing to the Medicare hospice reimbursement per diem. This rebasing eliminated the single-tier per diem for routine home care and replaced it with a two-tier rate, with a higher rate for the first 60 days of a hospice patient's care and a lower rate for days 61 and thereafter. In addition, CMS provided a service intensity add-on payment, which provides for reimbursement of care provided by a registered nurse or social worker for routine home care patients within seven days prior to death. Rebasing is revenue-neutral for routine home care billings if 37.6% of routine days of care are provided to patients in their first 60 days of admission and 62.4% of total routine home care days provided to patients after the 60 days. Basically, this is a 38/62 ratio. This change of reimbursement reduced our full-year 2016 revenue growth and adjusted EBITDA by roughly $24 million. The revised hospice reimbursement rebasing was the topic of discussion throughout 2016, since our 2016 revenue and operating results were being compared to a more favorable Medicare reimbursement methodology in the calendar year 2015. This unfavorable comparison goes away in 2017, since both 2017 and 2016 hospice revenue will reflect the rebased Medicare hospice reimbursement. With that, I would like to turn this teleconference over to David <UNK>, our Chief Financial Officer. Thank you, <UNK>. The net revenue for VITAS was $284 million in the fourth quarter of 2016, which is a decrease of 0.1% when compared to the prior-year period. This revenue decrease is comprised primarily of an average Medicare reimbursement rate increase of approximately 2.1%, a 2.9% increase in our average daily census ---+ and this is offset by an acuity mix shift which negatively impacted our revenue 1.9% ---+ and the rebasing of Medicare hospice reimbursement that <UNK> just mentioned negatively impact revenue an additional 2.3%. VITAS did not have any adjustments to revenue related to the Medicare cap billing limitation in the current or prior-year quarter. As of December 31, 2016 VITAS had 31 Medicare provider numbers, none of which has an estimated 2017 Medicare cap billing limitation, and all 31 of our provider numbers have a cap quotient in excess of 10% for the trailing 12-month period. Average revenue per patient per day in the quarter was $191.15, which is 3.0% below the prior-year period. Routine home care reimbursement and high-acuity care averaged $162.23 and $709.64, respectively. During the quarter, our high-acuity days of care were 5.3% of total days of care, 63 basis points less than the prior-year quarter. The fourth quarter of 2016 gross margin was 24.1%, which is essentially equal to the fourth quarter of 2015. Our routine home care direct gross margin was 53.1% in the quarter, a decrease of 160 basis points when compared to the fourth quarter of 2015. And this decline is attributed to lower 2016 Medicare reimbursement from the rebasing. Direct inpatient margins in the quarter were 1.2%, and occupancy of our 32 dedicated inpatient units averaged 68.2% in the quarter and compares to 68.6% occupancy in the fourth quarter of 2015. Approximately 75% of our inpatient days of care are in these dedicated units, with the remaining 25% of our inpatient care utilizing shorter-term contract beds. Continuous care had a direct gross margin of 15.8%, which is a decline of 30 basis points when compared to the prior-year quarter. Average hours billed for a day of continuous care was 18.1 in the quarter, a slight decrease when compared to the 18.3 average hours billed for continuous care in the fourth quarter of 2015. <UNK> is going to provide additional discussion to our high-acuity care in his portion of this presentation. Now let's turn to the Roto-Rooter segment. Roto-Rooter's plumbing and drain cleaning business generated sales of $119 million for the fourth quarter of 2016, an increase of $5.2 million or 4.5% over the prior-year quarter. Commercial drain cleaning revenue decreased 0.1% and our commercial plumbing and excavation increased 11.7%. Overall, commercial revenue increased 6.1%. Our residential plumbing and excavation increased 1.0% and drain cleaning decreased 2.3%. And our aggregate residential sales increased 3.2%. Revenue from water restoration totaled $13.7 million in the quarter, which is an increase of 31.7% over the prior year. Our full-year 2017 guidance is as follows. Revenue growth for VITAS in 2017 prior to Medicare cap is estimated to be in the range of 4% to 5%. Admissions and average daily census in 2017 are estimated to expand approximately 3% to 4%. And full-year adjusted EBITDA margin for VITAS prior to Medicare cap is estimated to be 14.5% to 15%. And we are currently estimating $5.0 million for Medicare cap billing limitations in calendar 2017. Roto-Rooter is forecast to achieve full-year 2017 revenue growth of 3% to 4%. This revenue estimate is based upon increased job pricing of approximately 1% to 2%, and modest growth in water restoration services. Our adjusted EBITDA margin for Roto-Rooter in 2017 is estimated in the range of 21.5% to 22%. Based upon the above, full-year 2017 adjusted earnings per diluted share, excluding non-cash expense for stock options, costs related to litigation, and other discrete items, is estimated to be in the range of $7.80 to $8. This compares to Chemed's 2016 reported adjusted earnings per diluted share of $7.24. I will now turn this call over to <UNK> <UNK>, Chief Executive Officer