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maec-2020

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2015

DISCA

DISCA #Sure. It's really too early, <UNK>, to get a sense of where the calendar upfront is going or cancellations. We don't see right now anything that gives us a sense that things are better or worse. The only thing that we see that's attractive is the advertising market in the third and fourth has been consistent, and is better than it was in fourth, first, and second. On the Eurosport side, we've been quite aggressive about going out and doing deals. So far what we've learned a couple of things. We've learned that we can grow viewership significantly without buying big-time soccer. We've also watched as big-time soccer has grown in terms of rates across Europe ---+ 60%, 70%, 80%, 100% in terms of fees; and in many cases it's big distributors that are fighting for that; and in many cases there has to be more than one distributor that gets it. So it's created a feeding frenzy around that content. The good thing for us is we've ducked our heads on that. And because so much economics has gone to soccer, and because we're the only player that can offer a pan-European platform, we've been able to sweep in 60-plus deals of very compelling rights ---+ whether it's speed skating, ski jumping, most of winter sports, summer track and field, more cycling, more tennis ---+ at mid-single-digit. And we're even having discussions with some players that bought soccer that are looking to pick up some extra economics by selling some of these niche sports. For us, those niche sports are looking like those are the drivers that are quite attractive for the Eurosport app. Those are the super fan groups that love ---+ that want to see all the speed skating or want to see all the cycling. So right now I think we're quite comfortable that we already committed that Eurosport will not go upside down; it will be profitable. We took the profitability margins down from in the 20%s to single digits, and we think over time that we should be able to not only be profitable but we should start to get some of the benefit of the app, which is all incremental, and the viewership gains that we're getting now, which we'll get the benefit. And we've seen in some markets already that when you put Eurosport together with our 10 traditional channels, we get benefit. And by selling Eurosport locally we're getting benefit. So I'd say so far so good. And just, <UNK>, some financial parameters on that. One thing that we've spoken about is this investment in sports not only is going to allow us to at least double our Eurosport-specific ad sales over the next five years, but as you know the combination of the sports and the Olympics and our share of viewership across pan-Europe is going to really help drive the top-line affiliate as well. And we will ---+ after Rio the Olympic rings will go on our Eurosport channels. We also have Eurosport.com, which is the number 1 online site for sports scores and clips; the rings will go on that. We're working very effectively with the IOC. It's very early days but we're having some very interesting conversations on multiple platforms about the fact that we own the Olympic IP for the next decade. Yes, sure, <UNK>. Look, there's no question that you're right, we are seeing a ramp of our nonlinear ad sales. Looking specifically at the third quarter, the majority is still very much from linear. <UNK> talked about the traction we're seeing, the 200 million monthly views. Clearly there is a growing, growing opportunity for us to monetize that. But specifically for the third quarter, it still is very much our linear ad sales driven by pricing and demand. The good news ---+ the bad news is we haven't done a great job in monetizing that. And when you look at the overall effort, it's about breakeven, with all the effort that we've made. That's the bad news. The good news is that more and more we're talking to advertisers that like the scale that we have. We're changing our approach in how we're selling, to take advantage. We see a lot of players like Vice who have done, candidly, an extraordinarily good job of monetizing their streams. So this is another thing that Paul and our team is looking at, that we've been, I think, best-of-class with linear and over the next two to three years if we could really build up our capability and our expertise in digital, I think that will be a significant upside. Because we haven't been great at it. It's way too difficult to prognosticate where the advertising market is going. It moved away quickly in the fourth quarter; we didn't quite know why. It flattened out, and now there is no question that volume has been much stronger and pricing has been good. A piece of that, candidly, is that we're outperforming. There are a number of players in the industry that are ---+ ratings have dropped significantly, and so there's been a meaningful ADU issue in the marketplace. So if you want to put money to work, the fact that our ratings are up ---+ and more importantly our share is up ---+ we didn't have that issue, so we were open for business. The other thing is that our channels are on-brand. Discovery has never been stronger, and the ability to get aligned with the number 1 network for men and now we have ID, which was the number 1 network for women ---+ ID is still meaningfully underpriced. And when you look at the CPM differential between broadcast and cable in general, it's still over 30%, and we can deliver with Gold Rush. We can be number 1 for men and beat the broadcasters. ID's length of view was so high. We have super-fan groups around Oprah and Tyler and Science. So I think that being on-brand has really helped us, and we have a good momentum story by having gone back to brand and the fact that our share is growing. So we're just going to have to see. I think right now Joe Abruzzese and his team are doing a very good job, and so are our programming teams in the aggregate here in the US. So we're going to continue to ride this out and hope that the advertising market stays. We'll see. Yes, <UNK>, look, it's a very fair question and one that we talk a lot about. The good news is this. We talked about earlier this idea that we're going to ---+ we expect to buy back about $1.5 billion of our stock the next 12 months. The good news is, given our still prudent but slightly more aggressive leverage target as well as our really expanding cash flow profile, we're still going to have a lot of powder on top of the $1.5 billion. So we still sit here today and say: our stock is cheap; it's a smart allocation of capital; and we still have an enormous amount of capital available beyond that for some opportunistic either buying of IP or investing in scale. So it certainly is not one or the other. The good news is ---+ and maybe surprising for investors ---+ is that we still can achieve both, given what we see as our cash profile and given the slightly increased level of leverage. Thanks, <UNK>. First, the cycle internationally in general tends to be more like three years versus five or six or seven years here in the US; that's first. And this won't surprise most of you, but there really is a difference historically in pricing of distribution deals. The way that it's worked historically is that you get your extra pricing by growth. So price has been relatively flat over the last 10 years for most of us in the content business, and it's because distribution was growing pretty aggressively almost around the world. We still see aggressive growth, meaningful growth, in Latin America ---+ particularly Brazil and Mexico, although Brazil has slowed down a little bit with the economy. And India we're seeing meaningful growth, and Eastern Europe. There are a lot of other markets that are more mature now, like Western Europe and a number of the markets in Japan. What we've been able to do or our strategy, which is starting to come through and will take a shorter time than it did here in the US, where the cycle is longer, is we have been scaling up in Europe over the last four or five years. With the Olympics, with Eurosport, but more importantly just with the overall scale expansion ---+ because we've been growing our market share double digit for the last six consecutive years in Europe and Latin America ---+ we now sit with distributors, and we started about a year and a half ago where, in Western Europe, since there is very modest sub growth it's not going to work for us. So the good news is we have enough scale, we believe, to drive price, and we've been able to do that as our deals come up. The same way we had an attack plan to drive a step-up in pricing here in the US, we have that outside the US. We're not executing it everywhere, because there are a number of markets where you're getting better than double-digit growth just because gestationally these continue to be higher growth markets. And then those markets we'll play the old game, where we're continuing to grow share, we're getting our channels carried, distributors are promoting us, and we're getting double-digit growth. In the more mature markets, we are being quite aggressive. Look, in Sweden, we pulled our signal and we were off for four days, and then we went back on; we were able to get better than double-digit increase. Across much of Europe on renewals we have been very clear that our scale is up, our investment is up, and we need significant increases. So you'll see those come in over the next couple of years. You know, one other point, <UNK>, that I think we could provide that I think is meaningful is that TV Everywhere and SVOD is becoming a big part, particularly TV Everywhere and VOD, across those mature markets. We have a 20-year library in language, and we also have the Olympic IP, and we also have sports IP. So the ability for us to have a win-win ---+ which is you take our channels, but in addition we'll give you some more content for TV Everywhere, because we have a ton of it ---+ it's a win for them, it's a win for us, and it helps us further substantiate the pricing rather than just the old shootout at the OK Corral. Thanks, <UNK>. As you know from our Investor Day, we assumed as the industry started to show very slight decline that that was going to continue. There is a lag because we tend to get paid two to three months later. But looking at the earnings reports from the distributors, I think it was very encouraging. Some of them have gained subs; others are declining at much lower rates. If that flows through, that will be meaningful upside for us to what our plan is, because we've assumed that there'll be a slight decline. And even at the numbers that we were seeing in the recent earnings reports, that's better than what we have in our plan. So we'll just have to see. It's a ---+ for us, the good news is we're very protected on the bundle. We could've gotten more price and structured deals where there was more flexibility to move some of our channels. We opted to have the maximum security for our channels and get price. So we will track pretty closely what the universe estimates are, because we did build into our deals over the last four years less flexibility to play ---+ to move around our channels. Well, <UNK>, we certainly don't want to give too much expectation today about 2016. But look, we're very encouraged by that 12% trend, and I think it continues to speak to our share of viewership being meaningfully higher than share of wallet. We talked about the third quarter, the second quarter being a bit of an anomaly; so us being back in the double-digit range is where we should be. For me, I continue to think that's where we're going to stay for a while. We just have so much growth potential and opportunity across so many of our key markets and regions, and so I think the third quarter trend not only is encouraging but I think indicative of a lot of the core ad sales metrics we're seeing across our International markets. <UNK>, look, this is something that we've thought about and debated the merits of for quite some time, quite frankly. We had one of our Board meetings in October. And look, when we look at our portfolio we look at our free cash flow growth; we look at the fact that 80% of our US affiliate deals are done with tremendous rate CAGRs; when we look at our cash tax rate and what we're doing there to drive that down ---+ when we compare ourselves not only to those operating metrics but then we compare ourselves to our peers around, as I mentioned I think before, our interest coverage ratios, our free cash flow to debt yield, it's the right capital structure for us. We have a derisked US business model. We have an accelerating cash flow model. I'm extraordinarily comfortable with the seat I'm in that we can sustain this higher level of leverage, still being fully committed to and maintaining our investment grade, and allow ourselves to drive a higher level of return on equity while still being very prudent with our debt and capital structure. So it just was very much the timing of not only Board discussions but then just operationally how confident I feel now about our growth profile.

2015_DISCA

2016

SSP

SSP #We gave guidance for the full first quarter on that, and talked about on core and total revenue up 11% to 13%, but we didn't say anything about January. We have an unfunded liability at the end of 2015 of about $200 million and we will be making a pension contributions to the plan in 2016 of something between $5 million and $10 million. Yes. I can start and maybe <UNK> can add-on as well. The TV group was very mindful about making sure that as the political race unfolds we are able to take the most advantage of that. And there were some expenses in terms of promotion at the station, would be one of them that we had incurred in Q4, to make sure that we were where we needed to be to capture most of those dollars. Hi <UNK>, it's <UNK>. Let me kind of give it to you at sort of high-level then I will let <UNK> give you a little more detail. As we said, if you look at the digital segments you've got several things going on at the same time. The local piece, which I believe as <UNK> said is about 65% of the revenue. You know that more by the day becomes a knowable business, where we can see what we think the revenue growth is going to be in the future, and it is going to continue to be strong and a sense of the expenses. So that keeps us moving toward profitability. But I have to tell you, we can get it to profitability much faster, but we have not been in a big hurry. When we look at the impacts also on the on air side that digital has, we have been pleased to just continue to build out what we believe were the market-leading digital brands and we think there will be value there. So we'll get to profitability over the next couple of years. We could make that quicker if we wanted, but we don't think it's wise. Midroll, the second piece, is profitable and growing. Although there is some investment in there as well as we add other elements to it and try to round out what is already a very strong position we have in podcasting. And in Newsy is, Newsy is the one I think you and I have talked about. We have an opportunity here, we are building a very strong brand with have a somewhat uncommon content strategy and programming strategy. Carriage agreements with pretty much all of the players. But you know that marketplace will shake out over the next couple of years. But you know the faster we see growth in Newsy viewership, probably the more aggressive we will be on the investment side. So I sort of look at how the pieces have fall together, we did not budget that segment ---+ we didn't start out with well, here's what revenue and cash flow needs to be in that segment. We are focused on building value in real businesses inside of it and then the segment number falls out at the bottom. We don't know want to show losses in any segment for any longer than we have too. But while we are building value we are going to kind of keep our foot on the petal. Here's <UNK> for a little more detail. Yes, for the fourth quarter we bought about 300,000 shares, in Q4. And we don't comment about whether we are currently active or not. We have been buying under plans very consistently since the window open again after the journal transaction. And I would continue to expect that ---+ you and I have talked a lot about capital allocation over the last year or so, 2016 will be a strong cash flow year from us. And I expect we will continue all of the above strategy of continuing to pick up national digital brands, TV stations in attractive markets, and continue with the share repurchase program. Thanks What I think we've said about 2017 and 2018 is, that we expect a nice double-digit growth in 2017 and 2018. And then of course the Comcast contract comes due in 2019. So we will see a stairstep increase when the impact of that kicks in. That is correct. Very much like we've been saying for the past six months or so.

2016_SSP

2015

VICR

VICR #Thank you. Possibly. So, obviously there is any for capacity in general that, if not satisfied ---+ I am talking about computing capacity ---+ if not satisfied by the next generation of processors, needs to be satisfied by the existing one. We will have to wait and see with respect to that. I think the point here is that any fine-tuning of the scale with respect to VR13, will have ramifications with respect to the level of business on VR12.5. And needless to say, that cuts both ways. Right. If VR13 it's accelerated, we will be selling fewer of the VR12.5. And conversely, if it were to be further delayed, we will sell more of the older one but we would like to see the new ones come about sooner than later. Because we have more opportunities for the new ones, yes. I am not going to pinpoint applications and customers beyond saying that we are spreading our coverage suggesting the past two applications other than processors. We are expanding our coverage applications of VR13 other than the data centers. And the level of interest in our solution across a different place in the industry is rising considerably, because it's not a mystery that the early adopters have done well with our solution. And they have achieved good success in terms of improved performance and capabilities. To be clear, not to potentially create confusion, the ramp that we are talking about in the second quarters, the bookings ramp, is distinct from shipping. And so, as suggested earlier, we are looking at the actual ramp in shipments to ---+ for VR13 to start in Q3. We have a good level of capacity in place and we expect to be able to reach production rates well above past peaks with capacity that we already have in place. For that reason, as suggested in earlier parts of this discussion, our focus over the last six months has been to actually expand capacity in the VIA space. We are starting from very little and we need to bring about significant capacity before we take the next step with respect to a particular chip manufacturing capacity, which is at the core of point of load, the processor type applications, as it is with respect to other kinds of applications in frontends and other areas. We think we've got still a bit of time to take the next step. With respect to Picor products, that is an established model that has got a good deal of scalability built in. So, we think we are well-covered over the next few quarters with respect to, in particular, data center type of applications. I think that would also be VR13, so I think the timing is unfortunately the same. That is correct. We have had ---+ ---+ divided solutions for quite some time now. So, in fact, we have been advancing the capabilities beyond that which was already cable enough, literally six months ago. I think if there is one more question, we will take it and ---+. I think you've got a believer in me. We've invested nearly [$200 million] in being about this capability and I do expect to see a very large return on that investment, so. I am a patient fellow, so. (laughter) Thanks a lot. Thank you, <UNK>. So with that, we will conclude. Talk to you next year. Yes, talk to you all next year. Take care.

2015_VICR

2016

MASI

MASI #Hello, everyone. Joining me today are Chairman and CEO, <UNK> <UNK>; and Executive Vice President of Finance and CFO, <UNK> de <UNK>. This call will contain forward-looking statements which reflect Masimo's current judgment, including certain of our expectations regarding fiscal 2016 financial performance. However, they are subject to risks and uncertainties that could cause actual results to differ materially. Risk factors that could cause our actual results to differ materially from our projections and forecasts are discussed in detail in our SEC filings, including our most recent Form 10-K and Form 10-Q. You will find these in the Investors section of our website. I'll now pass the call to <UNK> <UNK>. Thank you, <UNK>. Good afternoon, and thank you for joining us for Masimo's second quarter 2016 earnings call. We're happy to again report results that surpassed our projections. As in the first quarter, we continued to see strong worldwide adhesive sensor growth, which we believe was attributable both to increase in hospital sensors and our growing base of new customers as evidenced by the prior two quarters' growth and another strong quarter of driver shipments as we shipped 45,300 additional SET and rainbow SET oximeters in Q2, excluding our handheld and Finger Pulse oximeters. Here are some other highlights from our second quarter. Our product sales grew by nearly 12%. Our second quarter 2016 GAAP earnings per share was $0.55, including an $0.08 per share gain related to the new accounting rules for gains realized on stock option exercises and an approximate $0.04 FX benefit. This is a 57% increase from our GAAP earnings a year ago. Important new clinical studies were published during Q2 continuing to validate the growing list of Masimo technologies and products that are reducing cost and improving patient care. And we received two important FDA clearances, which will expand our domestic product portfolio, and on which I will discuss later in today's call. We're encouraged that our 10-year plan to achieve strong earnings growth, built on a solid foundation of breakthrough products and strong and broad service has continued to become more visible and consistent over the last two years. Encouragingly, our results for the first half of 2016 have exceeded our original projections and as a result, we are very happy to be able to once again increase our financial guidance for the rest of 2016. Next, <UNK> will review our second quarter financial results in more detail and also provide you with our new 2016 financial guidance. I will then discuss some additional second quarter business, product and clinical highlights. <UNK>. Thank you, <UNK>, and good afternoon, everybody. Our second quarter 2016 total revenues were $172.6 million, which was up 10.9% from $155.7 million in the prior year period. Total product revenues rose by 11.5% or 11.1% on a constant currency basis versus the second quarter of 2015. Product revenues for Q2 exceeded our expectations too, as <UNK> noted, to both continued strength in attracting new customers, notably in some of our key OUS regions as well as an increase in US hospital sensors. Rainbow product revenues for Q2 totaled $14.9 million, which was up 10.6% from $13.5 million in the prior year period. This increase is consistent with our projected total annual rainbow growth of approximately 10%. Our Q2 SpHb revenues declined to $3.6 million from $4.4 million in the prior year period. This decline was due primarily to a difficult comparison involving two large license orders last year, as well as a slight delay in the shipment of an OUS order, which will now be realized in Q3. Our worldwide end-user or direct business, which includes sales through just-in-time distributors, grew 12.7% in the second quarter to $140.9 million versus $125.1 million in the year ago period. Our direct business represented approximately 86% of total product revenue in the quarter versus 85% in the prior year period. OEM sales comprised the remaining 14% and rose by 5.1% versus the prior year period to $23.7 million. By geography, total US product revenue increased by 10.2% to $117 million compared to $106.2 million in the same quarter of 2015. Our total OUS product revenues of $47.6 million rose by 15% versus $41.4 million in the same prior year period and were up 13.6% on a constant currency basis. OUS revenues represented approximately 29% of total Q2 product revenues, up from 28% in the prior year quarter. Our second quarter 2016 GAAP product gross margin was 65.1%, up by 90 basis points from the previous year's 64.2%. This improvement is attributable to a number of factors including a more favorable product mix, the continuing benefits from our value engineering efforts and other manufacturing cost initiatives, as well as favorable FX movements, including the year-over-year decline in the value of the Mexican peso versus the US dollar. Reported second quarter 2016 total operating expenses were $78.7 million, an increase of $3.6 million or 4.9% versus $75.1 million in the prior year period. Our SG&A expenses were $63.9 million, an increase of $2.2 million or 3.6%, while our R&D spending was $14.8 million, an increase of 10.6% versus the year ago period. The increase in R&D expenses related to additional engineering resources to support both ongoing Masimo new product development efforts as well as additional staffing related to our commitment to reinvest the medical device tax savings. Second quarter 2016 operating income was $36.4 million compared to $27.8 million in the prior year period. This significant increase in year-over-year operating income is the result of a combination of factors, including strong product revenue growth, improved product gross margins and continued operating expense control. Encouragingly, for the third quarter in a row, our operating income margin has exceeded 21% and in fact, was up over 300 basis points above the same prior-year quarter. Q2 2016 non-operating income was approximately $500,000 compared to non-operating expense of $1.1 million in the prior year period. The $500,000 in Q2 non-operating income includes approximately $1 million in net interest expense related to borrowings under our line of credit less other interest income. This interest expense was more than offset by approximately $1.5 million in favorable foreign exchange translation gains resulting from changes in foreign exchange rates from April 2, 2016 to July 2, 2016 on our OUS local currency denominated balance sheets. Our second quarter 2016 effective tax rate fell to 18.6%, down from 30% in the same period last year and well below our expected rate of approximately 30%. This lower than expected Q2 effective tax rate was due to a $4.1 million benefit we recognized related to our adoption of ASU 2016-09, the new accounting rule regarding the reporting of tax benefits resulting from the exercise of stock options. As you'll recall, the new accounting rules require that the tax benefit related to the exercise of stock options reported as a discrete benefit to the current quarter effective tax rate as part of the profit and loss statements. In the past, these tax benefits were recorded directly to equity. Without this discrete item, our adjusted Q2 effective tax rate would have been 29.7%, very close to our 30% projection. As a result of this new accounting rule, our Q2 2016 fully diluted EPS was increased by $0.08 per diluted share, following a $0.02 increase in Q1 2016. Our average shares outstanding for Q2 were 52.7 million, down from 53.7 million in the year ago period, but up from 51.9 million in Q1, 2016. During Q2 quarter, we repurchased an additional 400,000 shares, increasing our year-to-date purchases to 1.5 million shares. The sequential increase in our Q2 weighted share count was primarily due to the impact that a higher stock price has on the diluted value of stock options outstanding under the treasury stock method. Second quarter GAAP net income increased by approximately 55% to $30 million or $0.57 per diluted share including the $0.08 per diluted share benefit related to the discrete Q2 accounting change and the 4% benefit from movements in foreign exchange rates. As of July 2, 2016, our DSO was 47 days compared to 52 days as of April 2, 2016 and compared to 46 days as of January 2, 2016. Our inventory turns remained at 3.7, consistent with the April 2, 2016 level and were down from 4.2 as of January 2, 2016. Total cash and cash equivalents as of July 2, 2016 were $116.1 million compared to $132.3 million as of January 2, 2016. During the first six months of the year, we have generated approximately $56.7 million in cash from operations and $19 million from the exercise of stock options. These funds were used in part to repurchase 1.5 million shares at a cost of approximately $63.4 million and to repay approximately $10 million in our line of credit borrowings and to fund our operations. During the most recent second quarter alone, in addition to the repurchase of approximately 400,000 shares at a cost of approximately $20.5 million, we also repaid $50 million on our line of credit, lowering our total borrowings outstanding from $225 million at the end of Q1 to $175 million at the end of Q2. Now I'd like to take just a moment to update our fiscal 2016 financial guidance, which is based on the best information we have available to us. We are now projecting that our total fiscal 2016 GAAP revenues will be approximately $689 million, including $658 million in product revenues, up from our prior estimate of $647 million, which was (inaudible) from our original fiscal 2016 guidance of $640 million in product revenues. We now expect our annual GAAP 2016 product gross profit margins to be approximately 65%, up from our prior guidance of 64.7%. We now also expect our fiscal 2016 operating expenses to be approximately $314 million, which is up slightly from our prior guidance of approximately $312 million. We continue to expect that our tax rate for the remaining six months of fiscal 2016 will be approximately 30%. We are projecting that our average quarterly weighted shares outstanding for the rest of fiscal 2016 to be between 53 million and 54 million. And as a result of these changes, we are now expecting our 2016 GAAP EPS to be approximately $2.01, up from our prior estimate of $1.83 per diluted share and our original projection at the start of the year of $1.69 per diluted share. And with that, I'll turn the call back to <UNK>. Thank you, <UNK>. I want to congratulate our team for our performance through the first half of the year. We intend to continue to achieve results that exemplify our greater growth potential, stemming from our breakthrough technologies that have had a profound impact on patient care and cost of care. As <UNK> just described, we have once again boosted our full-year forecast to incorporate a more positive outlook for 2016. We are realizing higher revenues through drivers across our installed base as utilization has risen. In addition, steady growth for Rainbow and recent regulatory clearances for important new products provide us with greater confidence that we'll exceed our prior target set at the beginning of this year. We're consistently winning new hospital conversions for Masimo SET and Rainbow SET oximeters. During Q2, we received two noteworthy product clearances from the FDA. First, we received FDA clearance for our O3 Regional Oximetry monitor, enabling us to participate in an estimated $125 million market that is growing by 10% annually. Given the accuracy and ease of use of O3 compared to competitive monitors in the field, we hope to capture meaningful share in this market in the next few years. In fact, one of the world's leading centers for cardiovascular medicine and transplantation, DHZB, the German Heart Center in Berlin, has adopted our O3 Regional Oximetry and SedLine Brain Function monitoring technologies to monitor their patients in the operating room and intensive care unit. DHZB is a specialized hospital dedicated to the diagnosis and treatment of cardiovascular and thoracic diseases, implantation of mechanical circulatory support systems and heart and lung transplantations and treats more than 7,200 in-patients and 24,000 outpatients annually. The second notable FDA clearance we received in Q2 was for our wearable tetherless Radius-7 monitor with Rainbow measurement capabilities. The Rainbow version of Radius-7 allows for patient mobility within the hospital and includes continuous hemoglobin measurement as an option, which may be useful for detecting post-operative internal hemorrhage. We also recently initiated the launches of next-generation SedLine and next-generation SpHb products in Europe, both of which incorporate substantially improved technology that increases their clinical utility. On a related note, we are happy to report that the rollout of Rainbow parameters within both low acuity and high acuity monitors made by Philips has commenced. GE is also now selling Rainbow in its low acuity monitor line. Unfortunately, we've recently learned that GE's rollout of Rainbow in their high acuity monitors would likely be delayed by two years to three years. On the clinical front, two papers are recently published that support the clinical utility of Masimo's innovative technologies. In a study utilized ---+ using the first generation Pronto Pulse CO-Oximeter to non-invasively measure total hemoglobin in 114 patients. SpHb was successfully measured 89% of the time. With mean lab-based hemoglobin values of 12.6 grams per deciliter plus and minus 1.9 grams per deciliter and mean noninvasive SpHb values of 12.3 grams per deciliter plus or minus 1.6 grams per deciliter. The authors, Dr. Ryan and colleagues, at the University of Tennessee Health Science Center, the Le Bonheur Children's Hospital found that non-invasive and invasive measurement correlated well and that the rapid availability of results and the lack of requirement of the venipuncture non-invasive hemoglobin monitoring maybe a valuable adjunct into initial valuation and monitoring of pediatric trauma patients. They also noted that non-invasive SpHb testing may be most effective in determining when invasive testing of hemoglobin is warranted. A paper just published in transplantation proceeding, authored by Dr. Lee and colleagues at Chang Gung Memorial Hospital in Taiwan investigated the utility of PVI and concluded that PVI may serve as a reliable estimate of cardiac preload status in patients undergoing or topic liver transportation as higher PVI values correlated with lower right ventricular end-diastolic volume [values] so that an increase in ventricular preload status could be inferred from a decrease in PVI during OLT. We also noted that right ventricular end-diastolic volume was better correlated with PVI than with other static filling pressures, such as central venous pressure or pulmonary artery occlusion pressure, therefore giving a safer, faster and better estimate of fluid responsiveness. These two papers are just the latest examples of the high clinical value that our technologies provide to clinicians as they strive to improve patient care. In fact, we estimate that the use of SET Pulse Oximeter, Rainbow SpHb and PVI will save an average hospital $1.3 million a year. In the age of both the Affordable Care Act and the expansion of ACOs, technologies that help clinicians get it right the first time are what hospitals want. In closing, our focus on delivering on our 10-year plan is based on our guiding principles of remaining faithful to our promises and responsibilities. We are encouraged that our first half of 2016 financial performance has exceeded our original [2016] guidance, and in doing so, has allowed us to once again increase our financial guidance for the year. We are looking forward to what will be a record year in 2016 as we head into the final stretch of our 10-year plan in 2017. As always, we remain focused on our mission to improve patient outcomes and reduce the cost of care by taking non-invasive monitoring to new sites and applications with our breakthrough non-invasive monitoring technologies. With that, we'll open the call to questions. Operator. Certainly. Certainly value engineering work that we've been doing the last few years is resulting in some of those gains. Our value-based pricing with our customers and our discipline with that along with the expansion of the new products, obviously, we've been talking about rainbow for a while, but we're seeing excellent growth with SedLine, excellent growth with capnography, and now O3. So adding SET, Rainbow and now Root, which has these new modalities together, along with the open connectivity and creating the connected ---+ for the hospital, we think will help us drive strong revenue gains as we manage our expenses to what we believe are sustainable given the initial investment we made in the first 60%, 70% period of this 10-year plan. Well, not to get too much into the minutia, all I can say, had we had that order in Q2, our revenues for hemoglobin would have grown 10% instead of being in decline, also given some of the factors of the last ---+ same quarter period ago. But what I can tell you on the Middle East, we're working really well with them. The run rate of sales have been excellent. We did regain the tender that we had won last year, and in fact hospitals' run rate for that was probably 2 times, 3 times of what we did last year with them. However, there is pressure from the Finance Minister for these hospitals to not automatic, get what they ask for, so they will be working towards getting what they want, but instead of it being pre-approved for the whole year, they'll have to seek it on a regular basis. So while all of that will mean not much for this year for us, because we've already projected worst case anyway, and we're more than happy to meet that with the new projections we gave you, we'll have to track what really happens on the street in Q3 and Q4 and then hopefully in Q1 of next year, we can tell you what to expect for the rest of the year based on the historical usage patterns, because unfortunately we can't rely on the tender request and tender win that we had given the way the Finance Minister has, I guess reined in that freedom from the hospitals and we'll request additional demands on a regular basis. We haven't reached any new agreement, but we still remain optimistic that royalties will continue till October 2018, given that we won the IPR on two of the patents that they went to try to eliminate. The one that we won goes till October 2018, the one that we partially lost expires next month. So that ---+ obviously the royalty haven't changed. So we think things will remain till October 2018 and if we can do something more with Medtronic, we'll be announcing it as soon as we have it. Yes, directionally it's exactly right. Working (multiple speakers) we had in the second quarter made us confident enough to take up our projected revenue guidance for both Q3 and Q4 in the range of about $2 million. We also though, because of the higher amount of weighted shares, ended up essentially, you could say effectively, losing $0.01 because of the impact of the now projected higher share number for Q3 and Q4. So the combination of that, the higher revenue of about $2 million each quarter offset by slightly higher weighted share numbers resulted in a net increase of about $0.01 for both Q3 and Q4. Correct. Yes, we actually can't because of the discrete nature of those. We can't even include those in any kind of forward guidance, number one, because it's very difficult, of course, to project what kind of stock option exercises might occur. And secondly, because it's simply isn't allowed as part of your forward effective tax rate guidance. Sure. On the GE, given that, of course, we are in possession of confidential information that I cannot disclose, all I can tell you is this delay had nothing to do with us. It's something that is an internal issue for them, but with their permission, we wanted to share with you where they are. The good news is Philips has fully rolled out, Drager has been out there for a while with Rainbow technology, Welch Allyn, ZOLL and many other OEMs. So we're anxious to get GE out there, but I know they're doing everything they can. But unfortunately things like this sometimes happen in the product development cycle. As far as our litigation with Philips, as you know, it's been broken up in four phases. We won phase 1 for $467 million verdict, which was not finalized, which actually may end up being a good thing because Supreme Court recently changed the standards for willful infringement. We think we have a great willful infringement case against Philips, which will be ---+ now we'll bring it up on the phase 2 coming up in January, but we'll seek to bring back on the phase 1 victory as well, where they have admitted that they infringed our technology before even the trial began. For us, the phase 3, that'll be the antitrust suit and patents use case against us, that will happen in March of next year and then phase 4 is some additional patents we have against them along with our antitrust suit against them and that has not been scheduled yet. So in summary, if I was going to tell you what I think will happen, I think hopefully ---+ assuming we win the antitrust and patents use in March, probably about 18 months after that, I'm sure Philips will appeal to the Court of Appeals, Federal Circuit Court of Appeals, which we expect we should win. And so we think sometime in about two years from now, we'll have our first check from Philips. And maybe with the pre-judgment interest, post-judgment interest, if there is willfulness found (inaudible) that could be much bigger than the $467 million that we secured in the phase 1 trial and post-judgment rulings by Judge Stark. We don't really know what our market share is, those are difficult to assess. We do believe we are growing 2 times to 3 times the rate of growth in the pulse oximetry market given that we're now ---+ we've been growing for almost two years at above 10% rate. So unfortunately, that's all I have for you. I know there's surveys that are done by independent surveying companies, I don't know how much I can trust those. So therefore, I don't want to state what they say because I know there are ways of guessing that those numbers as not as scientific as how sometimes they're truly done when economists get involved in big case trials and so forth. Sure, <UNK>. I think as we've been articulating for the past couple of years now actually, we changed really our direction towards planning our future level of total investment in operating expenses and we changed it from a perspective of identifying various targeted opportunities and ways to expand the business and essentially determining whether to fund those kind of expenses. It's one in which we just simply said, there is a fixed amount of operating expense that we're willing to invest each year and then we work very, very diligently internally to prioritize all of the various spending initiatives that we have. But at the end of the day, we're limiting ourselves to X amount of dollars outstanding growth. So because of that approach, obviously there is a tremendous amount of control in terms of our ability to dictate essentially what level of spending we're going to be at and that's something we started at the end of 2014, it's continued all the way through 2015 and it's obviously continuing through this year and as we look forward for the next couple of years, there is no intention to change that type of forced prioritization of investments in order to hit a fixed amount of aggregate spending dollars increase. Well, I don't think anything has changed on pricing. We see Medtronic do the same thing that Covidien was doing pricing wise. Given that we ---+ from clinical studies have data that shows (inaudible) save an average hospital of 250 beds about $1.3 million a year, we, not to mention the lifesaving impact of our technology, the [eye] damage reduction and (inaudible) of our technology, we believe our pricing is just right. And that's not too low, but consistent to wanting to help our customers reduce cost of care. We always calculate that into our pricing strategy. So the good news is, customers are willing to give us a small premium for the value that our technology brings to them that both save them money, big money, not small pennies but also help them take better care of the patients. Thank you so much, <UNK>. And I want to just add one thing, the reason we can grow our expenses the way that <UNK> mentioned, in a very disciplined fashion, is because we had grown, as you know, our infrastructure a little bit ahead of plan, normal times, the way we would do things, given the royalties we're gaining from Covidien, Medtronic and that has allowed us now ---+ and I guess the last part of our 10-year plan to not have to grow our expenses, yet not be choking the Company when it comes to both product that saves lives and helps people as well as the number of people we need from an infrastructure perspective to treat our customers as they're accustomed to. So we're really happy that the 10-year plan is working. We're happy that our investors have stuck by us and now are seeing the stock working, so we knew this commitment to you and look forward to our next quarter results. And if you must, thank you all for joining us.

2016_MASI

2017

AMSF

AMSF #Good morning. Welcome to the AMERISAFE 2017 Second Quarter Investor Call. If you have not received the earnings release, it is available on our website at www.amerisafe.com. This call is being recorded. Replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as a result of risks, uncertainties and other factors, including factors discussed in today's earnings release, in the comments made during this call and in the Risk Factors section of our Form 10-K, Form 10-Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. I will now turn the call over to <UNK> <UNK>, AMERISAFE's President and CEO. Thank you, <UNK>, and good morning, everyone. Before I discuss the operations this quarter, I'd like to provide some color regarding the workers' compensation industry in general as competition continued to intensify this quarter. As reported by NCCI in May, the workers' compensation industry, excluding state funds, reported a 94% combined ratio for 2016, which was unchanged from the 94% combined ratio reported for 2015. To add perspective, the P&C industry's combined ratio increased from 98% in 2015 to 101% in 2016. Workers' compensation was the only line within the P&C line whose combined ratio did not worsen from 2015 to 2016. Also adding to the competitive environment, loss costs continued to decline in the second quarter. NCCI reported, through May, approved rates were down 6.7%. I share this industry overview to provide background as we are pleased with this quarter's 81.9% combined ratio and the financial strength of AMERISAFE, which was achieved by focusing on underwriting discipline and consistent approach in handling our claims and expenses. Now on to the second quarter's operational results. As I've already stated, competition increased this quarter, and our gross premium written decline of 15.7% reflected it. The decline was driven by both policies written in the quarter as well as audit and related adjustments for policies written in prior quarters. Of the policies written this quarter, renewal premium was down 6%. However, policy retention remained high at 92.2% for those policies for which we offered renewal. Our renewal premium was obviously impacted by declining rates. In the aggregate, pricing in the quarter, as measured by ELCM, was a 1.68, down from a 1.73 in the second quarter of 2016 but slightly higher than the 1.65 in the first quarter. While comparing consecutive quarters is not apples-to-apples, I do feel this emphasizes our commitment to risk selection with appropriate pricing for long-term stability. As for audit premiums and other adjustments, audit premiums themselves were positive. However, the change, quarter over prior quarter, for audit and all premium adjustments was a headwind to top line, decreasing gross premiums written $4.1 million. Moving on to losses. The loss and LAE ratio for the quarter was 56.1%. The current accident year ratio was 69%, and the prior accident year loss ratio was a negative 12.9%. Here are some key metrics to note regarding loss expenses. Reported claims in the calendar year were down 5.1%, and the open inventory of claims was down 5.8% for the first half of 2017. The $10.7 million of favorable development this quarter resulted primarily from favorable case development, most impacted accident years 2015, '14 and '13. To delve more into the financial metrics, I will now turn the call over to <UNK>. Thank you, <UNK>, and good morning, everyone. For the second quarter of 2017, AMERISAFE reported net income of $15.5 million or $0.81 per diluted share compared with $16.6 million or $0.87 per diluted share in last year's second quarter, a decrease of 7%. Operating net income in the second quarter of 2017 totaled $15.7 million or $0.82 per share, slightly below last year's $0.85 per share in the second quarter. Revenues in the quarter decreased 7.8% to $89.9 million compared with last year's second quarter. Net premiums earned decreased 8.8% to $82.7 million when compared to the second quarter of 2016. Net investment income was $7.5 million in the second quarter of 2017, an increase of 20.5% when compared with last year's second quarter. The significant driver of this increase was the decline in value of a limited partnership hedge fund in last year's second quarter. This limited partnership is marked to market through net investment income each quarter. Without the hedge fund, net investment income was up 9.6% compared to the second quarter of 2016. The tax equivalent yield on our investment portfolio at the end of the quarter was 3.3%, up slightly from 3.2% at the end of the second quarter of 2016. There were no impairments of securities or significant realized gains or losses during the quarter. The investment portfolio continues to be high-quality, carrying an average AA- rating. Our duration of the portfolio at quarter-end is 3.69, and we hold 57% in municipal securities, 25% in corporate bonds, 11% in U.S. Treasury and agencies and the remainder in cash and other investments. Over the past year, our allocation to municipal bonds has increased slightly, and our allocation to corporate bonds has decreased slightly. Approximately 51% of our investment portfolio is classified as held-to-maturity, which is in a net unrealized gain position of $11.5 million. These gains are not reflected on our book value as these bonds are carried at amortized cost. With regard to operating expenses, our total underwriting and other expenses decreased 10.5% in the quarter to $20.2 million compared to $22.6 million in the same quarter last year. We saw decreases in insurance assessments and commissions during the quarter compared to last year's second quarter. By category, the second quarter of 2017 expenses included $6.6 million of salaries and benefits, $6 million of commissions and $7.6 million of underwriting and other costs. Our expense ratio for the second quarter was 24.4% compared with 24.9% in the second quarter last year. Our tax rate decreased to 30.1% in the quarter, down from 32.4% in the second quarter last year. The decrease reflects the larger amount of tax-exempt income compared with taxable income during the quarter. Return on equity for the second quarter of 2017 was 13.1% compared to 13.7% for the second quarter of 2016. Our operating ROE for the quarter was 13.3%. On July 25, the company's Board of Directors declared a regular quarterly cash dividend of $0.20 per share, payable on September 22 to shareholders of record as of September 8. And finally, just a couple of other items of note. Book value per share at June 30, 2017, was $25.02, up 5.5% from year-end. Our statutory surplus was $406.4 million at June 30, 2017. That was also up $12.4 million from year-end. And then finally, we'll be filing our 10-Q for the second quarter later today, after the market close. That concludes my remarks. And we would now like to open the call up to investors for our question-and-answer session. Operator. Right. That's a really good angle. We individually underwrite every account, so we do monitor the ELCM in the aggregate. But we do base it on the risk that we're evaluating at that time. And I can tell you, in the quarter, I was surprised at some of the lower ELCMs that we have that quoted and failed. So there are some pricing out in the marketplace that is well ---+ significantly below AMERISAFE's. And at that point, we're not going to chase the price that low. It's just not what we do. And <UNK>, I think sometimes, we see a mix shift, and maybe the retention was in states where we had higher ELCM, so that can drive the number a little bit in terms of what's happening, where we've renewed. But as <UNK> mentioned, there were some quotes out there that were pretty low relative to an ELCM and much lower than where we would want to go. We're not seeing any specific trends that I think are of note. We're probably ---+ I'm probably going to be a little bit more cautious on this call than maybe we have been in prior calls in giving state-specific data because it is highly competitive out there, and I wouldn't want to give away competitive data. But obviously, you know our larger segments, our construction and trucking, we see declines in both. From an audit perspective, oil and gas was still negative audits. But the payrolls were improving from prior quarter, so we take that as a good sign. No, actually, audit premiums themselves were positive. Now when we add them in with endorsements and cancellations, yes, they were negative. But audit premiums themselves were positive. It's the quarter-over-quarter change that brought ---+ was the $4 million decrease. But the only class of business where we've actually had negative audit premium in the aggregate is oil and gas. No, the $2.6 million is audit premium, endorsements and cancellation premium. We see and typically, you see this in a competitive environment. You see more cancellations. We've seen a slight uptick. It's not been dramatic, but certainly, we're seeing more cancellations than we saw last year. Someone gets a better rate partway through their cycle and cancels the policy with us. It doesn't happen as often, but that drove some of the change in the quarter. It's pretty consistent. It's just that it tends to be in more competitive markets, and it also tends to be in those classes of business that have the highest rates, right. They're much more price-sensitive if you're a roofer versus if you're a landscaper, for instance. Brokers are, in some regards, in the same predicament that insurance companies are. They're looking for premium because their base of their commission is premium. So they're very protective of their large accounts in placing those and making sure that they get renewed at appropriate rates for the client, that the client can accept, at the same time, commissions that are beneficial to the agent. Yes, that's a good point. I haven't really seen a swing in the distribution, no. Yes, <UNK>, I'll give the same answer I gave last quarter, which is we sort of expect the expense ratio to be 24% to 25%. And obviously, if net earned premium declines, then we'll be towards the higher end of that range. But we're not expecting any dramatic changes. But we're aware that we're in a soft market, and we have to continue to manage our expenses the way that AMERISAFE typically has, with a pretty frugal culture and focus on underwriting. Yes. I appreciate you asking, <UNK>, but we typically wouldn't give out those numbers until the quarter is over because, as I mentioned with the second quarter, it varies month by month. I just have a couple. Just going back in investment income. Was there anything unusual outside of the mark-to-market on the alternatives like bond prepayment or anything unusually good in the quarter just from kind of a core yield perspective in the general account. Yes. I think we've been increasing our duration and investing in higher-yielding securities, particularly when yield spiked up in the muni market and overall in the fourth quarter. So we're starting to see some of that come into the portfolio. There were some calls during the quarter that did influence investment income a little bit, but that is sort of the components. It can be volatile. But it certainly was up, still 9% or so, without the hedge fund adjustment. Okay. Yes, that's helpful to have in the model. And then just on capital. So presuming that the top line continues to be managed in light of a competitive market, the premiums-to-capital measure gets to be pretty darn low. And so I just kind of be curious how you're thinking about that. I mean, the company isn't well capitalized, but it's ---+ I got you like 0.8 to 1 right now, premiums and surplus, and that could move lower even with special dividends. So is there any change on how you're thinking about it. Because I feel like you're kind of moving from being overcapitalized to maybe really overcapitalized. And I don't know if there's any thought of kind of how to manage that if you have to continue to be really selective in a soft market. Randy, that's a good question. Our board does discuss our capital situation every quarter, when they look at the regular dividend, and they'll continue to evaluate that. Certainly, you're talking about all the right dynamics in terms of the things that they look at when they look at capital, what are we going to need that capital for, organic growth, M&A, whatever it might be, and then what is the likelihood. And then being disciplined about returning that back to shareholders if we cannot use it through dividends and other means. And so they'll continue to look at that. But you're right. If the ratio continues to go lower, it certainly causes us to be more capitalized ---+ more well-capitalized than in the past. Is there any thought that there could be some opportunity out there from a business perspective. Or is the market just ---+ I guess what I mean is, if you go back maybe 3 or 4 years, there was this idea that some folks could have some issues out there. Some blocks might become available. It seemed like maybe there were a couple of things that came around, but they went for pretty high prices. Are we just past that part of the cycle now. And where - which any kind of strategic opportunities be within comp. Meaning to allocate some of that capital writing more business in size or in bulk. Right. I think when you're talking about buying books of business in a declining environment, I'm not quite sure what we would be buying at this point because consumers ---+ the end consumer is expecting rate declines. And given our underwriting discipline, I would assume we'd be a little bit more pricey than they were accustomed to or looking for. So if we were to purchase a renewal book, I'm not quite sure how much of that we would actually retain. Yes. But we do look at it from time to time, and it is something that we think about as a use of capital. I think, as <UNK> points out, it's probably less likely in this market than a few years ago. Thank you. AMERISAFE has a consistent history of turning risk into opportunity through the experience and performance of its employees, evidenced this quarter in our 89.1% combined ratio. Our commitment to maintaining discipline enhances our financial stability for the protection of our policyholders and our shareholders. Just this month, Ward Group named AMERISAFE to its 2017 Top 50 in the P&C industry. This recognition was for outstanding financial results in the areas of safety, consistency and performance over a 5-year period, 2012 to 2016. Congratulations to the AMERISAFE family on this achievement. Well done. And with that, I'd like to thank you for joining us on the call today. Have a good day.

2017_AMSF

2016

WEX

WEX #It's both. If you look across the businesses ---+ and part of what I like about this quarter is you can actually really see the organic growth coming through in each of the lines of business that we have. And that's driven largely by a lot of work that's going on the front end just to progress business through the pipeline. So I'd say that it continues to look really good. And as you get into this part of the year, you certainly have much more visibility into what's going to play out towards the end of the year. So we feel good about that. In terms of the M&A pipeline, there's always going to be big ---+ there's a lot of opportunity. For us, we're obviously spending our focus delevering the Business, but we will continue to look at M&A opportunities, regardless of what's happening within the marketplace because we want to make sure that we are participating. I will take those in reverse. If you look at the Travel segment, the biggest impact that happened with Travel ---+ we talked about this ---+ was we had one large customer that signed a new contract in April of last year. So that's anniversarying in. And at the same time we also had some customers hit higher tier levels, just because the spend volume has been really strong ---+ stronger than what we anticipated. So we've got the impact of both of those things affecting this quarter. And they will ---+ if you're looking for more of a forward view, we think that the impact of that is reflected in this quarter. And that's what you would expect to see as the baseline going forward. A piece of that is the hybrid contracts that we have in the business. So as fuel prices have dropped, it makes the rate go up, and a piece of it is just blended mix across the portfolio. So there's nothing really that's novel that's happening. <UNK>, hi, this is <UNK>. At the top of our range, EPS guidance, if you remember, was $4.10 in February. We have move it, you are correct, to $4.37 for the full-year 2016. As you also said, domestic [PPG] for February was $1.97, and now we are raising it to $2.14. We are maintaining in the 2016 [meet for] guidance, the revenue is about 10% growth and 20% on earnings, assuming constant currencies and also the matched fuel prices and no impact on hedging. What I would tell you also is that there are a lot of puts and takes, and that the majority of the EPS increase is due to changing domestic fuel prices, as you mentioned. But we have a portion of the first quarter [profitability], and so more that is more anticipated contraction in the spreads and volume in the US. Thank you. Yes, same-store sales were down 4%. It's actually a little bit worse sequentially than it was in the fourth quarter. And I would say similar trends, though, when you really get into it ---+ it's largely driven by oil and gas, a little bit more affected by large fleets than smaller fleets. Transportation ---+ actually still down. And in construction ---+ is a little bit softer this quarter than it has been. So if there was a standout from quarter to quarter, construction is probably it. It's not quite as strong as it had been in the previous couple of quarters. I would think of this as the normalized rate. So what we reported in the first quarter is something you would see as the baseline as you go through the year. The pieces that affect the rate are mixed. As transactions occur geographically, there's obviously significant differences on rates. But there's also typically corresponding differences in rebates. While it has an impact, it's not as large as you might think. The other thing that affects it is customer blend, and as a customer hits their different spend levels, then that can affect the overall rate. Generally, I think that you're going to see a little bit of a downtick in Q2 and Q3 because there's just a seasonal mix to travel. But you shouldn't see the same type of decline you saw from Q4 to Q1. Again, think of this ---+ what we're reporting this quarter ---+ as more of the baseline going forward. Not to get too customer specific, the larger customers in our portfolio had some pretty significant spend volume increases. And that's a piece of it. And that travel happens everywhere. It's truly global. And then we've had a customer ramping in Europe. It's more than one, but the one that's notable enough that it's actually affecting the volume mix. That's a trend that we are expecting to continue as well. As I mentioned, the win with Ctrip, which we're really excited about, is still in the very early stages and it's kind of too early to know what the ramp is going to look like. But it's a customer we're obviously really excited about having into the mix and could affect the future results. The 9% positive is payment processing transactions. I would bridge it more ---+ if you look at the total transaction number, it's probably a better bridge. And then you add the negative 4% to that to think about how we're actually growing organically. That's what ---+ we still believe it's going to be breakeven this year. On an operating income basis, and we're progressing well on that front. The key pieces to that, that we've talked about, are continue to grow the portfolio, making sure that the pricing is set at market. And then working on operational efficiencies, and the team in Europe is doing a great job of progressing on all of those fronts. I'd say it's very much on track, if not ahead of where we expected it to be. We had said that on $0.10 of fuel price movement would translate into $0.16 of EPS. That was unhedged, so the underlying presumption is you're looking at the Business unhedged. We also had said that's domestic US only. And so the pieces that affect fuel price movements ---+ you still can get some movement in Australia; you just can't translate it to the NYMEX. And in addition to that, in Europe you've got the counter to that with ---+ you've got movement in spreads. And then so in this quarter, when we're giving an update on guidance, <UNK> talked about the fact that we're expecting fuel prices to go from $1.97, which we gave on the last call, to $2.14, based on the NYMEX curve on the full year. So you're getting the benefit of that, but we're also getting ---+ we're anticipating that's going to have some effect on fuel price spreads in Europe. That's where we're kind of buffering those two things together when we're looking at our full-year guidance number. I think that has been a trend in the US. We have signed ---+ when you think about transaction processing, for us, it's largely ---+ it's just a technology play where people are outsourcing the technology. And over time, we tend to build confidence in the fact that they can move from just the technology to some of the other areas of expertise that we have around ---+ the whole host of products from a credit perspective all the way up to ---+ in some cases, we're doing sales. We're doing that more and more, where we're actually the front end for a lot of the oil companies, because we have an inherent competency in that area. So I would say that it has been a trend we've seen over the years. And it is something that we ---+ when we look at a business, we're interested in doing the whole host of services. And obviously from our perspective, the relationship is deeper when you're doing more than just processing the transaction. I don't know that I would generalize; I think in this case, that was true. It depends largely on the portfolio and how it's been managed historically. It's something that we were able to do, and it was part of how we thought about the portfolio. It was a piece of how ---+ when we talked about moving it to operating margin breakeven, it was a piece of the plan in doing that all along. I put that in the longer-term category in my mind. There's nothing really new to talk about. There's still RFPs that are in process and kind of making their way through the path. I think it has more to do with the ---+ the mix isn't really the right word ---+ but some of the contract renewals that we've gone through, that mix of moving one other portfolio into ---+ from that transaction processing relationship to payment processing relationship. All of those things are coming together that are affecting the rate in this quarter. So it's not really anything that's new other than a normal process that we're going through and renegotiating with our customer base. There's about $70 billion worth of spend, if you look at US, Europe, Asia PAC and LatAm. So we're about 28% of that, so if you kind of do the math on our spend, comparatively. You asked about the merchant model versus agency model, so we're playing heavily in the merchant model, which is where we get involved in making the payment on behalf of the online travel agency, as opposed to the consumer making the payment directly to the hotel. And typically, the spend volume is roughly half and half. I haven't seen anything that's really updated that, nor have we seen trends that would make me think that's changed much. Yes. Mathematically, that's probably right. Yes, we had set long-term growth targets of revenue 10% to 15%, and earnings 15% to 20%. And we actually, with the exception of fuel prices, I'd say we've largely been on track with that. When we think about the Business over the longer term, part of what we've been trying to do is diversify the Business away from the fuel price exposure. We thought hedging was an okay strategy for a shorter period of time. But over the longer term, the intention was to increase the other parts of the Business in areas that we thought we had expertise that would also reduce that exposure. And so I would still stand by the numbers, as we think about the Business on a longer-term basis that we're seeing that represent in the quarter. If you take out the impact of fuel prices and FX, we grew 12% top line and 16% on an ANI basis, again, adjusted for fuel prices and FX. Underlying the Business, you're still seeing that level of strength. We've gotten to the point where we're starting to see fuel prices, hopefully, lift again. But regardless of whether that happens or not, we're making sure that we're gearing the Business on a longer-term basis so that there isn't as much sensitivity longer term to fuel prices. You were right in using the US calculation, but as a contra to what we're picking up in the US. You're saying that $0.27 is largely based on the fuel price changes happening in US fuel prices. We're expecting to see some contraction in spreads in Europe. So we're buffering some of the expectations we're going to have in fuel prices, because what typically happens is you get a little bit of an offset to that. And at the same time, we're pushing through the piece of favorability we saw in the first quarter that wasn't timing related. There's a little bit that was timing, but the majority of it, we actually are including in increasing the guidance. You asked about Ctrip, and I think it's kind of early for us in that stage to really know what that's going to ramp to be. Something like that, we typically are anticipating a ramp of new signings when we give out guidance. Something that's larger like that, and unpredictable ---+ we won't necessarily factor in until we have better insight into what that's going to look like. If you were to normalize ---+ <UNK> had said this earlier ---+ but if you normalize for those factors, the mid-point of our revenue guidance is a little bit more than 10% and mid-point of our earnings guidance is a little ahead of 20%. It's a little bit better than what we had said on the last call, but pretty comparable. Thank you, Raquel, and thank you, everyone, for joining us this quarter. We look forward to talking to you next quarter.

2016_WEX

2016

CRL

CRL #Given my nationality, maybe I will make a comment on the Brexit. And as you mentioned we gave you some of the immediate implications to Brexit being the impact on the foreign exchange. In terms of looking forward, it's still early stages in the UK. My personal belief is that as each week passes, I think it begins to stabilize a bit. I think, Prime Minister May has done the right thing in terms of not signing article 50 until she's got her ducks lined up. And I think it's becoming a much more thoughtful approach to the exit than I think it was looking like a few weeks ago. And while we're involved in a number of industry workshops in the UK, just to quote a couple, The Association of British Pharmaceutical Industry is one, the Bioindustry Association is another, and we have a seat at the table of these associations, and they have been formally asked to look into the implications of the EU, UK exit, and I think that the workshop called the Life-Sciences Transition Group, which is giving some advice to the British government. So, and of course we are keeping closely aligned with tax advisers, banks, and others to assess the impact on tax, trade, imports and regulatory methods. I've got a caveat, of course it's early days, but from what we're picking up, for our industry, the impact of Brexit should be a lot less than many other industries. The mood music at the moment seems to be that this may not be cause for major concern in our sector. That said, I do want to caveat that it's still early days and of course there's still plenty of room to go, and get things wrong. But it looks good at the moment. I assume you are asking principally about safety. Let me just, so I'll comment on that first. We're continuing to get 5% increase over prior year. Which we are pleased with. We have a very healthy mix of general and specialty toxicology which also benefits margins. And our efficiency initiatives have been quite powerful as well, so we're really pleased with how nicely we've, continuing to drive margin, and the space stays relatively full. When I say relative I'm talking about all of our competitors and clients as well. But, space seems fuller than it has been in years. So, as space continues to be relatively full, we have some level of confidence we will be able to continue to get price. And, so, we're pleased with the value proposition given the level of our investment and the quality and complexity of the work that we are doing. So far prices are 5% over last year. So, we'll start with the last part first. You should think that having an operating margin over 35% is extraordinary, and we would love to do that on a continual basis. It's not something we are ready to promise yet. We, our longest term goals are to have operating margins in this segment in the low 30s which we have always done and are quite confident we can continue to do. Obviously we are very serious about driving efficiency, and getting price when one can get it, and having new products and enhanced services. So all I can say is our goal will be continue to drive those higher, and further, but I would have to stop short of promising that 35 is here to stay, although that would be our goal. There's a lot of factors. We had very strong productivity enhancements with our new manufacturing in our Microbial Solutions and improved inventory status so we just sold a lot of cartridges and a lot of handheld units. That business has three parts, all of which are performing really well. Our Celsis business is performing quite well, also at, or ahead of where we had anticipated. Also as we said in our prepared remarks, our biologics business which is obviously driven by the increasing strength and availability, and success of new biologic drugs is really driving the demand for that sector so again our capacity utilization is good. There is some price in there, and we are utilizing, we've got a very good mix. We've made some investments in our facilities and I think those are bearing fruit. We are quite confident in that segment's ability to grow at least in low double digits and certainly to have operating margins remaining at least at low 30s. But as I said earlier we are really pleased with the quarter, and while we aspire to, we are not ready to commit to it. Sure, <UNK>. Well look on the capacity side, we work really hard with all of our businesses, to have capacity in sync with demand. I should also say that we have some efficiency initiatives in place, and being further integrated into our operating modalities, such that I think we will be able to continue to use our facilities in a more efficient and more robust fashion, which should help to enhance our operating margins. We are not concerned that we're not going to have enough space if that's part of your question. So I'd say that the demand curve these days is driven by, we have price, we have a mix, with sales of inbred animals, and immuno-compromised animals and sort of higher value animals. We definitely continue to take share, I would say generally, but perhaps more focused on the academic sector given our shares are very large in pharma. We're getting significant increase in China, which is obviously a very large, very new and very large growth market for us, so we are going to continue to build space and service that locale from multiple geographies. Many of those small cities there of course are more than 10 million people. And we are getting some service revenue, which again, sometimes it's not as linear as we would like it to be, but some nice service revenue in our genetically engineered models business and our diagnostic business and our insourcing solutions business. The business has stabilized, it is affected by large reductions in pharmaceutical infrastructure. We saw a little bit of that in the second quarter, we saw virtually none of that in the first quarter, kind of hard to predict what we will see in the third-quarter but short of that, the business feels stable. We are really pleased with the operating margins, and obviously pleased to kind of be at our longest term growth goals for the first and second quarter. So we are quite confident we can continue to grow the business low double digits. I would say that we had a little bit of a blip in the first quarter because we were changing over our manufacturing modality, in the Microbial Solutions business. So that is unusual. And I would say that businesses very unseasonal, if that's a word, it's quite consistent. The biologics business is hard to predict from history, but I would say, tends to have a slightly softer first quarter usually, and then a better back half of the year. But doesn't have the kind of seasonality related to holidays and summers that we typically see in the research model business, when people just don't buy animals because they won't be there to do research with and on them. And the other piece in that sector which we didn't call out this quarter is smallish but nicely operating egg business which is, has a couple of clients that buy more at certain points of the year but I wouldn't say that from portfolio point of view is very seasonal. I'd have to say that whole segment is not seasonally impacted much at all, and certainly not research models perhaps even the safety assessment business may or may not so that's a good thing. There's lots of competitive, it's interesting, it's, at the moment our most profitable segment and a very high-growth segment on an organic basis, it's quite competitive. We have lots of big competitors both in the biologics piece, companies our size or larger that are well-financed and do good work, and we have growing competition in the microbial space. The distinction though, is that they tend to be siloed approaches for a lot of our competition. These businesses are in a larger context, for us, so when you talk about revenue synergies, we have lots of pharma clients who buy a whole bunch of products and services from us, but also want us to help them with quality control aspects of the manufacturing facilities or testing drugs before they go into the clinic or after they go on the market. And of course in the egg business the products are used to manufacture vaccines and a lot of our big pharma clients have veterinary pharmaceutical subsidiaries. Sales synergy is quite good, although the microbial and biologic sales forces tend to be more technical and a little bit more siloed than some of our other sales organizations. But there's still some connectivity. Very strong segment for us that is quite consistent and quite predictable, and we really do think that without additional M&A, and there may or may not be M&A in that space we can continue to grow it, at least at low double digits and we will obviously work hard to continue to drive the margins up. But as I said to an earlier question, while we strive to get to the mid-30s we can't promise that yet. I had a little trouble hearing the question. I don't think I know that off the top of my head. Our biotech revenue is pretty substantial and there are thousands of clients that comprise that. Yes we have lots of sales with a lot of the big players. I won't mention any by name even though you did. But we have a lot of virtual biotech companies and we have a lot of what I would call kind of second-tier biotech companies that are public, that have substantial market caps that are in late phase 3 or have their first drug in the market and look like they'll have serial one. We called out Moderna in a press release recently which is a very hot technology that cuts across multiple therapeutic areas. And again, we don't have any clients, even our biggest pharma clients, that comprise more of the 5% of our revenue. Look, there's going to continue to be churn in our client base, there has been forever, <UNK>, forever. And our biotech clients will merge with one another and get bought, and occasionally some will go out of business, and every year hundreds more will start up. Look, so all we can do is do the best quality work for them and even if companies get bought, it's likely that the buyer is a Charles River client and it's likely that we will continue to have the work. Every once in a while we are going to have, whether those big biotech companies get bought by big pharma companies, that maybe does less with us than others, that would be a good thing as well. While anything can be disruptive for a very short period of time, we think it all gets sort of meted out in the scale of the work that we do. We are confident that we will continue to get appropriate levels of enhanced price in our safety assessment business, commensurate with the demand and available capacity the complexity of the work that we do, and the synergies that we have with other lines of business. All of it is subject to the long and short-term contracts that we have with clients. We have different pricing modalities with all of them. We have seen a classic and appropriate supply and demand curve here, as our spaces fill over a number of years. You have been on this journey with us, and we are essentially full. Appropriately full now. We're using our facilities well. We acquired a little bit of incremental capacity with WIL, and of course we have opened a little bit of incremental capacity with Massachusetts, and a couple of other sites, both last year and a little bit this year, that, I think as long as the demand is persistent, and we are able to accommodate it with the appropriate amount of increased capacity and we don't have large amounts of unused space that we would be able to get, continue to get price. And then clients are very interested in, particularly the big ones as they shut down space and having access to us as the, particularly as the studies get more complex, access to us, helping them design the study and interpret it. Hard to phrase what I'm about to say but I would say that price continues to be important but I would say it's often less emphasized than it was in prior years. That everyone is really interested in quality of work in science, speed and responsiveness, I would say, and collaboration kind of, second, third, and fourth, and while price is in the mix, we rarely start conversations that way. I'm sure we do sometimes. It's not the principal focus, and I think that's obviously a good thing, and it's an appropriate thing given the level of our investment in the fact the clients are increasingly relying on us. Yes so we have a wide range of clients in our discovery business from the very biggest pharma companies to start up biotech and everything in between. I wouldn't say it's particularly focused upon or used more widely by any particular segment of clients. Our very, very early discovery assets are small molecule-based. So maybe there are less classic biotech companies in that segment. We are seeing enhanced interest in our discovery capabilities. We called out some integrated deals which we recently signed in three therapeutic areas. We are working really hard on those. We have lots of conversations like that ongoing with large and small clients. It's very complicated scientific fields that tend to be multi year and multi million dollar deals. Sometimes there are milestones, sometimes there aren't. And we are working hard to be able to sell across that whole discovery portfolio, not just the in vivo piece but in vivo and in vitro and we're also working hard to have pulled through from discovery into safety, which sometimes happens, eventually happens. We do the discovery work and then the drug is looking good and the client uses us for safety assessment. Our aspiration is to have those conversations up front. Some clients will contract that way and others won't. Some of the integrated work is a lot longer sell than we had originally anticipated. That's okay. And a lot of it just has to do with educating the client base that our services are available and the nature of them. They tend to be very highbrow scientific conversations between our scientists and the clients' scientists. So the sorting out how we can help them and what we can do for them that they can't do themselves. I would say the sale is among the most complex that we have, and to that point we have a very sophisticated sales organization. Most of those people are PhDs so we are going toe to toe with our clients. We are pleased with the trajectory and the potential and some of the recent wins that we have had. Yes, as I said to the last questioner, the sell takes a while and we really have to have time to go in, so while I keep using the word sale, its way more sophisticated than that. So you're really going in and saying, look, we have the scientific capabilities which we believe, if you need them, can be quite helpful to you. Sometimes the initial feed back is, yes, we do discovery, why on earth would we need you, thanks for coming. But often when we dig down and we tell them we've found 65 development candidates, a third of which have gotten proof of concept working through the clinic, their eyes open up and we talk about the therapeutic areas where we have had success. We have a lot of clients that some of our discovery capabilities are what I would call industrialized aspects of some of the things that they do, but we do on a more routine basis, and we do more efficiently, and I would say that we do actually better science because we do more of it. When you get the client to listen, I would say, look, increasingly clients are more collaborative and open-minded, and are looking for any edge they can get, with anyone, whether it's another pharma collaborator, an academic collaborator, or a CRO collaborator, who will help them either discover something or enhance something that they've discovered or help them develop it, either to elimination, or to move it through the clinic. So I would say that clients are increasingly more open and interested in hearing our story and as the discovery portfolio gets larger, and we have greater therapeutic area coverage, and of course we start quite early in that process. There is more to talk to them about and I've always thought that a critical mass is important for us to get their attention and I think we are doing that, increasingly doing that well. Particularly for clients who are now working across our portfolio, starting with them and discovery, particularly for the smaller clients is really magic, because they tend to stay with us during the lifecycle of that drug and perhaps additional drugs coming down the pipeline. Little bit hard to do. The research model business, the research model, so the RM part of RMS, we're getting 2% to 3% price, and I would throw mix into the pricing comment as well. We have higher value animals. That's playing through there, you get a little bit of share gain. You've got pure, de novo available business in China, so you just have market availability which is increasing all the time. And then the service business, I would say, we have slightly less pricing activity in the service business, but the volume has increased nicely over the prior year. So kind of all of those things in the aggregate give us that 4% increase. I think you asked a couple of questions. We continue to be interested in expanding our portfolio, strategically, and scientifically. So we are both more important and more helpful to our clients. And as we said many times before we are emphasizing discovery. We are interested in probably in vitro capabilities. There are some geographic areas of interest for us and we would not foreclose expansion in any of our current businesses that are growing. I would also say that we have an extremely active and robust M&A operation and we have several deals in which we are in discussions at the moment. But that's sort of always the case with us. But we are very focused and there are a lot of things available at the moment. So as we delever, as we promised, and get below three turns, you should not be surprised if we do something meaningful. I would use the term meaningful to describe something not gigantic, but meaningful that it moves the top and bottom line and also gets us service capabilities that our clients like. Specifically on the safety assessment side which you asked about, all I can say is that all of our competitors, including WIL, which we bought, but all of our competitors traded in the last two years, three of them traded in the last 12 months. Several of them have traded to private equity, which means that sometime in the future they will be available again. And I couldn't really comment, I wouldn't comment anyway but I really couldn't comment on what we may or may not do in that space. It will depend on if and when those markets, when those businesses come to market, and how strong the demand curve is then. I wouldn't rule anything out. If it could help us support our clients in a more holistic way. You said discovery so I'm going to assume that you were talking about discovery and not safety. I would say that with a big pharma companies, more of the activities that they periodically do, so good example would be in our oncology franchise, we do something called zenographs, which we put human tumors into immuno-compromised animals. So, in some of the big drug companies where they're doing cancer research, they will do that themselves, but they kind of do it periodically, and, not the best use of their time or their people and while it's not trivial, and it's reasonably complex, it's much better in our hands where we do lots of that were lots of clients. That's an example of something that even the big drug companies say, well fine, why don't you do that for us because you do that better and more efficiently. I would say small clients, we can help them with target identification and enhancing their targets. We can help them with the medicinal chemistry and we can certainly help them with the in vitro and in vivo aspects of our business. I would say that our discovery assets are appropriate for clients large and small. It really depends on their view on outsourcing. I would say that almost all of our big pharma clients are increasingly more open and interested and actively doing outsourcing. There are a few that remain reluctant to do that, but they're, you can see they are beginning to think about it. So the client base, both large and small, will be significant and I continue to believe that the scale and depth and complexity of our portfolio and our ability to explain it to clients and sometimes link it with our safety assessment businesses or our Biologics business will be very increasingly more important to our clients. Safety, look, is very much outsourced already. At least 50% of the work is outside. I know of only one big drug company that does long-term tox studies internally. A lot of them do the early stuff internally, but even that, they are doing less of. And of course almost all of the biotech companies have no toxicology facilities and no interest or capability or need to do that. We feel that the outsourcing volume will over time, go from 50% or maybe 55% to 75% or 85% or higher. And the only thing that would retard that growth is lack of capacity or staffing, neither of which we intend to have a problem with. It's a scientific activity that's highly regulated, that we do better than the clients, and we do a lot more of it than the clients, and we do it in multiple geographic locales, so it's quite, we are quite confident that work will continue to be outsourced. Thank you for joining us this morning. We look forward to seeing you next week in New York at our meeting with Management. This concludes the conference call. Thank you.

2016_CRL

2015

XLNX

XLNX #We're not really seeing anything that significant in the price increase area. I was concerned on the second part of your question about the demand impact, particularly on smaller customers. We have seen ---+ we had strong channel sales in this last quarter and we are forecasting strong channel sales again, including European, which I assume is the biggest source of your question, including on the European side. It's really not ---+ at this point, has been a big of a deal as I was fearful of, because while we had maybe a soft quarter a quarter or two ago, things have come back pretty nicely. The Zynq product offering was a breakthrough offering. It was the ---+ generally the last part of the roll-out. And as such there was a large number of design wins. Now those design wins which were targeted at somewhat slower-moving markets like industrial and automotive, those design wins are moving to production. It's a unique product. The number of design wins is phenomenal. We're learning because of its nature that in some cases it takes longer. It's also a more sophisticated product. Hence, it takes a little longer to do the design. It requires both software and hardware. It has a high performance embedded process, a system. The number of design wins is just huge. And the overall magnitude of the design win value on [think] is very encouraging. It's very significant. And now it is finally starting to grow a very healthy clip. Until last year it was relatively negligible in terms of the portion of revenue, but now it is growing at a fast rate as these applications in automotive, wireless and mill arrow and industrial control are starting to hit production. I think also, you asked specific about design kits and our design board environment. In terms of numbers of kits and boards, it just totally swamps in terms of numbers all previous FPGA boards because of the nature of the cost point and the price point that many of these applications are going after. More of the $700 versus the $800 or $900 kind of an ASP. Both our distributor and Xilinx have a number of inexpensive boards and kits. The numbers of those that have been shipped out over the last couple of years is just really phenomenal. We really think we are seeding the industry really well with these capabilities. Thank you. So, Joe, we really haven't had any, I would say, any appreciable lead time increase on a broad perspective. There is a class of products that we have had a little bit of ---+ we've had some lead time increase, but I wouldn't say it's going to be that material of an impact to anything, our logistics. I don't think that has been a particularly ---+ there's anything there to concern anybody with from a logistic supply perspective. What was the second part of your question again. The fab cycle time. No, we have seen no push-out or lengthening of any fab cycle time. We are getting all the wafers we order when we order them. There is nothing going on there either for us. No, not really. It was a rep network where we're ---+ and we've terminated a variety of reps. In Japan, we are transitioning. We have a number of reps in Japan. The nature of that business is a little different than the rest of the world. We are transitioning one of the reps into our other rep network. That's the only really transition that we have ---+ excuse me, distributor in China, not reps. Distributor in China. One distributor moving into our other distributors in terms of the business. But nothing other than those two things. Reps in the US and Europe, generally we're transitioning to direct sales. Then in Japan there is a distributor that we are terminating and moving that business to other distributors that we already have. There is a lot of questions there. We think there is an opportunity there. That's why we have the SDAccel product, which now we're releasing (technical difficulties) to our customers. And we strongly believe that that, together with a stronger focus on this market should enable us to reap the benefits of it. We think it's a significant market. Whether it is tens of millions or several hundreds of millions of dollars, we think it's going to take time to grow to those larger numbers, and it'll take quite a long time. We are committed to having the best solution with regards to acceleration which addresses those markets. And whether it's x86 based or Ohm-based or whatever approach, then we are going to pursue solutions for that market. I think we are well-positioned. And the key to our leadership is now in this software which enables achieving or getting at that acceleration in the most efficient way. That's how we view it. It's a big market, but maybe not quite as huge in the short term as maybe others have positioned it. Single die helps but comes with a cost and the cost that you get typically is flexibility. The nature of these applications is they're very, very fragmented. Every one of them tends to have a different payload. Actually that payload is dynamic. If you are using it to accelerate some sort of algorithm, the algorithm that you are accelerating changes all the time. And so if you do too much integration and you tend to have a very inflexible solution, you might end up losing. When we talk to the customers, and these tend to be a different class of companies. Their approach is they want to retain as much control over their acceleration path. And they would rather not give that to anyone else. If you look at the way their approach has been, typically they do not buy from the traditional server companies. They actually build their own and they try to come up with a very specific solution which is the most valuable for them. There is a case to be made for integration, but what you lose when you do the integration is a lot of the flexibility which is inherently important to this market. I would say it is gray. In some cases it might go towards integration. In others actually having a separate solution and being able to maintain the flexibility there is a huge benefit. We have not seen a pause as a result of whatever has been in the newspaper and their stated position on this. <UNK> was only, I think, talking in general about when two companies get together what can happen in terms of how their organizations meld together. At this point in time, as best as we can tell, this is not going to be consummated in, at the earliest, later this calendar year, maybe in next calendar year. We're not seeing any sort of pause with our business with either company at this point in time. Thank you. Next question. We have now restructured our sales force to be tiered with two direct elements and the third element which goes through DiSTI. We are managing that a lot more closely than we have before. With the largest accounts, primarily in Communications and data center, we believe that we would benefit from a more direct interaction because fundamentally level of engagement needs to be deeper than it was before. Are we doing this later than ideally we should have. We probably are. In retrospect, this would probably have benefited from making this transition a year or two ago. I think also, I mean, it's not just ---+ this is not only a focus at one end market. There's going to be some transitions going on even in our aerospace and defense market coverage to more direct sales. I know some of these don't ---+ some of these kind of wins don't turn into immediate revenue. They are slower, but it does have both Industrial, Aerospace and <UNK>fense, test and measurement, as well as the Communications segments impacted. I think it is a net positive for us. As best as we can tell, and this is more about a CapEx China macro, I don't [want to] say macro, but China macro-related CapEx spend and the pace that they're getting funded internally to do things. I don't know what else. Some of it, there is always the politics between the FD standard and the TD standard. It's hard to tell whether that is still causing delays in FD as a result of TD trying to be ---+ and China Mobile trying to be more dominant. I don't know that I'm qualified to comment on whether how much of that is true or not. <UNK>finitely the wireless business, because of the volume and concentration of customers, tends to have a drag on our gross margins. So we would expect, and we have modeled this, that the second half would be lower than the first half as a result of that. I'm not going to get into the real specifics, but the second half would be lower than the first half. We are still confident in delivering our ---+ in our stated goal from investor day. This is a topic which is very sensitive. We have the capacity; you can tell by our track record that we do this very, very cautiously. The nature of our business is such that it has a unique element to it. So doing acquisitions for acquisitions' sake is not trivial for us. The answer is, we can do it. We know how to do it. At this point, if you look at where we are and what we have done, it's primarily been technology acquisitions as opposed to acquiring other companies that have a totally different business model and modus operandi.

2015_XLNX

2016

HRL

HRL #Yes. Sure. <UNK>, this is <UNK>. Again, from a sales perspective or brand perspective, clearly very pleased with the work the team did on continuing to grow the SPAM franchise. The SKIPPY business, the introduction of SKIPPY P. B. bites continues to go well. Our Mexican foods portfolio also continues to perform well. As we mentioned, we did have some increased advertising cost, but that's, from our perspective, a positive to support the ongoing and future brand growth. And there's no doubt, we have a couple areas in the unit that are work in process. The chunk meats category, which it's not a huge part of the portfolio, but that's become competitive and our team's working on really taking a different approach with the product offerings that we have there. Again, we talked about Compleats being down, and we're working very strategically to expand the availability of some of the value tier offerings and really increasing the sales or unit rates. And so for them, it was a mixed bag. But I think we still feel very positive on the outlook for Grocery Products going forward. I think one other thing to consider for this quarter, it would be more of a product mix issue. Some of the canned items are not typically high sellers at this time of year. But overall, feel very positive about the transformation of the portfolio and where GP's headed. And I would just add to <UNK>'s comment that we saw quite a run-up in trim, which is an input on a lot of the Grocery Products items. So while they experienced favorable cost of goods in a lot of areas, that was one area that did negatively impact them. Thank you. <UNK>, good morning. This is <UNK>. I think just as a reminder, when we took over the Applegate business, clearly we knew that there were some raw material or supply issues in terms of supporting that business, and then those were compounded with the outbreak of avian influenza. So in the short term, the team has worked really hard to get raw material supply back in place and we feel good about where we are today. So that certainly made the volume growth a battle for the team, and so we the had to regain some lost distribution. But the growth, we've seen some growth, we've seen some increased distribution. From our perspective, we love the brand, we love what the future holds for the brand. And again, on a short-term basis, it's clearly on target to deliver what we said it would deliver at the time of acquisition. He's saying for all of Refrigerated Foods. Oh, well, I think, again, as we think about the different parts of the Refrigerated Foods portfolios, our meat products team continues to be focused on the value-added items and they're doing a nice job. Our food service business continues to outperform the industry and we expect that to continue. The Applegate business will continue to show growth, now that we've got returns of supply. So overall, we feel good about that portfolio, as well. And I would just add that as we transition, particularly when you look at an Applegate that is more of a sales driven business than a volume driven, and as we continue to value add the portfolio, volumes become a little less meaningful as you compare it to prior quarters or years that may have had more of a commodity element. Are you talking about any particular part of the grocery store or our business or ---+. I think, <UNK>, our position on that is clearly we're focused on the effectiveness and our ability to not only deliver a return for us, but for the retail partner. And so we continue to look at categories individually and where there's opportunity to be effective with additional spending, we certainly will take advantage of that. But can't tell you today that there's a significant specific plan in any one given category. Really, we look at our share repurchase being an opportunity to offset stock option exercises. We still believe that using that as a compensation element is appropriate to drive our business. So we're constrained because of the ownership of the Hormel Foundation at about 48% to 49% these days. So we've agreed that they should be under 50%. So that would be the biggest constraint. Obviously, took advantage of some pressure on our of stock this past quarter to be in the market and acquire some of those shares. Thank you, Savannah. This is <UNK> <UNK>. I'll go ahead and conclude the call for us. As some of you may have heard, we actually celebrated our Company's 125th anniversary recently here in July. This provided us a unique opportunity to bring many of our Company's employees together to celebrate the occasion. After visiting with these employees from across the Company, I've never been more optimistic about our Company's future and our ability to deliver growth. I'm very proud of our team's performance this quarter and I look forward to continued excellent results going forward. I want to thank you all for joining us today.