of VITAS. Thanks, David. Total average daily census in the fourth quarter of 2016 was 16,160 patients, an increase of 3% over the prior year. Total admissions in the quarter were 15,889, an increase of 0.7% on a unit-for-unit basis. This admissions performance includes the significant disruption towards referral flow on the east coast of Florida in October from the threat of Hurricane Matthew. Excluding the October admissions in the Florida markets, fourth-quarter 2016 admissions increased 2.2%. Admissions have shown general strengthening starting in August of 2016. Even with the October hurricane disruption, our admissions have increased 2.4% during this 5-month period. This improving trend is a result of our continued focus on enhancing all aspects of our admissions infrastructure regarding people, processes, and accountability. This approach, combined with our continued healthy referral trends, will help to ensure we are admitting appropriate hospice patients in a timely, efficient manner. During the quarter, unit-for-unit admissions generated from hospital referrals, which typically represent over 50% of our admissions, increased 2.1%. Home-based referrals declined 0.9%. Nursing home admissions improved 2.1%. Assisted living facility admissions declined 8.1% in the quarter. On a per-patient-per-day ancillary costs, which include durable medical equipment, supplies, and pharmaceutical costs, averaged $14.99 in the quarter and are 6.8% favorable when compared to the $16.08, the cost that these items had in the prior-year quarter. As we discussed in our third-quarter call, margins in high-acuity continue to be an area of focus both within inpatient and continuous care margins that showed sequential improvement in the fourth quarter. Although the reimbursement for high-acuity is relatively high compared to routine home care. The cost associated with providing this care typically results in low margins. Our inpatient care currently consists of 32 dedicated inpatient units as well as our contract beds. On a market-by-market basis, we are continuously evaluating this capacity so our inpatient facilities are appropriately positioned to meet the needs of our patients in every community we serve. This process involves reviewing all of our existing and potential future inpatient contractual arrangements, and, when necessary, working with our partners to renew, restructure, or exit to best service the community. Margins have improved sequentially by 360 basis points from the third quarter, and we anticipate continued improvement in margins throughout 2017. Within continuous care, we have also enhanced our focus on the labor management of continuous care related to appropriate nursing to aid staffing assignments and the utilization of outside nursing agencies, based upon the patients' locations and the individuals' needs. These efforts improved our continuous care margins also 360 basis points when compared to the third quarter of 2016. VITAS's average length of stay in the quarter was 91.4 days, which compares to 89.8 days in the prior-year quarter. Median length of stay was 16 days in the quarter and compares to the 17-day median in the prior-year quarter. Median length of stay is a key indicator into our penetration in the high-acuity sector of the market. With that, I'd like to turn this call back over to <UNK>. Thank you, <UNK>. I will now open this teleconference to questions. I'm going to turn this over to <UNK> to answer. But let me start, <UNK>, by saying that the ---+ what ---+ just to emphasize one point we've made during the course of the year. With the change in reimbursement, we saw one thing: we saw more competition for patients who very likely would be a shorter stay. A lot of those patients come from the hospital inpatient, the high-acuity aspects of the hospital referral side. So that's where a lot of competition came. But let me start by saying, with regard to referrals, throughout the course of the year, despite some of the difficulty we had in predicting actual admissions, referrals were right at our historic rate. But I just use that as kind of a background, but I'm going to turn it over to <UNK>, because they have expended a lot of effort on just the issue you are questioning. And <UNK>, what I had alluded to inside of the fourth quarter is what you are seeing the results of, a multi-quarter strategic investment in a lot of different facets that encompass not only servicing our hospital referral sources better, but all of our referral sources better. So that includes the ability to have focus on speed of response, irrespective of which setting that referral comes in, as well as leveraging and integrating in some of the technological infrastructure that many of those hospital systems use. Whether they are referring that patient out through traditional means of a phone call, whether they are tapping on the shoulder of one of our dedicated resources inside of their facility, or whether they are facilitating that referral through some of the electronic platforms that they have that we have now integrated into more efficiently to be able to respond more quickly, more effectively, and address the needs of the patient and their family at that time. And <UNK>, just to give you an idea, and I think we have talked to you personally about this. What that really ---+ what the last point that <UNK> is making is, to the extent that as soon as they input the referral information into