2016_HRL

2018

SPSC

SPSC #Thanks, <UNK>, and welcome, everyone. 2017 was a year of strong execution for SPS Commerce in a retail market undergoing significant transition. For the full year, revenue grew 14% to $220.6 million, and adjusted EBITDA grew 23% to $32.6 million. Additionally, recurring revenue grew 15%, customer account grew 4% and wallet share grew 10%. In the past several years, we have seen tremendous change in the retail industry as we continue to engage with retailers to adapt their businesses to the evolving retail environment and enhance their omnichannel capabilities. In 2017, we expanded our network to include such notable brands as Walgreens Boots Alliance, a $100 billion global conglomerate; Lidl, a German grocer and one of the largest retailers in the world; and Mills Fleet Farm, a full service retailer for life, work, home and recreation products. Throughout the years, SPS Commerce has partnered with many early adopters to successfully deploy new e-commerce strategies and continues to offer unmatched capabilities to those undergoing the transition today. It's imperative for retailers to improve shipping and fulfillment capabilities to compete. And enhancing customer experience may involve offering online educational webinars, loyalty programs, subscription boxes or repeat order programs. Retailers understand the need for retail and e-commerce efficiencies, but they must all also learn to differentiate themselves and win customer loyalty to be able to compete against the retail and e-commerce giants of the world. SPS offers a comprehensive cloud-based platform and a broad-based retail network to enable thousands of trading partners to communicate in real time and adapt quickly to the ever-changing consumer demands and the complex retail environment. The numbers speak for themselves. We now have over 75,000 customers and over 25,000 recurring revenue customers. We have over 2,100 customers to pay us more than $20,000 annually. As we move upmarket, we are seeing an increase in customers integrating with us through our channel partners, and this year, channel sales contributed 22% of all new business. Our leadership position continues to drive growth in our channel strategy. As a result, we have developed strong alliances with some of the world's largest system ---+ global systems integrators and value-added retailers like Capgemini, and most recently, Pw<UNK> With the world's largest retail network, SPS continues to be a strategic partner of choice, enabling robust omnichannel capabilities. As the retail space continues to evolve in complexity, many retailers are now looking for real-time collaboration, inventory visibility and data, which is critical to satisfy elevated consumer demand and realize efficiencies to address the high cost of doing business in the omnichannel world. These trends are fueling the adoption of our broad suite of products. In 2017, our analytics solutions comprised 17% of total recurring revenue, growing 4% year-over-year. As we noted on our last call, the retail environment changes. Bankruptcies and consolidations are impacting the sale of analytics. As a result, our analytics business grew slower than fulfillment in 2017, and we expect this trend to continue. Fulfillment remained strong at 18% year-over-year growth, driven by strong demand for our cloud solution despite lower enablement activity. In 2017, we rolled out the next generation of our web fulfillment product to our customers, which moves beyond traditional EDI and allows us to develop more strategic, consultative relationships with our customers by enhancing their ability to consult with SPS directly through the interface to address the needs of their trading partners. In the fourth quarter, we engaged with Mills Fleet Farm, an Upper Midwest retailer since 1955 with a diversified offering of merchandise of over 120,000 SKUs across a broad range of product categories. Mills recently launched an expansion plan to double its size in 6 years, which began with making significant improvements to their supply chain, including the construction of a new distribution center and an overhaul to their legacy technology and processes. Mills needed to quickly onboard vendors and ensure compliance with their new EDI requirements and turn to SPS for our expertise. We ran a community enablement campaign to quickly onboard hundreds of vendors in time for the opening of their new distribution center in early 2018. These types of community enablement campaigns demonstrate the increasing requirements for retailers to upgrade their legacy technologies and are also an important lead generation source for SPS Commerce. In summary, SPS is the largest retail platform to enable fully orchestrated retailing across all channels, a platform architected for today's complex omnichannel environment, which includes brick-and-mortar, e-commerce and drop-ship. We have a multibillion-dollar global opportunity in front of us, and we feel confident in our momentum exiting 2017. With that, I'll turn it over to Kim to discuss our financial results. Thanks, <UNK>. We had a great fourth quarter. Revenue for the quarter was $58.2 million, a 14% increase over Q4 of last year and represented our 68th consecutive quarter of revenue growth. Recurring revenue this quarter grew 15% year-over-year. The total number of recurring revenue customers increased 4% year-over-year to approximately 25,800. For Q4, wallet share increased 11% to approximately $8,400. For the quarter, adjusted EBITDA increased 14% to $8.5 million. For the year, revenue was $220.6 million, a 14% increase. Recurring revenue grew 15% for the year, and adjusted EBITDA grew 23% to $32.6 million. We ended the year with total cash and investments of $169 million. In an industry that is in transition, SPS Commerce has adapted its business model and set new targets to ensure we continue executing and delivering results for our shareholders. We continue to position our company for the long term and have aligned our sales force to thrive at a dynamic retail environment. We exited the year with a strong sales organization of approximately 295 quota-carrying sales headcount, and we believe this set us up well to deliver on our 2018 expectations. Going forward, we will no longer provide specifics on headcount on a quarterly basis. We may provide periodic color as relevant. We delivered strong traffic growth while investing for the long term, and we implemented a buyback program to repurchase up to $50 million of SPS shares. Before turning to guidance, I would like to highlight the impact of our adoption of the new revenue recognition standard, ASC 606. The impact to our financial results and guidance is as follows. Under ASC 606, 2017 revenue will show a reduction of approximately $500,000 and 2018 revenue will be reduced by approximately $400,000. Under ASC 340, the majority of commissions will now be expensed over 2 years, resulting in a reduction of commission expense of approximately $2 million in 2017 and approximately $1 million in 2018. As a result, adjusted EBITDA increases by approximately $1.5 million in 2017 and approximately $600,000 in 2018 versus the prior accounting standard. Our guidance reflects these changes, and you can see the impact of prior years on our financial data sheet on our website. There will also be more information provided in our 10-K filing. Now turning to guidance. For the first quarter of 2018, we expect revenue to be in the range of $57.4 million to $58.1 million. For the full year, we expect revenue to be in the range of $241 million to $244 million, representing 10% to 11% growth over 2017. For the first quarter of 2018, we expect adjusted EBITDA to be in the range of $9.5 million to $10 million. For the full year, we expect adjusted EBITDA to be in the range of $42 million to $43.5 million, representing 23% to 27% year-over-year growth. We'd like to note that without the impact of AOC 606, our adjusted EBITDA year-over-year growth would have been 27% to 31%. For Q1 2018, we expect fully diluted earnings per share to be $0.14 to $0.16 with fully diluted weighted average shares outstanding of approximately 17.4 million shares. We expect non-GAAP diluted earnings per share to be approximately $0.30 to $0.32 with stock-based compensation expense of approximately $2.9 million, depreciation expense of approximately $2.1 million and amortization expense of approximately $1.1 million. For the full year 2018, we expect fully diluted earnings per share to be in the range of $0.67 to $0.71. We expect fully diluted weighted average shares outstanding of approximately 17.5 million shares. We expect non-GAAP diluted earnings per share to be in the range of $1.32 to $1.36 with stock-based compensation expense of approximately $11.9 million. We expect depreciation expense of approximately $9.9 million, and we expect amortization expense for the year to be approximately $4.4 million. For the year, you should model approximately 30% effective tax rate calculated on GAAP pretax net earnings. We expect to pay nominal cash taxes in 2018 due to our NOLs. In addition to the 2018 guidance, we are introducing a 2020 goal and an updated long-term target model. Specific to the 2020 goal, factoring in current industry dynamics, we expect to reach adjusted EBITDA of at least $65 million and adjusted EBITDA margin percentage in the low 20s. We expect a revenue run rate comfortably in excess of $300 million exiting 2020. Beyond 2020, we expect to see continued margin expansion with a long-term target model for adjusted EBITDA margin of 35%. In summary, we delivered strong revenue and adjusted EBITDA growth in 2017 as we continue to invest for the future. We believe SPS is well positioned to expand its market leadership. And with that, I'd like to open the call to questions. Yes. I think when you look back from ---+ we haven't seen the full year '17 numbers yet, but '16 numbers were ---+ that overall brick-and-mortar grew about 3% and e-commerce grew more in the 17% range. And I think my guess is it's going to be slightly better than that but not significant for the full year. Retail continues to be overbuilt. I think we're going to continue to see store closings partly because of e-commerce but a big part just because it's been overbuilt for the last 25 years. So I think we're going to continue to see that. We did see additional transaction volume in Q4 that ---+ mostly from our drop-ship that created a little extra revenue in Q4, so that was strong. And then we did see some strength in our enablement campaign activity in Q4. But I don't think it's a huge overall change in the environment, and we're not counting on a complete turnaround. (inaudible) I think we're just going to continue to see some bankruptcies. I think we're going to continue to see store closings, and it continues to be an industry in transition. So if you take a step back, first off, from a product suite standpoint, we think analytics is an extremely important part of our portfolio. It fits very nicely with our mission and vision of perfecting (inaudible). And it does help in the overall sales for ---+ as we have an entire package for both retailers and suppliers. So we think it's an important part, and we do believe in the long-term TAM. I don't think the store closings and that matter. It's just a matter of where it's falling in people's priorities. I met with a supplier yesterday, and the suppliers are very much engaged and want to do more with the point-of-sale data and analytics. But they can only go so far if the retailers aren't going to share that data. So I still believe that there's an incredibly large long-term total addressable market. But I don't think we're going to see that move to the top of the party list for retailers over the next year or 2. Well, the customer growth count, as we stated in the past, is really around enablement activity. And channel sales will drive revenue. But for the most part, channel sales tend to be slightly larger deal. Typical deal size is 3 to 10 or larger than our average size. So it drives revenue but lower customer count. An enablement activity is what will be the stronger activity for customer count. We saw a relatively strong Q4, especially relative to most Q4s' enablement activity. I think, obviously, we believe in an incredibly large total addressable market. And I think for things to accelerate, we need to see a higher activity of enablement campaigns, so there's some normalization there. And we obviously need an acceleration and a prioritization of analytics. So those are the 2 things that we're going to watch. Sure. So when we look at 2017, EBITDA dollar growth was about 23%. When you look at our guidance for 2018, our EBITDA growth is 23% to 27%. So really, we demonstrate our ability to show some of that margin expansion in '17. And so really, in '18, you'd expect similar as it relates to the implied margin expansion. As it relates to where that comes from, over time, we believe we have opportunities for efficiencies really in most of the areas, with the exception of R&<UNK> We think that as a percent of revenue, and sort of that 10% to 12% makes sense for us. But over time, we think there's opportunities to show improvement in gross margin, sales and marketing as well as G&A. Specific to your question on the sales and marketing side, a couple things. We exited 2017 with about 295 quota-carrying sales headcount. We believe that puts us in a great position relative to what our expectations are for 2018. So the way you should think about that sales and marketing then in '18 is we'll continue to add here or there as we see opportunities to do so, but we're exiting in a really good sort of sales force optimization point so we don't need to be adding as many as we've had to add in prior years. Therefore, there's more efficiencies that you're going to see out of our model and more efficiencies that you'll see translated to the sales and marketing line itself in 2018. Well, I think there's a number of things that are driving the sales force. Obviously, we had a reorganization about a year ago, and I think the sales force ---+ I mean, I really believe we have extremely committed, strong sales organization. We have more seasoned sales reps. But more importantly, our customer success team has stepped up over the last year or 2 and is really driving customer behavior and assisting the sales force in selling to our existing customers. I think our sales operations team is doing a great job of taking burden off of the sales force, which allows them to be more efficient. So I think we've done a number of things that are proving out to allow the sales force to do what they do best and go after new prospects and work with our existing install base. Well, I think if ---+ when I look back 3 or 4 years ago, I think the e-commerce trend and omnichannel trend was more of an opportunity than a threat to people. We had a lot of tailwinds, retailers weren't as stuck, and there was ---+ they felt there was less disruption. I think over the last 3 or 4 years, the last 20 years of behavior from retailers of overbuilding is catching up with them. Obviously, the e-commerce, they need to get in the game, so there's more disruption there. And analytics is completely much more on the back burner as far as priorities. There's very large priorities. I think retailers actually are getting more engaged and into the game of truly building an omnichannel business. I think there's areas where we can continue to grow the sales force. I think there's areas where you need to be careful, I think, like analytics. I think they're ---+ it just ---+ it's not just a matter of more headcount will give you more sales. I think there's areas that we'll continue to add and we'll be selective, but it's not as straightforward that you just knew that if you added more, you'd sell more. But I think from a capacity standpoint, the things that Dan Juckniess and the entire sales organization has done and embraced over the last 12 months really set us up well for the long term. Sure. So from a customer churn, we're at 13%, that's an annual number, same as we were last quarter. And dollar churn is just about half of that, it's at about 7%. And that same is what we saw last quarter as well. Those are annual numbers, not just quarterly numbers, obviously. Sure, the last ---+ it's changed by about 1%. So if you went back, the customer churn used to be around 12% and the dollar churn used to be about 6%. So we've seen a slight uptick of about 1% on both of those metrics. Yes. I think it's fairly fresh in their minds. I haven't had a lot of feedback, but I think their plates are full. I think capital has been, in some cases, been the restraint. But I think a lot of the restraint for retailers is just how much can they do at a time. We still see that trend. Obviously, that's a retailer by retailer. They're not all going through the pipe at one time. But I think it's retailer by retailer. And I think there's going to be ---+ continue to be more and more large transformation as retailers are realizing that they either embrace an omnichannel strategy or they're not going to survive. So as it relates to 2018, we provided overall guidance for what our expectations are. However, we've also stated that we do expect that the analytics will continue to grow at a slower rate relative to the fulfillment growth. No, I think Mills Fleet Farm was a nice program. What we tried to do on the earnings call is highlight a customer or 2. So it was a nice program and it was one of a few that ---+ several that drove that. So it was deeper than just one program. Yes, and the ---+ in Q4, with the sequential adds being a bit higher and you also saw that in the customer growth rate, so it went up ---+ it's 4% versus the 3%. Those are highly correlated to the quantity of community enablement campaign. So one of the comments that <UNK> had made earlier is we did see a few more of the community enablement campaigns. They ended up coming in, in the latter part of the quarter, which was part of our reasons for our exceeding in the quarter. Sure. So we continue to see and expect to see the retail market. It's still undergoing significant transition. And as those retailers do that, there's opportunities for us to help them through community enablement campaigns, but the timing of when those campaigns happen really are more dictated on where the retailers are within their journey. So a lot of the commentary we said in '16, again, we still expect retailers are on this journey for ---+ into '18 and beyond. Yes. Our international business, in Australia, we've had nice traction there. That's an entire ecosystem obviously built into the whole global concept. But we've see nice traction in Australia. Our business in Asia is really more linked to the supply chain ---+ North America supply chain, and we continue to see that growing more at the pace of overall fulfillment on a growth standpoint. It's ---+ we actually support thousands of customers that may have a component in Asia through our Asian operations. And then Europe has been slower, but that's more linked to our analytics business, which, again, continues to be slower growth.

2018_SPSC

2017

KELYA

KELYA #Thank you, John. Thank you, and good morning. Welcome to Kelly Services 2017 Third Quarter Conference Call. With me on today's call is <UNK> <UNK>, our CFO. Let me remind you that any comments made during this call, including the Q&A, include forward-looking statements about our expectations for future performance. Actual results could differ materially from those suggested by our comments, and we have no obligation to update the statements made on the call. Please refer to our SEC filings for a description of the risk factors that could influence the company's actual future performance. Before we review Kelly's third quarter results, let me point out that our revenue growth was impacted by a weakening of the U.<UNK> dollar against several European currencies in the quarter. I'll present our year-over-year comparisons in nominal currency with the exception of our international performance, which will be represented in constant currency. Now turning to Kelly's results. The third quarter was eventful for us on several fronts. We acquired Teachers On Call, a leading educational staffing company, further strengthening our leadership position in the K-12 market. We announced our planned implementation of a digital talent platform, which will transform our front office. And I am pleased to report that even in the face of unprecedented weather events, we once again delivered good top line growth, healthy operating earnings and solid returns for our shareholders. Kelly's third quarter revenue was $1.3 billion, up 6.5% compared to last year. We achieved earnings from operations of $18.2 million compared to $18.8 million last year, reflecting the addition of sales and recruiting resources and increase in performance-based compensation and other factors that <UNK> will walk you through in a few minutes. And diluted earnings per share were $0.58 compared to the $2.06 per share last year, reflecting the impact of our APAC JV transaction. Excluding that impact, EPS increased more than 30% year-over-year in the third quarter. It was a solid quarter that continued to build on the momentum we saw in the first half of the year. And we are pleased with our performance, particularly our ability to deliver top line growth and make key investments in our future. Now before we look more closely at how specific elements of our business performed in the third quarter, let me remind you that effective January 2, we realigned our business into 3 operating segments. The Americas staffing segment includes our local branch-delivered staffing business in the United States, Puerto Rico, Canada, Mexico and Brazil. The international staffing segment includes the results of our EMEA staffing business. And the global talent solutions segment, which we call GTS, includes our global outsourcing and consulting business, OCG; and our centralized staffing operations in the United States, Canada and Puerto Rico. Now let's take a look at how these segments performed in the third quarter, starting with Americas staffing. Americas staffing is comprised of commercial staffing, Kelly Educational Staffing and professional and technical specialties. Americas staffing revenue increased 7% in the third quarter compared to the same period last year. Commercial staffing revenue increased 8% over prior year compared to the 6% year-over-year increase we reported in Q2 and the 1% increase in Q1. We continue to see demand for light industrial accelerate in the third quarter, building on the trend we saw in the first half of the year. And our office/clerical business returned to growth after several quarters of decline. Kelly Educational Staffing delivered revenue growth of 6% in the third quarter. This growth rate was impacted by 2 primary factors: the addition of revenue for the month of September from the newly acquired Teachers on Call, offset by the loss of revenue caused by the hurricanes experienced in the United States. Revenue in our professional and technical specialties was flat in the third quarter compared to prior year, down from the 3% increase in Q2. Total firm fees, which remain volatile in the Americas, were up 2% year-over-year. The third quarter gross profit rate in Americas staffing was 17.8%, down 50 basis points from a year ago due mainly to business mix. Expenses for the quarter were up in Americas staffing by 6% year-over-year, primarily the result of adding sales and resources in line with demand in commercial staffing and PT specialties as well as performance-based compensation. We expect to leverage from these investments to start to improve in the fourth quarter. All told, the Americas staffing segment achieved an operating profit of $13.3 million in the quarter compared to $14.3 million last year. Let's now turn to our international staffing operations outside of the Americas. Revenue in the international staffing increased 15% compared to prior year in nominal U.<UNK> dollars or 10% on a constant currency basis. This growth was driven by increased demand across Europe. For ease of reference, the remainder of my comments on international staffing will be in constant currency. Fee-based income for the quarter was up 8% year-over-year, largely due to Eastern Europe. The segment's reported GP rate for the third quarter was 14.3% compared to 14.7% for the same period a year earlier, down due to customer mix. An 8% increase in GP dollars is mainly attributable to higher revenue driven by hours volume and the temp staffing business. Expenses in international staffing were 2% higher than the prior year as we continued to add recruiters in our branch network, partially funded by redeploying headquarter expenses into targeted growth areas. Netting everything out, international staffing's operating profit in the third quarter was $7.2 million, up 57% over last year, and we are pleased with the solid performance in this segment. Now let's turn to the results of our global talent solutions reporting segment. This segment is a combination of our previously reported OCG segment plus our centrally delivered staffing operations. The GTS reporting segment reflects the 2 primary ways that clients in this segment are buying from us: talent fulfillment and outcome-based services. I'll discuss each business' result separately, but first, let's take a look at how GTS performed as a whole in the third quarter. GTS revenue was up 2% year-over-year while gross profit grew 8% for the quarter. Revenue was up year-over-year in our KellyConnect, Business Process Outsourcing and Contingent Workforce Outsourcing practices, offset by revenue declines in our centralized staffing and payroll practices. Now let's look at gross profit results in each of the 2 GTS businesses. Our talent fulfillment business is made up of our Contingent Workforce Outsourcing, Payroll Process Outsourcing, Recruitment Process Outsourcing and centrally delivered staffing practices. Gross profit in the talent fulfillment business was up 2% year-over-year, an improvement from the 1% decline reported last quarter. We continue to see nice double-digit GP increases in our CWO practice from new programs in Q3 as well as year-over-year GP growth in our RPO practice. These results were partially offset by year-over-year GP declines in our centrally delivered staffing and PPO practices. The outcome-based services business is comprised of our BPO, KellyConnect, Kelly legal managed services and advisory services practices. Gross profit for outcome-based services increased 33% year-over-year, driven primarily by continued momentum and strong results in both KellyConnect and BPO. The GP growth we've seen in KellyConnect during the last 3 quarters confirms the return on investment we made in this practice during the second half of last year. We also saw double-digit year-over-year GP increases in BPO in the third quarter as we continue to expand existing programs and win new business in this practice. Overall, the GTS segment gross profit rate was 18.5% for the quarter, up 110 basis points year-over-year, largely due to favorable practice and customer mix along with lower workers' comp and other employee benefit costs. Expenses in GTS were up 3% year-over-year in the third quarter due to headcount and salary costs related to the addition of new programs, coupled with increased performance-based incentive costs. These increases were somewhat offset by cost reductions from the actions we took in the first quarter to optimize our centralized delivery staffing business in line with demand. All told, GTS third quarter operating profit was $20.8 million, up 30% over a year ago, another solid quarter for this segment. Now I'll turn the call over to <UNK> who will cover our quarterly results for the entire company. Thank you, <UNK>. Revenue is at $1.3 billion, up 6.5% compared to the third quarter last year. As <UNK> described, our revenue growth benefited from the weakening of the U.<UNK> dollar against several of the European currencies in the quarter. On a constant currency basis, our total revenue increased 5.3% compared to the 3.5% in nominal currency growth, [so currency as reported] 220 basis points impact. In addition, our acquisition of Teachers On Call added about 30 basis points to our total revenue growth rate. Overall, our Q3 revenue performance reflects another quarter of improving trends driven primarily by solid growth in our locally delivered staffing business in the Americas and international. Staffing placement fees were up nearly 7% year-over-year, driven by good firm fee performance in international staffing. Excluding the impact of currency, fees were up 4%. Overall gross profit was up $16 million year-over-year or up 7.3%. Our gross profit rate was 17.4%, up 20 basis points when compared to the third quarter last year. Our overall GP rate reflects ongoing structural improvement as we shift to higher-margin solutions within our global talent solutions segment, partially offset by the impact of margin rate erosion in Americas and international staffing due to changes in business mix. SG&A expenses were up 8.3% year-over-year. About half of that increase comes from our corporate expenses, which reflect a return to normalized levels of performance-based compensation expenses after the 2016's unusually low level of performance-based compensation and litigation-related expenses. Within our operations, expense increases reflect good leverage on our third quarter GP growth even as we have made investments to capitalize on market opportunities within our locally delivered staffing business in the U.<UNK> and related international markets. We continue to focus on expense control efforts and generating return for investments in our service delivery infrastructure. Earnings from operations were $18.2 million in the third quarter compared with 2016 earned of $18.8 million. These results reflect the conversion rate on return on gross profits of 7.9% compared to 8.7% for Q3 2016. This relatively flat level of earnings reflect our solid GP growth, offset by additional expenses in the Americas staffing business to position us for future growth as well as higher performance-based compensation expenses. As a reminder, our third quarter 2016 results included the $87.2 million pretax gain on closing of the APAC JV transaction in July 2016. Income tax benefit for the third quarter was $4.1 million. Our Q3 2017 tax benefits include the impact of releasing additional tax valuation allowance, and our Q3 2016 tax expense includes the tax expense related to the gain on the APAC JV transaction. Adjusted for both items, our effective tax rate was 5.7% this quarter compared to our third quarter 2016 effective tax rate of 6.5%. And finally, diluted earnings per share for the third quarter of 2017 totaled $0.68 per share compared to $2.06 in 2016. 2016 Q3 EPS included $1.62 per share related to the after-tax impact of the gain on the APAC JV transaction. Excluding the impact of the APAC JV transaction, EPS increased more than 30% year-over-year. Now as we look ahead to the rest of the year. For the fourth quarter, we expect revenue to be up 8% to 9%, with about 200 basis points of the improvement coming from continued currency impact and about 120 basis points coming from our acquisition of Teachers On Call. We anticipate that there will be some continuing impact of reduced demand in hurricane-impacted Puerto Rico and believe it may put some modest downward pressure on our expected revenue growth. We expect the gross profit rate to be consistent with last year and SG&A expense to be up 4.5% to 5.5%. About half of the increase in SG&A is due to increased performance-based incentive compensation expense, as mentioned in my Q3 discussions, as well as the acquisition of Teachers On Call. Even with increase in performance-based compensation, we are on track to deliver good full year operating leverage. Our 2017 annual income tax rate is expected to be in the mid-single digits due to favorable trends in the first half of this year and due to a release of additional tax valuation allowance. Now moving to the balance sheet. Cash totaled $22.2 million compared to $29.6 million at year-end 2016. At quarter end, debt was $23.9 million compared to normal range at the end of 2016 and over $15.2 million from a year ago. These balances reflect that during the quarter, we paid $37.2 million net of cash received related to our acquisition of Teachers On Call. Accounts receivable totaled $1.3 billion and increased 12% compared to year-end 2016. Global DSO was 58 days, up 2 days from the same quarter last year and up 5 days since year-end 2016. DSO in the third quarter is higher due to seasonality, including the impact of the seasonal increase in Educational Staffing business in connection with the start of the school year. The remainder of the increase is due primarily to customer mix. In our cash flow year-to-date, we generated $18.2 million of free cash flow, down from the $20.4 million of free cash flow generated last year. The decline in free cash flow reflects higher capital spend in 2017 as a result of increased investment to begin our digital talent platform as well as the timing of spending on projects related to technology and infrastructure and compared to the prior year. For more information on our performance, please review the third quarter slide deck available on our website. I will now turn it back over to <UNK> for his concluding thoughts. Thank you, <UNK>. It's been a good year so far for Kelly, and we're pleased with the progress we're making. After building strong momentum in the first 2 quarters, our third quarter performance confirmed that we are continuing to drive top line growth even as we invest in talent, technology and solutions that will accelerate our progress in the future. Our Americas staffing segment continued its forward momentum, capturing strong revenue growth. Our local operating teams are more focused than ever. Our investments in targeted areas are yielding results. And the acquisition of Teachers On Call further strengthens Kelly's educational staffing leadership position in the K-12 market. We expect continued return on these investments as we move forward. Our international segment remains tightly focused on pursuing core specialties across Europe, closely managing expenses as they actively capture new opportunities. And our global talent solutions segment continues to deliver top and bottom line growth as we help companies navigate a more holistic approach to talent solutions. It was clearly a successful quarter. Our performance demonstrated our continued ability to grow the top line, operate with increased efficiency and deliver a solid return to our shareholders, all while continuing to invest in the future. Our acquisition of Teachers On Call and our decision to implement a digital talent platform confirm that we are not content to stop at short-term growth, and we are strategically positioning Kelly for the long term as the world of work evolves. Looking beyond our reporting segments. Our APAC joint venture has reached its 1-year anniversary and has fully met our expectations in terms of expanding our market presence and strengthening the Kelly-PERSOL relationship. Finally, we are pleased with our financial performance. Events in the third quarter also served as a reminder that Kelly has truly exceptional teams. I'm very proud of how our colleagues came together to support one another through the natural disasters we encountered, all while staying true to the character of Kelly in meeting the needs of our customers and candidates. <UNK> and I will now be happy to answer your questions. You mean the revenue growth that we saw in the third quarter. Yes. So as we look forward, not going any further than what we said with the fourth quarter, we see a continuing pace of growth going into the fourth quarter. And certainly, the fact that we have demonstrated that we're investing in sales and recruiting resources in our Americas segment predominantly but also in international demonstrates that we think that there's continuing demand as we look out in the future. Okay. Thank you, John, and thank you, everyone, for being on the call.

2017_KELYA

2017

XLNX

XLNX #Thank you, <UNK> Sales in the March quarter increased for the sixth consecutive quarter to $609 million, up 4% sequentially and up 7% on a year-over-year basis Growth was driven by our Advanced Products, which increased 9% sequentially to a new record Gross margin was 69.5%, at the high end of our guidance, due primarily to favorable end market mix Operating expense was $250 million This was $6 million higher than guided as we accelerated some 16-nanometer tape-out expenses to extend our technology leadership and add some increased litigation expense Operating income for the quarter increased 6% sequentially to $173 million or 28.5% Other income and expense was an expense of $2.2 million, better than guided due primarily to investment gains Tax rate was 10% for the quarter due to discrete item Our net income for Q4 was $153 million or $0.57 per share We are pleased to have delivered on our financial plan in fiscal 2017. We met our target of 6% revenue growth, driven by a 45% increase in Advanced Products, and operating margin was 30% for the year This profitability led to the generation of a record $934 million in operating cash flow Finally, our EPS was $2.32 for the year, a 13% increase over FY 2016. Now, some key points on the balance sheet and cash flows We ended the quarter with $3.4 billion in gross cash and $2 billion in net cash after our debt Accounts receivables decreased by nearly $100 million, as we collected last quarter's higher than normal receivables balance Inventory was $227 million, up $21 million from the prior quarter, with nearly all the increase coming from our Advanced Products Operating cash flow was $306 million for the quarter In the quarter, we paid $82 million in dividends, and we repurchased 1.8 million shares for $108 million, an average price of $58.45. We ended the quarter with diluted shares at 267 million, which included the impact of 15 million shares from the convertible and the warrant associated with it For a complete explanation of the impact of these instruments on share count, please refer to our convertible FAQ on our Investor Relations website As we have discussed, capital allocation remains a top priority for the company This year, we returned $855 million to shareholders through $333 million of dividends and $522 million of share repurchases This total capital return is $90 million more than we returned to shareholders in the prior year Our board recently authorized an increase to our dividend for the 12th consecutive year We continue to execute on our share repurchase program with the intention of exhausting our $1 billion authorization over the next several quarters We currently have $680 million left on that authorization Now to guidance In the June quarter, we are expecting sales to be between $600 million and $630 million Our backlog is up heading into the quarter, and we are expecting continued growth in our Advanced Products On end markets, we expect the communications category to be up, industrial and A&D categories is expected to be flat sequentially And, lastly, broadcast, consumer and automotive is expected to be slightly down Our gross margin will be approximately 68% to 70% We expect operating expense to decline to approximately $242 million, including $1 million of amortization Other income will be $1 million Finally, our tax rate is expected to be between 12% and 15% We will provide full year FY 2018 guidance at our upcoming Analyst Meeting in New York City on May 22. We look forward to seeing you all at that meeting Let me now turn the call over to <UNK> Yes <UNK> <UNK> <UNK> - Credit Suisse Securities (USA) LLC <UNK>? Yeah So two things So I might frustrate you by not being very precise But in the comms, we do show data center We do expect data center to grow meaningfully And again that's in the context of some of our older data center business not growing as much as we would like And in certain cases, our design wins that we've had were slowing down So we do think that, in summary, that the data center growth, which is part of the overall comms growth, all the end other markets in the comms area we expect to be growing as well, but the data center growth will be driven by hyperscale Then with regard to share count, so I haven't been providing detailed share count guidance for the past couple of quarters for a couple reasons One is I don't want to kind of signal exactly what we're doing on our buyback And the second part is, the complexity of the convert and its impact on our diluted share count is hard to describe briefly So I would though recommend you, CJ, go to our website We're going to update what we expect to be the impact on diluted share count from the redemption of the convert in this quarter Like I said, it's fairly complex, but we've tried to make it understandable And you will see that it will have a significant impact in this current fiscal quarter, and then because of the way the accounting is done for the share count, it will actually even translate to a further reduction in the next quarter So I mean, I will actually, I'm happy to take a follow-up if there's something specifically you were looking for, but I'm not going to give you a precise share count guide That was a very artfully phrased question, too Good for that It's generally been on an upward trend as design wins that we have, one in our 28-nanometer generation ramp in As you know, in defense, it's a very, very long-tailed business So at any point one time, we have multiple generations, multiple of our product generations being sold into the industry So given our competitive position and strength of design wins and our continued design wins in large opportunities like Joint Strike Fighter, we feel very good about the business So I think an element of your question, <UNK>, was maybe related to whether the applications on AWS are kind of nichy or small or whether there's some big entities using it And the launch partners range obviously from some smaller entities to some very large entities, and they're doing a range of applications that are fundamental to each of the companies in the core businesses So I do think the scaling opportunity is there and very well represented So the industrial A&D softness is due to program-specific things in defense primarily The rest of the business areas are relatively going to be flat relatively quarter on quarter In the automotive, consumer, broadcast space, as we've mentioned in this call already, we've set a record in automotive And if you go back a quarter, we talked about kind of a low based on some inventory things So we're going to see a little bit of dip in automotive And by the way, though we expect a longer-term trend upward based on the strength of our ADAS design wins, we won't be surprised by some quarterly fluctuations But underneath that, the ADAS business is very strong It's just kind of a quarterly correction and the rest of the end markets in that segment are flat We will probably talk a little bit more in May about longer-term trends in audio/video broadcast, but you're right, the industry is facing some headwinds, and we are feeling those as well Chris, we'll, like all the other questions that relate to longer-term views on the business, we'll talk about that more in our Analyst Meeting

2017_XLNX

2017

HCI

HCI #Thank you, and good afternoon. Welcome to HCI Group's First Quarter 2017 Earnings Call. With me today are <UNK> <UNK>, our Chairman and Chief Executive Officer; <UNK> <UNK>, our Chief Financial Officer; and <UNK> <UNK>, our Senior Vice President of Finance. Following <UNK>'s opening remarks, <UNK> will review our financial performance for the quarter and then turn the call back to <UNK> for an operational update and business outlook. And finally, we will answer questions. To access today's webcast, please visit the Investor Relations section of our corporate website at hcigroup.com. Before we begin, I'd like to take an opportunity to remind our listeners that today's presentation and responses to questions may contain forward-looking statements made pursuant to the Private Securities Litigation Reform Act of 1995. Words such as anticipate, estimate, expect, intend, plan and project and other similar words and expressions are intended to signify forward-looking statements. Forward-looking statements are not guarantees of future results and conditions, but rather are subject to various risks and uncertainties. Some of these risks and uncertainties are identified in the company's filings with the Securities and Exchange Commission. Should any risks or uncertainties develop into actual events, these developments could have material adverse effects on the company's business, financial conditions and results of operations. HCI Group, Inc. disclaims all the obligations to update any forward-looking statements. With that, I would now like to turn the call over to <UNK> <UNK>, our Chairman and CEO. <UNK>. Thank you, <UNK>, and welcome, everyone. First, I'd like to provide a brief overview of our company. As most of you know, HCI Group is a holding company with subsidiaries engaging in diverse yet complementary business activities. Our principal operating subsidiary is Homeowners Choice Property & Casualty Insurance Company, which provides homeowners insurance in Florida. We also have TypTap Insurance Company, which currently focuses in providing flood insurance to Florida homeowners. TypTap features TypTap.com, our internally developed online platform for quoting and binding flood insurance policies. Accessible from any Internet-capable device, including your mobile phone, TypTap.com provides a quote in seconds and a policy in minutes. Additionally, we have a Bermuda-based reinsurance subsidiary called Claddaugh Casualty Insurance Company, which participates in our reinsurance programs. To support all of our insurance operations, we also have an information technology operation called Exzeo that develops insurance-related products and services. For example, it developed the technology that powers TypTap.com. It also developed Atlas Viewer, our map-based technology that allows us in real-time to identify, track and manage daily claims as well as claims associated with catastrophic events. In the future, we expect to find other means to leverage the new technologies, including the delivery of products and services to third parties. Finally, we have Greenleaf Capital, which owns and manages our growing portfolio of Florida real estate that currently includes 2 office buildings, 2 parcels of waterfront property and 2 grocery-anchored shopping centers. Turning to the quarter. The first quarter was a solid start of 2017. I am pleased to tell you that it was HCI's 38th consecutive quarter of profitability, and net income for the quarter nearly doubled from that of Q1 2016. Other highlights from the quarter were: We increased our quarterly dividend by $0.05 to $0.35 per share. We also completed the sale of $143.75 million of 4.25% senior convertible notes. We used a portion of these proceeds from the offering to repurchase common shares and also to retire all of our 8% senior notes. That redemption was finalized in April 3 after the end of the quarter. Now I would like to invite our CFO, <UNK> <UNK>, to walk us through our financial performance for the first quarter. <UNK>. Thank you, <UNK>, and good afternoon, everyone. For the first quarter of 2017, income available to common stockholders totaled $12 million compared to the same quarter of 2016 with net income of $6.1 million. Diluted earnings per share for the current quarter was $1.15 compared to $0.60 diluted earnings per share for the same quarter of 2016. Gross premiums earned was $91.6 million for the current quarter compared to $98.8 million for the comparable quarter a year ago. This decrease is attributable to normal policy attrition and the impact of the 5% rate reduction effective on new and renewal policies beginning in January of 2016. Ceded premiums were $28.6 million as compared to $40.4 million. For the first quarter of 2017, reinsurance costs were 31.2% of gross premiums earned as compared to 40.9% in the same quarter a year ago. This decrease is the result of the reduced reinsurance cost for the treaty year effective June 1, 2016. Through March of 2017 and for reinsurance treaty years beginning June of 2016, with the replacement of the multiyear reinsurance treaty as discussed in prior calls, benefits of $2.5 million and approximately $8.3 million were recognized, respectively. Net premiums earned for the first quarter of 2017 were $63 million compared to $58.4 million in the first quarter of 2016. Gross written premiums were $71.4 million for the first quarter of 2017 as compared to $75.6 million in the same period of 2016. For the same periods, net written premiums were $42.5 million compared to $35.2 million for their respective periods. Loss and loss adjustment expenses for the quarter totaled $25.8 million compared to the first quarter of 2016 of $27 million. As of March 31, 2017, we have strengthened reserves for incurred but unreported losses and for development on reported claims to the current carried level of $50.2 million compared to the carried IBNR and bulk reserve amount at March 31 of $30.5 million. In addition, we have continued to strengthen our reserves as seen in the minimal increase in our loss ratio. Our loss ratio applicable to the first quarter of 2017, which we define as loss and loss adjustment expenses related to gross premiums earned, was 27.9% compared with 27.4% in the first quarter of 2016. Loss and loss adjustment expenses for the first quarter of 2016 were impacted by tornadoes and hailstorms. Investment income and related investment items increased by approximately $2.6 million, primarily resulting from increases in net investment income of $1.3 million, realized gains of $800,000 and a reduction in net other than temporary investment losses of $500,000 as compared to the first quarter of 2016. Interest expenses increased by $713,000, primarily the result of interest on the recently completed bond issue in March of this quarter. The expense ratio applicable to the first quarter of 2017, which we define as underwriting expenses, interest and other operating expenses related to gross premiums earned, totaled 25.1% compared with 24.3% in the first quarter of 2016. Expressed as a total of all expenses related to net premiums earned, the combined loss and expense ratio for the first quarter of 2017 was 77.1% compared with 87.3% in the same quarter of 2016. These fluctuations in the ratios reflect the variances in gross premiums earned and reinsurance costs. We are constantly monitoring claim activities for development of trend and frequency, severity and litigation situation reaching all carriers in the state. Investments in fixed maturities, securities and equities increased to $230.2 million from $219.3 million at December 31, 2016, an increase of 4.9%. Cash and cash equivalents increased by $127.4 million during the quarter, primarily the result of the senior note debt offering which provided net proceeds of $109 million. On March 3, 2017, we closed our new convertible senior notes issue with total principal amount of $143.75 million. As part of this transaction, we repurchased 413,600 shares at $49.19 per share and entered a prepaid forward contract for a further repurchase of 191,100 shares at $49.19 per share, for a combined total of 604,700 shares at a total of $29.7 million. After paying transaction fees of approximately $5 million, the net cash from this offering was approximately $109 million. Subsequent to the end of the quarter, $48.8 million of these proceeds were used to redeem our 8% senior notes. The balance of approximately $68 million will be used for general corporate purposes. Coupon interest rate on the new convertible senior notes is 4.25%. However, the effective rate of interest is 7.6%. The carrying value of the new senior notes is $123.6 million. Total stockholders' equity at March 31 of $232.1 million reflects the decrease generated through the prepaid stock repurchase agreement discussed previously. Net book value per share has increased to $25.63 per share at the end of March 2017 from $25.23 at December 31, 2016. In the quarter, our basic earnings per share was $1.27. For purposes of calculating basic earnings per share, the weighted average share count for the quarter was 8,918,000 shares. The issuance of the convertible senior notes were dilutive in the quarter and our fully diluted earnings per share was $1.15 per share. For purposes of calculating the fully diluted earnings per share, the weighted average share count for the quarter was 11,140,200 shares and the interest expense add back was $1,499,000. The fully diluted share count as of March 31, 2017 is approximately 12,400,000 shares. We are pleased with our first quarter results led by strong fundamentals throughout our organization, and we remain committed to increasing shareholder value in future periods. Now I'd like to turn the call back over to <UNK>. <UNK>. Thank you, <UNK>. First, a few Hurricane <UNK> comments. Most of the <UNK> claims are now closed and we remain comfortable with our reserve levels. But keep in mind that claims can have a long tail, especially in the current litigation environment. Looking ahead, we expect Florida insurance regulators will approve an 8% average rate increase for our Homeowners Choice HO3 and HO6 books of business. We expect that rate increase to go into effect with new and renewal policies some time in Q3 of this year. 8% is a blended average. Many policyholders will receive a smaller increase or actually no increase at all. The increase will primarily impact policyholders in Southeastern Florida where litigation assignment benefit abuses have been most prevalent. We don't take these rate changes lightly. Homeowners Choice has not raised rates since 2013 and will be one of the last companies to raise rates this year. But unfortunately, at this point, we have to do out of prudence. Looking to reinsurance, we have substantially completed our 2017/2018 reinsurance program. We expect the cost to be similar to last year, but with much better coverage. Moving to TypTap, our recently formed flood insurance subsidiary. Since inception, TypTap has sold over 4,000 policies with gross written premiums over $4 million. We believe there is significant room for growth. Finally, our balance sheet is strong and obviously is stronger because of the recent transactions. And we have significant amounts of cash to invest in our businesses, enhance our technologies and pursue accretive opportunity that may arise. Finally, before I take questions, I have an announcement to make. For some time now, <UNK> <UNK> has indicated a desire to retire from the CFO role. We have not yet set a final date and we have some formality that need more work to do. However, on the call today is <UNK> <UNK>, our Senior Vice President of Finance who joined us last December and has been designated by the Board of Directors as <UNK>'s successor. <UNK> has considerable financial experience, and we are pleased to welcome him to the company. And I expect <UNK> will step into the role of CFO soon, probably before the next earnings call. <UNK> is not leaving us. He will remain with HCI and assume the title of Senior Vice President of Finance and provide ongoing strategic and financial guidance. I want to take a moment to thank <UNK> for his commitment and service to the company. <UNK> has been our CFO since the company's inception. He was there to file the original certificate of authority with the Office of Insurance Regulation. His expertise in the insurance industry has been extremely valuable during our initial public offering and subsequent growth. We are pleased that he will continue to work with us going forward. With that, we are ready to open the call for questions. Operator, please provide the proper instruction. Matt, there are 2 things, I think, that have been ---+ actually, 3 items that have been ---+ that have occurred in the industry for those who may not be aware. I think Prepared Insurance Company was sold. Elements Property Insurance Company was also acquired by somebody else. And I think the wind-down of Mount Beacon was greatly accelerated. I think some of these things may have occurred or been accelerated due to Demotech's actions. Beyond that, I think everybody else either put in more capital or did whatever they had to do to get their ratings reaffirmed. But I do know that Demotech is still concerned and watching everybody's balance sheets and income statements on a quarter-by-quarter basis. It's ---+ they're a regulator ---+ they're a ratings agency. That's what they're supposed to do. And I can tell you, that's what they're doing. Okay. So I'll take the question in 2 parts. Let's talk about the ---+ writing homeowners policies. TypTap has been ---+ has had its COA amended and has had rates and forms approved to do homeowners insurance in Florida. Having said all of that, we have made no announcements and have not done any marketing or anything else to actually write our first homeowners policy for TypTap in the State of Florida. So I think that is something that's coming. And the rate filing, et cetera, I think, are a matter of public record at this point. As far as expansion beyond Florida, I think given TypTap seasoning, Homeowners Choice and the state it finds itself in at this point, we may ---+ I think it's imminent that both companies will expand beyond Florida sometime in the near future, obviously, subject to all the regulatory approvals, both from Florida and from any state that they wish to apply to, yes. A bit of both in terms of that. I think the high cash balance and as the Fed has been raising interest rates, you can easily pick up 1% to 2% in anything that's liquid from ---+ immediately liquid to liquid over the next 2 years. So we will pick up some money from that. The big cash balance is really there to ---+ in case opportunities or needs arise for the business. So we're not necessarily committing to do anything just yet. Having said that, we did all of these transactions because we saw a window of opportunity whereby we could remove any concerns of debt being maturing and being due anytime in the next few years. And doing it in a way whereby actually our cash requirements to service the debt didn't actually go up and yet we netted about $70 million in cash. So it's a very good transaction. Great question. As we've told everybody, how this works is that we submit all of our data and information to the ---+ to actuaries who run up the numbers. Obviously, all of this stuff is a little bit backward-looking and delayed. So the data that's been used is probably a few months old. But anyway, based on that, they come up with what they think an actually sound rate should be charged. The OIR, our regulator, also get the ---+ do the same kind of things with their models and their actuaries. And they come up with an answer. And then everybody has a conversation as to what they think is a prudent number. And there's always a fair amount of discussion on the matter because unlike what people perceive these things to be, the OIR has a mandate to try and make sure that our rates are not so high as to be too high nor to be too low that we may be in a degree of insolvency or anything of that nature. In the course of this year's conversations, they felt it was ---+ given the logjam that AOB seems to be in the legislature, et cetera, they felt that out of abundance of caution, it might be worth taking a slightly higher rate just in case AOB and litigation spread beyond Tri-County to the rest of the state. So yes, it is higher than we had anticipated. It's higher than we thought we would do. But at some point, the regulators are extremely concerned, as is Demotech for that matter and as are we to some degree in case AOB spreads beyond the Tri-County area. My simple answer to that would be, I don't think so. Basically, it was renewal and slight reduction in the (inaudible). Well, actually, the one item that you would see why that gross written might not be going down as much is because the rate decrease went through starting January 1 of 2016. So when you are now renewing in Q1 of 2017, there's no rate decrease anymore. And remember that you have the impact of TypTap. Yes. It's not quite been finalized yet, but it will sometime be ---+ it'll either be August or September of this year, late Q3. We've been tracking lawsuit filings, et cetera, as you know, for several months. Not just our ---+ lawsuits filed against us, but against the top dozen or so carriers in the state, et cetera. And from everything we see, while our lawsuit count year-over-year has been flat, still way too high, but hasn't increased any. I cannot say that is the case across the industry. We have seen a couple of carriers with large increases in number of lawsuit in first quarter of 2017 versus what they had in first quarter of 2016. And I think the overall lawsuit filing in those Tri-County area has gone up. And I think there is some uptick in some other parts of the state. But I ---+ there, you're talking from a very small number. It could just be no, not supposed to be an actual trend. Current accident year was $23.2 million for about 25.3%. And for the entire quarter, it was 27.86%. Yes, 2.4 ---+ $2.49 million. Just a quick numbers question, what is interest expense roughly going forward. About $16.9 million. Annually. Yes, per year. Per year. Okay. And you just said, was it $2.49 million was the number for prior period development. Correct. Okay, $2.49 million. And you mentioned earlier that the reinsurance costs should stay the same just for the 2017/2018 year. Is that on an absolute dollar basis or a percentage basis. I think it's in dollar basis. Okay. And should we expect the percentage to stay consistent as well more or less, I guess. <UNK>, that depends on what you have as projections for revenue. That's true. Yes, that's a fair point. But I guess, just to ask differently. When we look forward ---+ I guess, when we look forward a little bit, do you expect that TypTap and maybe other initiatives that you might have could offset that. I know on past calls you mentioned that you thought TypTap could potentially prevent PIF from declining further. Do you still have that thought. Or sort of how do you kind of think about that. Yes, look, where this is going to get complicated ---+ and this is why you make the big bucks is, there is going to be some attrition, but ---+ and TypTap is growing so that offsets some of that. The other thing you will also have is this rate increase that we're talking about. It's going to have 2 opposite effects. It's a question of which one dominates. One obviously, and this is especially I'm talking about in the Tri-County and the Southeast Florida area. You're going to see a rate increase on the one hand, which would increase premiums, et cetera, but the size of the rate increase, may also cause retention rates to drop in those areas, which would tend to bring the premium down. So it's too early to tell which of those 2 forces will dominate and that may change the trajectory of revenue changes. Okay. And is it fair to think of the 8% ---+ is it partly due to the fact that when you took the 5% rate decrease, it's kind of before everything sort of blew up in Florida. So because of that, you're taking, I guess, a larger increase this year to almost undo the decrease last year, if that makes sense. Because like did you feel that the decrease last year in retrospect shouldn't have happened since AOB started to become even crazier by ---+ I think even when Heritage reported results in the first quarter, they had the development and you saw every quarter basically everybody in Florida taking development. So in retrospect, was that kind of where the 8% came from. <UNK>, I tell you what. Playing Monday morning quarterback on what you should have done 2 years ago, it's always right ---+ in hindsight, everything looks very clear at the time you make the decisions based on the best information you have. So the 5% rate decrease was ---+ in order for it to go into effect on January 1, 2016 was probably approved in late September, October 2015, right. And at that ---+ and they were, obviously, measuring the sort of data that was even older than that, right. So they were looking at it from what the results looked like in 2014 and maybe the early part of 2015. Based on those numbers, a 5% decrease was appropriate. This time around, obviously, looking at the data from the recent past and you come to a very different conclusion, right. But as with all of these things, it's ---+ it would be inappropriate to second-guess decisions made with new information ---+ second-guess decisions made with all information when new information comes to light, yes. So we tend not to look at it that way. And I know you said $4 million of TypTap premiums. What was the policy count there. I think it's about 4,000 in-force at the moment or 4,000 have been sold, yes. Okay. 4,000 have been sold. Perfect. On behalf of the entire management team, I'd like to express our appreciation and continued support we receive from our shareholders, employees, agents and most importantly, our policyholders. We look forward to updating you on our progress in the near future.