their system, contemporaneously we get it. So just cutting out two or three steps of the admissions process with regard to initial contact, confirmation of the information, etc. There are some real changes going on as life becomes a little more complicated in the hospice area. And we're breaking it down. It's not just the hospital setting, <UNK>. It's every step in the process to really make sure we are doing the best in which we can to really optimize that experience for our referral sources as well as the patients and families. We've already seen that. First of all, to answer your question, yes. We think that we've lapped that dynamic change that we saw in the market. I think that as we have observed, the best explanation is that there were a whole class of patients that a lot of our competitors put forth very limited effort to get those patients who were very ---+ who looked very likely to be in hospice for two weeks. They just were slow to respond. We were quick to respond. We got an outsized percentage of those patients. When the economics changed a little bit, we saw that change. In other words, they went from 0 to 50% effort. During the course of the year, we saw those efforts flag a bit. And as <UNK> said, by the last ---+ four of the last five months of last year, we already saw that lapping and their efforts flagging a bit and retreating to the mean. So yes, to put it this way, at this point, you can see that in our guidance we are looking for admissions to go back to their ---+ for the last 11 years, we have basically said we expect admissions to go up 3% to 5%. We anticipate that's what we are seeing. And as <UNK> says, he's hopelessly optimistic, with some of his efforts, that we can even move that expectation up a bit, to the extent that his procedures start bearing the fruit that he has already begun to see. And I wouldn't lose sight of the fact, though, that ---+ remember, half of our patients pass away in about two weeks or less. And clearly, we lost money on those patients. There's no way you can recapture the setup costs. And the reason I point that out is, long term, you have to have growing admissions, have growing census. But admissions is a very poor correlation to our revenue ---+ our growth in revenue in any given quarter or, frankly, in any given year. But long term, absolutely, we need to grow in admissions, and we think we are back there. First I'm going to turn it over to <UNK> on labor. On your labor question, <UNK>, I think we are ---+ the competition for the right talent out in the marketplace, we still ---+ that's an occurrence that has occurred throughout 2016. We still see it there. And what we have done similarly along the lines are make strategic decisions as well as investments around investing in our people, making VITAS a very attractive place to work, to come to, and to stay at, and actively tracking the outcome of those things. And we are very comfortable and optimistic that the culture and the Company that we have created and been successful in retaining our folks through through the long term, we will still be able to do. And we are actually starting to see a large influx of interested talent up and down the labor pool looking to join the organization. Because they are looking for stability. They are looking for an organization that does the right thing for patients and families, and one that they see career development and growth within. And one thing ---+ to be candid, <UNK>, also, we're like everybody else. As I look at the labor expenses over the last three months or so, they are a few basis points higher rather than a few basis points lower. There's no question this is ---+ it's a struggle out there. As you get towards full employment, things like this just get a little tougher. But then, luckily, that's one aspect of our reimbursement that changes automatically based on a hospital wage index and inflation. So that's the one thing that historically VITAS has been able to very well manage. And a chart we always show is that basically over the last 12 years, VITAS has been able to hold field-level expense, dominated by the labor expense, within 1 percentage point with regard to total reimbursement. So they continue to have a pretty good hold on it, but it is getting a little tougher rather than a little bit easier. And regarding the expenses related basically to the DOJ, <UNK>, for the quarter on a pre-tax basis, VITAS, we had $1.2 million in expenses, and that compares to $1.1 million last year. And for a full year, we had $5.3 million in 2016, and that compares to $5 million. So we have been running at roughly a $5 million annualized run rate pre-tax. And if anything, that will probably ramp up as we get deeper into this or theoretically closer to trial. No, no updates. We are still in the mediation process, which is a ---+ it's an interesting process, but that moves quite slowly. And there are no set number of additional meetings in the future. We just respond accordingly to the requests of the mediator. One thing you can track, though, because it has an indirect impact on us, is the AseraCare litigation. As you know, they have received a favorable summary judgment last year, and I think now that actually the appeals process begins in March. Well, except for oral argument, about the second week in March. I have no further remarks. Just thank everybody for their kind attention. And we will be here in about three more months. Thank you.