2017_HCI

2016

PLAB

PLAB #Thank you, <UNK>. Good morning, everyone. As expected, second-quarter sales fell slightly from last quarter and last year, generally following the trends we discussed during our Q1 conference call. High-end FPD was strong, as panel manufacturers continue to roll out new and innovative products such as AMOLED mobile displays. High-end logic was soft due to lackluster demand from our large foundry customers in Asia. And mainstream followed expected seasonal trends with a recovery in US and Europe, and lower demand in Asia due to <UNK>ese New Year. The only deviation from our previous commentary was lower memory demand, as our customers reacted to negative end-market conditions and we saw a pause in the 3D NAND ramp, weakness in 3X nanometer foundry memory as customers transition to 2X nanometer technologies, along with commodity DRAM entering the final [partrilling] phase of the 20 nanometer node ramp. Earnings were down due to the impact of lower sales. Despite lower sales and profits, cash flow from operations was positive, minimizing the reduction in our cash position due to payment to bondholders in April. In total, we reduced debt by $60 million and increased net cash by $23 million during the second quarter. <UNK> will go through the details in a few moments, but I want to remind everyone of the significant strides we have made as an Organization to improve our balance sheet. Just a few years ago, we had a net debt position and high leverage ratios. After several years of hard work and focus on improving our balance sheet, we are in a much healthier position today. The most common question we get from investors now is what are you going to do with all of that cash. This is a good problem to have. It took a total of team effort to achieve and I'm proud of the position we have built together. As you will hear throughout our comments this morning, we have very clear and achievable plans to invest the cash [in an effort] to deliver profitable growth. Looking out to next quarter, customer discussions, order patterns, and industry commentary continues to support the view that conditions are improving for high-end logic. For example, one of our leading foundry customers is expecting strong 28 nanometer tape-outs in the second half of calendar 2016. If this occurs, the impact should be positive for Photronics. They continue to remain extremely optimistic regarding FPD photomask demand, where our capacity remains sold out and we see no signs of that changing any time soon. We recently saw the expiration of our MP mask JV with Micron. While this legal entity will now shift back to Micron control and we receive payment for our ownership, our relationship with Micron remains strong. We have a technology agreement which will carry us to the next two nodes and a supply agreement which ensures we will capture the majority of the masks they outsource. That being said, it is obvious that this move now positions Micron to source more masks internally. Our challenge is beginning new business to offset any decrease in Micron demand. To this end, it is fortunate that several memory manufacturers rely on the Micron bit cell; as the largest merchant mass producer in the world, we have relationships with these companies. Therefore, we are well positioned to sell them masks as they develop and manufacture their chips, and in many cases our technology is already process of record. We have already qualified and/or are qualifying this customer base. There is also the beginning of memory production in <UNK>a and we are well positioned to sell masks to the first movers. Finally, the memory technology landscape is fluid, with entirely new products being brought to market such as 3D XPoint, joint developed by Intel and Micron, and we are actively engaged in these efforts. With this total opportunity mix, I will be disappointed if the memory business is not larger 12 months from now than it is today. It will not be easy and it will not be a linear progression. Few things in our business are, but I believe there is a clear line to realizable growth in memory for Photronics. Longer term, there are several growth sectors that we are focused on. The first is FPD. Based upon the number of questions we receive from investors, AMOLED in particular is an intense area of interest. As we have noted over the last few quarters, our current asset base in FPD is running at full capacity. Any revenue growth is limited except for our ability to increase product mix and, therefore, blended average ASP. In order to answer FPD mask business, we are announcing today investments to increase capacity and capability, and have placed orders for additional running capacity at the high end. We anticipate taking delivery of these tools in mid-2017 in order to be prepared for anticipated industry growth going into the second half of next year. We are a clear market and technology leader in FPD photomasks, and this investment will help us to maintain or possibly expand our leadership position. Beyond 2017, the next significant driver for us will be geographic expansion into <UNK>a, both to serve the IC and FPD markets. Our senior leadership team has spent significant time in the country, along with local leadership, to evaluate the options and opportunities. We're not quite ready to announce a final decision, but I do like the direction our planning process is going, and anticipate being able to share more with you soon. As we've stated before, this country can be a significant growth driver. The semiconductor market is a target for investment by government, domestic manufacturers, and foreign entities. Some of our largest IC customers are in the process of building capacity there, and other customers are adding capacity that could provide us with the opportunity to serve them in a bigger way than we do today. In addition, dramatic FPD market growth appears to be coming, as the construction of several new manufacturing facilities, primarily for large-screen LCD and OLED, is well under way. Our total investment in <UNK>a will likely be a mix of new tool purchases and the transfer of tools from other facilities, in addition to bricks and mortar. Many of the target customers in <UNK>a are already served by our facilities in Taiwan, Korea and the US. So being able to utilize some existing tools will minimize cost and lead time. As we've stated before, sales to <UNK>a are small but growing, becoming more material to our results. We are excited about the opportunity this country presents for Photronics. In summary, our Business is going in the right direction, and we have several attractive options in front of us to grow our top and bottom line. That being said, on a quarter-to-quarter basis, our results can be variable given the nature of our Business, particularly as we grow high-end IC and FPD market share where timing is more unpredictable and higher ASPs make any order meaningful to our Business. But as I've stated many times, I'm very pleased with our position, and believe we have the ability to make targeted investments to drive growth and deliver shareholder value. Before turning the call over to <UNK>, I would like to thank all the Photronics employees for their commitment and dedication to improving our Company in Q2. I will now ask <UNK> to provide more details on our second-quarter performance. Thanks, <UNK>, and good morning, everyone. Second-quarter sales fell 5% sequentially to $122.9 million and 3% year over year, as strong FPD growth was offset by softness in IC demand. Sales of FPD photomasks improved 36% compared with last year and 6% sequentially. High-end FPD sales increased sequentially to 78% of total sales. Demand remains strong for advanced LCD and OLED displays, and we have been able to prioritize high-end orders bringing positive mix. Additionally, in some areas we have been successful in realizing higher pricing. Backlog remains above average, and we continue to run at full capacity. Our next phase of capacity installation should come online in mid-2017, which should allow additional growth. Until then, expect sales to remain flat, limited by our installed capacity, with potential benefits from both mix and pricing. IC sales were down $8.9 million sequentially, the majority of which was high end, which was down $8 million, primarily related to the reduced high-end memory demand that <UNK> alluded to. High-end logic was also down slightly due to lower foundry sales in Asia. As <UNK>'s alluded to, mainstream sales rebounded in the US and Europe, but were down sequentially, primarily due to the <UNK>ese New Year. On a year-over-year basis, mainstream was down due to lower foundry demand, principally in Asia. Breaking out sales geographically, 67% of total sales were from Asia; 26% from North America; and 7% from Europe. Gross margin for the second quarter was 25.5%, down 180 basis points sequentially as a result of reduced volumes, principally high-end memory and Asian mainstream. SG&A expenses were down $1.2 million sequentially, due principally to cost reduction programs and, to a lesser extent, the deferment of certain costs. The operating margin for Q2 was 12.1% as compared to 13.5% sequentially. And EBITDA was $34 million for the quarter and $176 million for the trailing 12 months. Other expense net was $3 million, primarily related to unfavorable foreign currency, principally from Taiwan. Income tax expense includes a non-recurring net bottom-line benefit of $3 million related to the recognition of certain tax benefits in Taiwan. Since part of the benefit was recognized by our PDMC JV, the accounting of the benefit is a little complex. The bottom-line impact was $3 million, but the impact on our tax expense line was approximately a benefit of $4.2 million. Of this, $1.2 million is our partner share, thus reducing the minority interest line. So, excluding the total tax benefit, tax expense for Q2 would have been $1.9 million, just below the low end of our guided range of $2 million. GAAP net income was $11.9 million or $0.16 per diluted share. And excluding the bottom-line tax item previously mentioned, non-GAAP net income was $8.9 million or $0.13 per diluted share. Turning to the balance sheet, we ended the second quarter with cash balance of $194 million, bringing our net cash position to $124 million, an improvement of $85 million since Q2 of last year. On a pro forma basis, including the payment from Micron we received after the quarter closed, our net cash position is in excess of $200 million. We did have a few changes in our balance sheet during the quarter, so I will walk everyone through those changes. First, $57.5 million of our convertible debt matured on April 1. At the time of the maturity, our stock was trading slightly above the conversion price of $10.37. As a result, only about $7.4 million of the debt converted to equity, raising our total shares outstanding by approximately 700,000. The remaining $50.1 million of debt did not convert, and we repaid the principal amount back to those holders from our cash balance. As a result of the convertible debt maturing, our diluted share count fell about approximately 4.8 million shares, although the total was not reflected in our Q2 share count because the change occurred on April 1 and EPS is calculated based upon weighted average shares. The total share count adjustment will be reflected in our Q3 results, and is included in our Q3 guidance which I will discuss in a few minutes. During <UNK>'s comments, he referred to the tremendous turnaround of our balance sheet over the last several years. To put his comments into perspective, at the end of 2008, the height of the recession, we had total debt of $224 million and net debt of $140 million, and our debt-to-EBITDA ratio was over 2 times. Since then, we have reduced our debt to $70 million and have $217 million in net cash on a pro forma basis, and a debt-to-EBITDA ratio of 0.4 times. This was achieved even as we invested in leading edge capability and capacity. And over the last several years, our CapEx has averaged nearly 20% of our sales, demonstrating that we have remained committed to becoming both the market and technology leader within the photomask industry. CapEx for the quarter was $13 million. We anticipate spending approximately $60 million to $70 million in cash CapEx this year. CapEx for the FPD investments mentioned earlier will occur through 2017. Before providing third-quarter guidance, I just want to remind everyone that our visibility is always limited and our backlog is typically only 1 to 2 weeks. Also, the demand for some of our products, such as high-end IC foundry logic, is inherently lumpy and difficult to predict. Finally, as our high-end business has grown, ASP for these mask sets are higher, and a relatively few number of high-end orders can have a significant impact on our sales for the quarter. Given those caveats, we expect third-quarter sales to be between $118 million and $128 million. This range assumes FPD remains strong and IC mainstream sees incremental improvement from Asian seasonality and market growth, and high-end IC is mixed with anticipated logic growth but lower demand in memory as Micron may reduce outsourcing following the JV expiration. Based upon this revenue expectation and our current operating model, we estimate earnings for the third quarter to be in the range of $0.10 to $0.18 per diluted share. The first half of the year, which is typically our softest given seasonality of our major markets, has been a bit more tepid than we anticipated about six months ago. <UNK>wever, we have done a tremendous job of controlling costs, and have continued to generate cash despite the lower demand environment. We still remain optimistic regarding the long-term demand trends, and believe we have several attractive areas for investment to achieve profitable growth in the future. We are certainly well positioned to support these growth initiatives, and with our strong balance sheet, and we look forward to continuing to build upon our leadership position. Thank you for your interest. I will now turn the call over to the operator for your questions. Sure. What we try to target to monetize that investment within one year of being installed and qualified, so we're presently at about $120 million, $125 million run rate, so we would expect it to go up incrementally once those tools are up and running. This would mean market conditions remain strong. If we go back to the last incremental addition of capacity to SPD, we ramped that investment last year from a dead stop to fully loaded in the space of three months, which is - - I been doing this for 30 years and it is the fastest I've ever seen. What's driving this investment for us primarily is one particular opportunity that we have. We have an agreement with a customer to monetize the value of that investment. Beyond that, the overall market itself for us is quite strong. So we're very confident that when that capacity comes online, it will ramp quickly. <UNK>, as you know, we are the only merchants to have the next generation FPD capability. And the incremental add will be more of what we have, so there will be no qualification delays. If you look at our capital spending for the year, the terms we generally get for FPD equipment, given the supply chain there, are unfortunately the worst in the business. So the adjustment in the CapEx spend that you heard <UNK> make is reflective of the fact that we made investments in FPD and the cash flow aspects of those investments are inferior to IC. And you're right, there's not a lot of money being spent this year on incremental IC capacity. I think you know we've out-invested our competitors and in a soft demand environment there is not any compelling reason to add there. And just to add, <UNK>, to <UNK>'s comments, some of the CapEx spend, the cash spend this year, $60 million, $70 million, is related to installed capacity that went in in the latter part of 2015 and 2016. We were able to get extended payment terms in certain cases. Hi, <UNK>, this is Chris. I can answer that one. Yes, 14 is still pretty slow adoption in the foundry there are not that many high-end devices running yet. But the foundries are coming out with new low-power, lower-cost versions of their 14, they're starting to integrate RF. I think there's a lot of effort in the biggest foundries to make it more accessible for a broader range of chip designers and chip applications. So 14 has not really taken hold, I would say, in the deepest sense for a foundry product, but there is a lot of effort going on in the space now to make that a more viable node for more users. We are qualified with multiple customers at 14. We do have capacity, so we are looking for 14 to pick up in 2016. Unfortunately, our competitors are not interested, generally speaking, in assisting us in gaining market shares. So sadly, there's not any option really to outsource the FPD. Regarding our cash CapEx next year we don't expect ---+ we haven't given guidance yet, but we don't expect a significant change in our CapEx spend, absent <UNK>a. But there's not been a question yet, but we see in <UNK>a right now, more than a dozen new factories in FPD actively going up. It's amazing. So we do what we always do and that is we hold, we put our finger on the trigger and we hold and we hold and we hold and when we believe we can make an investment and monetize it quickly, we pull the trigger. So we are very optimistic that there will be a significant step-up in demand in 2018 beyond AMOLED in 2017 and just as we had done leading up to the last ramp in our business that we just observed, we're trying to stage our investments so that as the market emerges, we can monetize it. Now if there's a greenfield in <UNK>a, or when there's a greenfield in <UNK>a I think is a better way to describe it now, that will cause a deviation from our recent CapEx trajectory. <UNK>, if I could just add on a quick thing on <UNK>'s comments, when we talked about $40 million to be spent through 2017 on this FPD equipment, some of that is baked in to the guidance for 2016 as well. I had mentioned that earlier, given the terms. It's a bit tough to call, right. As far as 3-D NAND goes, for that to really ramp strongly for us, some of, I think, the CapEx that you guys are all talking about needs to be spent and installed. So we're actually watching that closely, but we can't make any commentary on that because it's simply too transparent, what the origin of it is. Yes. You're certainly right about with your latter comment. I mean, it's not new demand. What it is, is it's shift of market share to one of our customers away from the 800-pound gorilla. So for us, it's new business. We've been averaging the last three quarters prior to this one about $12 million plus or minus a couple hundred thousand on SG& A. It's down because some improvement in cost containment programs in place. But what I mentioned could be up to $500,000 or so, it is not a significant amount and wouldn't really drive EPS one way or another. We also had unfavorable FX during the quarter and for the year, it was only $600,000, so ---+ and the share count has also changed as well. If you look at the slides, I think it's we [ended] at $74 million, because of the conversion of some of those shares. Also if you look at our performance year to date, our operating income, revenues are essentially flat and operating income's sitting $32.5 million versus $26.5 million the first six months of last year. So we are doing what we always do. And that is every quarter, every day, we're at the salt mine taking cost out of our business. So on flat revenues, our operating income's going up by $6 million and if you look at the current quarter, it's essentially flat operating income against revenues that are down $4 million. So we're not going to stop our cost reduction efforts in any shape, form, or fashion. They will continue. Okay. Hi, <UNK>, it's Chris. I think 28 Nanometer, the logic node, is a very strong node it brings a lot of value to the designers, so first and foremost that node is going to be around a long time and it's going to have wide adoption. I think specifically your question on what we see on the pickup, partially yield improvements and then customer costs going down but I think still you're seeing it more and more be an attractive entry point for different kinds of application processes and designs people are willing to take that risk and move into it, particularly with 14 still being a pretty big jump from a cost perspective. So I think improving yields, lower wafer costs, more capacity in the so-called Tier 2 foundries will help a lot. And, second, I think just the realization that 28 is a node that's going to be around a long time and the chip designers really have to move to it if they want to [give] value for their next-generation devices. Yes, and there's also no doubt, as you mentioned, <UNK>, that one of our large customers where we have dominant market share is bringing a significant slug of 28 Nanometer capacity online. They've said that publicly. So we expect the benefit from ---+ we expect to directly benefit from that. Yes. I think, as you know, photomasks basically go - - silicone wafer starts are a really poor proxy to our business, right. Incremental CapEx spend is a poor proxy. The best proxy is the overall size of the semiconductor industry. So our business tends to go at the highest level as the R&D budgets of our customers go for new products and it's basically if photomasks are 1% of semi, so as that new 3D NAND capacity comes online, we would expect the photomask demand to follow their revenue potential that capacity generates. So if it's $3 [billion] worth of revenue, then it's at least $30 million worth of photomask business. So that's kind of how it goes. And, <UNK>, the cost crossover for 3D NAND is still not great. I think a lot of the chip makers are ---+ still marvel at how much ex capacity they need and how much wafer space. So the cost picture is still not great, which means 3D is still right now suitable for a fairly narrow slice of NAND applications. But as that capacity comes online and equipment starts to get depreciated, I think you'll see it used with more flash memory uses and then there are more tapeouts and designs connected to it. And Chris makes, I think, an important point and that is it's really not until you get to the second generation of 3D NAND flash that the industry generally gets to the cross-curve crossover. Yes, <UNK>, that's what we've been doing quietly. You may recall that about more than a year ago we opened a sales and application office in <UNK>a. I think in our Q4 conference call year end, I mentioned that for the first time <UNK>a revenues were material to Photronics. So we've been very quietly and deliberately developing the market there. And now with one of our largest customers bringing a mega fab online the second half of this year, we have another large customer that is building a factory in <UNK>a. We had NAND flash business we talked about earlier coming to fruition in <UNK>a. In addition to that, we have the business I just described that we quietly built growing in <UNK>a. There is more than a dozen FPD factories being constructed in <UNK>a. The decision is right front of us. Thank you once again for taking time to join our discussion this morning. As expected, 2016 is presenting lots of challenges as well as opportunities. We like our position as we navigate through the next few quarters and look forward to updating you along the way.

2016_PLAB

2015

MNRO

MNRO #I think coming off of last year and Q4 with the start we have had, we are trying to put a number out there that we can hit. I think that is a big piece of it. And what I am looking for is to show that the inflation that we have on the tire side will stick, and that the initiatives that we've got underway will help us produce traffic and sales. So I guess we're going to make sure that we are reasonably conservative given what we have got at the start of this year, which is a April that is down on top of a positive last year, and May that is ahead. Yes. They are within our markets. And they, as I have said in the past, that 10 level has represented more than one year of growth, and certainly us having more than that still qualifies as well more than one year of growth. We see a lot of interest from independent dealers right now in transactions. Yes, generally that is the case. Yes, <UNK>, I would tell you that as we have said in the past, we are interested in anything that is at the right value for our shareholders. But we don't comment on rumors that might be swirling around. It is more of a shift. We are shifting ---+ what we're finding in the digital area is that we are getting more efficiency out of our spend. We certainly needed to add some resources in terms of capability to our team, and we have done that. Again, globally, as more of a shift in spend than an increase. I think when you look at it, that relates to the FY14 and 2015 acquisitions. The 2013 are within, sorry, the FY13 acquisitions were in our comps this year. So perhaps a bit of that is some comp pressure on those. But if you look at the 5% that we did in FY14 and the 10% that we did in FY15. And you look at those numbers, I think you will find it ties into the $0.09 to $0.12 accretion. It's that accretion standard that we give for the 10% acquisition growth. Sorry, I need to be specific in that. If you want to think about it that way, we again, this year have a 1% comp hurdle rate for accretion on the comp store sales side. So we are ---+ the business is producing that 1% hurdle rate instead of the 2% to 2.5% rate, and that is a follow-on benefit from those prior acquisitions. So with regard to the purchase price, we do not disclose that. We do have to file reports and things where some of that information may be a part of. But with regard to the opportunities with franchise locations going forward, our primary objective is to go in, improve the business with what we have developed for our 1,000 stores. I think one of the difficulties of franchise systems themselves is that from time to time, there is a need to operate stores. And I think, certainly, as we look at it, we view ourselves as much better place to do that effectively than at least the prior situation with regard to the Car-X stores. Tire units were down 1% in the fourth quarter. Flat. It is about $11 million, <UNK>. In general, for the 5 to 40 store deals that we have been executing on, there is no change in the multiples that we've seen. No. I'm sorry, I said there was no change in the multiples that we've seen. Maybe I didn't understand your question. For those deals, we haven't seen anything significant in terms of new entrants into that consolidation area. First of all, that, I guess the way we see growing profit there is primarily through opening new locations. There is interest in the franchisee group to open new locations. We can support that, and we can have a significant impact on the EBITDA out of that business by opening a reasonable number of new locations. Again, leveraging what we've built and we maintain here for our 1,000 store chain. So very efficient for us, and a very high return for us. So with regard to where we stand versus the competition, of course, we see a lot of details from competitors in the acquisitions or the NDAs that we are involved with. So no, I don't think we're losing ground to the competition. Again, the building block for me is oil change traffic, and that has been positive for the last two years. What we are looking at is the opportunity to really offset some of that ---+ some of those dynamics in the marketplace that cause choppier sales. And frankly, I think we can do a better job. We recognized that in order to get there, we needed some additional experience and help internally. And our team has really come together around that. With some of those firsts for Monro, they will definitely put us ahead of most of our competitors. So it is really more than anything a reaction to the fact that we operate in a fragmented market. And we never ---+ we've had deflation over the last couple years, and we just haven't produced ---+ that's held back the comps some. I think with that deflation turning around, we can build off the positive oil change traffic that we have had that produced positive comps this year. They've maintained a steady state where they are right now. Again, we think that there is opportunity to expand from there. It was mostly traffic, overall traffic was down in the quarter due to the disruption that we talked about. So that was the biggest piece for the quarter. For next year, like we said, most of the comp is pricing, and ticket is basically flat to slightly positive with tires, as I said earlier, being flat as a part of it. No, it was basically flat. It was really mostly traffic in the fourth quarter. I think you should focus ---+ again, we made the comment that the fourth quarter was the highest gross profit dollar quarter for us. And I think again, we've given you the profitability metrics and some of what I gave in the script. $1 of gross profit is equal to $0.05, 1% value is equal to $0.025. You've got the operating margins at the midpoint. So I think you have got ---+ those are the elements we were looking to give you to allow you to build it from there. No. So, yes, those stores are on the average of what our service stores are, which is between $600,000 and $700,000 a store. We gave you an EBITDA number, so the EBIT margin is high. You can probably back into what our revenue might be or in that range and use that EBITDA to get there. We also said it's going to be slightly accretive this year, so you shouldn't be building in significant contribution this coming year from Car-X. If you look at what I gave you in the script, I think you'll have the elements to come back to a revenue number. The royalty there will be basically all of our revenue. So it's not more ---+ it's that simple. We do have some opportunities going forward to sell some parts based on our ability to source at very attractive costs for them. But really, the most significant piece of the revenue will be the royalty. The first was ---+ we don't have a contract requiring them to buy. They are free to buy from whom they choose. We think we have a lot of compelling things to offer them. Secondly, we do not have any dollars baked in to next year. And I wouldn't suggest that any significant number of dollars be baked in to next year. So that guidance will ---+ it doesn't incorporate that. And third, because we're not working in numbers for the guidance, we're not going to talk about what we would sell to them. And I think you could expect that we might have transfer costs that will be similar to what we have to our own stores [which are] attractive. Thank you. Thank you all for your time this morning. I am looking forward to sharing our successes in driving traffic and sales through our new initiatives with you, as well as the growth we expect through acquisition opportunities we are actively working on. Our business model should produce another year of double digit EPS growth, on top of the 40% increase over the past two years. We appreciate your continued support and the efforts of our employees that work hard to take care of our customers every day. Thanks again, and have a great day.

2015_MNRO

2016

VSH

VSH #I do not believe that this has anything to do with the move of the production itself; it goes very smoothly. It is over, at least we supply from the new plant seamless, it is really quite ---+ there is no interruption for the customer, the customer has not suffered whatsoever. It was done properly. At the moment we do suffer from the weakness in computers there is no question because this is a traditional place. And we work on growing our automotive of part of the business. But I do admit that this by far, the others look very good, the other lines that this is [still just] performance. <UNK>, we compare naturally knowing the history that not only we have in the last years but of course we compare the performance vis-a-vis prior years. And the picture this year is definitely better than the prior years so we are confident to meet the projection in the third quarter. As I said the strategy hasn't changed a bit. We're looking for reasonable acquisitions and continue to do so. But on the other hand they must be available so we are looking. We are looking across the board that means in all of our product lines and in all geographies. But it has to make sense and of course we have always a few candidates that are evaluated. But it is really too early to talk about these opportunities which may come. I think we all were right in anticipating a further decline. The decline has slowed down. There's no question about it, but still it declines. Not in a substantial form as it has been since quite some years but to see a recovery maybe for instance. I would not say that at all. Seasonally it has been stronger in the second quarter than before, but the real recovery is something else. Maybe it has bottomed out, but who knows. Many projections were too early in that sense it was quite a few years that expected to be bottoming out, and then it didn't happen. One thing is for sure that the decline became less steep, there is no question. No, not really to us. We are just observers. We do feel it not only us, we do feel that our customers have substantial price [hikes] at the moment which is just a plain statement I think. You are talking distribution and POS [divided] by POA, right. Approximately 1.02. POS was up by 2.5%. And the orders on our distributors were up by 3%. Slight, very slight. Yes. Thank you. Thank you, <UNK>a. Thank you for your interest in Vishay Intertechnology. I will turn the call back to you, <UNK>a.

2016_VSH

2016

TWI

TWI #That prediction I don't know. <UNK> and I were up at ---+ I was in Bryan, then flew through ---+ go through the Freeport. We were sitting there with the plant managers, and Bryan is going to 10 hours. They are running ten hours shift. And out through September, they've got to do ---+ they've got a hump, okay. And they are coming up. When we got to Freeport, the manager, every factory has birthday meetings. Whose ever birthday, they come in and they get the questions. So you closed on Labor Day, but generally, like in our wheel business, that week after, we'll just close it down, because we'll have the inventory. There will be a few people to ship stuff. But you can ---+ if an emergency comes, you've got enough people to slap in a few wheels. But on the tire side, and <UNK> can correct me if I'm wrong, but Bryan is not shutting down, and neither is Freeport. And I don't believe <UNK>s Moines is. No, no. We ---+ you know, you've got your normal seasonal period, where you have ---+ you do your maintenance in late June or early July. Because of the OEM volume, we are taking just one extra week on the wheel plant over Labor Day. But other than that, we are having our normal production runs scheduled for the second half of the year. So ---+ and most of that is being driven by two things, as I said earlier. It's being driven by the 100-and-under horsepower and our aftermarket sales of tires. I don't believe so. I'm being honest. I've been with equipment dealers every week. Dan Wall in Iowa was just named a number-one dealer for ---+ or the elected, or whatever ---+ for the year. And he's a John <UNK>ere dealership, and he runs Iowa selling to Kansas. But he has five states for the turf, reference the golfing item. And he's had a fairly decent year. He's a little more creative than maybe some, but he's been hustling. And he's moved a lot of used equipment. He bought ---+ it was either two or four more dealerships, and he went in on the used equipment and auctioned it right off. You look at some other dealers, and the used equipment ---+ they have to take a hit. And some of them are much more aggressive in how they do it than others. So the dealer just sold $2 million worth to the Philippines, all right. Getting it all ready. Then he sell ---+ actually, that same dealer is working on another off-site. Weird. It's the dealer and how good the dealers are in it, and they are bringing down their costs. And now, when ---+ let's go to a big farmer. Big farmers are present probably close to 50% of all big iron on new sales. Well, for a long time they would be able to buy a brand new piece, trade it in a year later, and get almost what they paid for it. So that's like farming with equipment for free. Well, that has really stopped. So if they are going to farm on 8000 or 9000 series tractors, then they might decide that, well, I'm going to keep my equipment for three years, and then I'll trade. I'll trade a third each year. So that means we are going to go back to see different type numbers. And that's why I said earlier, I don't see any magical booming up at the top. I think it'll be strictly a gradual uptake. I do not think you going to see ---+ you'll see a 4% or 5% increase. It might go two years, and then it might stay flat. Then it might drop a couple of percent. Then it'll go up 5% or 3%. That's the kind of graph I think we're going to see for the next 10 years. Well, there's ---+ when you say looking at your peers, number one, there's no peer in the world that is like us, because we only make farm, OTR, and construction. And we make the wheels with them. And there's no one in the world that does that. Not a Michelin, not a Bridgestone. And then you're left ---+ let's take our friends at Trelleborg. Trelleborg makes a few wheels, but most of the wheels they make are solid. They make a lot of margin on their solid tires. The reason they bought Mitas is because they make all this other stuff that we're looking at now, using our big facility in Union City, to go after some of that business, which is, you know, these bladders they use in sewage ---+ we have an infrastructure project. Those contractors just blow those things up. That's where you put sewer pipe, and you've got water. You don't want water; then you put these bladders in it. And then you send down, and they connect, and then they pull it out. Well, that just rips them. But in the US, you're laying pipe. So the margins on those are 40%, 50%. Mitas made all the special bicycle tires. So that ---+ for Europe, that was their big thing. I mean ---+ and margin is really, really good. So when they started buying up all the small guys that used to be in the Houston block, they become a big competitor to Trelleborg. It was 50% of their business. That's why Trelleborg bought them. So now they've got that market in Europe. The only unique thing about our Russian plant ---+ we can make all that, too. We're going to make tubes for every LSW tire. Because when you go on hillside, over out in the Western part of this country, you've got ---+ those tractors and combines, you cannot have a tire go flat. Sod will come rolling down the hill. So we're going to do it just like you do log scooters that run around hitting tree stumps and everything else. We're going to put a tube in it. And we're going to make it so the rims have bead humps, where a bead can't move. And it's a safety feature. But when you get over there and show it to the farmer, hey, that's what they want. So we're going to send it from Russia with love. Okay. Thank you. We just want to say thank you all that listened. Come out and see us. And whatever you do, vote. You want to watch my tweeters (sic), you'll know how I'm going to vote. But I'm an old guy, so you're going to have to live with the results more than I will. But have a great, great weekend, and thank you all. Bye.

2016_TWI

2016

FLR

FLR #A lot of the resources are fungible within the Company. We have the ability to move people around to different projects. I don't think from a leadership perspective we really have an issue. We are always going to bring new people in with the skills that we need. When you look at what's in front of us, obviously light rail is going to be important, so we're going to need rail expertise. As I mentioned, there's going to be a lot of bridge work, so we're going to need some bridge expertise. I feel pretty good in being able to bring those folks on as necessary. We'll clearly add, be additive to that. I don't see a capacity issue. We have added ---+ when you think about the resources from the two nukes and Stork, we're over 60,000 employees now. I still believe we're the employer of choice, given our ability to retain people. I think that we can move ---+ we're going to reallocate resources around the globe. I think our dispersed model is working, and showing that we don't need to hire and fire like the normal cycles that have dictated in the past. I point to Houston as an example. It's been as high as ---+ at least in the last little while ---+ as high as 4,800 people. It's around 2,800 people now, and it has been for 2.5 years, three years. We don't expect it to drop much more than that. Again, some of the things we've done to perfect the dispersed execution model I think gives us a lot more stability in the ---+ across the portfolio, but it also shows that when we need to turn the crank, we can bring in the people we need, almost regardless of how big we need to be. So do I. No, I don't think so. I've said this in previous discussions with some of you. I lived in Saudi Arabia in the 1990s. I remember 1997 oil was $17 a barrel, up from $11. Even though oil is in the places to where it's more difficult to get to than maybe then, they were still ---+ Saudi Aramco was still spending $30 billion a year, right. They're still going to spend at $40 and $50 and $60. They don't need to get back in most cases to peak for them to be efficient and profitable. I don't think we need to re-tool any more than we've already re-tooled. I think the things that we've done to become more competitive and satisfy that capital efficiency need by our customers puts us in a position to be extremely robust and profitable as we go into the next wave. Yes, it's not a high-revenue type company. It's basically service revenue, people. You're not going to see a huge bump in revenue, but I think you will see some good bumps in profitability. The short answer is absolutely, we're already seeing opportunities that arise that maybe we didn't have access to before. I think that the fact that Stork is owned by Fluor now gives customers confidence that they are there for the longer term. There might have been some question before in terms of their viability. We're seeing great response from the customers in terms of their interest in hiring Stork, and we're in some markets where Fluor physically wasn't present, that helps Fluor in those geographic regions. There's lots of head room, I believe, in the US Gulf Coast. When you look at the installed capital base in the Gulf Coast, it's a huge number of facilities and assets that need to be managed and need maintenance and modification, shut-down turn-arounds, those kinds of things that make Stork very attractive, in terms of their delivery model. I think that we just scratched the surface. I think there's great growth opportunity for that segment of the business. Just anecdotally, as soon as the transaction was announced, Stork management had incoming phone calls from their customers saying great now that you're going to be a part of Fluor, we would like you to propose on doing this, or increasing your scope for that. Clearly, there's benefits associated with the two companies being together. No, it's a good question. We've seen this before, and we certainly see it now. I would argue that it's a huge mistake, because typically those people don't do the types of services that we do. We've got real examples where that has happened in terms of FEED projects in oil and gas in previous cycles, and not that long ago, where they had people available, so they said well let's let them do the FEED. Then they came to us to actually re-do the FEED, because the answer that they got was too expensive and not the right schedule. They probably don't like to hear me say that, but we are really good at those kinds of things, and they are really good at producing product. We're better positioned, our industry's better positioned to do those kinds of things. But they've got pressures that they've got to deal with in terms of employment. Some cases, they can't ebb and flow like a Company like ours can, and we understand that. We'll be there to help them when they need it. The $140 million is scheduled for ---+ Later in the year. Third quarter Most likely third quarter. It will be recorded as an investment in a joint venture, as opposed to a capital expenditure. Other than that, there is no other planned capital, other than I mentioned the $300 million roughly of CapEx that we expect in the more normal course, over the course of the year. That may (inaudible - multiple speakers) side, but that's the only other thing that we're considering at this point. No. I mean, it's always going to ---+ there's always going to be timing events, but I expect the relationship between working capital and earnings and therefore cash flow and earnings to be pretty consistent with what it has been in the past, absent little movements of time, where something comes in before or right after a quarter end. <UNK>, how do you feel about your draft choices. (laughter) We hope so. Well, we're not going to really talk about it. But it's the kind of thing that all companies are dealing with, and it's kind of a one-off thing. Thank you. Thank you, <UNK>. Thank you, operator, and thanks to all of you for participating today. As I said in the opening remarks, and certainly in the Q&A, we continue to see that low commodity prices are driving customers to extend projects and delay FID decisions based on cash flow. This, I think coupled with a little bit slower pace associated with some of the larger projects we have won over the past couple of years, and the long-term O&M contracts we've recently put into place in infrastructure and others, have a slower burn, but provide I think a more stable revenue trajectory. The revised 2016 guidance range reflects I think this reality. While our capital structure is sound and our cash flow generation remains robust, we remain disciplined in how we use our cash, and will continue to do so as we look at lowering our cost of business and internal costs associated with it. Finally, we continue to invest for the long term. As you've seen with our recent investments in the fab yard and certainly Stork, it positions our Company to not only take care of ---+ capture market share in the traditional markets, but it also allows us to show growth in some of the longer-term aspects of our business. With that, we greatly appreciate your interest in Fluor, and your confidence in our Company. Thank you, and have a good evening.

2016_FLR

2017

OLLI

OLLI #Good afternoon, and welcome to the Ollie's Bargain Outlet <UNK>onference <UNK>all to discuss the financial results for the third quarter of fiscal 2017. (Operator Instructions) Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from Ollie's. And as a reminder, this call is being recorded. On the call today from management are Mark <UNK>, <UNK>hairman, President and <UNK>hief Executive Officer; John <UNK>, Executive Vice President and <UNK>hief Financial Officer; and Jay <UNK>, Senior Vice President of Finance and <UNK>hief Accounting Officer. I'll turn the call over to Mr. <UNK> to get started. Please go ahead, sir. Thank you, and hello, everyone. A press release covering the company's third quarter fiscal 2017 financial results was issued this afternoon, and a copy of that press release can be found on the Investor Relations section on the company's website. I want to remind everyone that management's remarks on this call may contain forward-looking statements including, but not limited to, predictions, expectations or estimates and that actual results could differ materially from those mentioned on today's call. Any such items, including our outlook for fiscal year 2017 and our future performance, should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these forward-looking statements, which speak only as of today, and we undertake no obligation to update or revise them for any new information or future events. Factors that might affect future results may not be in our control and are discussed in our SE<UNK> filings. We encourage you to review these filings, including our annual report on Form 10-K and quarterly reports on Form 10-Q for a more detailed description of these factors. We will be referring to certain non-GAAP financial measures on today's call, such as adjusted operating income, EBITDA, adjusted EBITDA, adjusted net income and adjusted net income per diluted share, that we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most closely comparable GAAP financial measures are included in our earnings release. I will now turn the call over to Mark. Thanks, Jay, and hello to everyone, and thanks for being with us on the call today. We had another strong quarter, and we're very excited about our results and the continued momentum in our business. Strong deal flow, great new store performance and tight expense control drove our record results for the third quarter. <UNK>onsistency and execution are 2 of our hallmarks that are critical to our success, and after 35 years are things that we will not change. For the quarter, we delivered record top and bottom line results with an 18% increase in sales, a 31% increase in adjusted net income. <UNK>omparable store sales increased 2.1%, against the 1.8% increase in the third quarter of last year and a 5% increase on a 2-year stack basis. Our sales strength was once again broad-based with nearly half of our departments comping positive. Some of our best performing categories were health and beauty aids, housewares, toys, furniture, and bed and bath. We continue to grow our vendor relationships with our increased size and scale. And we believe we're well-positioned to capitalize on the many buying opportunities in the marketplace. As we build the stronger direct relationships with major manufacturers, we're able to offer our customers what they want, brand name merchandise at drastically reduced prices. The best news is that we continue to see very strong deal flow. Our new stores performed above our expectations during the quarter. We opened 15 locations during the third quarter and since quarter-end, we've opened another 3 for a total of 34 new stores in fiscal 2017. We continue to see a strong pipeline of leasing opportunities. Ollie's Army is stronger than ever. Growth of the Army continues to outpace sales with members spending significantly more than nonmembers. Next year, we plan to launch some exciting enhancements to the program that we've been working on for some time. We're introducing ranks for the Army members, which will enable us to reward our most active customers. Members will receive different rewards and surprise offers based on their level of spending. We're also working on a mobile app that will allow us to communicate the latest and the greatest deals to our best customers. Our busiest night of the year, Ollie's Army Night is just around the corner, and we're excited to once again open our doors exclusively to Ollie's Army members. Our stores are packed with great deals and our team is eager to welcome our most loyal bargainers. The event is this Sunday, December 10. If you're a member, we hope to see you, if not, there's still time to enlist in the Army now and join us for a great, great night. The stores will be packed. As we've said before, we're celebrating our 35th birthday this year. We're proud of our long history of offering great deals to our customers and the successful expansion of Good Stuff <UNK>heap to an ever-growing number of new markets, and we have no intention of slowing down. I want to acknowledge our more than 7,000 team members for their hard work and their dedication that has taken us to where we are today. We know the holiday season places extra demands on our associates. And I sincerely thank them for all they do, not only at this time of the year, but each and every day. It's their passion and commitment that are truly the drivers of our success. Let me wrap up by saying how proud we are of our third quarter results and the overall trends we're seeing in the business. As I'd like to say, we're hitting all of our marks. The consistency in the strength of our model proves itself each quarter with stores across every vintage, state and cotenancy performing well. Our store openings are complete for the year, and we're building a full pipeline for the coming year. And our new stores continue to perform above our expectations across all geographies. We are laser focused on the closeout industry, developing strong vendor relationships and ensuring we are well positioned in today's retail environment. Our third quarter results were strong and early fourth quarter trends are encouraging. As a result, we're raising our full year guidance, which John will give you more detail in a moment. In our business, it begins and it ends with deals. Bargains is our middle name, and we're living up to expectations by offering customers great deals on brand name merchandise. We're well-positioned to continue to deliver those bargains to our customers and in turn deliver against our long-term objectives for our shareholders. Thank you, once again for your support of Ollie's. And I'll now turn the call over to John to take you through our financial results and outlook in more detail. Thanks, Mark, and good afternoon, everyone. We're pleased to have delivered another solid quarter on top line sales increases, operating income leverage, strong adjusted net income and EPS growth, all above our long-term expectations. Net sales increased 17.9% to $238.1 million. <UNK>omparable store sales increased 2.1% against a 1.8% increase in the third quarter of last year and a 5% increase on a 2-year stack basis. The increase in comparable store sales was driven by an increase in both average basket size and transactions. We opened 15 stores during the quarter, ending the period with 265 stores in 20 states, an increase in our store base of 14.2% year-over-year. Subsequent to year-end ---+ to the quarter-end, we opened 3 additional stores for a total of 34 new stores in fiscal 2017. This brings our store count to 268 and completes our new store openings for the fiscal year. Our new stores continued to perform above our expectations across our new and existing markets, and we remain excited with the productivity of our overall store base. Gross profit increased 16.4% to $98 million and gross margin decreased 50 basis points to 41.2% of net sales. The decrease in gross margin was primarily due to a decrease in merchandise margin, partially offset by favorable supply-chain cost. SG&A expenses increased 12.6% to $68.1 million. The increase was primarily related to higher selling expense from our new stores opened over the past year, increased sales volumes in our remaining store base and investments in personnel to support our continued growth. As a percentage of net sales, we leveraged SG&A expenses by 140 basis points to 28.6%. Excluding $600,000 of transaction-related expenses from prior year, we leveraged SG&A expenses by 110 basis points in the quarter. Operating income increased to 29.8% to $24.2 million, and operating margin increased 100 basis points to 10.2%. Excluding the $600,000 of transaction-related expenses from last year, adjusted operating income increased 25.9% and adjusted operating margin increased 70 basis points. Net income increased 80.3% to $18.9 million and net income per diluted share increased 70.6% to $0.29. Excluding the income tax benefits due to the accounting change for stock-based compensation this year, and transaction-related expenses net of taxes in the prior year, adjusted net income increased 31.3% to $14.2 million and adjusted net income per diluted share increased 29.4% to $0.22. EBITDA increased 28.2% to $27.3 million and adjusted EBITDA increased 23.8% to $29.2 million in the third quarter. At the end of the quarter, we had $42.2 million in cash and no outstanding borrowings under our $100 million revolving credit facility. We ended the quarter with total debt of $126.7 million compared to $196.5 million last year. Subsequent to the quarter-end, we paid down an additional $30 million of our term loan debt resulting in a balance of $96.3 million. <UNK>apital expenditures totaled $6.5 million in the third quarter of fiscal 2017 compared to $4.3 million in the third quarter of fiscal 2016. The increase was largely due to the timing of new store openings and expenditures associated with our new data center. Turning to the outlook for fiscal 2017. As Mark discussed, we are raising our full year guidance. As such, we are raising our total net sales expectations to a range of $1.062 billion to $1.065 billion. We expect comparable store sales to increase between 2% to 2.5%. We are raising our operating income expectations to a range of $131 million to $132 million. We are raising our expectations for net income per diluted share to a range of $1.36 to $1.37, and our adjusted net income per diluted share to $1.21 to $1.22. Excluding the impact of the accounting for stock-based compensation, our outlook assumes an effective tax rate of approximately 38% in a diluted share count of $65 million. Our interest expense is estimated to be in the range of $5 million to $5.5 million. <UNK>apital expenditures are expected to be $18.5 million to $20 million for the year. And total depreciation and amortization expense, including the component that runs through cost of goods sold is still projected at $12 million to $12.5 million for the year. As a reminder, fiscal 2017 is a 53-week year, and the extra week occurring in late January. We continue to estimate the extra week will add approximately $18 million in sales and less than $0.005 to diluted earnings per share. I will now turn the call back over to the operator to start Q&A session. Operator. (Operator Instructions) Our first question comes from <UNK> <UNK> with JPMorgan. So when we think about your model, if you exclude the fidget spinners last quarter, you've been pretty consistent, 2% comp story now for really the last 5 quarters straight and actually consistent at that level really for the last 10 years plus. So I guess, my question, at a 2% comp, are you still comfortable with the model generating mid-teens top line and mid-teens EBITDA dollar growth going forward. Is that the best way to think about things. Matt, this is John. Absolutely, 100%. Based on the 1% to 2% top line the ---+ each comp store sales growth, we expect to be able to generate the mid-teens revenue and the approximately 20% net income growth year-after-year, yes. Great. And then just a follow-up. John the new store productivity just continues to accelerate. I think the returns this year are the best historically that we've seen in the model. I guess, what do you see driving the performance of these most recent openings. And how do you see the store pipeline shaping up as we think about next year. Sure. Matt, the new stores are performing well and actually, in fact, above our expectations. They've been performing well for several years now. But we're seeing a pretty good class of stores here in 2016 and '17. That are definitely above of what we expected based on our new store model. But we ---+ the deals are driving what's in the box and we're continuing to see that revenue increase in our stores based on the deal flow that the merchants are able to get. And as you know, we've delivered a very consistent model year-after-year. So we're very excited about it. Next year, we believe we have a nice full pipeline for the new store growth, shaped up pretty nicely. And we expect to see mid-teens growth in new store count next year as well. Our next question comes from Brad <UNK> with KeyBanc <UNK>apital Markets. I guess, first a question on the start here to the fourth quarter. Any more color on where you guys are running and maybe more explicitly what your comp expectations maybe for this fourth quarter. Yes, I'll go first, Brad. Thank you for your comments. Typically, we don't give the monthly guidance range or quarter trends. I can tell you Thanksgiving weekend was very consistent with our expectations. We were pleased with our results. We're off to a good start in Q4. But as you know, as we are in everything there is a lot of big days between now and the holiday of <UNK>hristmas, inclusive of one coming Sunday night, a lot of it is predicated on weather. But all that being said, feel really good about where we are. As far as guidance, Jay. Yes. I can speak to that one, Brad. This is Jay <UNK>. And just to add on what Mark said, and the other thing we talk about is just coming up against our own good numbers, we're facing a 2-year stack of 7% and a 3-year stack of 16% in the fourth quarter. But with that said, the last quarter we talked about Q4 being in the low end of the 1% to 2% comp range, really not a major shift, but what we're thinking of is the comp range for the quarter now is probably in the mid to the high 1% to 2% range. Great. And then just a follow-up on the earlier question about the long-term financial outlook. I guess, just explicitly as we think about 2018, obviously, we need to adjust for the extra week you have this year. But any other early thoughts, John, for us as we start to fine tune our model on a annual and quarterly basis for 2018. Yes, Brad, we're not going to give a whole lot of color on 2018. But I would tell you as we've said for a long period of time now that we've been public. Really go back to the long-term consistent algorithm that we've given to you guys of top line ---+ mid-teens top line growth, 1% to 2% comps, gross margins right at about 40% and net income growth close to 20%. So if you model that out, it can be pretty consistent. As you know, we levered pretty well once we get above the 1% to 1.5% comp store sales, but we don't build it our infrastructure to do that. And we don't actually have ---+ we don't build our model as well and sort of get our sales behind the eight ball of sales do slow down a little bit. So same model parameters that we've given to you in the past we'd stick to on the long-term basis. Our next question comes from Peter Keith with Piper Jaffray. It's actually Bobby <UNK> on for Peter today. I just want to ask about the closet opportunities you're seeing specifically pertaining to consumables and branded <UNK>PG companies. Do you think that as pricing area remains type of competitive. A lot of retailers are moving more to private label and you're seeing new branded <UNK>PGs that's for new points of distribution. So just a dynamic you're benefiting from. If you could just discuss the trends you're seeing in branded <UNK>PGs that would be great. Yes, I don't know if anybody else has switched to private label is driving any <UNK>PG availability. To be honest with you, I would tell you that our focus, we are laser focused on getting name brands at drastically reduced prices and some of the greatest names in America are in our store ---+ stores, which I will tell you none of them. It's ---+ but it's certainly exciting the consumer, they're responding, we're offering them bargains, we're developing these relationships, we're strengthening these relationships. And the entire environment consistent with what I think I've said 3 ---+ 2 or 3 quarters, this is the best closeout buying environment that I've seen that I've been doing this for 35 years. So obviously, that's a relation here to Ollie. So it's the strongest that I've ever seen. And our pipeline is full, our brands are big, bright and beautiful and they're bargains. So I feel really good about where we're at. Great. Just a quick follow-up with consumables at 20% sales, I believe, given any thought to where this figure could go over the next couple of years. Yes, Bobby, this is John. With regards to the consumables, we're obviously not making a concerted effort to increase our consumable penetration in our model. As you know, we go where the deals come from the overall vendor base. So where this consumables go, potentially could go up 200 or 300 basis points. But I would say, we don't want it to increase much more than where it's at today. As you know, that puts additional margin pressure on the mix that we sell to the stores. But if we can drive additional volume and additional traffic in the store from consumables we would take that any day. Our next question comes from Scot <UNK>iccarelli with RB<UNK> <UNK>apital Markets. This is <UNK> <UNK> on for Scott today. Just wanted to touch on quickly the inventory growth. It's been a little bit higher and actually this is first time, I think, it just touched higher than sale. Now this quarter ---+ it had to do with timing of store openings, gearing up with the holidays or just deal flows or anything there that you guys can speak to. Yes, Rob, this is Jay. And I can speak to that. I mean you're right. It is just a tick higher than our sales trend, but we're happy with our inventory position. It's really a byproduct and a reflection of the strong deal flow as well as to your point there is a little bit of timings of store openings in there. But really it's the byproduct of the strong deal flow that we're seeing. And we're happy with the inventory position as we head into the remainder of the holiday season. Great. Glad to hear it. And just one follow-up unrelated, but more towards the Ollie's Army. <UNK>an you give us any update or metrics around your member count on kind of what percent of sales maybe those guys are doing now. Yes, sure. The current membered count is 8.1 million versus 6.7 million a year ago at the third quarter, which is about 22% increase and they ---+ the metrics continue to be very consistent. They're making up over 65% of our sales, which is consistent with what we've had in the past. Our next question comes from Rick <UNK>on with Stephens. Also, I'd like to follow-up on the merchandise margin pressures which you discussed. Is that mix shift driven toward consumables or other factors weighing into that margin. Yes, Rick, this is John. It's predominately mix shift that we're seeing in the consumable category that's driving the margin down. We've talked about this for several quarters now. So not a big surprise to us and it was expected as we guided last year from a much higher gross margin down to the number we're at this year. So not a big surprise there. We also had a slight improvement in the supply chain cost for the quarter as well, which is a little bit less than we had expected in that facet of the business we're seeing a little bit of pressure on the inbound and outbound freight cost post hurricanes with the ---+ not a lot of availability in the trucking side of the business. So we'll able to navigate through it, and we still are confident with north of 40% of gross margins for the full year basis. We had previously guided to about 40.3%. Right now, we're closer to about 40.2% on a full year basis from a gross margin perspective. Also I'd like to follow-up on hurricanes. If you think that, in fact, was a headwind to the comp in the period. I'll take part of this and Mark might kick in a little bit here, Rick. With regards to the hurricane, we did not see a big impact on our business. We don't ---+ a lot of our stores down in the Florida markets are not comparable stores yet. So we did have some disruption in the Florida market, nothing significant. We're very lucky and fortunate not to have any stores damaged in any material way. We had some closed store days, but the comps in the hurricane areas was not impactful enough for us to really call off for the quarter. But probably a little bit tiny impact, but we don't believe that, that was something to speak to on a material basis. Got you. Finally, if I could ask on the HBA, you've called that out our scenario strength for 5 consecutive quarters. So you're lapping some big numbers a year ago. How much more opportunity do you see in that category. Well, we think that because of our relationships and the growing scale and our ability to take more products from these major <UNK>PG companies that we think that we have a ---+ I'm very bullish on the outlook on a go-forward basis, obviously, we wouldn't come up with numbers for you. But when you come into our stores, you'll see incredible name brands in America at bargained prices. And we're very, very excited about the prospects. So we think that it's helping us. We think that it's breaking the basket, getting people started and we're excited about it. (Operator Instructions) Our next question comes from <UNK> <UNK> with Wells Fargo. I just wanted to touch on SG&A. You have seen a tremendous amount of leverage in this line item over the last year plus, I guess. Total cost growing at a rate of less than square footage growth previous quarters. I guess, what I'm trying to get is, how we've been able to keep cost down with the store expansion that you've seen particularly even with going into new markets. Yes, Ed, I'll take part of this and Jay and Mark might wrap it up here for me. But with regards to the overall SG&A cost, we're pretty much, as we said before, if we can greater than 1% to 1.5% comp. We're going to be able to lever pretty heavily. So we have a pretty light load on the SG&A front in the way we, obviously, run the business. So that's a positive piece of it. We're able to drive with incremental sales volume. We have ---+ we run a tight control of expenses in our business and as we continue to grow the top line sales or G&A our goal is to continue to lever that G&A number as we continue to grow the sales base. And I think we'll be able to do that pretty successful as we continue to expand. And there's some one-time cost that we're not lapping related to become sort of box compliant that we're investing there. So just looking forward, the leverage point doesn't change very much, I think. Well, right now, with where we're at, we think we can lever at 1% to 1.5%. We have said in the past, there are certain times when we have a little bit heavier investment that we have to make on the people side of the business. So this year was a little bit lighter than normal on the people side and next year it may be a little bit heavier. So I would not expect anywhere near the same leverage you've seen this year while we outpaced ---+ we've outpaced the 1% to 1.5% comp, we're getting a lot of leverage ultimately there. But when we build the model next year at the 1% to 2% comp, I would expect our SG&A ratios to stay pretty consistent to where they would be this year or maybe a 10 to 20 basis point leverage point when you model out for 2018. Okay. And then you had mentioned just some changes around Ollie's Army next year. I was just hoping maybe you could provide a bit more color as to what you're looking to do. And potentially any impact that you would expect on sales. I don't know if there is a margin impact associated to all this. Just any other color there would be helpful. Yes, I'll go first. And as I mentioned in the prepared comments, I've been wanting to do ranks for ages and ages and ages. And just did not have the capabilities, the internal capabilities of doing it. And of course, we've been telling everybody about Phase 1 and Phase 2 and the other systems so that we can get our fingers around the lot more of the data that we've been gathering throughout the year. So we're going to be able to do the ranks, and we're going to have 1 star, 2 star, and 3 star. And obviously 1 star is going to be somebody who spends a certain amount of money in the year, a 2 star might be more and the 3 star and perhaps will offer them additional discounts or incentives, perhaps will offer them deals that might be exclusive to them only, but everybody has to stay with me on the Ollie's Army. You got ---+ I'm not going to kill these people. These are my ---+ these are our customers. We're protected of them. We're going to talk to them in a fashion that we know that they want to hear from us. And we're not embedding any underlying huge numbers to it. We know what they want to hear, we know how they want to hear it, we know how to motivate them. We think we're going to have additional opportunities. But I'm asking everybody to stay with us, stay with me on the planning. And I wouldn't go planning or modeling any great advantages to it. Our next question comes from <UNK> <UNK> with MKM Partners. Just on the new store performance, which came in certainly ahead of my number and I think the street number as well even though comps were relatively in line. And I know you've talked about it a little bit already. But any significant changes in terms of the site selection process or the locations that you're getting as other retailers close stores. Are you doing anything different just with the pre-openings routine or the marketing or anything like that, that would play into the strong new store performance. Yes, <UNK>, this is John. With regards to the overall site selection process, we've not changed our site selection process, whatsoever. We have the same team, the same individuals has head up the real estate department for many, many years. So we're going to the market the same what we have for a long period of time. Our pre-opening process Arcadians is very, very consistent. We're doing the same thing we've done for a long period of time. So that there has been no ---+ nothing ---+ no big changes to speak of that we've done that would be driving the incremental business that we're seeing. Are we getting slightly better sites in certain situations where we've had other retailers go out, we have been able to secure the site that we may not have gotten in the past possibly. But I would not say that's the majority of what we were able to do. We're pretty much getting the same or similar sites that we've in the past. And we would always say, the deal is going to drive the performance of the stores and the excitement in the stores that when we get the customers in, we feel we have and they're going to buy and spend more money. So that's what we're seeing from our perspective, and we're excited to see it. And one thing we say it's been broad-based, it's been across all of our stores. It is not just in one geographic area, we're seeing it consistently in all of the stores we've opened this year and last year as well. And that I know you don't want to talk too much about the fourth quarter to date or the fourth quarter guidance ---+ sales guidance. But looking at Thanksgiving, I know you weren't open on Thanksgiving, but Black Friday early in the morning and then through the Thanksgiving weekend and on <UNK>yber Monday, could you see any ---+ even, let's say, subtle change in store traffic patterns on those days that would give you any indication that your core customer might be spending a little bit more online. Or was it relatively consistent with last year in terms of the basic pattern. Yes, <UNK>, we didn't see any of that at all. What we saw was a consistent response. And you know my biggest ---+ our biggest and greatest deals flew first, that's no different than any other year. When we opened our stores, we had people waiting to get into the stores. But we absolutely saw no adverse effects, whatsoever, very consistent with previous years, and we were very pleased with the weekend, very pleased with the early trends so far to Q4. (Operator Instructions) Our next question comes from <UNK> <UNK> with Morgan Stanley. Wanted to go back to one of Ed's questions, just on the SG&A opportunity ---+ I know that you mentioned a couple of times kind of above that 1%, 1.5% comp is where you really do see that nice leverage start to kick in. But can be just remind us a little bit with some of the kind of within that line where some of your bigger levers and bigger future opportunities may be going forward. Yes, <UNK>, this is John. With regards to the biggest opportunity or biggest lever we'd able to pull in the SG&A side is 1% to 1.5% we'd expect pretty much no ---+ like very, very little to 0 leverage and most all leverage is coming out above that's going to be focused more on the G&A front. Store piece, we do get a small component of it, but the way we run our stores, there is a big fixed component in the store side. We're not going to get the lever until we get above that 1.5%, but the G&A is where we're go pull the ---+ pull this ---+ pull the levers and see the biggest opportunity there as we go forward in our long-term basis. But like we said, we don\xe2\x80\x99t expect to see a lot of leverage coming out of the model. When we model out 2018, we're going to be remodeling our consistent 1% to 2% comp, and you're going to see very little leverage about 10 to 20 bps in the SG&A side compared to this year. Okay. Perfect. That is very helpful. And then just a very quick follow-up on the enhancements to the Ollie's Army program. Should we think of ---+ how should we think of progression there. Is that going to be kind of on day 1 with both the ranks and the mobile app that it's going to be launched storewide. Are you going to do different geographies kind of step at a time. How should we think of that timing. <UNK>, our personality is walk before we run. There is no way we would do both programs at the exact same time, but we do expect to have them rolled out this year. We think that the ranks are going to be perceived as pretty cool by the Army. They're going to like it. But we wouldn't do them both at the same time. Now that you say, would we do it geographically, that is perhaps ---+ that would fit our personality. So you're probably spot on. And one thing to add, <UNK>, probably what we would expect is, we would probably have both of those rolled out sometime by the first half of 2018. Obviously, they would not come together, but they would be lined up back-to-back. But hopefully, both by the first half of next year. Our next question comes from <UNK> <UNK>oncepcion with <UNK>iti. <UNK>omps for the quarter seem to be pretty much as you expected maybe a little bit better, so great job on that. But investors have become accustomed to larger upside surprises. Do you think we reached an area where people should change their view and look at your guidance as something that should be relied upon more and not something that's conservative. 1% to 2%. 1% to 2%, but we could go back 10 years, 1% to 2% ---+ I'm sorry, 2% comp. So I think it's the consistency in the model. We went Q1 at 1.7%, Q2 at 4.5%, the spinners were in there and the Q3 we're at 2.1%. I ---+ that's what I'm asking, we're asking everybody to stick with, everybody to understand how we run the business, how we budget the business, how we model the business. And then as I've said, as we've said, we just don't turn the registers off when we hit 2%. If we can get more, we're going to get more. But this is the way we run the business, and we think that's the right way and the most prudent and appropriate way to run the business. And just a follow-up on your guidance. I think I heard you say, you're expecting a mid-to-high 1% to 2% comp in the fourth quarter. If you use a midpoint of that, that seems to be a slowdown on a 1-year and possibly 2-year basis relative to what you saw in the third quarter. So is that view reflecting what you're seeing today. Or is it conservatism or are there is some unfavorable items we should be considering in the fourth quarter. Yes, <UNK>, this is John. I would say that it's not anything that we're afraid of. It's the way we run the business. It is our conservative nature we have. But like Jay has alluded to I think earlier, we're up against 16% 3-year stack. We're not going up against easy numbers here. So we've had 3 or 4 years in a row where we've had positive comparable store sales. So we don't look at that as slowing down. We look at more from a maintenance perspective and keeping customers continue to drive positive comparable store sales. So we're excited where we're at, what we're seeing right now, business is very strong and like we said we're going up against some very big numbers now to be able to beat them. It makes us very, very excited. Great. And last one from me, just wanted to get your views on tax reforms if it passes. What do you expect to do with that benefit. Or would you think it'd be competed away and just related to that if your customers get a higher personal income tax return, do you see that spending come through your stores in a bigger way. I mean, is that something you've seen in the past. Alan, this is Jay <UNK>. And I'm going to start with that. In regards to the tax reform it's awfully early to figure out exactly what's going to happen or if the reform will become effective. I mean, we are a full taxpayer, so any reduction in the corporate rate will benefit us. And generally speaking from the consumer standpoint, if they've got more discretionary income in their pockets we don't view that as a bad thing certainly. Okay. Thank you, operator. Our stores are stocked with incredible deals, and we encourage all of you to get out there and shop at Ollie's. We believe we're well positioned for the remainder of the holiday season. Thanks to everybody for participating in the third quarter earnings call. And thanks again to all of our Ollie's associates. We wish everyone a happy and a safe holiday season and look forward to speaking to you again on our fourth quarter call in late March. Thank you very much and have a good day.

2017_OLLI

2017

ABCB

ABCB #Thank you, <UNK> and good morning everyone and thank you for taking the time to join our first quarter earnings call. I'm excited about the results that we reported this quarter and even more excited about the momentum we have going into the second quarter and the remainder of the year. We reported operating earnings of $0.60 per share, which is up 20% from the $0.50 per share we reported in the same quarter last year. Total operating earnings for the quarter were up 32% to $21.6 million, which reflect the additional shares we've issued in acquisitions as well as in the recent capital raise. Our results for this quarter reflect the additional earnings from the Jacksonville Bancorp acquisition that was not reflected in the first quarter results for 2016. Additionally, earnings contribution from our joint venture with US Premium Finance was part of our growth story in the first quarter. Those collectively represent about half of our growth. The rest of the growth in earnings is from organic growth in the balance sheet coupled with really impressive management of operating expenses. Our organic growth with lower efficiency ratio is going to continue to be an impressive earnings driver that should hold our operating ratios in the favorable place they are today. Speaking of operating ratios, operating return on assets for the first quarter came in at 1.27% compared to [1.18%] in the same quarter of last year. Our return on tangible capital was up slightly at 15.8% compared to 15.4% in the first quarter of 2016. Our margin excluding the effect of accretion was up about 6 basis points against the linked quarter which resulted primarily from the acquisition of the loan portfolio of US Premium Finance. I guess the year-ago period were down about 1 basis point, which I consider a success given that we've grown earning assets by [over $1 billion or 19%] over the last year. Yields on earning assets improved about 4 basis points to 4.38% over the linked quarter, which mirrored the increase in our cost of funds which moved higher to 0.42%. Our biggest win on the operating front was in our operating efficiency ratio, which fell to 60% compared to 65% in the first quarter last year. We've been able to manage this level in what is our slowest and most challenging quarter of the year. It gives me more confidence that we can hold efficiency at this level and that the EPS growth that we expect from our growth will materialize. On the growth side, we had [just over $100 million of growth in loans or about 8% annualized]. This is somewhat skewed because of a sizable drop in outstanding loans in our warehouse division, which saw really outsized balances at the end of 2016. We finished the quarter with pretty solid growth in commercial bank and in US Premium Finance. Pipelines across the Company in the bank and our lines of business are very strong and we're confident in our previous growth targets of something approaching 20% for the entire year. We finished the quarter with stronger capital ratios than we've seen it sometime thanks to the successful capital raise earlier this year. Tangible book value increased to [$16.52 per share, up 26% from this time last year while tangible common equity to tangible assets increased to 8.85%]. Even with our return on assets in the 1.25% to 1.35% range, I expect that our balance sheet growth this year will bring the capital ratios down a bit, but we're in a great position to capitalize on the organic and M&A opportunities that are ahead of us with our stronger capital position. I'll give you a quick update on BSA/AML. We continue to make excellent progress there and we remain on track to have every item of the consent order completed by June 30 as we've talked about previously. Currently, we only have the look-back process to complete and that's underway. We're working feverishly with the best consultants in the country to have that completed on schedule and we certainly expect to do that. While we obviously don't know what the findings will be, we're confident that there will be nothing of substance that will delay the project completion on our timeline. On the M&A front, there continues to be a number of discussions around the M&A opportunities. So we're pushing hard to get back to that arena. Although we are excited about our organic growth for the foreseeable future, we're anxious to layer on some of the M&A opportunities that we see to further augment our strong profitability. <UNK>, I think I'll stop there and ask you to take us through some more of the details on our results. <UNK>, the last thing I'd want to do is be critical, but we had a slight delay getting FDIC to approve, to act on to give us their non-objection. So that took too much, but our timeline is still intact. We are, on other parts of the project, we're 30 days ahead. So all-in-all, the look-back is the final piece, but you don't know what you're going to find on the look-back. We certainly don't expect anything, but that's the only unknown at this point and we've heard comments from others that other banks are not getting out from under their order as quickly as we will have finished ours, but I would tell you, we've been working on it for almost a year, since August, we had our action plan in place in August of last year. So we've been working feverishly on it and we still expect to be totally finished with our part by June 30. I can't speak to what the FDIC timing will be, but they've indicated that they will be in on the visitation in June. So my expectation is, it won't be longer drawn out, but that's it in a nutshell. We'd be open to do both honestly. I mean we've had significant conversations with conventional banks like we've done in the past and I think that's a real opportunity. We work in, as <UNK> mentioned on as we approach the $10 billion and go beyond that, what gaps do we have, what resources do we need, we've been working on that and investing in that and we will continue to do that. As well, there is opportunity to leverage our premium finance business and other equipment finance business. So we'll look at those opportunities as well. I would just reiterate what we said, our number one focus is BSA, number two is organic and making sure we can execute the way we have this quarter, last quarter, last several quarters, but we absolutely intend to augment that with M&A.

2017_ABCB

2015

CBU

CBU #Thank you, Nicole. Good morning, everyone, and thank you for joining in on our first-quarter conference call. We started out 2015 on a productive note. Operating earnings were very good at $0.55 per share, which is $0.01 better than 2014 and also on historical high water mark for the first quarter. The margin contracted as expected, which <UNK> will discuss further. Earnings were supported by continued growth in noninterest revenues, very strong credit quality, and effective expense management. The one area of underperformance was for the quarter was in credit generation. Total loans were down 1.7%, which is a much greater seasonal decline than we typically experience in the first quarter. On a more positive note, the second quarter has started out very strong, and we have already grown back a third of that decline over the first three weeks of this quarter. Also, our commercial pipeline is 20% higher than the same time last year. The mortgage price line is up, and we are entering the seasonally strong months of the auto lending business, but we think we are in very good shape heading into our peak Q2 and Q3 lending quarters. In addition, deposit balances grew sequentially by over $190 million or 3%, which will provide low-cost funding support for expected loan growth. For the past several quarters, we have commented on capital levels and are focused on productively deploying access capital. In that regard, in February, we announced the acquisition of Oneida Financial Corp, an $800 million asset institution with 12 branches across Madison and Oneida counties. The 60% stack and 40% cash mix of consideration will effectively deploy approximately $55 million of that surplus capital. This transaction is attractive in many respects, including Oneida's geography, which will give us the number four deposit market share in the Syracuse MSA; its business model, which is very community focused; and its culture, which aligns extremely well with ours. Oneida also has significant nonbanking businesses that drive more than 60% of its total revenue, including insurance, benefits administration, and wealth management ---+ all businesses that will integrate well with our existing and highly profitable businesses. As disclosed, we expect the transaction to be approximately $0.07 per share accretive to 2016 GAAP earnings and $0.11 per share accretive to 2016 cash earnings. We are very pleased that Oneida's chairman and CEO, Mike Kallet, and its President, Rick Stickels, will be joining our Board of Directors. The merger integration is proceeding well, and we expect to close in early July. With respect to the remainder of the year, we do expect modest core margin contraction, but improvements in asset generation, in banking and nonbanking revenues. Asset quality is very strong right now, and our focus on expense efficiency will continue. We will remain in a surplus capital position, even after the United transaction, and will continue our focus on opportunities to deploy that capital in a manner that is productive to our shareholders. <UNK>. Thank you, <UNK>, and good morning, everyone. As <UNK> mentioned, the first quarter of 2015 was a very solid operating quarter for us with seasonally modest, yet still productive year-over-year operating improvement trends. I will first discuss some balance sheet items. Average earning assets of $6.67 billion for the first quarter were up 1.3% from the first quarter of 2014, with all the growth in earning assets being in loans, a positive relative to mix, meaning that the average loans grew organically $91 million or 2.2%. Average deposits were up 1.5% from the first quarter of last year, and the multiyear trend away from time deposits and into core checking, savings, and money market accounts continued in early 2015, resulting in a further decline in overall funding costs. Average outstanding loans in our business lending portfolio in the first quarter were within 0.2% of the fourth quarter, a seasonally expected outcome. Asset quality results in this portfolio continue to be very favorable with net charge-offs of under 6 basis points of average loans over the last 15 months. Our total consumer real estate portfolios of $1.94 billion comprised of $1.61 million of consumer mortgages and $339 million of home equity instruments were also down model modestly on a linked quarter basis. We continue to retain in portfolio most of our short- and mid-duration mortgage production while selling secondary eligible 30-year instruments. Asset quality results continue to be very favorable in these portfolios with total net charge-offs over the past five quarters of just under 8 basis points of average loans. Our consumer indirect portfolio of $804 million was down $30 million from the end of the fourth quarter of 2014, in line with seasonal demand characteristics and reflective of the significant quarterly contractual cash flows off this portfolio. Despite solid new car sales, used car valuations were the largest majority of our lending in concentrated continue to be stable. Net charge-offs in this portfolio over the past 15 months were 33 basis points of average loans, a level we consider very productive. With our continued bias towards A and B paper grades and the very competitive market conditions in this asset class, yields have continued to trend lower over the last several quarters. We have continued to report very favorable overall net charge-offs results with the first quarter of 2015 results at just . 09% of total loans being a stellar performance. Nonperforming loans comprised of both legacy and acquired loans ended the first quarter at $22.7 million or 0.54% of total loans. Our reserves for total loan losses represent 1.14% of our legacy loans and 1.08% of total outstandings and based on the trailing four quarters' results represent over seven years of annualized net charge-offs. As of March 31, our investment portfolio stood at $2.66 billion and was comprised of $247 million of US agency and agency-backed mortgage obligations or 9% of the total, $670 million of municipal bonds or 25%, and $1.68 billion of U.S. Treasury securities or 63% of the total. The remaining 3% was in corporate debt securities. The portfolio contained net unrealized gains of $106 million as of quarter end. Our capital levels in the first quarter of 2015 continue to grow. The Tier 1 leverage ratio rose to 10.15% at quarter end, and tangible equity to net tangible assets ended March at 9.19%. As mentioned previously, these higher capital levels and our strong operating income generation allowed us to again raise our quarterly dividend to shareholders in 2014 to $0.30 per quarter or a 7.1% increase. Tangible book value per share increased to $16.31 per share at quarter end and includes $36.7 million of deferred tax liabilities generated from tax deductible goodwill or $0.90 per share. Shifting now to the income statement, our reported net interest margin for the first quarter was 3.83%, which was down 11 basis points from the first quarter of last year and 6 basis points lower than the first quarter of 2014. Consistent with historical results, the second and the fourth quarters each year include our semiannual dividend from the Federal Reserve Bank of approximately $500,000, which added 3 basis points of net interest margin to the fourth-quarter results compared to the linked first quarter. Proactive and disciplined management of deposit funding costs continue to have positive effect at margin results, but have generally not been able to fully offset declining asset yields. First-quarter noninterest income was up 2.4% from last year's first quarter and seasonally below the fourth quarter of 2014 as expected. The Company's employee benefits, administration and consulting businesses posted a 6% increase in revenues from new customer additions, favorable equity market conditions, and additional service offerings. Our wealth management group revenues were essentially even with a very strong first quarter of 2014. Seasonally, our first-quarter revenues from banking noninterest income sources were down 7.6% from the levels reported in the fourth quarter, but were up modestly from the first quarter of 2014. Quarterly operating expenses of $55.6 million, excluding acquisition expenses, decreased $245,000 or 0.4% from the first quarter of 2014. Merit-based personnel cost increases in 2015 were partially offset by slightly lower headcount levels, as well as lower net benefit costs. Seasonally, as expected, our facilities-related costs in the first quarter were higher than the linked fourth quarter, but were still almost $300,000 lower than the first quarter of 2014. Our effective tax rate in the first quarter of 2015 was 31.0% versus 29.7% in last year's first quarter, a reflection of a lower proportion of tax-exempt income to total income, as well as certain statutory changes driving up our effective state tax rates. We continue to expect net interest margin challenges for the balance of 2015 as most of our existing assets are still being replaced by new assets with modestly lower yields. Our funding mix and costs are at very favorable levels today from which we do not expect significant improvement. Our growth in all sources of noninterest revenues has been very positive, and we believe we are positioned to continue to expand in all areas. While operating expenses will continue to be managed in a disciplined fashion, we do expect to continue to consistently invest in all of our businesses. As we frame our expectations for the second quarter of the balance of 2015, we remind ourselves that the second quarter contains one more calendar day and one more payroll day than the first quarter and the third and the fourth quarters, two more. We continue to expect Federal Reserve Bank's semiannual dividends in the second and fourth quarters. While we expect a seasonal decline in certain of our utility and maintenance costs in the second quarter, we historically spend a bit more in marketing and business development in the last three quarters of the year. Our first quarter net charge-off results were extremely positive and, although we do not see signs of asset quality headwinds on the horizon, we would expect higher levels of provisioning for the remainder of the year. Tax rate management will continue to be subject to successful reinvestment of our investment cash flows into high-quality municipal securities, which has been a challenge at times during this period of sustained low rates. However, we believe we remain very well positioned from both a capital and an operational perspective for the expected Oneida financial integration in the third quarter of this year. I will now turn it back over to Nicole to open the line for any questions. Sure. Origination volume was lower, and pay down volume was higher. That, I guess, was experienced across all of the portfolios. It was more acute in the auto lending portfolio, which has cash run off of about $30 million a month. So because of the short duration in that portfolio and the growth last year in the second and third quarters, in particular, in that portfolio, we experienced higher level of cash flows in the quarter. So a large part of the fourth-quarter or first-quarter performance was just seasonal expected cash flows out of the indirect portfolio. The commercial portfolio was down a bit also ---+ a bit more than we had historically experienced. I think, frankly, it was just ---+ it was seasonally related, just the more acute in terms of the first quarter and just general economic activity in the first quarter more broadly, and that played out in commercial as well. Mortgage lending, the application volume in the first quarter of this year was actually higher than the application volume in the first quarter of last year. So I think we are in pretty good shape, particularly heading into the more seasonally active homebuying season here in our market. So I hope that gives you the color you were looking for, Alex. I would say both of those things are probably true. I think it was a more seasonally difficult quarter than it has been in the past. But, again, if we look at our pipeline, right now, at the end of the first quarter, if you look at the commercial pipeline at the end of the first quarter, compared to the commercial pipeline at the end of the prior year's quarter, it is actually 20% higher. So I think we think that we are in very good shape. In fact, as I said in my prepared commentary, we have already earned back in the first three weeks of the second quarter a third of the loan decline we experienced in the first quarter, and leading the charge there has been commercial. So I think we are starting to fund that higher pipeline, and I believe you're going to see that play itself out similarly over the second and third quarters. Sure, Alex. What I am probably focused on there is the ---+ what we end up with other for us, essentially, are things that are not occupancy related. So they tend to be things like business development-related outcomes, technology-related expenses. And what we have found is that activity levels on the revenue production side of our income statements go down, so goes down some of our operating expenses. So we have got some linear outcomes, things like IT processing, transactional processing, and a handful of our IT environments that actually move down or move in sync with the revenue generation. We always tend to be a little bit more modest relative to our business developments and marketing spend in the first quarter than we are for the balance of the year, and I think that is really just ---+ we know from an access standpoint of our customer base across our geography, some of our great marketing initiatives just don't take hold with people when their activity levels are so modest in that first quarter. Nothing else beyond that, Alex, really stands out and really steps up, but it is ---+ and, I think, in <UNK>'s comments, similar to this. The activity levels that you saw from a standpoint are very modest revenue increases. You also had some activity levels in our own utilization of people and technology that were lower in the first quarter. Sure. I think, as you know, we've got the business we have been in for a long time. It has got a number of components to it. The run rate on that business right now is probably $45 million to $50 million. The margins are also very productive at over 25%. So it is a very attractive business for us. We have continued to invest in that business in a lot of different ways over a number of years. Some of it has been organic investment in technology because there is a significant element to that business that is technology oriented. It is people in terms of resources, it has been new business ---+ investment in new business lines, new revenue lines, some of which have grown really nicely and blossomed into their own business units and some of which have not. So some of it has been almost like venture capital support, if you will, for those businesses, and some of it has been acquisition over the years. Acquiring resources. A lot of times it is expertise. It gets acquired, and occasionally it is just purely revenue. So strategically, those businesses continue to be very important for us. They have grown I would say in a relatively linear fashion over time in terms of just consistent and continual growth. Some periods are greater than others in terms of the revenue growth. The business continues to grow. So at the current run rate, grown that business, let's say, 5% to 10% a year, is somewhere ---+ is $3 million to $5 million increase in revenue. So it does get a little harder over time, just by virtue of the numbers to grow at what we saw. There were years where that business grew organically double-digits, and that would be very difficult now, I think, to do given the scale and breadth of the business, which is okay. Because we have got a better model and better fixed costs in that business that allow us to create more net margin with incremental increases in revenue. So I think we really like the business model right now. We like the mix of businesses. We like the growth characteristics and opportunities in all the businesses underlying the benefits administration, more broadly, which does consist of a number of different business lines. So we will continue to invest in that business. I expect that it will continue to grow. I think we really like to get to the second part of your question, <UNK>, what Oneida brings to that set of businesses. It is one of the more attractive elements of the Oneida transaction. They have got a nonbanking ---+ set of nonbanking businesses including insurance, benefits administration and wealth management. It is about 60%-plus of its revenue mix. So very different for a bank that size. They have been very successful in growing their nonbanking revenue lines. We think that they are going to integrate really well with ours because there is a lot of similarities, and there is also a lot of complementary kind of revenue streams where they are doing something that we don't really do that is complementary to something else we do and vice versa. So there is a lot of opportunity in those businesses to integrate with what we have already got right now. Our margins in those businesses are higher, which they should be because we have larger businesses with the exception of insurance, <UNK>, a significant insurance business relative to ours. So we think we are going to be able to combine all those businesses in a way that is going to be very efficient from an operating perspective, as well as the ability to cross-pollinate our skill sets in a way where we will be able to sell through to a greater degree across our collective client bases. As I said, there is things that they do well that we don't, and things that we do well that they don't do. So I think the ability to kind of get in front of the client with a more full suite of capabilities, really across the benefits in wealth management and insurance lines, is going to be very productive for everyone. So we will continue invest in that business. We're going to continue to have opportunities. I think we are going to continue to see it grow. I expect the margins will continue to be very strong, and I expect that the Oneida transaction will be highly complementary in many ways and give us the opportunity to further grow that business just by virtue of greater scale and some of the cross pollination of revenue lines. <UNK>, it is a combination. It is not a one office setting in terms of the nonbanking businesses that Oneida has. They have some concentration in Oneida, Madison and (inaudible) County, so central New York. Where, as <UNK> pointed out, they are probably deeper relative to the lines of service they are providing at their existing customer base than maybe certain of the activities that we actually do today. In terms of building that out, I think, to <UNK>'s point, the complementary services to existing clients, is being wider and deeper for new customers, and it is being able to say, I have got a full-service solution and being able to say that across employee benefits administration, insurance characteristics, as well as wealth management. So I think knowing that some of the demographic areas that we are in, deeper and more astute consultative advice, sells in our marketplace, and we think we will be able to exploit that. I also think in terms of the buildouts of that customer base, it is not all residing in central New York. Oneida has a downstate presence relative to insurance outcomes that is very productive and, again, that is more of a producer-based activity. We would love to think that we could grow that organically over time by adding production resources, and we will continue to look for that. And, not unexpectedly, after we announced the Oneida transaction, my phone is ringing relative to other insurance enterprises. So if that is productive on a longer-term basis, we will continue to look at that. The entire portfolio has effective duration of just about five years. The treasury portion of that is a little bit over six years. The unrealized gain across the whole portfolio is about $106 million at the end of the quarter, which is probably, again, close to where it is today. The treasury portion of that is about $69 million. <UNK>, I think, if opportunities present themselves to shorten the duration a little bit, that is what certainly we would look at. In the first quarter, we added $150 million of treasuries at about the seven-year point, which arguably didn't shorten the duration, but we like the mix characteristics. I think we were a buyer at about a [205] rate where, if you asked that same question today, I think you get a number about [50] below that. The other thing we didn't get to think about is that Oneida brings about $300 million of investment securities, principally mortgage-backed securities and municipals, and so we will be doing some repositioning of some of that portfolio. One could argue that that $150 million in the first quarter was partially an early repositioning of some of the stuff they hold, as well as some of our own existing cash flows. If the market presents that same opportunity in the second quarter, you may see us do it again. Just because, again, from a positioning standpoint, we get to look at a little bit larger portfolio now and say, what do we want the characteristics of that to look like, both from a duration and a quality perspective. So there could be some moving parts on that until the closing. Well, I think, first and foremost for us, <UNK>, it is the continuing challenge of putting investments ---+ putting loans on the books instead of investment securities. Again, a long-term challenge for us, just given some of the demographics that we are in and because historically we have been deposit buyers more often than not from a branch perspective. So that is first and foremost. I think other than that, <UNK>, we have had a long-term approach that does not take credit risk in our investment portfolio, and I don't see that changing in a big way, certainly over the course of the next year. To your point, because I think we disclosed some of these things, we expect that there will be rate changes ---+ rate increases on the short end of the curve later this year and then in some kind of methodical way up as you go into 2016. We do think the yield curve gets back to historical levels of shape. It is still a little bit higher than its historical levels today. So we are cognizant of that. And what we are also cognizant of is we enjoyed this funding profile that we think is better than most. So we can have a little bit more duration on the asset side and feel ---+ still feel very comfortable with our balancing. That is unlikely to change in the next year. And so we certainly are not seeing signs that long-term rates look like they are headed for steepening over the course of the next year. So that is kind of the basis we are operating under. <UNK>, I would say, we are trying not to lengthen it, but I would also say that the prognostication of where that goes in terms of what we have seen for long-term rates over the last five versus the next five is we don't try to bet in either direction. We try to balance within a certain level of interest rate sensitivity, and that is the regulatory obligation that we have to do. And, again, I think over the last four or five years, we have proven that we are pretty adept at that. Gee, <UNK>, I think we ---+ I think we modeled $12 million. Yes. We did. I think we modeled $12 million in total. Yes. And I don't think we think that that is going to be radically off, <UNK>, but we will have that more centered over the course of the next four weeks than we had over the last four weeks. But I have $12 million in my model as well. Actually, that is a good point. We certainly are a net gatherer of deposits on the municipal front in the first quarter of the year and then a little bit again in the third quarter of the year. <UNK>, that was a little bit stronger than historical on the municipal side, but there is some movement underway that would suggest some of the bigger banks are moving from that municipal line of business. But, that being said, we usually actually in the first quarter have a decline in sort of core non-municipal balances, and we actually did experience that in the first quarter. So I think it was good across the board from a depository funding standpoint. And, in fairness, lots of these municipal relationships that we have either broadened or deepened actually feel like they will be sticky for quite a period of time. You might see a little bit of that, but, remember, with us, <UNK>, the deposits ---+ the municipal funding for us is 10% or 11% or 12% of the total mix, not 25% or 30%. So a little less data, maybe, than some of our peers or some of our smaller peers that are in market. The other thing I would also say is that we can say this on a personal level, but we are firm believers in that some of that core accounts went from my checking account to the government's checking account in the first quarter and don't expect that it is quite as profound in the second and third. Thanks for that. They were not. So they were across the quarter. There were a handful at the tail end of January and into early February and then again more like the middle of March to the end of March, so to your point. But, at the end of the day, we acquired enough shares to essentially stay even from a total outstanding share standpoint from where we were at the end of the year, which would suggest that we did some housekeeping relative to covering equity plan issuances, stock option exercises, and restricted stock vesting. That was the objective, and we thought we would sort of telegraph that, and we are happy to have completed that in the first quarter because we really hadn't been doing that over the last couple of years. It is almost entirely fixed. (multiple speakers). The ARM activity would be immaterial. I don't know that it was bigger than other quarters, was it. I think it was about consistent, I thought. I would think that, given the seasonality of where we are headed and the fact the application volume has been up, without looking at the numbers in detail, there is some likelihood that the number could get bigger into the next two quarters than it was in the first quarter. For us, that line where mortgage banking is buried so we had like $1.1 million in quarterly revenue, which has been pretty consistent in that whole line. But just the mortgage banking side of that is only about half of that number. Then, the all other everything is the other half. Yes. I think that is about where we are thinking. I think the first-quarter decline was bigger than we expected, and the pipelines are also bigger than we expected. So hopefully, the two of them will wash each other out, and we will get back to where we hope and expect to be, which is 3% all-in. Agreed. I think one of the things you get from the fourth quarter to the first quarter ---+ and this is pretty granular ---+ is that some of the effective tax rate changes that we went through, especially with New York State, deep into this earnings release, there is a line for fully tax equivalent yield adjustments, and that is down quite a bit from the fourth quarter. And so, really, the end of the year was sort of a bright line for that. So certain of the activities that we were doing relative to tax planning sort of came through a natural life end at the end of December. So you will see a much lower number there, which pulls through on the NIM side. One could argue, you don't necessarily pay for it in net interest income, but you pay for it on the tax line. But, to get back to your question, I would say to 2 to 3 to 4 basis points a quarter is well within our expectations in terms of straight core margin decline, and some of that gets offset in the quarters where we pick up the Federal Reserve Bank dividend. So sort of balancing that back to a 2 or 3 type expectation, probably safe to model that way. If you look at the portfolio yield, specifically, I mean, what seems to be the trend, the commercial yield on the commercial TRE continues to decline. A lot of that competitively oriented ---+ market oriented. On the consumer side ---+ and I would put in consumer, mortgage, home equity, indirect lending, and direct lending through the branch ---+ it feels like it is pretty much bottomed out or very close to it. So I think we are going to see continued downward pressure on commercial and CRE and pretty much stable to maybe very slightly declining yields on the consumer side ---+ the other lines. As it relates to the deposit funding costs, as you can see, they have pretty much gotten as low as they are going to be. I think they were 17 basis points last quarter. That funding cost isn't going to go much lower than that. So that is kind of the underlying dynamics as it relates to the margin. Sure. It is almost exactly $70 million. The majority of that is pipeline related. To a much lesser degree, it is drilling related, which is mostly stone and gravel and water. We also have a couple of hotels ---+ lodging that we have kind of put underneath the gas portfolio just because of where it is at in the revenue support for that, which is principally gas related. So that is kind of the mix of the $70 million. The weighted average risk rating of that portfolio is almost exactly what the risk rating is for the entire commercial portfolio as a whole. So that is good. We continue to monitor all the credits in that portfolio as a group that meets quarterly to review the performance of that portfolio and the underlying financial metrics. In terms of broader based activity in the gas markets, there has been a slowdown in drilling activity, but no slowdown whatsoever in the pipeline part of the business, which is one of the issues, which is, there is a tremendous amount of supply, but there is an insufficient infrastructure around transmission, which is needed to free up the supply. So given the majority of our $70 million portfolio is related to pipeline, that continues to proceed and, in fact, grow in some cases in terms of the activity. So we monitor that portfolio regularly, and it is continuing to perform sufficiently well for us at this point, consistent with the rest of the commercial portfolio as a whole. Very good. Thank you, Nicole. Thanks to everyone for joining us here today, and we will talk again next quarter. Thank you.