2017_CHE

2016

HLIT

HLIT #Okay. <UNK>, I'll take that, and perhaps <UNK> will jump in. Look, business is good with cable operators I guess is the headline there. The dynamics on the two sides of our business are indeed different. We've got a ---+ the market leading EdgeQAM platform. Where EdgeQAMs are needed, we think we're winning the business. And we had a modestly up quarter in legacy EdgeQAM. That being said, cable operators are embarking on a big architectural transition. And frankly, where possible, they're looking ahead with their investments to this next-generation CCAP. And in our particular case, as we get closer and closer to general availability of our new CableOS platform, naturally, we see customers pulling back a little bit and waiting ---+ looking ahead to that platform. So, that's what's behind the commentary about softening Cable Edge demand in the second half of the year as we transition from legacy EdgeQAM to our new CableOS launch. And on the other side of the equation, things have been going well for us on the digital video front with cable operators. And frankly, there was a real slowdown last year. But, a combination of the UltraHD we were just talking about and some real significant advancements that we've made around compressing high-definition content and some of the interesting things we're doing around over the top, we've got good momentum with cable operators on the video front worldwide. And of course, the subscription numbers that you've seen for cable as well as the broader pay TV space are not bad. I think it's clear that the ---+ well, over the ---+ while the cord cutting is a threat, I think it's not one that is turning out on the short term to be that damaging to our service provider businesses, customers' businesses. And they're responding to the threat. So, we've seen a resurgence actually in spending not only in cable, but also in satellite direct to home as well as telecom. And while our largest customers are notoriously reticent to allow publicity, I think you can go to some of the press releases we've made over the past couple of months, Claro in Chile, [America Mobile] operation, Airtel in India, in Finland a very significant over-the-top project, etc. So, we see satellite direct to home as well as telecom operators following suit with cable and making investments and expanding and upgrading their video infrastructure. So, just to add a few numbers to <UNK>'s comments, in quarter one and quarter two, we did ---+ quarter one, we did $17 million; quarter two, we did $19 million in our Cable Edge business. And our guidance is $12 million to $14 million in Q3. So, we had a strong first half. Our initial guidance for the full year was $12 million to $14 million for the first three quarters. So, again, the first half was stronger than we had initially anticipated. And that's why we boosted our guidance from ---+ up by $5 million from our initial goals. We do expect our Q4 Cable Edge business to tick back up again from the Q3 level that I just mentioned, primarily driven by just, again, the legacy sales that are fairly flat and level relative to Q3. And then we are anticipating shipments of our new CableOS products in Q4. So, we're looking for, again, an uptick as we exit the year in our Cable Edge business. Okay. Thank you. Yes, I would say ---+ let me just start with the operating expenses because it's a little bit easier. We closed TVN earlier than we anticipated. We closed it in February as opposed to in Q2. That added about $4 million to our operating expense guidance for the full year. If you take that $4 million out of the equation, we were essentially right in line with our initial guidance. So, OpEx, again, I think is straightforward. On the gross margin side, we do expect to get in line with our initial guidance for our video business. It fundamentally is tracking along that path now. And as we get into the back half of the year and have full recognition with software revenue, we think we'll be, again, right in line with the initial guidance. On the Cable Edge side, we gave guidance of 40% to 41% gross margin versus our initial guidance of 45% to 47%, primarily due to the mix. The hardware mix is a bit stronger than we anticipated, although as I indicated during my prepared comments, we do believe that our license revenue will follow those hardware shipments as we head into 2017. So, we're looking for an uptick from that standpoint again next year. So, I would just summarize by saying that our video business is essentially right on track with our initial guidance, again, with the earlier closing of TVN taken into consideration. And our Cable Edge business is tracking from a top-line standpoint, off slightly from a gross margin standpoint, again, due to the content of revenue that I just mentioned. No. Essentially, those were products that we had not had much activity on in their current configuration. And to change that, we would've had to put R&D and additional sales focus on it. And it just didn't make sense for us. And it did not impact our overall plans for our Cable Edge revenue in 2016. Well, I think there's a couple different ways to look at it, <UNK>. The first one is that, as we exit Q4, we believe that will have a lower level in OpEx than we had in Q2 and in Q3. So, we're going to have a lower level in Q4 as we exit the year, first point. The second point, as a percent of revenue, our OpEx in Q3 and Q4 will be lower. And particularly, in Q4, it will be at the ---+ probably I think the lowest point that Harmonic has had for OpEx as a percent of revenue in a number of years. And I think the most important point is, with the operating expense run rate that we expect to have, we will be in a position to generate double-digit operating profit in 2017 without a significant increase in revenue. So, I think the expenses are about where we targeted them to be. And again, with the exit rate that we're planning for the year, we're going to be in great shape from a percent of revenue standpoint as well as generating double-digit operating profit heading into 2017. Okay. Well, thank you, all, very much for joining us. We'll call it an afternoon there. Please know that we're committed to continuing this momentum, looking forward to a good Q3, a good rest of the year. We appreciate your continued interest and support. Good day, everybody.