2015_CBU

2016

SXI

SXI #The two major contributors to that were the sale of the sale of the BevLes product line last summer. That was in June. And the exit of their UK direct-sale presence. So just over $1.5 million in the quarter. Now, the product rationalization work continues in the business. So as we've said before, the food service equipment business, our sales could get smaller before they get larger as we focus on the more profitable core products. No. No, I don't think so. I'd have to answer that no today. The history of the refrigeration business, if you go back over several years, within ---+ and to follow Standex, the refrigeration business has had these cycles kind of trending upwards. But it has been cyclical. As national chains have launched rollouts, we benefit from those, then they slowdown. Gosh, back in 2011, Walgreens was building 600 stores. That was a chief source of growth for the business. That declined. Subway grew. And these other customers we've referred to have created this sort of lumpiness on the top line. So our expectation of long-term growth hasn't changed. You know, we'll continue to communicate as we get closer to our customers and understand where the market is going. But we just see this as kind of a combination of timing and the natural cyclicality in national rollouts. Great questions. So let me first take ---+ in general, the capital allocation story, we've been pretty clear about how we prioritize our capital allocation. First, to maintenance capital, then growth capital. If we are highly levered, then we want to manage our debt, we pay down our debt. The next priority is acquisitions, and then finally returning cash to shareholders in the form of dividends. And in the past, it was potentially a buyback. But <UNK>, we didn't really have a tool to buy shares from the market. Our authorization was focused on countering the dilution from executive comp. So I think the first thing to understand is this completes our capital allocation toolkit, if you will. And our intent here is really just to use this opportunistically. We believe in the long-term prospects and the long-term value creation of the business. And we think the market will present us with opportunities to purchase shares opportunistically. You also mentioned the M&A pipeline. That ---+ it is getting busier. I am personally spending more of my time on M&A activities now than I did a year ago. I'd say the first couple years I was here, focused a lot on putting in place OpEx, the growth disciplines, getting the organic management processes in place. And as I visualize the pie chart in my time, there is a much bigger slice going to M&A. I'll tell you, that pipeline is more active. So please don't read into the buyback that there is any dampening of our expectations on the M&A side. I'll let <UNK> handle your last question. <UNK>, like <UNK> said, in the priority list it's at the bottom. We want first to have the maintenance capital, the growth capital. If we are levered, pay down debt. And then look at acquisitions and then finally return cash to shareholders through either dividends or share buybacks. So I wouldn't anticipate a large purchase of shares. We have nothing planned right now. We are just doing it opportunistically when the market disconnects from our price. I'll tell you, <UNK>, that is a work in process. As you know, in ---+ let's separate again the three parts of the business: cooking, specialty, and refrigeration. Refrigeration has continued to churn out new products in the sense that there are sort of variations on platforms and there's continuous evolution of the product line. That has continued more or less on pace in refrigeration. Cooking, I'd say new product development really went on the back burner as we were going through the consolidation. And especially the last move that got so much attention a year ago, the move to Nogales. And our new product development is beginning to ramp up. We have some market tests going on in cooking solutions to explore what opportunities are out there, where we want to develop. A little early for me to communicate what our expectation is about how extensive that will be. Although at NRA, you will see some new products coming from our different business. Our BKI brand has a new gas rotisserie, for example. Our Combi Oven; we have a mini Combi we'll be presenting. And we also have a conveyor oven that's a new product from the Bakers Pride brand. So maybe one way to answer it is we are probably in kind of the second inning of that game and just starting to ramp up our new product development engine. The third thing ---+ and the specialty side probably continues on pace, certainly in federal. Although we are starting to see some pretty attractive opportunities in the pump business that could result in some growth this next year. So I'd say if I'm not overly confusing you here, cooking needs to ramp it up. And they. ve started the market tests to identify the opportunities. I think it's kind of a combination of both. We are not the biggest player out there. And where we succeed is where we can enter into a relationship with a customer who has an ---+ a change initiative, a change plan, we can work with them to develop equipment that fits their new kitchen concept. Or in the case of a Combi Oven, to help them develop their menu around it. So our sweet spot tends to be maybe smaller regional chains, higher-end chains, where there's some level of customization and customer intimacy possible. So I'd say the challenge is more finding the right customers in the marketplace. And our innovation follows those customer needs. How to answer that. I guess first, from a macro standpoint, our long-term expectation in this electronics business we've communicated we think it's a 4% to 5% growth business. And I'd say that the magnitude of the opportunities that we're being awarded and that we are developing in the marketplace support that level of business. As I mentioned in the script, some of our recent awards have been with our traditional sensors. We also are expanding into adjacent spaces with new technology. Last quarter, we communicated a new capacitive level sensor, which is a new technology for us. We showed a picture in ---+ of a product that actually is a Northlake product, which is for a sort of an intelligent circuit breaker that's being rolled out at Florida Power & Light to help them more efficiently manage their grid. So this high reliability magnetic space in supporting electrical grid, electrical distribution, is a growth area for us as well. You know what. I was ---+ if anyone on the line ever wants to go to a very interesting tradeshow, the Space Symposium in Colorado Springs. I was there a few weeks ago. And I view the space business ---+ there was some turbulence in the space business with the emergence of, call it, Space 2.0, the commercialization of space. That will change the way the dollars are spent in space. But our view is that the market continues along with sort of a slow growth; maybe 2% growth. And our participation in that we believe will continue to be lumpy, as it has been in the past. But our long-term expectation is that it remains about where it's been for us with slight growth. Yes, that is a great question and one that's got us preoccupied. I'd say every chain has a slightly different story, but the variation on the theme is there is uncertainty to us when national programs will be rolled out. We are participating in bids and RFQs. We are working with customers on prospective rollouts, with drug stores and with some of our supermarkets. But when they will pull the plug on these new programs is unclear to us. Well, yes, I guess I'd comment to focus on those growth opportunities we do see. There are companies like Walgreens is building fewer stores. Subway is investing outside of North America. So there are some ---+ some of the national chains that have been big customers in the recent past don't seem to have anything on the horizon. However, there are others that do have opportunities. We are pursuing those. It's the timing of those opportunities that's unclear. Thank you for asking about hydraulics. Our hydraulics president will be appreciative of the interest. It's somewhat fragmented because there are a lot of smaller players in custom hydraulics. And if you imagine the kinds of specialty vehicles with, say, scissor lifts to bring food and concessions up to ---+ to raise them to door during the plane changeover. We'll provide the hydraulics to those scissor lifts, so a customer like a JBT that makes equipment like that. That's right. Yes. Yes. So let me elaborate on that. So the midteens margins, the one caveat I would put out there is the potential timing of some of the space shipments, these large domes. And you've seen them. They can ship a quarter or two. We have shipments scheduled in May and June. If those go out, midteens. I think the last time we talked, about 15% in the quarter that it will be highly dependent on the shipments of the space domes. However, we are confident that double-digit margins in any case and absolute growth year on year. It's those two things. It's space shipments and the aviation ramp. So yes, the Wisconsin plant will make some contribution, but they will really be making their first shipments in June. So this has more to do with the ramp-up of the existing aviation contracts, ramp-up in Enginetics, and the space projects. Well, I'll tell you what. We have a backup plan. So if we have troubles with our plant, we have outsourcing partners we can continue to meet customer needs. So we've got customers protected, and of course, that means that our top line will ---+ commitments will be met, but that the outsourcing would be a higher cost. So from that standpoint, we've got our deliveries well scheduled. We are confident in that. For the moment, the ramp-up is going well. We think it's being well managed and we are on track to produce in June. No. No would be the short answer to that question. You know in the past, <UNK>, we communicated our expectations of the growth for this business is 5% to 7%. And they have continually exceeded that in the past. So we look at the market indicators of new model rollouts and refreshes, which support that 5% to 7%. And I think that's ---+ we think that's a reasonable number. Now, we do have some growth initiatives out there. To the extent we are able to grow with nickel shell, that's a new source of revenue for us. Laser engravings are at a higher price point than chemical etching. So as that becomes a bigger part of the market, there is maybe some growth from there. It's a little early for us to revise our expectations based on those initiatives. So that 5% to 7% number is a safe range. Yes, it's just shy of $300,000, $400,000 of startup costs. And what these are is, as I mentioned: the laser engraving. And in fact, in recent earnings release, we talked about the investments we're making in laser in North America and China. And the laser sales this last quarter in North America were just very, very slow. We are still commissioning the machine. We had all the cost in the revenue. We put in place nickel shell in Detroit. And the revenue will start this quarter. And we also have fully staffed a design hub in Detroit. So these are all North American investments where we are taking the growth initiatives that have been successful in Europe and building them in North America. So our view is based on the success we've had in Europe, based on the discussions we are having with customers in North America, that this is a timing issue of the ramp of these new offerings. But let me comment on the margin, too, because we often get asked about the margins: what's the margin expectation for engraving. And they have quarters in the 20%s and mid-20%s. And I think over time, we've said reasonable expectations: upper teens to low 20%s depending on the quarter and the phasing of the projects we get. They'll be in the Q, right, <UNK>. Yes. They are going to be in the Q later today. So food service: $38 million basically in backlog. And that's to be delivered in both a year and beyond a year, right. Yes, that's correct. Engraving is $18.5 million, engineering technologies is $86 million, electronics is $43 million, and hydraulics is $5.7 million. So it's $192 million versus $204 million last year. But there's some lumpiness in there that, again, we even say in our Q that this is not a quote unquote leading indicator. This is backlog can be very lumpy. You'll get it later today. One thing (inaudible) aviation. I guess what I would do is I'd just refer back to previous communications we've had about the size of some of the awards that we won in the last couple years. The lipskin, the plug-in nozzle and the two lipskin awards all total ---+ with the press release, if you add the value we put in the press release is it's $13 million to $15 million if you add all those together. We have ---+ in the last earnings release, we said that we believe the market we serve has into the 2020 is a CAGR of 7% growth. But we haven't put a number out there of what we think this aviation business can grow to. Obviously, we have planning assumptions internally, but we haven't communicated that. I guess we'll have to ---+ I'm looking at <UNK>. We'll think about it in the future how we set expectations. Because we remain very bullish about the segment and it becoming a more important supplier to those key customers. On oil and gas, whether I'm confident or not ---+ what was it, $800,000 or something in the quarter. So it doesn't have much farther to drop. So I think there is some MRO business. There's some parts for ---+ to support installed products in the field. And we anticipate continuing to get some of that. So that's why ---+ that's where I come from in saying it will bounce along the bottom. So the products that we deliver, we have two applications. Out of our UK plant, we deliver shims that are part of the mooring system on offshore platforms. That business, you know, we are skeptical ---+ if that comes back, that will be longer term because that's more expensive ---+ is a more expensive source of oil. In North America, we serve the energy markets by selling parts that going to land-based turbines that you find in oil and gas compression and distribution. So it's kind of midstream investments. I thank everybody for their interest in Standex. We continue to be confident we are working on the right priorities and pleased with the operational progress we see in our business. We look forward to following up with you next quarter. Thank you.

2016_SXI

2017

STX

STX #Thank you. Good morning, everyone, and welcome to today's call we are hosting from Dublin, Ireland. Joining me today from Seagate's executive team are Steve <UNK>, Chairman and CEO; Dave <UNK>, Executive Vice President and CFO; and Dave <UNK>, President and Chief Operating Officer. We've posted our earnings press release and detailed supplemental information for our June quarter and year-end fiscal 2017 on our Investor Relations site at seagate.com. During today's call, we will review the highlights for the June quarter and fiscal year '17 and provide the company's outlook for the September quarter and then open the call for questions. We are planning for the call today to go approximately half an hour, and we will do our best to accommodate your questions following our prepared remarks as time permits. We will refer to GAAP and non-GAAP measures on this call. Non-GAAP figures are reconciled to GAAP figures on our supplemental information available on the Investors section of our website. We have not reconciled our non-GAAP financial measure guidance to the most directly comparable GAAP measures because material items that impact these measures are out of our control and/or cannot be reasonably predicted. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measures is not available without unreasonable effort. As a reminder, this conference call contains forward-looking statements about the company's anticipated future operating and financial performance, customer demand, technology and product development advancements and general market conditions. These forward-looking statements are based on management's current views and assumptions and should not be relied upon as of any subsequent date. Actual results may vary materially from today's statements. Information concerning our risks, uncertainties and other factors that could cause results to differ from these forward-looking statements are contained in the company's SEC filings and supplemental information posted on the Investors section of the company's website. I would now like to turn the call over to Steve <UNK>. Please go ahead, Steve. Thanks, <UNK>. Good morning, everyone, and thanks for joining us today. For today's earnings call, I will cover the high-level trends we are seeing in the business, and Dave <UNK> will then discuss certain financial highlights, and I will close the call with our outlook for the September quarter. Before I begin my operational comments, I would like to discuss our announcement today of Seagate's CEO succession plan. Today, Seagate's Board of Directors voted unanimously in favor of my transition to Executive Chairman of Seagate and appointed Dave <UNK> as Chief Executive Officer. Dave and I will assume our new roles effective October 1, at which time I will shift my focus primarily to strategic growth initiatives and other opportunities designed to enhance shareholder value for the company. Dave has also been appointed to the Seagate's Board of Directors effective immediately. Over the last 2 years, the board and I have been focused on executive management succession. In addition to Dave's appointment, Dave <UNK> transitioned to CFO 18 months ago. And recently, we have appointed Jim Murphy, Executive Vice President, Worldwide Sales and Marketing; <UNK> Schuelke as Senior Vice President, Chief Legal Officer and Corporate Secretary; and Ravi Naik as our Senior Vice President and Chief Information Officer. In addition, as part of the restructuring actions taken over the last 12 months to optimize our global manufacturing and development center investments, we have also aligned all of our manufacturing operations under Senior Vice President of Operations, Jeff Nygaard, and we have reorganized our R&D functions to meet the evolving storage marketplace requirements. The board and I believe we have the right management team and organizational structure in place to execute Seagate's business strategy, capitalize on opportunities in the storage marketplace and continue to create long-term shareholder value. It's been an honor and a privilege for me to serve as Seagate's CEO in 16 of the last 20 years. I'm grateful to our amazing employees, customers, suppliers and shareholders, and I look forward to working closely with the management team on our future opportunities in my new role as Executive Chairman at Seagate. Turning to our operational results. The overall macro environment continues to exhibit stability, and we believe this will continue through the rest of the calendar year and well into 2018. We remain cautiously optimistic that this should translate to moderate IT spending growth. In the context of the storage marketplace, the major transformative shifts from a client server to mobile cloud, high-capacity mass storage deployments continue to represent significant opportunity for Seagate. The long-term trajectory of growth and infrastructure spending for the large cloud service providers and hyperscale companies remains intact as they continue to increase their service offerings and demonstrate significant business momentum. At the same time, the more mature enterprise storage technologies remain a large percentage of the overall IT storage market and can exhibit variance beyond seasonal patterns as the structural shift to a wide variety of IT and cloud service providers accelerates. In addition, the end-to-end storage supply chain is continuing to experience price increases by as much as 2x to 3x in the memory markets. The effect of this significant price increase is evidenced by some near-time enterprise customer demand softness, which we believe will be resolved over the next several quarters. For the June quarter, Seagate achieved revenues of approximately $2.4 billion, GAAP gross margins of 27.7%, net income of $114 million and diluted earnings per share of $0.38. On a non-GAAP basis, Seagate achieved gross margins of 28.9%, up 310 basis points year-over-year; net income of $192 million and diluted earnings per share of $0.65. HDD exabyte shipments for the June quarter were 62 exabytes. Average capacity per drive across the HDD portfolio was approximately 1.8 terabytes per drive, and ASPs per unit were $64. We saw strength in the quarter from our largest nearline U.S.-based CSP customers and relative seasonal demand in the compute and branded markets. Offsetting this was weakness in our enterprise storage customers, including traditional OEM nearline and mission-critical demand; China CSP nearline demand and our own cloud storage systems business. In addition, there was weakness in the surveillance and NAS markets due to some inter-quarter channel inventory management. As a result, our overall revenue results were approximately 5% below plan with approximately half of that shortfall from our cloud storage systems and half from HDD enterprise weakness and channel inventory management. We believe some of these factors, particularly China CSP demand and NAS and surveillance market demand, are temporal and supply chain-related while some of the OEM revenue declines are more structural. Our non-GAAP margin results of 28.9% were approximately 210 basis points below our guidance. Within this, approximately 2/3 of the impact was due to operational [trans] issues in our CSSG business, and approximately 1/3 was due to lower-than-expected enterprise and surveillance HDD portfolio mix. GAAP operating expenses were $470 million, down 16% year-over-year; and non-GAAP operating expenses were $422 million, down 5% year-over-year. Cash flow from operations for the quarter was $243 million, and free cash flow was $139 million, up 13% year-over-year. While we were disappointed to not meet our top line targets in the June quarter, Seagate effectively achieved our operating margin and gross margin profitability targets for fiscal year '17. For the year, diluted earnings per share grew 215% on a GAAP basis and 82% on a non-GAAP basis. In addition, for fiscal year '17, we generated $1.9 billion in cash flow from operations and returned 53% of that to shareholders in dividends and share repurchases. In summary, I'm pleased with the operational improvements we made in fiscal year '17. And we're well positioned for the markets that are being served by our products and systems. I'll now turn the call over to Dave <UNK> now to go into more details on our operational activities. Thanks, Steve. For the June quarter, we achieved $2.4 billion in revenue and shipped 62 exabytes of storage with an average capacity per drive of 1.8 terabytes. For the enterprise market, we shipped 23.5 exabytes with the average capacity per drive of 3.4 terabytes. Our average capacity per drive for our nearline products has reached over 4.8 terabytes per drive, up 8% over last year's strong 8 terabyte sales quarter and up 60% from the June quarter 2 years ago. We continue to ramp our 10TB nearline product and shipped approximately 300,000 units in the June quarter. Our sales for this capacity point have almost doubled over the last 2 quarters, and we expect to ship approximately 1 million 10TB units in the September quarter. In addition, our 12TB product shipped with revenue in the June quarter with excellent customer feedback, and we are confident our qualification process is competitive. We expect to achieve approximately 50% of the exabyte share within the 10TB and 12TB markets by the end of the calendar year. The growth in hyperscale and cloud storage deployments continue to represent a significant opportunity for Seagate, and we are confident in our nearline HDD portfolio designed to serve these storage environments. Over the next 12 to 18 months, we expect the nearline market to be diversified in capacity points for different application workloads with use cases from 2 to 4TB products for certain applications and up to 16 terabyte for other use cases. In the client and retail markets, our 1TB per platter, 2.5-inch platform continues to perform well. And to date, we have shipped over 45 million drives, substantially ahead of the competition. Using similar technology, our 2TB per platter, 3.5-inch platform began ramping last quarter for desktop markets, providing great value for customers needing 2, 4 and 8TB client capacity points. Customer feedback indicates we are well ahead of the competition. Operating expenses for the June quarter were (inaudible) (sic) [$470 million] GAAP basis and $422 million on a non-GAAP basis, down 5% year-over-year. Total consolidated expenses were slightly lower than forecast, primarily due to lower variable compensation. We continue to identify areas for cost improvements and this morning, we filed a restructuring plan that will provide savings of approximately $90 million annually. These cost actions provide support of our objective to exit the calendar year with non-GAAP operating expenses of approximately $400 million per quarter. In addition to these actions, we will continue to manage our operating expenses tightly, targeting approximately $375 million per quarter by the end of FY '18. Capital expenditures were $104 million for the June quarter for maintenance capital and manufacturing footprint redeployment supporting the continued ramp of new HDD products in our portfolio that utilize new tooling and equipment. Cash flow from operations in the June quarter was $243 million, and free cash flow was $139 million. These results include approximately $50 million in cash payments related to previously announced restructuring charges. Our balance sheet remains healthy, and we ended the June quarter with $2.5 billion in cash and cash equivalents and 292 million ordinary shares outstanding. Our board has approved our quarterly dividend payment of $0.63 for the June quarter, which will be payable on October 4. Interest expense for the June quarter was $62 million and will be lower in the September quarter due to the lower debt balance. Our debt structure and level of interest expense continues to be well within our financial capabilities, given our staggered maturities and low interest rates. In FY '17, we successfully completed a debt offering of $1.25 billion of investment-grade financing with weighted average interest rate of less than 5% and paid $316 million to repurchase and redeem outstanding debt, including our 2021 7% senior notes. Overall, our operational and financial performance in FY '17 reflect execution of our business model profitability improvement objectives and our ability to generate cash flow from our storage portfolio. Looking ahead, we will continue to optimize our business model and focus on our go-to-market and product portfolio advancements towards the future growth opportunity markets. I would now like to turn the call back to Steve. Thanks, Dave. Turning to the market outlook, we remain cautiously optimistic about the current macroeconomic environment and IT and enterprise spending trends. We believe the end-to-end supply chain issues we identified last quarter will persist at least through the end of the year and, therefore, we want to exercise more caution than seasonally normal for traditional enterprise spending and other markets affected by higher-than-normal supply-chain pricing. At the same time, we are continuing to anticipate a stronger back half of the calendar year for exabyte growth with the CSP ecosystem and seasonal demand for our other major markets, including PCs and the branded market. For the September quarter, we are expecting to achieve revenues of between $2.5 billion and $2.6 billion. Our gross margin expectations for the September quarter are relatively flat and within our 29% to 33% targeted range. Cash flow from operations will be up sequentially. As Dave indicated, non-GAAP operating expenses will trend sequentially down to approximately $415 million in the September quarter, and we expect to exit the December quarter at or below $400 million. While we are not on a trajectory to meet our previous guide of non-GAAP EPS of $4.50 for calendar year '17, we do anticipate revenue and profit growth sequentially for the December quarter. Thank you for joining us on the call today, and we'll now open the call up for questions and answers. Yes, Steve, this is Dave <UNK>. Let me try the first one there. They're somewhat interrelated, I think, your 2 questions. So on the nearline side, some customers, you're heavy with; and other customers, you're not as heavy with. So there are some fundamental shifts going on depending on ---+ upon capacity points. I think at the highest capacity points, there's some things about our ramp that we're not happy with. The product is really good, and we're ramping it hard right now. At the lower capacity points, the 4s and 8s and things like that, quite happy with our products. That's where the ---+ some of the China CSP behavior and the smaller customers and their issues that they had across their supply chain were affected. So there's slight share shifts going on, but really only the highest capacity point is super relevant. We think that's temporal. Like I said, the 2 questions that you asked are interrelated somewhat. The systems business that we have is ---+ there's a few different kinds of business in there. There's some specialty products' buildout that we do, and then there's some things where we were really acting more like an ODM, I'll say. And that stuff is not very good business. And obviously a lot of ODMs get themselves into situations with the supply chain issues, where either they were underwater, they couldn't procure parts at the right point. They had supply that was older supply, so to speak. So it was ---+ it was a really tough road for the last 2 quarters in that, and we're going to have to really take a look at how much of that business we continue to support going forward. So Katy, let me first say, while I appreciate your congratulations on retirement, much to my children's chagrin, I have not retired. In fact, this is probably the best way for me to stay engaged with the company for a few more years. But I did, I suppose, retire from the CEO job. But ---+ so I'm super happy about where I'm headed, and what my engagement will be with the company. Also super happy that <UNK> is CEO. As I said to someone the other day, that running a disk drive company is a little bit like driving in stop-and-go traffic. Sometimes you're going 15 miles an hour, and sometimes you're going 85 miles an hour. But you usually get to your destination on time, and no one's hurt. But it's stressful as (expletive) for the driver and, oftentimes, for the passengers, too. So I think we have a younger driver with better reaction times now. The ---+ I think your point is right on where we're headed on margins. The way we see the math, to your point, clearly, ramps are always challenging whether or not it's a 2.5-inch notebook product or a 3.5-inch surveillance product or a high-end nearline product. And whenever you're ramping, the products, the yields come up the ramp. You get better and you also do redesigns and bring costs down. And you also start to understand customer needs, which allow you to optimize the firmware, et cetera, et cetera. So we would expect that with the ramp on those products and the overall mix of that occurs as customers move from 10s to 12s, to 14s to 16s, that we have opportunity to move up in that margin range. I think the good news on the quarter, frankly, is even with the weakness that we had on nearline and mission-critical and certain customer bases ---+ and even within the services group, the margins that they did contribute were not what they should've been. Even with that, the overall margin structure was pretty solid, which I think should give you a good sense of the underlying core HDD businesses is operating pretty nicely right now. And yes, it should improve as we execute here in second half of the year, yes. Yes, let me answer that, and then I'll turn the other thing back to <UNK>. We've never talked about where our gross margins are by products, and it's a really dangerous game to get in because we're so leveraged in our manufacturing and our R&D systems that to try and actually splice margins by segments, while it may be a fun accounting practice, it's really deceiving from an overall business practice. I will tell you, though, that our client portfolio has definitely greened up in terms of the technologies we're deploying. And again, we have an areal-density lead there that's now going on almost 2 years. So that means fewer heads and disks. So to reach the same capacity points, those clearly have better margins than they did historically for us competitively. So ---+ but I think the real message here is that it's ---+ you have to view it as the manufacturing company as a whole. And we strive to get as much leverage as we can across the components into the products as possible. And then on the enterprise commentary, there\ This is Dave. No, this has been in constant dialogue and under plan as we continued to drive to a glide path of exiting calendar year, this calendar year under 14 ---+ $400 million. And so this has long been in process as we go out and continued to drive further synergies amongst the organizations and how we continue to repivot the higher-yielding, higher-portfolioed product set that we bring to market. So to your point, this is something that we definitely had under long consideration and have taken the necessary actions. Yes, if you go back a year ago, we kind of ---+ I think we did at the June call of last year indicate that we're going to take a variety of actions on the manufacturing side to address the capacity issues, and where that would have a significant COGS impact, which is obviously reflected. And secondly, that we were going to work OpEx on 2 different vectors: One was absolute OpEx dollars, and the other was to maintain our margin model that we've committed to and we're staying committed to. That one, as you may remember, wasn't kind of on the steady ramp down because the first ---+ the last 6 months of last year were quite strong, and we needed to keep a fair amount of people in place to actually meet the upside demand. And there was also some critical product transitioning going on that we felt it made sense to keep the resources in place to make sure those transitions went well. And that benefited us extremely through fiscal year '17, where we obviously overachieved fairly dramatically relative to where we were a year ago. So I think we're back on how do we get to $400 million. I would probably say, though, as we think about going from $400 million to $375 million that, that is not a reflection so much of something going on in the market, as much as a reflection of what happens when you start making adjustments to your OpEx. You obviously, then, see other opportunities where you can take some additional actions. And some of it is also related to things that Dave <UNK> mentioned about, what's the quality of business that we're doing in the systems side. And what's the underlying OpEx support for that. And does that math really make sense. So a little bit of that, I'd say, in terms of how we're going to get from $400 million to $375 million, but not like market related to the sale of disk drives. It's more, I think, related to what we think we can do within the context we've always described as one that's positive. I think it's probably a little lower going to the cloud service provider, if by the cloud services providers, you mean the top, the biggest ones of them, right. It's probably a little bit lower than that historically. We did get into this discussion about structural versus temporal and noted some of the weakness among OEM nearline worldwide, and that ---+ some of that may be structural as well. <UNK>, I'd say, as people are looking to buy, they may be buying from ODMs or other third parties. They're nontraditional customers, and that model is accelerating. It's not going back to the old ways. So some of that ---+ that's been soft, but some of it may be structural as well. I just wanted to better understand where we are from a technical perspective. You talked about some changes in R&D in terms of getting to the next node and hammer type of technology. And then also, if we could just review what you think about in terms of your policy around keeping folks updated around quarters with respect to mid-quarter updates, pre-announcements and those types of activity, that would be great. I'll do the hammer first. So this is a technology for everyone's benefit that we've been working on for quite some time in the hard drive industry. It's the next S-curve. The top of the areal density curve that we're on right now, it's getting harder and harder to squeeze that much more out of. The progress ---+ and we haven't talked about hammer very much in the last 2 years, but the progress has actually been pretty substantial in the labs, both on the reliability front, which was really the issue, and then on the demonstration of areal density front as well. So historically, we had talked about 20 terabyte drives in 2020, and we still are on path for those kind of demonstrations. We're going to shoot as high as we can, and we may even get above that based on what we're seeing in the labs right now. But productization's looking more and more favorable all the time, and we're going to be driving hard from inside of Seagate. So what that means is there's been a lot of discussions about 12 and 14. And then, ultimately, we'll get to 16 terabytes, but we will get to 20 and 24 terabytes some day. And we're seeing that ---+ those kind of components in the labs right now that, with the right amount of coaxing, we'll get them into products and get them out to the markets. Then on. . Yes. <UNK>, this is Dave <UNK>. In regards to definitive process per se on a pre or not a pre, I think the approach that the management team took this go around was, given the fact that there was so much information coming together and lack of visibility of what was really extending out, not only between this quarter but to the back half of the year's results, we opted to have a further context of full disclosure and earnings call at around the full year versus just the current situation at hand to be able to provide the full context to our investors and shareholders. So that was our thought process that went into it. Okay, I'd like to thank everyone for taking the time to be on the call today. And thanks to our employees and our customers and suppliers and investors. Look forward to talking to you next call. Thanks very much.