2016_HLIT

2017

HPQ

HPQ #So the Samsung integration expenses run the gamut, from transaction costs, legal costs, and then very specifically, around integration. And whenever you put this together, it's always a little bit difficult to know exactly what the timing is going to be. In total, we still expect the Samsung integration costs are going to be in the $150 million to $200 million range, and that we will take those on a GAAP-only basis, and basically call them out each quarter. So I don't think there's anything particularly special about the fact that the timing has changed a bit. Just a better assessment of when the costs are going to be incurred. So <UNK>, what is typical for us, in terms of normal seasonality for personal systems is probably closer to 6%, not your 10%. But we do expect to be worse than that, as a result of the strength that we saw in Q1. And as you know, we don't guide revenue, and certainly don't guide revenue at the segment level. But we have the right cost structure. We are innovating, and bringing to market great value propositions for our customers. And so, we will continue to fight a good fight with our competition, and we'll see how we work out ---+ how it works out in Q2. Sure. <UNK>, I'm very pleased with how it's working out. We basically believe that by getting to closer to global pricing consistency, that there would be a number of benefits. One was going to be just much more linear supplies performance. As I said, we'd have linear sales out, that then therefore we would have more linear sales in, and we're absolutely seeing that. And as I said, that's what gives us some confidence we will get some permanent linearity benefit this year. But it is also great from a partner perspective because, of course, they're carrying lower channel inventory, and therefore that's their working capital. Our channel inventory levels are healthy. They are below the top end of the newly lowered and narrowed ranges. So we're feeling good about that as well. And then, we're also seeing in the quarter, improvement in terms of discounting. And as I mentioned, we're taking that in lower discounts, and basically reinvesting them back into marketing to drive print relevancy and usage. And it's very important that we do that, because we do not want to be selling supplies on promo. We want to drive the value, to help our customers understand the value of using HP branded ink and toner, and marketing is going to be important to that. And again, looking through the eyes of a customer, it increases customer satisfaction when there's not enormous price volatility in the market, but encourages gray imports, and all of the issues associated with that, and the frustrations associated with that. So we've seen the gray marketing activity significantly reduced. We're seeing much more stable prices in the market, which is a benefit for the customers, channel partners, and our business performance. So <UNK>, I guess, it's all in the eye of the beholder. I love 16%. I love 16% when we put units out, positive NVP units out there, and we grow units 6%. And if that was the opportunity that existed throughout the rest of the year, I'd be okay with it. And I would hope that you'd be okay with it, because it's going to drive great supplies connect over the long-term. Now I think that we probably will get higher in the range, but honestly, if there are opportunities to place more NVP positive units, we should do that all day long. I mean, we've got currency impacts, you've got productivity savings, there's lots of things that are going on in the margins, but the biggest driver for us, to be at the lower end of the range, it's going to be placing positive NVP units. We're confident in stabilizing supplies by the end of 2017. In constant currency. Thanks. Sure. Let's talk first about the restructuring. In Q1, we had roughly 350 employees leave under the plan. And as you said for the year, our target is 1,500 to 2,500. And again, we gave that range, because we were assessing different outsourcing opportunities, and there's still a bit of a range based on that. I would say, we're on track from a restructuring perspective. Restructuring is just a part of the overall $1 billion in productivity savings that we're targeting for the year. And that is, it is, it comes over the course of the year, and is a little bit back-end loaded. But we're feeling confident that we will be delivering on those productivity savings as well. So first, 8% to 10% is really a long-term kind of operating margin view. And it ---+ we've always said, that we'd be at the lower end of that range, if there were good opportunities to place positive NVP units. So there's kind of a theme here, it really makes a difference because of the upfront investment that you need to make on units. Certainly, to get in that range, we also need to get supplies in more ---+ in a growth mode. And in addition to that, it would be the full execution of our strategy, not only in the core, but as well as the growth. There's A3, think about that $[55] billion market, where we have less than 4% market share today, continuing our ramp of graphics and commercial mobility. And we've only just begun on 3D printing, where we placed those first units, and revenue [rec'd] them, which is even more exciting. And the fact that our customers are telling us, that the printers are performing as per our promise on speed, quality, and cost is really important. And that strategy is anchored in time horizons. The core is the here and now, growth is the next two to three years, and future is sort of 3 to 10 year time frame. And that's how we think about this business. I thank you all for taking the time out of your busy schedules to tune in today. I think this quarter can best be characterized as relentless execution and innovation that delivered really strong results. It's a consecutive quarter of growth. So this is the second quarter in a row of growth and solid performance. Innovation is at the heart of driving the meaningful share gains that we had. We're the pillar of stability right now in the industry, whether it's on the security dimension or innovation dimension, regardless of the market conditions. We have increased confidence in our ability to deliver on the commitments that we laid out at the Security Analyst Meeting. And I remain convinced, as does the rest of our entire organization, that our most innovative days lie ahead of us. Thanks very much. Thanks a lot.

2017_HPQ

2015

AMWD

AMWD #Good morning. Two points I would draw you back to. If you went back a year and looked at Q3 of fiscal year 2014, one of the things you would have heard the team talk about at that point in time was accruing infrastructure we put in place for our new construction business. And that was a pretty severe drag on margin in that particular quarter. At this point in time we've now grown into that structure. It was a drag on our first quarter and our second quarter result, but we've essentially grown back into that structure. So that's one comment. The second would be with respect to inflationary impacts. A year ago we were taking pretty big increases. And that pressure has slowed. So that would be the other piece. Yes, you know, to kind of forecast the housing industry has been quite a challenge for everybody involved, and there's a lot of factors that obviously we look at and I know others look at. We constantly reported and consistently reported that we are over indexing in that market. Obviously with the builders that we do business with, we have teamed up with some of the best builders in the country and they are over indexing in their markets. Also the geographic regions in which we have historically played have been over indexing relative to the U.S. as a whole. And then our market share, as well as substantially improved over the past five-years. So as you look at those, our market share, we do expect to continue over index I think there will be slowing impacts out there. Both regionally as we just discussed, whether that is Texas, Florida or Phoenix or some of the major markets we play we are starting to see some variation in those markets. Also our accounts will get tougher and tougher when we talk about market share gain. We've gained most of that market share in the past five years, and we're taking advantage of that market share growth and we a re continuing to grow market share, but it will be a slower pace than we've done in the past. So in general I do expect us to continue to over index but I do expect the incremental amount that we do over index will be less than what we've done in the past. Thanks. This is <UNK>, <UNK>. Primarily if you look at what a lot of analysts are talking about out there, and we obviously read what's being projected for calendar year 2015 primarily related to new construction. And obviously there's a strong correlation as new construction, you know, improves and certainly remodel improves, because you assume there's a domino impact of people buying up and so forth. Some of the projections we're seeing out there, and obviously it's a large range from 8% even as high as 27% to 30% when you talk to some folks. We spent quite a bit of time in the past couple months in preparation for our budget as <UNK> mentioned. [K biz] several weeks ago and spending time at a lot of our builders. And there tends to be I guess a little more conservatism on the builder side if you talk directly to the builders, with regard to some of their numbers compared to what you may hear from the industry analysts and so forth. At the end of the day if you look at some of the economic underpinnings of that key variable that we track closely and that's first time home buyers. Some builders are starting to talk about ramping up for that, but for the most part a lot those economic indicators just have not changed enough in our opinion to really go out and kick start anything significant in that market. And they're vital. They are view truly vital to get this thing going at full speed so it can be self supporting within its own self where people can be allowed to buy up. It supports the remodel industry, et cetera. The government is taking action. You're seeing it whether it's FHA premiums, et cetera, that there are things that are improving, small banks are starting to lessen their lending requirements and so forth, but it's still early stages. Longer term we still remain very optimistic. We do expect to see continued growth in this calendar year. I just say we're going to be a little bit more on the conservative side compared to some of the high numbers we're hearing out there. Yes. Yes, a lot of variables but if you compare this recovery to prior recoveries, and one of the key bottlenecks that remains, it is the ability of the first time home buyer to get back into the market. It is an entry level home but that allows other folks that's want to potentially sell to move up. Even allows baby