2017_STX

2017

RHT

RHT #Thank you for the introduction, Jim I would also like to take this opportunity to thank our Red <UNK>at associates around the world for their contributions to delivering a strong quarter both operationally and financially On last quarter's call we indicated that we expected to close the year on a strong note I'm pleased to share that we did just that Our fourth quarter revenue results were well above our guidance, the accelerated growth of our billings in Q4 drove our FX adjusted rolling four quarter average billings proxy metric to the highest level in five quarters and we ended the year with a record backlog We are seeing our customers increasingly building out hybrid cloud environments and implementing digital transformation initiatives, which we believe help drive these results Red <UNK>at is benefitting due to our broad portfolio of solutions and proven history of delivering business value and innovation Let me begin with the financial highlights of our Q4 performance, followed by a summary of our full fiscal year results and our outlook for FY18. For a more detailed view of our results and reconciliations of our non-GAAP measures to GAAP, please refer to our earnings press release I am pleased to announce total revenue of $629 million, approximately $7 million above the high-end of our guidance and representing growth of 16% in USD and constant currency Although currency rate volatility continued in Q4, the exchange rates stabilized to a point where many of our USD and constant currency growth rates are essentially equivalent So, for this quarter I will keep my prepared remarks focused on our reported USD results where appropriate and you will find a table of constant currency results in our press release Subscription revenue continued to be the largest driver of our total revenue at $560 million for the quarter, an increase of 17% year-over-year This renewable revenue stream was 89% of the total revenue for the quarter We continued to drive growth across our technology portfolio Subscription revenue for our Infrastructure-related offerings was $435 million, an increase of 11% year-over-year Our Application Development-related and other emerging technologies subscription revenue was $125 million, an increase of 40% year-over-year Application Development-related and other emerging technologies revenue was approximately 20% of total revenue, up 340 basis points from the year ago quarter On a non-GAAP basis, operating income of $153 million grew 23% year-over-year and non-GAAP operating margin of 24.3%, which was 30 basis points higher than guidance As a reminder, non-GAAP operating income adjusts for non-cash share-based compensation expense, amortization of intangible assets and transaction costs related to business combinations Our non-GAAP effective tax rate of 29.2% was higher than expected due to a higher than expected level of income being generated in higher tax jurisdictions As such, our non-GAAP diluted earnings per share came to $0.61, in line with our guidance and up 17% year-over-year We ended the quarter with cash and investments of approximately $2.1 billion We returned $139 million to shareholders in the quarter through the repurchase of approximately 1.9 million shares of stock Our repurchase program has reduced our fully diluted, weighted average shares by more than 3 million shares year-over-year Operating cash flow was $318 million for the quarter and increased 27% from the year-ago-quarter Strong billings growth, a modest improvement in monthly linearity and strong collections contributed to this result The FX-adjusted days sales outstanding was at 58 days, improving from 61 days a year-ago quarter Total deferred revenue at quarter end was $2.1 billion, an increase of $347 million or 20% over the same quarter a year ago The total change in deferred revenue from our cash flow statement which neutralizes most of the impact of currency fluctuations increased by $357 million compared to the end of Q3. The rolling four quarter average billings proxy which is calculated by adding FX adjusted revenue plus the change in deferred revenue on the cash flow statement for the last four quarters was $690 million, up 19% year-over-year Next, let me discuss our backlog which as a reminder, we disclose at the end of each fiscal year Total backlog was up 28% year-over-year for a record balance in excess of $2.7 billion in USD We define total backlog as the value of non-cancellable subscriptions and service agreements, including total deferred revenue, which is billed, plus the value of non-cancellable subscriptions and service agreements to be billed in the future not reflected in our financial statements <UNK>ere are the components; as I mentioned a moment ago, the billed portion of the backlog is total deferred revenue which was $2.1 billion at the end of fiscal 2017. The other portion of total backlog, which is yet to be billed and as such is not included in our balance sheet, was in excess of $650 million at the end of fiscal 2017, up nearly 60% compared to in excess of $410 million last fiscal year This is the highest growth rate we have reported on this metric since we first disclosed it in FY08. It is worth noting that the portion of off-balance sheet backlog to be billed in the next twelve months was in excess of $330 million, up approximately 20% on a year-over-year basis, which is consistent with the growth in this metric for the prior two years The backlog contributes to a significant portion of next year's revenue as well as giving us forward visibility of revenue beyond FY18. I will now review the metrics for business momentum and large deals in the quarter We had strong bookings growth across our major geographies even with many of our largest deals being attributed to the Americas This quarter 67% of bookings came from the Americas, 21% from EMEA and 12% from Asia-Pacific versus a 64%, 23%, 13% split in Q4 last year The Q4 route-to-market mix was 69% from the channel and 31% from our direct sales force, compared to a 71%, 29% split in Q4 last year The increase in the direct channel contribution was driven by the increase in large deals that closed in the quarter Our proxy for bookings duration was approximately 25 months This is higher than our historic duration of 21 months Going forward, we would expect duration to move closer to the historic 21 months level While the short term component will not be impacted by the shorter deal duration, we believe the growth rate of long term component could be impacted by the smaller pool of out-year deals Now to briefly recap and summarize highlights for the full fiscal year; total revenue grew to $2.4 billion, up 18% in US dollars or up 17% year-over-year in constant currency and near the high-end of guidance from last March Subscription revenue grew to $2.1 billion, an increase of 18% in both US dollars and constant currency Subscription revenue for Infrastructure related offerings was $1.7 billion, up 15% in US dollars and 14% in constant currency Subscription revenue for Application Development-related and other emerging technologies was $439 million, up 36% in both US dollars and constant currency For FY17, Application Development-related and related emerging technologies subscriptions constituted 18% of total revenue, up from 16% last fiscal year Non-GAAP operating income grew by 15% year-over-year Non-GAAP diluted EPS for the full year was $2.27, up 19% over the prior year Now I would like to turn to guidance Our outlook assumes current business conditions and current foreign exchange rates Our outlook is in US dollars but on a constant currency basis, we would expect a 1% headwind to Q1 revenue growth and a 2% headwind to full year FY18 revenue growth We are forecasting our full year revenue guidance to be $2.72 billion to $2.76 billion in US dollars, up approximately 14% at the high end of the range In FY18, we will be balancing investment in our growth initiatives and operating leverage Our plan includes adding approximately 1,000 net new associates or approximately 10% headcount growth compared to 19% in the previous fiscal year Given this level of investment, we expect operating margin to expand by 50 basis points to approximately 23.6% in FY18 compared to 23.1% in FY17. We expect full year non-GAAP earnings per share to be approximately $2.60 to $2.64 per share, assuming approximately $2 million per quarter forecast for net other income, and annual effective tax rate of 28% and approximately 180 million diluted shares On a GAAP basis, we estimate annual stock compensation expenses of approximately $200 million and annual amortization expense of approximately $30 million GAAP fully diluted EPS guidance includes non-cash interest expense related to the convertible debt discount of approximately $19 million We estimate the capital expenditures to be in a range of $75 million to $85 million Operating cash flow is expected to grow in a range from $850 million to $870 million and includes an incremental $25 million of cash paper taxes For those of you who try to model billings metrics and quarterly cash flows, we would expect the same business flow in our model as in the past Along with our assumption of deal duration moving to the historic 21 months level, we also expect bookings and billings to repeat their historical pattern of being lowest in Q1 and growing going forward to end at the highest level in Q4. In addition, we have also seen a continuation of sales towards the fourth quarter For modeling purposes, we would factor in an approximate 2% increase in the percentage of full year sales that occurs in Q4 when estimating billings Our operating cash flow guidance for FY18 has factored in this continued shift and the timing lag on collections For Q1 specifically, we offer the following outlook; we expect revenue to be in the range of $643 million to $650 million, which is up 15% in US dollars at the high end of the range We expect a non-GAAP operating margin of approximately 20% and a non-GAAP earnings per share of $0.52 to $0.53. Our assumption on Q1 expenses including further investing in our emerging technologies as well as expenses for a number of important events in Q1 including our annual Sales and Partner Kick-off events, the opening of our Executive Briefing Center and Innovation Lab in Boston, the OpenStack Summit and our premier user event, Red <UNK>at Summit which is moved into Q1 which was in Q2 last year Consistent with prior practices here at Red <UNK>at, I will not be providing a forecast for quarterly cash flow but please note that it can be variable depending upon individual payments or collections Overall, we are very pleased with our financial performance in the fourth quarter We are excited about the company's long-term growth opportunity in the hybrid cloud digital transformation and modernizing data centers with open source solutions At Analyst Day in May, we will have the opportunity to have deeper discussions on our plans to realize this large, growing opportunity I personally look forward to meeting many of you at Analyst Day <UNK>, I would now like to turn it back over to you for our first question Question-and-Answer Session Sure So <UNK> just in terms of the actual number of deals that we had ---+ so we had 11 deals with ---+ they had open stack in them and then we had another nine with OpenShift And back to your point in terms of the overall growth of the billings; I mean clearly, that we did what we said we were going to do A lot of focus was put on longer term deals so that our teams can continue to focus in on newer clients and opportunities So we ---+ I think are very proud of what the team executed in terms of the quarter and we set out to do that at the beginning of the fourth quarter and that's exactly what we did So I mean as you can imagine ---+ I mean linearity continues to be something that we focus in on The team did a great job this past quarter in terms of addressing linearity but you know, as we've mentioned in the past, trying to address linearity or completely eliminate linearity wouldn't be necessarily something that financial makes sense because a lot of times clients certainly know in terms of negotiating, you know, getting deals to the very end So what we've essentially done in our guidance as well as the cash flow modeling is we've assumed this was the 2% that I'd had mentioned in my prepared remarks We've assumed the 2% shift of business into Q4 and we've rippled that through the cash flow statement So we continue to be very focused in terms of collecting our cash timely, there is no change to any of our payment terms, it's not our desire to change the payment terms but certainly we're going to stay very focused in our linearity as we go into next year So we approximate it to be about $120 million headwind, a theoretical headwind to billings for the year As Jim mentioned, I mean it's an area that continues to grow It's a nice business for us And yes, but we would say it's about $120 million headwind to billings That's the crazy cloud access component The CCSP program, our cloud access to our customers just take their subscriptions to Amazon or other clouds that bills the normal So it only to CCSP piece that they are [indiscernible] Yes, and just in terms of the operating cash flow, as we mentioned that the big focus that we have is certainly linearity and as I mentioned the 2% shift that was essentially down from the quarters one, two, three and quarter four I mean obviously you are going to see that in the accounts receivable and clearly something that we're continuing to focus in on that to the extent that we can obviously make sure that that is minimized as we go forward and we well but, it's certainly, it's a business reality that we see and also at some of the larger deals as you would expect, they are only billing one year in advance So that's pretty common and pretty expected and that's not all of our transactions but certainly as deals get bigger, we'll become a larger portion of the IT wallet share spend, that's going to be something that we're going to continue to deal with I'll start and let me actually look through the numbers to tell But Ansible is often sold as part of a broader solutions One of the reasons we acquired the company is it's a great standalone automation solution, but in a scale out world automation becomes increasingly important So our customers who want to buy cloud forms often also acquire Ansible Most of it, I would bet that most of our OpenStack and OpenShift customers buy at least a degree of Ansible as well It really does just ---+ it becomes a core component of the way you're going to manage an automating modern infrastructure So Ansible especially is in many of those same deal OpenStack and OpenShift is kind of a mix often OpenShift will run on top of OpenStack, but some of the largest deals that I mentioned are over telco deals that were just OpenStack One of those big top four was OpenShift running on OpenStack just kind of looking down So they are often sold together because you got to have a deployment target for OpenShift The sale point we use over-and-over again is you can run it on Amazon, you can run it on Azure, you can run it on VMware, you can run it on OpenStack and it really is a mix In this quarter, actually a fair number of the OpenShift deals also weighed in on OpenStack So there's a reasonable amount of cross sell there

2017_RHT

2016

GEO

GEO #Thank you, Operator. Good morning, everyone, and thank you for joining us for today's discussion of The GEO Group's first-quarter 2016 earnings results. With us today is <UNK> <UNK>, Chairman and Chief Executive Officer; <UNK> <UNK>, Chief Financial Officer; David <UNK>, President of GEO Corrections & Detention; and <UNK> <UNK>, President of GEO Care. This morning we will discuss our first-quarter results and current business development activities. We will conclude the call with a question-and-answer session. This conference call is also being webcast live on our website at www.geogroup.com. Today we will discuss non-GAAP basis information. A reconciliation from non-GAAP basis information to GAAP-basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q, and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, <UNK> <UNK>. <UNK>. Thank you, <UNK>, and good morning to everyone, and thank you for joining us on this call. We are very pleased with our first-quarter results and the outlook for the balance of the year, which continued to reflect organic growth in each of our diversified business segments of GEO Corrections & Detention and GEO Care. During the first quarter of the year, we achieved a number of important milestones. GEO Corrections & Detention successfully completed the activation of the Arizona State Prison in Kingman. We had assumed management of this 3,400-bed facility on December 1st of last year under a 7-year contract with the Arizona Department of Corrections. At the time of the transition of management functions, the Kingman facility housed approximately 1,700 inmates. We are pleased to have achieved a smooth transition from the previous operator and have completed the ramp up at the facility, which is now operating at its deigned capacity of 3,400 beds. The Kingman facility plays an important role in helping meet the need for cost efficient correctional bed space in Arizona. And this important contract is a testament to our decade-long partnership with the state of Arizona. With respect to GEO Care, we have continued to implement our new 5-year contract with the Department of Homeland Security for the provision of case management services for families going through the immigration review process. This important contract is representative of GEO Care's leadership in the provision of community-based and case management programs through our comprehensive GEO Continuum of Care. GEO Care has been able to build on its existing relationships with local community providers to provide comprehensive case management services under this new program. These important projects underscore the diversified nature of our services and our ability to grow across the entire spectrum of corrections management ---+ community reentry programs, case management services, and offender rehabilitation. Internationally, we are continuing to develop this $650 million Ravenhall Correctional Facility for the State of Victoria in Australia, which as we have discussed in the past will include an $88 million investment by GEO. The facility remains on schedule for completion in the fourth quarter of 2017, and subsequently, we will begin operating the facility under a 25-year contract. Once operational, the Ravenhall facility is expected to generate approximately $75 million in revenues per year. The Ravenhall project will be the premiere GEO Continuum of Care offender rehabilitation facility in the world. As the world's largest private provider of detention and correctional services, in prison as well as in community, we remain focused on combining investments in government infrastructure with best-in-class social services. Our financial performance continues to be underpinned by our Company's diversification, which has allowed us to capture growth opportunities across multiple market segments. Our ability to develop industry-leading rehabilitation and reentry programs through our comprehensive GEO Continuum of Care has positioned GEO to pursue diversified growth opportunities. The strength of this growth platform and our financial performance has allowed us to continuously enhance value for our shareholders. We are proud that our continued growth has allowed us to pay the highest dividend in our industry of $2.60 per share on an annualized basis, which currently represents less than 75% of our AFFO guidance for 2016. At this time, I would like to turn the call over to <UNK> <UNK>. Thank you, <UNK>, and good morning to everyone. As disclosed in our press release today, we reported adjusted funds from operations in the first quarter 2016 of $0.84 per share, which represents a 17% year-over-year increase. We reported adjusted EPS for the first quarter 2016 of $0.45 per share, which represents a 10% year-over-year increase. Our revenues for the first quarter 2016 increased to approximately $510 million from $427 million a year ago. Our construction revenue for the first quarter 2016 was $41 million, which came in $22 million lower than our guidance of $63 million. As a reminder, our construction revenue is related to our Ravenhall project in Australia and has little or no margin. For the first quarter 2016, we reported net operating income of approximately $136 million or a 17% increase year over year. Compared to our first quarter 2015, our first-quarter 2016 results reflect the reactivation of the 1,940-bed Great Plains and the 1,748-bed North Lake correctional facilities in June of 2015; deactivation of the 640-bed expansion of the Adelanto Detention Facility in July of 2015; deactivation of the 626-bed expansion of the Karnes Residential Center in December 2015; the new GEO Care contract with the Department of Homeland Security for case management services in November of 2015; and $41 million in construction revenue compared to $22 million in construction revenue for the first quarter of 2015. These revenues for both periods are associated with the Ravenhall Prison project in Australia. Moving to our guidance. We have increased the low end of our full-year AFFO guidance resulting in a range of $3.54 to $3.62 per share. We have also increased the low end of our full-year adjusted EPS guidance, resulting in a range of $1.96 to $2.04. We have confirmed our full-year revenue guidance, and expect total revenues to be in a range of $2.18 billion to $2.20 billion, including approximately $264 million in construction revenue related to the Ravenhall project. For the second quarter 2016, we expect total revenues to be in a range of $544 million to $549 million, including approximately $70 million in construction revenue related to the Ravenhall project. Our second-quarter 2016 AFFO is expected to be in a range of $0.87 to $0.89 per share. And we expect adjusted EPS for the second quarter 2016 to be between $0.47 and $0.49 per share, excluding the write-off of deferred financing fees associated with our recent bond offerings and tender offer for our 6.625% senior notes due in 2021. With respect to our liquidity position, we continue to have ample borrowing capacity in excess of $150 million under our revolving credit facility, in addition to an accordion feature of $350 million under our credit facility. As I mentioned, we completed the offering of new 10-year senior notes earlier this month. A note offering of $350 million was priced at a 6.00% yield. The proceeds from the offering were used to fund the tender offer and redemption for any and all of the $300 million of our 6.625% senior notes and to pay down borrowings outstanding under our revolver. With respect to our usage of cash, we expect our project and growth CapEx to be approximately $30 million in 2016, of which $10 million was spent in the first quarter. We also have approximately $17 million in scheduled annual principal payments of debt. As it relates to our dividend payment, as we announced last week, our board has declared a quarterly cash dividend of $0.65 per share, or $2.60 annualized, which currently represents a payout of less than 75% of 2016 AFFO guidance. As we have expressed to you in the past, our board remains committed to returning value to our shareholders by targeting an annual dividend payout of at least approximately 75%, and we'll review our dividend payment on an annual basis at a minimum. Finally, for those investors new to GEO, I'd like to briefly touch upon what we believe are our Company's attractive investment characteristics, which are underpinned by our real estate portfolio of company-owned facilities which have a physical useful life of as long as 75 years or longer. We currently own or lease approximately 70% of our facilities worldwide, and we have stable and sustainable income through increasingly long term ---+ longer-term contract arrangements. We have a diversified base of investment-grade customers, and have historically enjoyed occupancy rates in the mid to high-90s and customer retention rates in excess of 90%. With that, I will turn the call to <UNK> <UNK> for a review of our market opportunities. Thanks, <UNK>, and good morning to everyone. I'd like to address recent project activations, major contract rebids, and select publicly known business development opportunities. GEO is the largest detention operator for the US federal government agencies, including the Federal Bureau of Prisons, US Immigration and Customs Enforcement, more commonly referred to as ICE in the US Marshals Service. Our business relationship with these three federal agencies now spans three decades. Additionally, we provide correctional facilities for 10 states, including Florida, Georgia, Louisiana, Oklahoma, Arizona, New Mexico, California, Vermont, Virginia, and Indiana. Our business relationships with our state customers began in the mid-1980s and now involve more than 20 facilities that are almost all medium security or higher. With respect to international business, GEO is the only US publicly traded company providing corrections and detention services overseas. We presently operate in the United Kingdom, Australia, and South Africa. As it relates to our recent project activations, during the first quarter of 2016, we completed the activation of the 3,400-bed Arizona State Prison in Kingman, Arizona under a 7-year managed-only contract with the Arizona Department of Corrections. We assumed management of the Kingman facility in December of last year, and at that time it housed approximately 1,700 inmates. We are pleased to have completed the ramp up process at the facility and have now achieved normalized operations at 3,400 beds. At full occupancy, the facility's expected to generate approximately $73 million in gross annualized revenues, including $24 million for debt service payments, resulting in net annualized revenues to GEO of approximately $49 million. Moving to our company-owned Karnes ICE Residential Center, for which we completed a $32 million expansion in the fourth quarter of last year. As you may remember, the center began operating with a new fixed monthly payment under a new 5-year contract, which was effective on November 1st of last year, resulting in approximately $57 million in annualized revenues. As we updated you during our last call, the state of Texas has completed the rules promulgation process with respect to licensing of family residential centers. This process is only an added step to the standards of compliance the center already adheres to under ICE's family residential standards. Presently, the center operates as a short-term processing facility, and this licensing process will allow for longer lengths of stay. We submitted our license application in early March, and are hopeful to complete the process within the next month, after which the center will be one of the few, if not the only licensed family residential facility in the United States. Finally, during the first quarter, we completed the transition of our ICE population from the South Louisiana Correctional Center to the Pine Prairie Facility in order to better align the mission of these facilities. As we have previously discussed, the BOP had issued Criminal Alien Requirement 16, or better known as CAR 16. The CAR 16 procurement involves the rebid of several contracting facilities, totaling more than 10,000 beds, with contracts that expire during 2017. The procurement includes our company-owned 3,500-bed Big Spring Correctional Center in Big Spring, Texas. CAR 16 also includes a 3,600-bed Reeves County Detention Complex, which is owned by Reeves County, Texas. Reeves County has two separate contracts with the Bureau of Prisons involving 3,600 beds. GEO is a subcontractor to Reeves County, and provides management services under a fee-only arrangement for the provision of approximately two dozen management positions. All other employees of the Reeves County Complex are employees of Reeves County. CAR 16 proposals were submitted last June and contract awards are expected in late 2016, with new contracts going into effect in the first quarter of 2017. With respect to future growth opportunities, we currently have approximately 3,000 beds in idle facilities, and have several active efforts to redeploy this available capacity. There are a number of publicly known opportunities in the US and overseas we are currently pursuing totaling several thousand beds. And we are also exploring a number of non-public opportunities that relate to both new project development and potential asset purchases. At the federal level, ICE has issued a procurement for a 1,000-bed detention center in the Houston, Texas area. This is a rebid of the Houston ICE processing center. The RFP requires proposed facilities to be within a 50-mile radius of the ICE Houston office, comply with the most recent ICE detention standards, and provide extensive ICE offices and support areas. In addition to this procurement, ICE has indicated a need for beds in the Chicago and New Jersey areas. We are continuing to monitor these potential opportunities. Moving to the state level, several states continue to face capacity constraints and inmate population growth. And many of our state customers require additional beds as aging, inefficient prisons need to be replaced with new, more cost efficient facilities. For instance, in the states we currently operate, the average age of state prisons range from approximately 30 to 60 years. There are several states, including Arizona, Oklahoma, Ohio and others which are considering public-private partnerships for the housing of inmates, as well as the development and operation of new and replacement correctional facilities. In Oklahoma, the Board of Corrections recently approved the Department of Corrections to explore available options for the housing of offenders in private facilities to meet the ongoing need for new and replacement beds. In Ohio last year, the legislature approved the sale of a state-owned prison totaling 2,700 beds. This opportunity would present the second such sale of a corrections asset for the state of Ohio. Additionally, other states, including Minnesota, Alabama, and Michigan have recently discussed proposals for the development of new facilities, or for the leasing of available private facilities to meet ongoing bed needs, or replace older, more costly facilities. With respect to our international markets, our GEO Australia subsidiary has continued to work on our project for the development and operation of the new 1,300-bed Ravenhall prison near Melbourne. This large scale project is expected to be completed in late 2017, and will provide an unprecedented level of in-prison and post-release rehabilitation programs. The project is being developed under a public-private partnership. GEO will make an investment of $88 million with expected returns on investment consistent with our company-owned facilities. Additionally in Australia, the state of New South Wales has issued a procurement of a 1,000-bed facility, known as the Grafton Prison, under a public-private partnership structure similar to our Ravenhall Prison project in the state of Victoria. At this time, I'll turn the call over to <UNK> for a review of our GEO Care segment. <UNK>. Thank you, <UNK>, and good morning, everyone. As you may remember, our GEO Care segment is comprised of four divisions. Our GEO reentry division manages 21 halfway houses, totaling over 3,000-beds and 63 day reporting centers nationwide, with the ability to service more than 4,000 participants. Our youth services division oversees 12 residential facilities with approximately 1,300 beds and 7 non-residential programs with approximately 1,200 participants. Our BI division monitors approximately 139,000 offenders under community supervision, including 102,000 individuals through an array of technology products including radio frequency, GPS, and alcohol monitoring devices. Finally, our GEO Continuum of Care division oversees the integration of our industry-leading, evidence-based rehabilitation programs both in prison and through our community-based and post-release services. As we've discussed in the past, we're enthusiastic about the opportunity to expand our delivery of offender rehabilitation services through the GEO Continuum of Care, which we believe is in line with current criminal justice reform discussions. We view these efforts as positive, and we believe that the emphasis on offender rehabilitation and community reentry programs as part of criminal justice reform will create growth opportunities for our company. Each of our divisions continues to pursue several new growth opportunities. GEO reentry continues to work with existing and prospective local and state correctional customers to leverage new opportunities in the provision of community-based reentry services in both residential facilities and non-residential day reporting centers. We are pursuing new residential reentry center opportunities for state and federal agencies, and new day reporting centers in several states. These new opportunities total more than $28 million in potential annualized revenue. We were also recently successful in securing new contracts for the continued housing of BOP offenders at our Salt Lake City residential facility in Utah, and for additional beds for our state programs in Newark, New Jersey and at our Taylor Street facility in California. Additionally, we recently transitioned the Alaska offender population in our Seaside Center from the old building that was leased by GEO to a new center which is now company-owned. Our youth services division continues to work towards maximizing the utilization of our existing asset base, and continues to undertake new marketing initiatives to increase the overall utilization of our existing youth services facilities. Our Ohio, Texas, and Colorado facilities continue to experience strong census consistent with improvements we saw in 2015. We're pursuing additional referrals to our Pennsylvania facilities, and are looking to continue our expansion of community-based programs in Ohio. Finally, our BI subsidiary continues to market its supervision and electronic monitoring services to local, state, and federal correctional agencies nationwide. BI is currently bidding on new business opportunities in the District of Columbia, as well as a number of other jurisdictions. With respect to our contract for the Intensive Supervision Appearance Program, or ISAP, we have been ramping up the program from 23,000 participants in early 2014 to approximately 46,000 participants today. The program is on track to achieve ICE's objective of 53,000 participants by the end of 2016, according to a congressional testimony from the agency last year. Similar to this important contract, during the first quarter, GEO Care continued the implementation of our new family case management program contract which was awarded to us by the Department of Homeland Security late last year. This important program provides community-based case management services for families going through the immigration review process. This new contract represents approximately $11 million in annualized revenues, and is indicative of GEO Care's leadership in the provisions of community-based and case management programs through our comprehensive GEO Continuum of Care. GEO Care had existing relationships with local community providers throughout the country, and we have been able to build upon these partnerships and expand our network of community partners in order to provide comprehensive services under this new program. At this time, I will turn the call back to <UNK> for his closing remarks. Thank you, <UNK>. We are very pleased with our strong financial performance for the quarter and our outlook for the balance of the year. We've achieved a number of important milestones with the ramp up of the Kingman, Arizona facility by GEO Corrections & Detention, and the implementation of the new family case management program by GEO Care. These important projects are representative of our diversified growth platform, and our ability to provide tailored real estate, management, and programmatic solutions to our customer base across all segments of the correctional spectrum. This diversified growth and investment strategy has positioned GEO as the world's largest private provider of corrections, detention, and offender rehabilitation services. We remain focused on pursuing new growth opportunities, and are enthusiastic about the opportunity to expand our delivery of offender rehabilitation services through our GEO Continuum of Care platform, which we believe gives our company a competitive advantage when pursuing new contracts. As a REIT, GEO is focused on providing essential real estate solutions to government agencies in the fields of detention, corrections, and post-release facilities. But additionally, as a service provider, our commitment is to be the world's leader in the delivery of offender rehabilitation and community reentry programs. This commitment is consistent with criminal justice reform efforts that emphasize rehabilitation and community reentry programs for offenders, which we view as positive for our company as evidenced by our continued growth in our diversified business segments. We believe that our unique platform of correctional and rehabilitation services better positions GEO to capture future growth, which will enhance value for our shareholders and allow us to continue to grow our earnings, cash flows, and dividend payments. This concludes our presentation, and we would now like to open the call to your questions. Well, we believe we provide essential government services at the federal level and in the state level. And it's historically, those services have received bipartisan support, and we expect that support to continue in the future. The utilization of which. Are you speaking about a specific business unit or segment. I think the margins will improve a little bit through the balance of the year. The first quarter is typically our lowest performing quarter. We see some seasonality in some of the populations at some of our facilities, and we typically expect that to improve during the second quarter and going into the third quarter. So we should see a little bit better margins, and that's obviously reflected in our guidance in the improved performance. Well, currently we use it to pay down the revolver and create some additional liquidity there. But you know, as I think is evident from the call, as <UNK> mentioned and <UNK> mentioned, there's a number of opportunities that we're continuing to pursue, and the bulk of those opportunities would require some sort of capital to make them come through. So, the Houston project is a significant opportunity. ICEs continuing to look for beds in Gary, Indiana ---+ or in the Indiana area, Illinois area, and then in the Newark area, as <UNK> mentioned. So those are significant potential capital opportunities that we may see a need for. There's the project in Australia that could require capital. There's a new bid down there that we've discussed. So, all of those opportunities would require capital. Well, the interest income is stepping up, as you mentioned, in connection with that contract receivable that we have on the balance sheet. So as that continues to grow, the interest income will continue to step up some. I don't have the exact breakout in front of me, but again, it's probably another million dollars for the year, something like that. Not material, but it's factored in. In interest income throughout the balance of the year. We'll continue to see that grow as the contract receivable grows. The contract receivable will grow probably another $150 million or so. Well, thanks for the question, <UNK>. The facility is stabilized with normal operating rhythm for the state of Vermont. The state of Washington, we have not seen utilization from that department. As you may recall, they have gone through an effort of reorganizing their own agency and leadership is being in place there. But we have continued dialog with the state of Washington about future needs, and the facility's performing very well. Thank you. Well, I could tell you, we obviously are in dialog with the Michigan Department of Corrections and respective stakeholders in that jurisdiction because we do have a significant presence there. Their department has continued needs. I know there's an evaluation about their physical plants and their current capacity expectations. So, we've made ourselves available for that continued conversation. We want to be very supportive of Michigan and their needs. And in concert with that, we're willing to have the open dialog to best suit the organizational activity for that community. I think most of our client populations are fairly stable, with a few exceptions. <UNK>, this is <UNK>. Hi. I would entertain the logic that right now, as most state governments are evaluating their revenue expectations and their budget outlays for upcoming appropriators to consider, they're seeing compression and they're looking for opportunities to become more efficient. So we continue to be encouraged by the ability for us to provide services, quality services to create options for them to consider. But the expectations for the economic adjustments is really up to what's in front of those jurisdictions. And we're just happy to be available to those dialogs when they have needs. Well, I think our track record we established in the short period of time that we've been a REIT, we've evaluated it at least annually, and consistently in the fourth quarter, and I would expect that we will continue to follow that pattern. And we've been pretty straightforward that we're targeting that 75% to 80% payout ratio. And I think we've been consistently right at that. Maybe 74 or something like that, but we've been right around that payout ratio. So we'll continue to monitor that. We'll continue to evaluate in a timely fashion. We'll continue to evaluate it against whatever our projected capital needs are. But I think we've shown good discipline in regards to that matter. Well, thank you all for joining us on this call. I look forward to addressing you again in the future. Thank you.

2016_GEO

2016

HLT

HLT #I don't think we've seen a big increase year-over-year in that. I think if you look at it over the last two or three years, we've seen a significant increase both by customer ---+ because of customer behavior ---+ but also technologies and apps that have come out that have accelerated the behavior. We did do it ---+ and so yes, like others, we have seen that trend. It's more prevalent in certain major markets around the country. It is not as prevalent throughout the system. We do think it's an important issue. We are working hard on it. We did do the test, as I mentioned I think on one of the last couple of calls, not necessarily because that's what exactly we want to do, but we wanted to get a sense of how customers responded to it. We're working on a bunch of different approaches to it. And the trick here is to do something that makes sense for customers, or that's what we're in the of business doing is serving customers. But is also thoughtful relative to how we manage the inventory for ourselves and all of our owners. We're one of the very few businesses I can think of that ties up basically all of its inventory with no downside risk. And that, particularly in today's world with new technologies and these kinds of behaviors, that has a cost to it. Now that cost ultimately is going to be borne, at some point, by the consumer. So while it may seem like it's good for them, it may ultimately not be so good. So we're ---+ I don't have the answer yet. We're doing ---+ we have all of our, as I say, we've got all of our scientists working on it. And we're trying to figure out, as probably a little bit later this year, how do we come up with a way to price our products in a way that customers understand it. It works for them for the various things that needs that they may have, but it's a more sensible way to manage inventory. And we're making some progress on it. Nothing to announce. Nothing to scare consumers about. We're not going to do dumb things relative to ---+ that don't make sense for consumers. But we may ---+ there are, like other businesses, there are ways to be able to look at pricing for those that need more or less flexibility and to create different sorts of pricing structures. So we'll give you more when we have it. We're very focused on it because I think it's in everybody's interest ---+ customers and owners and the system. Yes, I mean, not anything dramatic. There are parts of the world, China being the best example, where you have seen as they over the last year or two have sort of been evolving their economy and shifting to more of a services versus an infrastructure-based economy, you have definitely seen a slowdown there relative and a lengthening of development period between signings and opening. But there's nowhere else in the world ---+ maybe a little bit in Europe as it's had ---+ as Europe has had its ups and downs. But broadly speaking, if I went and actually statistically looked at the time lines that we've had historically between signings and openings, they're following pretty normal patterns ---+ maybe outside of those, particularly China, but a little bit of Europe outside of those examples. So I think so goes on a lag to the signings. You can sort of prognosticate that the openings will pick up as the gestation period ---+ as you get through the gestation period for development. Given that we have doubled our net unit growth percentage at the same time we've been growing the Company since 2007 or 2008 by 50%, I think you've been seeing it. We've gone from sort of a low point of unit growth of 3% in 2010 to 6% to 7%. So we've doubled our growth rate. At the same time the Company has gotten 50% bigger. So I would say you're seeing it, hopefully appreciating it. (laughter) I am confident ---+ as I said in my comments, I've known Tom for 30 years. Tom was not just on the list. Tom was the number one top person on our list. And we couldn't be more pleased that he was willing to come provide the leadership of our new REIT. So it's an exciting day for all of us. Some of it for sure. There's no question. It would be hard, <UNK>, for me to give you an exact number at this point. Maybe when we get through the month and we have ---+ we can scrub all the data we can. There's no question the reverse impact is benefiting you. But there's also no question ---+ and I'm not trying to pound the table. There's no question we're also seeing, broadly unrelated to that, a modest pickup in corporate transient business. It's there. I've been talking to a ton of corporate customers. The great thaw that I describe, it's going on. What I can't tell you is what is the result in terms of broader growth, exactly what is the shape of the uptick. But I think all things being equal, meaning things stay in a relatively stable mode, it's just hard ---+ forgetting the Easter effect ---+ it's hard to apply common sense and not believe that you're going to see corporate transient pick up. Yes. We have, <UNK>, these two big transactions coming up that are ---+ that as <UNK> said earlier in response to Steve's question, have some expense associated with them. So that's it. And also as I said in my prepared remarks, we fully expect to target the same credit rating and start a share repurchase program once we get the spins ---+ or ask our Board to start a share repurchase program once we get our spins complete. But we're really just saving our cash for the transactions at this point. Yes, we're hunkered down to get these things done. There's a lot of moving pieces, all of which are manageable. But we want to get it done, create three pure play companies and we'll get back on it. It did, honestly, surprise us to the up side a little bit. In talking to our China teams, which I talk to our team constantly around the world, they were a little bit surprised. And part of what's going on is part of the great thaw ---+ the reason for the great thaw is I think there is a little bit more stability in the Chinese economy. Certainly the world is starting to settle down on China. I think if you're in China, which our guys are, and operating and running business, I think it feels like things are, to our teams, more stable. The business is showing up. And so, yes, we feel pretty good about what will happen for the year. I'm not going to say we're being conservative. It's not going to make a huge difference in the numbers if we're a little off given it's a relatively low percentage of our overall EBITDA. But things are reasonably good, yes. Surprised it's a little bit the up side. Not so much so that we thought we should change our guidance at this point. Some of it driven by some particularly strong group bookings in some of the bigger hotels in China, but all good. It's nothing but good. And we ---+ same thing on the development side. We shifted the strategy there appropriately a couple of years ago to more of the mid scale side of things. And we're continuing when others are not to accelerate both signings and, particularly, accelerate openings. I think we'll probably open 20% more rooms this year than we did last. And last year was I think the best year we've ever had in openings in China. So China feels reasonably good. Thanks, <UNK>. On an overall basis for the segment, we've seen cost per occupied room for the first quarter was still below 2%. So we've had pretty good cost containment there. In the US hotels, we'll detail all this in the Form-10s and the like and how it breaks up, but a little bit higher. But we've been doing a good job of containing costs. Even in wage and benefit environment, it's been pretty high growth across the nation. I'll let <UNK> maybe give a little more specifics because he's more active day-to-day in working with our owners. But at a high level, I think it's been reasonably steady. I think most of our stuff, if you use the US, because it's a big chunk of where the development is occurring, most of it is getting financed by local and regional banks where you have owner operators, some big, some small, that are financing with generally a decent chunk of equity, full recourse on the debt. It the way they do the business. And the local and regional banks have continued to be pretty stable. The end of last year and very beginning of this year when all the world ---+ my description ---+ froze up, you were starting to see little telltale signs, certainly on Wall Street, of less capital available. I would say, my opinion, it didn't really trickle through to Main Street very much. And now with the world being stabilized with a whole bunch of our owners that are building these things ---+ a few weeks ago when I asked them, are you seeing any difference in your ability. And they said, no, maybe a teeny bit more expensive, a little bit more equity, but after ---+ but no real difference in sort of the Main Street kind of lending environment, or nothing that they viewed as material. The best ---+ the quality developers are still able to get it and still able to finance our stuff. <UNK>, I don't know if you want ---+ I think that's a good way to describe it is the Wall Street versus Main Street. The Main Street side of it is where the lion's share of our development is getting done, especially in the US. On the Wall Street side of it, I think for existing cash flowing assets when you had the world freeze up the way <UNK> described it, CMBS in particular, spreads did gap out quite a bit. But those marks have restabilized and they're looking a lot stronger than they were. But again, on the Main Street side of it, I think specific to your question about development, that is almost all local. They're highly equitized. They're financed on a loan-to-cost basis. And it's just a little bit different environment than some of the things you've been hearing out of Wall Street. Yes, <UNK>, we saw those comments, of course, like you did. And we have not seen ---+ that particular activity has not existed in our business. And frankly, our customer ---+ who's a little bit different customer ---+ has been quite strong. So our default rates are not ticking up. Our average FICO on new loans is almost 750. So a quite high credit profile for our customers. And frankly I was just looking at our default rates were not up really at all in the quarter. So we're not seeing that issue. Thanks, <UNK>. I just want to say thanks, everybody, for spending so much time with us this morning. We continue to make great progress. You should be looking out in the not too distant future for our Form-10s to get more information on the spins. We look forward to catching up with you on the next quarterly call or before. Thanks.