boomers to move down. It's just that domino impact of what this industry needs to really get into full motion. That first time home buyer, as a relative percent of the total, is still quite a bit lower than it was back in the, say, 2006 time frame. The coming quarter or quarter three. It's actually interesting, the dealer channel, once again, hard to get exact science in those. But the dealer channel did not perform as high as we initially hoped. And at the end of the day, some of it was for good reasons. We actually saw a lot of dealers that due to their success the past couple years were more willing to take a couple weeks off for Christmas, and literally just shut their doors and go on vacation, and that did impact some of the numbers. They continue to over index as <UNK> said, though, relative to the home center market, primarily just due to the a flew answer of the customers walking in the door. The average price of the cabinet they sell is quite a bit higher. And so they continue to do better, continue to over index ,and we do expect continued higher growth out of that dealer channel. Our challenges, obviously Waypoint is still a new brand for us. We're growing it in the dealer channel, but relative to our total makeup we will over index as a whole just because we have more weighting in the home center market. I'll talk a little bit about the business as a whole. It's definitely on our plan, you know, still early, so we're definitely beyond the stages of covering our overhead costs with regard to our SG&A and so forth. We are happy with the margins. I think our opportunity is to go out and grow the business. We have large number of dealers out there. Now it really comes down to penetrating within those dealers and obviously with that comes the incremental margin. We're not where we want to be on margin yet, but the opportunity to improve certainly remains. Yes I would ---+ this is <UNK> ---+ I would add that the ---+ on a like versus like product basis, the market's pretty efficient. And we see similar margins on similar products, but as <UNK> mentioned the difference is the dealer channel has a tendency to sell a higher mix. So as that grows as part of our overall business, it will help re-weight the average of the margin up. But it's more due to the mix than a like versus like. The market is pretty efficient. For the most part you will typically see a pick up in promotions relative to the spring selling season. That's what's budgeted in ours and certainly most others in the industry, as you move into it. I don't predict it's going to mean anything outside of what we would typically see in our Q4, relative to promotion. We've actually been fairly consistent on our side. You just get a lot of variance when you look at a competitor-by-competitor standpoint. We've seen a little bit of uptick relative to the few competitors out there. Nothing that I would say is out of the ordinary, though for coming into the spring selling season. We haven't quite finished the look forward on those respective measures. With respect to material inflation it has somewhat slowed. It wasn't zero in the quarter, we still had an impact in our fiscal third quarter, but the pace is certainly slowed down. Fuel is certainly down, as well, which helps from a transportation perspective. That was a slight benefit for us in the quarter, as well. We're starting our process now as we go through our budget exercise and looking external data to tell us what we think the most likely fuel price will be going forward. So nothing really specific there to offer other than we're in the midst of doing our ground work on that. Let me [jump at one] First of all make sure we're ---+ right now not anticipating we're going to see any type of relief relative to, you know, potentially positive impact of inflation. We are going to see continued inflation into our fiscal year 2016. The question is how much. What <UNK> was referring to for our Q3 is inflation was less than what we initially forecasted, which was a benefit for us, but some of the preliminary numbers I have seen for our fiscal year 2016 still show fairly significant inflation into our next ---+ our fiscal year 2016. And we don't have that detail yet. Thank you. Since there are no additional questions this concludes our call. Again thank you for taking time to participate, speaking on behalf of the management of American Woodmark we appreciate your continuing support. Thank you and have a good day.

2015_AMWD