2016_HLT

2017

ALOG

ALOG #Thank you, <UNK>, and I'm going to start on the fifth slide in your deck. Its title is Q2 FY17 Quarterly Update. Our Q2 revenue expectations were realized in total, with a substantial uptick in Security, offset by minor deficits in both Medical Imaging and Ultrasound. Security will obviously have a stellar year. Ultrasound in total not so much, though the direct business is making progress, and Medical Imaging in between. <UNK> will quantify those statements for you a little bit later in the talk. On a more strategic level, our team has been analyzing the future of our Ultrasound business, actually our entire business, so most of my further comments this afternoon will address that and you might want to flip to the sixth slide. So with Q2 revenue finishing as expected, we will commence the course correction implied three months ago. Our focus is on restoring the Ultrasound cost structure with Uro Surg at the heart, and adjacent categories competing for resources, as is usual in business. Rising in priority is supporting both Medical Imaging and Security with sufficient resources to grow. Before the end of this fiscal year, we will be pruning initiatives that have of recent produced revenue but not commensurate profit. In fact, some of these initiatives often encourage significant losses at variance to our expectations. Now as a reminder, three-fourths of our Ultrasound business is strategically advantaged, vested by our customers, featuring brand recognition across the world, profitable and growing. Yet even this core Ultrasound business should be more profitable. The remaining 25% of Ultrasound will either promptly improve as a result of the restructuring or find another home. We believe this is the best long-term strategy for Analogic and our shareholders. After four or five years of diversification in Ultrasound, sometimes depriving Medical Imaging and Security of resources and attention, we are scrutinizing our portfolio in Ultrasound. In the portfolio printing process, we have retained those activities that are growing and profitable, those which could be restructured to the same effect, and those that have revenue upside with realizable profit no later than entering FY19. Importantly, not all of our pruning means discard. Improve the cost structure and we'll reexamine the Resource allocations. For example, we are continuing point-of-care initiatives but with a sterner investment and profit criteria. With the ultimate closure of the Vancouver facility, we will be supporting point-of-care product needs from Denmark. Notably, part of the heritage of Vancouver will be the transfer of point-of-care product knowledge to Denmark. Point of care, as well as a few other categories are in the show-me category instead of the promise-me bucket. We will supply resources to Medical Imaging and Security as warranted, rather than subordinate to Ultrasound. This back-to-basics approach means some non-productive revenue will disappear, but the losses associated there with will also dissolve. Signaling that redirection, we are changing leadership in the Ultrasound sector. We consolidate accountability under the control of a single senior vice president, a measure to both improve communication and execution. Brooks West, whose background is described in the press release, will be joining on March 13 as Senior Vice President and General Manager of global Ultrasound. Brooks has both sales and marketing experience in the device sector. More importantly, Brooks has spent almost a decade listening to corporate strategies and sorting blarney from reality. During the recent interview process, Brooks challenged our initiatives. He candidly said we're drinking some of our own bath water concerning the patience of investors. He's not delicate, diplomatic, or sensitive, but he looks at businesses from your viewpoint with acumen we welcome. We are in a different course, under different leadership with a different prism for value and decisions and determined to deliver the value for which you invested in Analogic. So welcome, Brooks, starting one week from today. The 100-day assessment is over. We commenced an execution phase that will conclude by the end of FY17. We enter FY18 with business leaders in Medical Imaging, Security, and Ultrasound, in whom I have faith and who will deliver results that earn your confidence. In turn, they will have expansive authority to make their businesses successful and a reduced overhead cost to bear. Q2 was a bit better than we expected, buoyed by Security, which is off to a spectacular start. Our China and European direct sales teams delivered noteworthy revenues in Q2, in both cases again; however two other key account relationships should be reported which will impact the next few quarters. First, we continue to experience delays in shipment of our technology product to the Ultrasound general imaging partner. Accordingly, we have taken steps to provide better technical interchange and work more closely with our partner toward mutual goals. I too am now involved directly with the progress reports with the partner. This puts FY17 revenue at risk in favor of a longer-term productive relationship. We have factored these changes into our FY17 outlook and softened our outlook for 2018, a change which could provide an upside opportunity. In the second case, we were unable to meet pricing targets for a key customer of our CT components business. We understand the pressure they were under and wish them success, as they are not just a long-term customer but colleagues in this imaging space. The loss of this business will be felt entering FY18 and also has been factored into our outlook. Anticipating the challenges of our component business, part of our strategy has been to work our way up the value chain in CT, which we have demonstrated through our private-label CT activities in China. We expect this strategy and introduction of additional products in this area will bear fruit in FY18 and will provide further growth in FY19. I'll now turn the podium over to <UNK> <UNK> who will provide some details behind the aforementioned comments. Thanks, <UNK>, and good afternoon, evening everyone. I'll start on slide 7 with our quarterly financial highlights. Revenue grew 3%, driven by 71% growth in Security, which was a significant recovery from a soft prior-year comparison. Security growth was largely offset though by declines in Medical Imaging and Ultrasound. [Non-GAAP GAAP] gross margin declined about 2% because of both product and customer mix. We turn to non-GAAP EPS; it was $0.99 per share, while GAAP EPS increased $0.83 to $0.59 per share, as we recorded a contingent gain of $8.2 million, or $0.41 per share, due to a drop in the Oncura revenue forecast, as well as in 2016 we incurred charges for both the BK distributor matter and restructuring. In addition, in the quarter, we recorded an impairment charge of $10.4 million, or $0.52 per share, primarily related to the change in fair value of the Oncura reporting unit. It should be noted that we passed on all other goodwill, intangible, and annual impairment tests, but our cushion on the Ultrasound reporting unit has fallen to 25%. Now pertinent to this point, we announced a restructuring primarily focused on our Ultrasound business. <UNK> has communicated the selling and operational points, so it will not repeat. The financial impact of these actions is we anticipate reducing our cost structure by $12 million to $15 million on a run-rate basis in FY18. No run-rate savings are built into our FY17 forecast, but are in upside if we're able to implement actions (technical difficulty). The restructuring cash charges anticipated are upwards of $5 million, with $0.5 million incurred within quarter two and the remaining amounts expected across quarters three and four. We may incur additional non-cash charges in the second half of FY17, as we finalize the restructuring plan and determine its impact on our business. So I'll move to slide 8 and quarter two results. Non-GAAP operating margin was down about 2% as well, reflecting primarily gross margin results, as well as some higher OpEx because of the addition of Oncura sales marketing costs offset partially by lower R&D and G&A. A couple of GAAP expense points. GAAP expenses are significantly lower, reflecting the Oncura contingent gain and the BK matter settlement cost in the prior year within the G&A line, offset in part by the impairment charge. The BK matter interest charge from FY16 also explains lower costs within the other income expense line. The non-GAAP tax rate increased to 24.7% from 20.9%, reflecting a lower contribution from foreign earnings. We still estimate though our FY17 non-GAAP tax rate to be in the range of 27% to 29%. Non-GAAP operating income dropped 13% and non-GAAP EPS dropped close to 16%, reflecting primarily the impact of lower gross margin for mix, as well as the higher tax rate. Turn to slide 9 and our quarterly performance trends. We've already touched on revenue and operating income margin. One additional point on gross margins is we do continue to expect some improvement in gross margin from the current first-half levels, reflecting enhanced product customer mix. But lower expectations for both Medical Imaging and Ultrasound revenue will lead to an overall full-year drop of about 100 basis points versus prior year because of the mix impact. Now I'll turn to our operating performance by segment on slide 10. Medical Imaging revenue fell 2% caused by lower CT and Mammography, partially offset by favorable timing in MRI. We now expect Medical Imaging to be down 2% to 4% for the year, reflecting primarily an insourcing decision by one of our large CT OEM customers, which we believe will not be offset as we thought when we entered the year. Non-GAAP operating margin dropped about 50 basis points, reflecting gross margin impact in the product mix. Ultrasound dropped 7%, primarily because of lower general imaging, partner revenue, and OEM probes. Strong results in China and Europe were the bright spots. We have further lowered our Ultrasound forecast to be down 3% to 5%, as we now anticipate general imaging revenue will push out to FY18, as well as an expectation of the restructuring activities potentially dampening our sales performance. Lower revenue and a higher run rate cost base primarily from the Oncura acquisition, led to operating margin falling by 9%. As earlier discussed, we have initiated a plan to address our Ultrasound cost structure, which will drive a benefit in full-year 2018. Turning to Security. Security delivered another strong quarter of growth, primarily from higher revenue from international high speed, as well as some rapid D&A shipments. Confidence in our backlog supports our view that growth should reach the 20% level for the year versus prior year. Non-GAAP operating margin increased 6%, driven by the revenue benefit, partially offset by product mix. Move to slide 11 and year-to-date results. Revenue was up 4%, driven by strong Security performance. Gross margin is down 2 points, reflecting negative product customer mix within the Medical Imaging and Security segments, as well as a lower Ultrasound contribution. Non-GAAP operating expenses increased about $4 million because of the addition of $3.6 million in Oncura sales market expense and $1.8 million of CEO transition costs, offset in part by lower R&D. A note on GAAP expenses is they follow a similar trend of being down as quarter two, reflecting same points related to the contingency gain, impairment, and BK matter charges. I'll move to my final slide, slide 12, and discuss working capital and cash flow. We again generated strong cash flow in the second quarter, with $14 million of operating cash and delivered $12 million of free cash flow. Capital expenditure is still expected to be in the $13 million to $15 million range for the year. Drivers for the enhanced performance were DSO improvement of 3 days to 53 days, and inventory days on hand reduction of 5 days to 183 days. I'll now turn the call back over to <UNK> to discuss our outlook. Thank you, <UNK>. We have not been swayed from a course correction flagged 90 days ago simply because Q2 had a significant lift in the year-to-date growth is noteworthy. We will be deploying resources more carefully. We will complete the restructuring before the end of this fiscal year. We will be pruning marginal activities in favor of those that have more favorable economic structure. We will build a cost structure that can sustain value creation, even in the challenging years ahead. Our revenue growth must follow affordable paths. FY18 will produce increased earnings as a result of the restructuring. FY19 will reflect an acceleration of both revenue and earnings. And one quarter ago, we talked about examining our portfolio. To be clear, that diagnosis was focused on Ultrasound, and we feel like we have accomplished that goal. Analogic is not a safe harbor for concepts that require too much capital runway. Welcome to Brooks West who will remind us of the impatience of our owners and rest assured that the technology on which Analogic was based will be deployed in increasingly meaningful ways. Analogic has amazing talent, evidenced by the products and security that lift this year. Medical Imaging will be a similar catalyst in FY19. We will find a more efficient course to bring products to market. Analogic has always been able to imagine, design engineer, and manufacture, and now we have to find the best course to bring these products to market. And with that, we can invite some questions. I don't know that I'll get all your questions let me start from the few. We are interested in businesses that grow; otherwise we can't create value. I start from the standpoint that 80% ---+ 75%, 80% of this business in Ultrasound is in a segment that is growing and we are advantaged, so I think they're not high growth. There will probably be 3%, 4%, maybe 5% in that area. But more than we have been experienced in the past, because I think we lost a little bit of focus on the heart of that business. As far as depriving the sales resources, if you would look at our documents over the last four or five years, you would see sales and marketing expense, extraordinary growth in those categories. And supporting initiatives, perhaps, maybe even support them well. But it hasn't produced results and it's been ongoing for a long time. So I do feel like we have a focused sales team. I think we see evidence now in the direct side that they can still grow the business. But for the ---+ I'm going to call the perimeter initiatives, those that are not inside that 80%, we are going to test those. I think some of them will prove successful. You asked also about Oncura. I think Oncura is at the edge actually. I think there's some potential there. The one thing that we are doing is Oncura is when acquired, they were both a vet Ultrasound business, and they were imagined to be the catalyst of a human telemedicine business. We are now focused on the former of that rather than the latter. So I wouldn't want you to think that we had any imagination of cutting our way to success. That's not what we're doing, but we are going to be careful where we put the resources and we're going to look at them on shorter intervals, and they need to produce results. <UNK>, comment. Well, we've been discussing that, and I think there's an ebb and flow here in this customer set. Product development cycles could be three to five years, so I think customers come into that. We're grateful for the business, and occasionally like this one, they go out from that. I couldn't guarantee that there wouldn't be both in the future. I think this particular customer was in an extremely cost competitive situation. And when ---+ I wasn't here when this happened, but I believe that when we discussed this pricing with the customer, they were just going for targets that didn't make economic sense for us. Sometimes that works. This is a customer we've long had a regard for, and part of us says we hope it works for their benefit. But if not and it doesn't work, we'll be here for the rebound. Thank you for the question. Yes, we can, <UNK>. Yes, <UNK>. That's about right, and you could just ---+ that's about the usual level we run at each quarter. You can have $0.01 or $0.02 either way sometimes, but that's about the level we run at. Oh, 2018. Yes, I can answer that. I think we continue to expect, as we've seen in the last couple of years, roughly flat growth, up 1%, down 1%, depending on the modality. And continued strong gross margins and operating margins, so similar to what you've seen in the last few years. So as <UNK> said, we have ebbs and flows, and, unfortunately, we've had a flow out, which will impact us in 2018. But as <UNK> discussed, we have a number of products we're working on where we hope certainly by 2019, you can start seeing an improvement in Medical Imaging growth as we move forward. By the way, <UNK>, I was in Tokyo when this final decision was made, and so when I heard about that, I also heard that there was a three-year contract signed with the same customer in another modality. So this is a very specific situation that even doesn't go across all the modalities with the same customer. So we wish we had the business. Maybe we'll get it again, but I wouldn't read too much into it from a trend basis. No. We think they will go outside to another supplier. I think that supplier will be new to this segment. And in one sense, I said I hope it goes well for them, but this is a very complicated product. We'll just have to wait and see. We've seen experience in the past that sometimes these transitions have gone well, and other times, the customer has come back to us because it did not go well. I think we will continue to have good growth. We have a whole bunch of growth drivers in Security. Will it be at the 20%, 25% level. I don't think we're guiding to that level of growth, but we do continue to expect to have positive growth in security. No, we do not. We think we're on a track with the various growth drivers of our high speed, our checkpoint, and then rapid D&A as a upside that will continue to have growth in that segment.

2017_ALOG

2015

HD

HD #We like every other Company are looking at what's happening with the wage market. And in parts of the country where there's high employment and there's wage pressure we adjust. But we are able to work through that through the great productivity model that we have in our stores. We will continue to adjust market by market as we see the dynamics of each market unfold. Well we're in the very early stages of integration and we're working through that. We're excited about the opportunity. We know that there is an overlap with our vendor community and we will get synergies from that and are beginning to get synergies already. We also know that we've taken our first actions on a little bit of the reorganization of folks where we have duplicate efforts that we don't need going forward. So we're in the early stages but we're excited about the opportunities that we see. And if I could just add a comment from the macro perspective we saw household formation up 1 billion households formed in the third quarter. Many of those households will be moving into multifamily units. The Interline acquisition gives us a great selling vehicle to serve that new household if you will. What we said is that we will look at acquisitions where it gives us the ability to gain capabilities that we might not want to go build ourselves. So if you think about some of the acquisitions that we've done, the BlackLocus acquisition gave us a data science capability that's being leveraged by our merchants for assortment and price. If you think about the Crown Bolt acquisition that was basically accompany that was built for us that we sold when we sold HD Supply. We got it back. That gives us different distribution capabilities for small package goods in our stores. The Interline acquisition gives us the capability to better serve our Pro customer through things like open account, through 93 points of distribution where we can deliver same day, next day. So this is all about how to we actually get capabilities. Beyond that really not looking for acquisitions. Right so you might think, well, do you need to buy marketplace. We can build that. Do you need to buy a services Company. No, we have one. So those are capabilities that we don't need to acquire. I would say on that we already have a model that leverages a nice interconnected complement of displaying the product in the store but then delivering direct from our manufacturers' warehouses. So we're leveraging an interconnected model from the day we developed our appliance model. We had a disciplined and balanced approach when it comes to capital allocation. The first use of cash is to invest it back in the business. This year we'll spend about $1.6 billion of capital back into the business supporting our growth. We then take our excess cash and first pay 50% of our earnings in the dividend. And the way that works is at the end of the year we will look at how much we've earned and we will cut it in half and that will be the new dividend. If there were ever to be an earnings disruption we wouldn't cut the dividend, we would just earn back into that 50% payout. And then excess cash is used to repurchase shares. We think that's the best use of excess cash rather than leaving it on the balance sheet which would be value diluting to our shareholders. We do have an adjusted debt to EBITDA target of two times. We're at that ratio right now. So we have used the financial leverage judiciously both the support acquisitions as well is to buy back our shares. As it relates to evaluation of our share price we do have a point of view. We're not at that intrinsic value, so we continue to outperform and that intrinsic value continues to increase. There are ongoing legal fees as well as litigation activities. We estimate it another $5 million of expense in the fourth quarter but there could be more. None of it would be bigger than a bread box. It's all manageable. The biggest numbers that we had were the numbers that we settled on the payment card networks in the second quarter. And bigger than a bread box is not a financial term. I wouldn't say it's any more dramatic than we've talked about before. But we do look at sales by price point. And again this quarter we had a progression of higher comps as you went up price points in an assortment. Our large spend Pro as <UNK> mentioned earlier is actually comping above the Company average and that's been a driver certainly in our Pro recovery. That hasn't changed dramatically in the last few quarters. It's been pretty consistent. We would certainly expect it to continue. If I could just jump in on the market share, the census data, the NAICS score for one would suggest that we have grown market share. And again we compete in with a lot of folks across each of our product categories. It varies widely by product category, whether that's other big-box, whether it's wholesale distributors, whether it's digital competitors. So we are very focused category by category as to where are the largest opportunities to grow our business and take share. And that share on a rolling 12 through September was 56 basis points up. Sure. And I think that's the key is that based on the weather and we did have impacts from weather last year it then impacts categories differently from a timing standpoint. So as you mentioned tough winter last year in the Northeast, certainly as you get into the spring you see people making repairs on things like roofing and then in some cases a lot of live goods needed to be repaired as well. But then that obviously is offset by categories. If it's a warm winter nobody's doing ---+ you're doing outside projects and nobody was doing that last year. So those are the dynamics category by category that affect our business, particularly as it relates to the start of spring and then through the tail end of the winter season. But just as I said over time weather normalizes. And if you look at our US comp on a two-year stack basis we see an acceleration from Q1 to Q2, Q2 to Q3 and now with the guidance I have just given you that acceleration into Q4 as well. It was a tough winter. I think as <UNK> mentioned while we had pressure from deflation and lumber we were very pleased with our unit productivity and pleased with what we saw in our Pro business and as we said the larger spend Pros leading the pace there above the Company average. That clearly those lean to bigger ticket projects in the building materials business, bigger ticket projects, so we're very encouraged by that spend with the customer. Then likewise you look at categories like appliances that's a big ticket spend as well. So we don't really see a slowdown if you will big-ticket. And Matt if I can add from a macro perspective as we look at home equity lines of credit they are down 29% from the peak but 17 million home equity lines have been planted this year and 28% of the banks who are underwriting those lines of credit are stating that their underwriting is starting to ease a bit. So if you think about people use their home equity lines that typically goes into a bigger project like a kitchen remodel or sort of thing. So it's a bit encouraging as we think about Q4 and beyond. So the way we look at it quite candidly is as one business and an interconnected approach. A couple of things, one we shared with you that we did what we call COGS A, so we looked at normalizing how we account for things in both channels so that our merchants have a common view of all costs and expenses. And then as I mentioned earlier 42% of our online orders are picked up in our stores. So it's very much a blended mix and we look at it as a blended mix and so we see it more of the same going forward. And we'll probably provide a little bit more outlook as we go into our December Investor Conference in terms of how the business is coming together by channel. But certainly view it as one Home Depot for the customer. I will just say that we do a lot of deliveries from store today. But <UNK> <UNK> is here, I will let him comment on this. Our stores have been a base for delivery for quite some time where we take orders in the store and deliver them. This buy online, deliver from store initiative that we have rolling in 108 stores now and we will roll out in 2016 allows us to take orders online, drop them to the store and use those same delivery assets to get to our customers. We continue to stay abreast of the various offerings in the marketplace. We think the most important thing for us to focus on right now is our deliver from store initiative, utilizing the assets that we have in place now. No, not really. We've grown pretty comparably quarter to quarter. Do you want to start <UNK>. I would start on the investment piece first. Absolutely we seat terrific productivity in the areas that we have invested. And from what we can track we believe we're taking share in these areas and I'd highlight three. One would be the lithium-ion battery technology in power tools and now migrating to outdoor power. We have an extremely robust lineup of brands and product and values in power tools and believe we're taking meaningful share there. LED in light bulbs and now increasingly integrated into light fixtures where we've been very aggressive following the development of that technology. We were partnered with some of the best folks in the industry and our light bulb and now again integrated fixtures with LED are very strong. And we believe we're taking share. Then in appliances certainly, you know we've been expanding square footage for some time now, investing into floor space and adding some additional brands to our portfolio there. We saw double-digit comps in appliances yet again this quarter and believe we're taking share in appliances. And to your question about where are we on the cycle, we're doing a lot of work in this regard trying to come up with our own point of view. But one thing we've learned looking at data coming out of the Harvard Joint Center for Housing Studies as well as John Burns Real Estate Advising Firm is that homes that are older than 45 years tend to be have a higher repairs. And in fact the amount of money spent on repairs in those older homes is 5.6% higher than the amount of money paid to repair a home that is 20, 24 years old. There are 40 million homes in the United States that are older than 40 years. So as the housing stock ages it just bodes very well for big-box home improvement retailers to sell to those customers who need to make repairs in their homes. We don't have that kind of insight. But we will continue to study it. And what I would say on that is the merchants will continue to focus on products that make it easier for our Pro as well as our consumers to be able to do those kind of projects. Our Pro business in total is good whether it's as <UNK> mentioned managed accounts, whether it's our consumer credit card data that shows, our Pro credit card data that shows. We've lost some visibility in the small Pro with our data breach that we're working to regain, so that's probably why we don't talk as much about our smaller Pro. But all of the data points that we have indicate that our Pro business is very solid and we're pleased with the results, whether that's within categories or whether it's at customer data that we have specifically. To put some numbers behind it, if you just look at Pro sales on our private label credit card as well as managed accounts we know those sales. They make up 20% of our sales in the third quarter and they grew faster than the company. It's really, really hard to tell. Clearly if you think back a year ago on our call we talked about the fact that we were pleased that each month had positive transaction growth despite the breach. We again some positive transaction growth. As <UNK> mentioned just a minute ago when you look at a two-year stack comp basis we've seen progression in two-year comps quarter after quarter after quarter and we anticipate that we will be able to do that again this quarter. So it's really difficult to get at that number. The only other thing I can tell you is as we said last year we know that there are customers who were upset based on the emails that we got. So there had to be some impact, it's just really hard to quantify. Alan, we have time for one more question. It's something that we were watching very, very carefully and certainly thought we might see some impact. But candidly Texas would be the biggest market that would have those kind of impacts. We really haven't seen it at all. As I mentioned earlier all of our major markets in Texas actually outperformed the Company average comps and we've seen strength across the store. You are going to hear all about it on December 8. Thank you for joining us today. And we look forward to speaking with you at our investors and analysts conference next month.

2015_HD

2017

ANIP

ANIP #Good morning, everyone, and welcome to ANI's earnings conference call for the first quarter 2017. My name is Art <UNK>, I'm the CEO, and with me today is <UNK> <UNK>, our Chief Financial Officer. Before we begin, I want to refer everyone to the forward-looking statements language in this morning's press release and ask each of you to review it carefully as important context for this conference call. Discussions will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures can be found in our earnings release dated today. Today, we reported strong first quarter results: net revenues of $36.6 million, adjusted non-GAAP EBITDA of $14.7 million and adjusted non-GAAP net income per diluted share of $0.74, increases of 78%, 29% and 40%, respectively, as compared to the prior year. As a result of these reported financial metrics, we are reaffirming our annual guidance: annual revenues of $181 million to $190 million, adjusted non-GAAP EBITDA of $73.1 million to $77.2 million and adjusted non-GAAP net income per diluted share of $3.58 to $3.94. Our two significant business platforms, generic pharmaceutical and branded pharmaceutical products, generated $26.6 million and $8 million in first quarter net revenues, increases of 101% and 44%, respectively, as compared to the prior year. Non-GAAP gross profit was $21.8 million or 59% of net sales as compared to $17.1 million or 83% of net sales in the prior period. In the first quarter, we generated $6.5 million in positive cash flows from operations. Looking forward to the remainder of 2017, we continue to broaden our generic and brand product lines and we anticipate positive effects on our revenues and non-GAAP EBITDA from the launch of 3 brand products, InnoPran XL and Inderal XL and Inderal LA in the newly launched ANI label. In addition, we anticipate several new generic product launches. Recently, we announced the launch of Indapamide tablets. And lastly, our partner, IDT Australia, announced it has received FDA clearance for Pindolol tablets, which will allow us to launch the product in the coming weeks. Finally, our EEMT market share has increased to approximately 65% due to a contract win and the fact that one of our EEMT competitors has dropped out of the market, the full effect of which will begin in the second quarter. In the first quarter, EEMT revenues were $5.1 million. Corticotropin gel and its recommercialization effort continues to progress. Recently, we successfully manufactured a development line of Corticotropin active pharmaceutical ingredient that replicated the yield in manufacturing process from when the API was last manufactured. Because of this success, we have begun process characterization and scale-up efforts on 3 batches of API, which is the next step prior to commercial API manufacturing. We will soon select the finished dosage for our manufacturer and intend to initiate finished dosage form manufacturing of Corticotropin gel in the second half of this year. We continue to advance the development of analytical methods in order to modernize the NDA. We made progress in developing analytical methods to analyze the components of the purified Corticotropin API powder. These analytical methods are being used to generate results that are, in turn, compared to results from historical batches of API. In addition to our manufacturing and analytical method work, we have developed a comprehensive regulatory filing plan for Corticotropin gel and intend to meet with the FDA to present the plan in the second half of this year. I will now turn the conference call over to our Chief Financial Officer, <UNK> <UNK>, who will provide you with more details on our financial results. Thank you, Art. Good morning to everyone on the line, and thank you for joining the call to discuss ANI's first quarter 2017 financial results. ANI began 2017 by posting a strong quarter that was in line with our internal expectation and one that sets the tone for achievement of our full year goals and objectives. Net revenues for the quarter ended March 31, 2017, was $36.6 million, representing a 78% increase from prior year as the company continues to execute on key 2016 product launches and integrates InnoPran XL and Inderal XL into our brand portfolio. Sequentially, reported net revenues were down a modest 4% or $1.6 million from fourth quarter 2016, driven by the contraction of the market size of EEMT, which negatively impacted sequential sales comparisons by $1.3 million. This contraction as well as the recent EEMT contract wins cited by Art was fully reflected in our internal quarterly plan and external annual guidance as originally presented. We recognize that the analyst community did not quite reflect the extent of this quarterly phasing in the consensus figures. However, this should not be tracked from our published results today. First quarter adjusted non-GAAP EBITDA was $14.7 million, representing a $3.3 million or 29% increase from the year ago period. This result was achieved while increasing our investment in R&D by over $600,000 driven by our Corticotropin recommercialization project. Our adjusted non-GAAP diluted earnings per share metric increased $0.21 or 40% from prior year to $0.74 per diluted share. As previously reported in our year-end 2016 earnings call, in February, we utilized cash on hand, along with $30 million of borrowings from our credit agreement with Citizens Bank, to fund the purchase of 2 brand products, InnoPran XL and Inderal XL, for total consideration of approximately $51 million. These transactions had been accounted for asset acquisitions under U.<UNK> GAAP purchase accounting rules and have resulted in approximately $34 million of product-level intangible assets and nearly $17 million of purchased finished goods inventories stated at fair value on our balance sheet. The intangible assets will be amortized over a 10-year estimated useful life with the majority of the amortization to be taken during the period of patent protection for the assets. The inventory step-up will be amortized as the inventory is sold through. From the close of the transaction in February through March 31 of this year, we recognized approximately $1.5 million of incremental cost of goods sold for sales of these products related to the inventory step-up. Further details of the accounting for these transactions can be found in our first quarter 10-Q, which will be filed with the SEC after the bell this afternoon. Turning to the details of our first quarter sales performance. Net revenues of our generic products doubled from the first quarter of 2016 to $26.6 million, driven by the continued execution of our 2016 product launches. Key contributors included fenofibrate, propranolol ER, E. E. <UNK> , Nilutamide and mesalamine. Net revenues for our branded pharmaceutical products grew 44% year-over-year to reach $8 million in the quarter, driven by the April 2016 launch of Inderal LA and the introduction of InnoPran XL and Inderal XL into our product lineup in the second half of February 2017. In addition, revenues from contract manufacturing services were up $409,000 or 30%. Cost of sales as a percentage of net revenues increased from 17% in the prior year to 45% in the current year, partially driven by the aforementioned $1.5 million of cost of goods sold recorded in the current quarter due to the Inderal XL and InnoPran XL inventory step-up. Excluding this amount, cost of goods sold represents 41% of net revenues for the first quarter of 2017, in line with expectations and reflective of the increase in sales of products with profit-sharing arrangements. Selling, general and administrative expenses were $7.3 million as compared to $5.9 million in the prior year, primarily due to employment-related costs as we have added personnel to support the growth of our business. In addition, during the quarter, we incurred nearly $500,000 of transaction expenditures including legal and due diligence support related to a transaction that we ultimately decided not to pursue. This amount has been added back for the purpose of our non-GAAP measures. Research and development costs were, as forecasted, higher in the first quarter driven by momentum in our Corticotropin recommercialization program. Notably, our overall effective tax rate for the quarter was 31% of quarterly pretax income, reflective of the previously discussed fourth quarter dissolution of the foreign subsidiary that was put in place in conjunction with our first quarter 2016 purchase of the Corticotropin assets from Merck. From a balance sheet perspective, we had unrestricted cash and cash equivalents of $10.8 million as of March 31, 2017. This balance is reflective of first quarter cash flow from operations of $6.5 million and a utilization of approximately $21 million of cash on hand to fund the Inderal XL and InnoPran XL transactions. We also drew down $30 million from our credit agreement with Citizens Bank to fund these purchases. As of the March 31 balance sheet date, we had net debt of approximately $163 million, representing approximately 2.2x net leverage utilizing forward-looking 2017 adjusted EBITDA. As stated in our press release this morning, we are reaffirming our annual guidance as first published and discussed in detail on our fourth quarter 2016 earnings call and associated press release. In summary, we project full year net revenues to reach between $181 million and $190 million, representing a robust 41% to 48% increase over 2016 and a corresponding 20% to 26% growth in our adjusted non-GAAP EBITDA to be between $73.1 million and $77.2 million. This guidance continues to include anticipated increase in quarterly revenues from EEMT, driven by recent contract wins; the annualization and continued operational focus on maximizing 2016 launches; expansion of our brand revenues with the addition of Inderal XL and InnoPran XL; and execution of 2017 generic product launches while continuing to increase the investment and momentum behind our Corticotropin recommercialization project, our employee base and our manufacturing and distribution capabilities. With this, I will turn the call back to our President and CEO, Art <UNK>. Thank you, Steve. Moderator, we will now open the conference call to any questions. So hi, <UNK>. Thanks for the question. So we experience in EEMT market every year script declines of ---+ in the neighborhood of 15% to 20% and that expectation is always built into our forward-looking sales estimates for the products. So to give you an example, year-over-year, first quarter of '16 versus first quarter of this year, our unit sales were down by approximately 15,000 units or a total of 2.75 in net sales. Now that was driven by, certainly, script declines year-over-year, but also by the fact that our market share was in that 45% to 50% range as compared to where it was in the first quarter of 2016. So we see ---+ we're always going to experience script declines in that product. It's just a function of a generic product that's not being ---+ obviously not ---+ has no detail left behind it. But at the same time, we now have 3 of the 4 large script groups, buying group consortiums, under contract and so that allows us to ---+ you'll see an increase in our overall unit sales from our representative market share today to climb to what's representative of 65% of the existing market as it stands today. So we expect to see revenue increases over the course of the rest of the year on EEMT. Well, we have approximately 20 generic products, 21 if you include Indapamide. And we're fortunate that we have about 7 of those products that have essentially 1 or 2 competitors or no competitors and so ---+ in the generics space. And so that, to some respect, insulates us from some price erosion that's certainly occurring in the marketplace today. And many of those products that I mentioned also have exclusive raw material relationships associated with them. So that's helpful to us. That sort of puts us in a bit of a unique position now. That's tempered by the fact that, clearly, there's a new buying consortium, and I think we all know that Claris One has sent out request for proposals and eventually will make awards. So that provides certainly for more competitive platform across-the-board for generic products. But our business continues to grow in the generics space even with the headwind that we have experienced, <UNK>, year-over-year in regards to EEMT. Our business in generic products is up 100%. And so we see our business as continuing to be a growth engine with products that we're going to launch in our generic platform. And so that's helpful. I mean, we are not a company yet that has, what I would call, scale. 20 products in the generic marketplace does not represent scale. We've just been fortunate to choose ones that have lesser competitive environment, a lot of companies seek those out. But our objective is continue to launch products, grow revenues in the generic space and continue to advance our ---+ broaden our product line offerings. We have not. We'll request a Type C meeting at the appropriate time to obviously adapt to the timeframe that I mentioned, the second half of the year. We have a strategic planning session scheduled later on this month with our Corticotropin development team. We'll kind of be putting a stake in the ground as we advance towards an sNDA filing and part of that will be when we request a meeting, the Type C meeting, with FDA. Typically, FDA will grant those meetings with a 60-day lead time, sake of argument. So we have not yet approached FDA and asked for a meeting, but it's our plan to do so and obviously meet with them in the second half of '17. I think, certainly, what's very important ---+ no, what's very important <UNK>, we're trying to take a step approach in terms of disclosure and not get ahead of ourselves. The disclosure that we've advanced ourselves now to initiate process characterization on the manufacturing of 3 lots of purified Corticotropin powder, that's important because that represents lock-to-lock consistency in terms of yield, potency, et cetera, and I think that, that is a key milestone. From our perspective, if we can accomplish that, successfully accomplish that, we've got runway to an sNDA filing. And so that is something that I would think would be, from my perspective, is the next significant milestone associated with the project. So it's relatively stable, the pricing environment. Again, there's only one other competitor today, <UNK>, that's Creekwood. And as I mentioned, they have 1 of the 4 big buying consortium awards, primary awards. So for right now, it's relatively stable pricing. Remember that our product has always been priced higher than Creekwood's price. So we typically ---+ outside of EEMT because we had, early on as a public company, such a large concentration in revenues and obviously, gross profit associated with that product, we've always talked about the revenue base for that product. We don't disclose our revenues for other individual products. I can tell you, though, that since we acquired propranolol ER last year where the generic revenues for the product are certainly up over that period of time. I think we acquired a product that had an 8% market share level and our market share has certainly increased from that point. In regards to fenofibrate, fenofibrate, I'll remind you is a product that we receive a small amount of the sales revenues because we are marketing this product under our license as an authorized generic. And the revenues there have been fairly stable since we acquired the license to market this product. But we've seen our market shares on our key products, majority of them, increase over time. And that's obviously contributed to the doubling of our generic revenues from the prior year period. I think we're ---+ we've always been careful not to get ahead of ourselves on the project. I think we're just providing more color on milestones that have been achieved, us developing, successfully manufacturing the first development lot of purified Corticotropin powder is an important milestone because being able to replicate the yield that we anticipated from, let's say, historical manufacturing was very important in the project. And if you think about where we've come ---+ where we started in, let's say, January of last year when we acquired the asset, we've assembled a team, we have put together what we feel are the necessary analytical methods to modernize the NDA. We've started contract manufacturing or manufacturing of purified Corticotropin raw material. We've sourced, obviously, the natural substance, porcine pituitaries, and now we have what we feel is a fairly comprehensive regulatory filing strategy. And so we're getting to the point now where, as I always say, there's going to be enough meat on the bone, data points, to allow us to sit down with the FDA and discuss our intent to submit a supplemental NDA filing in the not-too-distant future. So this is just a natural course of events from my perspective, <UNK>, as to how we've rolled out this recommercialization program. And I think you should expect these updates to be ---+ well to articulate where we're at in the project and if that means that it provides more color to the project, then so be it. But I think it's just important that we report on what we consider to be significant milestones for the project as we move forward. Let me give you some color on the transaction. As you know, we continually look to advance to maturation of our business model. We were looking at, quite frankly, and it's without obviously naming any names, we were looking at vertically integrating into raw material manufacturing. We were looking at potential additional formulation capabilities, and at the same time, we were looking at acquiring a pipeline of filed ANDAs and ANDAs about to be filed. And so we always have viewed that step as important progress for the company, and it was unfortunate that we were not able to consummate the transaction. We just felt that in the due diligence process that the value was not something that we were ---+ or the price was not something that we were willing to pay. And so we've decided to cease exploring the opportunity and obviously walk away. And so ---+ but at least that gives you a feel for part of the company's internal strategic thinking as how we'd like to advance the company on a go-forward basis. I would just like to thank everybody for attending our earnings conference call today, and look forward to our next quarter and getting together once again. Thank you very much. Bye-bye.

2017_ANIP

2017

VZ

VZ #Good morning to everyone on the call, and thank you for joining us today I look forward to working with our investors and all of you who follow our stock and sharing progress in our strategy to deliver the promise of a digital world We are in a vibrant and exciting industry Our leadership position in wireless and fiber networks, as well as our loyal and high-quality customer base, is a reflection of our commitment to continuous improvement by our outstanding employees, which places us in a great position for long-term profitable growth The continuous changes from technology advances and the competitive environment will provide us new opportunities to evolve and develop innovative solutions to continue to be the key player in this dynamic market I’m energized by those challenges and the great team we have and I am excited about the coming years My primary objective is to build on the strong foundation of this business and ensure we are always being responsible stewards of the company by running the businesses we have today as efficiently and effectively as possible, while investing responsibly to deliver long-term growth and shareholder value Let us now move into an overview of 2016. As expected, 2016 was a transformative year for Verizon We demonstrated strong financial performance and returned value to our shareholders, while repositioning the business Our core businesses are executing well in highly competitive markets, and we are on track with our strategic priorities During 2016, we completed wireline divestitures of three markets, negotiated new contracts with our labor unions, executed successful 5G technical trials, and gained traction in new growth businesses Operationally in wireless with our network leadership strategy, we added 1.3 million smartphone net adds and maintained industry leading retail phone churn performance of less than 0.9% for the year and for seven consecutive quarters In wireline, we restructured the segment and its cost structure Overall, we delivered solid operational and financial results, which I will go into in more detail in a few minutes Our capital allocation was consistent with our strategy We invested in adding capacity through densification of the 4G network, acquired Telematics, and Smart City businesses and extended ecosystems to monetize data traffic We reduced our unsecured debt and delivered strong value to our shareholders through the 10th consecutive increase in annualized dividends last September Entering 2017, we are confident with our strategy and priorities to serve customers and increase value The foundation of our strategy is a network that is ubiquitous and reliable We will continue to invest in our networks, expand network capabilities and advance ecosystems to offer value to our customers The execution of these priorities will allow us to lead to the network layer and develop innovative solutions to meet customer demands in the rapidly expanding mobile first digital world Now let’s get right into the operating performance starting with our consolidated results on Slide 6. Total operating revenue in the fourth quarter was $32.3 billion, a decline of 5.6% Consolidated 2016 revenue was $126.0 billion, representing a decline of 4.3% If we exclude revenues from the divested wireline properties and AOL, which became part of our operations during the second half of 2015, adjusted operating revenue would have declined approximately 2.4% Wireless revenue tracked with our expectations in the quarter as the shift from service revenue to equipment revenue across our base of customers is ongoing Equipment revenue was seasonally strong, primarily led by new smartphone launches and equipment installment take rates Wireline segment revenues continued recent trends declining 3.1% with consumer growth of 0.2% for the quarter In our new businesses, we are pleased with AOL’s performance for the quarter and full year In the fourth quarter, our digital media business, led by AOL, generated revenue of $532 million net of traffic acquisition costs This revenue was down about 5% year-over-year as expected due to the revenue lift related to the Microsoft deal in the fourth quarter of 2015, but increased around 10% sequentially in line with our expectations Organically, Internet of Things revenue was $243 million, up 21% in the fourth quarter We expect to sustain these strong trends Including acquisitions, Internet of Things revenue increased more than 60% in the fourth quarter Strong cost management across the business enabled us to drive profitability, including offsetting the lost earnings contribution from the divested wireline market On a consolidated full year basis, excluding non-operational items, EBITDA totaled $44.8 billion, and EBITDA margin was 35.5% Now let’s turn to cash flows and the balance sheet on Slide 7. In 2016, cash flows from operations totaled $22.7 billion, which is impacted by payments of cash income taxes of $3.2 billion associated with the gain on the divested wireline properties Full-year capital spending of $17.1 billion was just below our guidance of $17.2 to $17.7 billion Free cash flow for the year totaled $5.7 billion, which does not include the proceeds from on balance sheet securitization transaction In the second half of 2016, we shifted to on balance sheet securitization of our equipment receivables as it provides us a lower overall cost of funding As we have previously noted, the proceeds from our on balance sheet securitization program are reflected in the cash flows from financing During the fourth quarter, we generated cash proceeds of about $2.4 billion from on balance sheet securitization for a total of $5.0 billion during the second half of the year Our balance sheet is strong and provides us with financial flexibility to grow the business We ended the year with $108.1 billion of gross debt, which comprised of $103.1 billion of unsecured debt and $5 billion of on balance sheet securitization Our year-end unsecured debt balance was lower by $6.6 billion than the prior year We remain on track to return to our pre-Vodafone credit rating profile by the 2018 to 2019 timeframe Now let’s move into a review of the segments starting with wireless on Slide 8. In the wireless business, we are delivering a balanced operational performance in a highly competitive environment Total wireless operating revenue declined 1.5% in the quarter to $23.4 billion For the full year operating revenue totaled $89.2 billion, a decline of 2.7% Service revenue of $16.3 billion declined 4.9% for the quarter as compared to the 5.2% decline in the third quarter For the full year, service revenue declined 5.4% Overall service revenue trends are consistent with the postpaid base migrations unsubsidized servicing pricing Approximately 67% of our postpaid customers are now on unsubsidized pricing, which is ahead of our expectations due to higher volumes in the fourth quarter Service revenue plus device payment plan billings increased 1.7% in the fourth quarter and 2.0% for the full year This deceleration in trend is due to the strong migration of customers in the second half of the year to unsubsidized pricing as customers fulfilled their price service contract We are also seeing strong migrations to our new pricing structure that we launched mid-year with safety mode and carryover data While these plans have resulted in greater than expected optimization they improved customer satisfaction and retention Recently we launched a single line pricing plan to improve our competitive position in that segment Equipment revenue increased to $5.7 billion, up 6.2% for the fourth quarter and 3.5% for the full year The percentage of phone activations on device payment plans increased to approximately 77% in the fourth quarter compared with about 70% in the third quarter and about 67% in the fourth quarter of 2015. We expect the first quarter take rate for device payment plans to be similar to 4Q as two-year service contracts are no longer available for upgrades by the embedded base At the end of the quarter approximately 46% of our postpaid phone customers had a device payment plan Improving the cost structure of our wireless segment is a priority We see additional opportunities to increase efficiencies in our operating model through the continued application of our Verizon lean Six Sigma processes On total revenues, our EBITDA wireless margin was 36.9% for the fourth quarter and 43.8% for the year In terms of profitability, we generated $8.6 billion of EBITDA in the quarter, a decrease of 5.2% For the full year, total EBITDA was $39.0 billion, an increase of 0.2% As expected, the equipment promotional activity in the quarter was elevated given the holiday season We will remain competitive in the marketplace In the fourth quarter, overall traffic on LTE increased by approximately 49% while we extended our lead in the industry’s third-party performance studies across the country Wireless capital spending totaled $3.5 billion in the quarter and $11.2 billion for the full year Now let’s turn to Slide 9 and take a closer look at wireless connections growth In the fourth quarter we added high quality retail postpaid net additions of 591,000 with a sequential improvement in the number of 4G smartphone and total phone net adds We added 552,000 new 4G smartphones in the quarter, which are partially offset by a net decline in 3G smartphones, resulting in 456,000 net new smartphones Total postpaid phone net adds totaled 167,000, which included a net decline of basic phones Tablet net additions totaled 196,000, which was 764,000 less than last year due to lower gross adds and higher churn resulting from previous year’s promotions Full year postpaid net additions of 2.3 million included 1.8 million 4G smartphones and 1.4 million 4G tablets The primary offset to these net additions was net declines in basic phones and 3G smartphones Postpaid gross additions improved sequentially to 4.2 million for the fourth quarter and to 15.4 million for the full year Our disciplined focus on customer retention resulted in retail postpaid phone churn of less than 0.9% Overall our retail postpaid churn increased year-over-year due to higher tablet churn to 1.1% Total postpaid device activations totaled 13.1 million in the quarter, down 1.9% and 43.2 million for the full year, down 7.3% About 85% of these activations were phones, with tablets accounting for the majority of the other device activations About 8.3% of our retail postpaid base upgraded to a new device in the fourth quarter, up sequentially and consistent with prior year During the quarter, 8.6 million phones were activated on device payment plans Net prepaid devices declined by 9000 in the quarter compared to a decline of 157,000 in the prior year We are seeing sustained year-over-year improvement in retail prepaid We ended the year with 114.2 million total retail connections, excluding wholesale and Internet of Things connections Our industry-leading postpaid connections base grew 2.1% to 108.8 million and our prepaid connections totaled 5.4 million Let’s move next to our wireline segment starting with a review of our consumer and mass-markets revenue performance on Slide 10. In the wireline segment, consumer revenue increased 0.2% and mass markets, which include small business, declined 0.2% in the fourth quarter For the full year, consumer revenues expanded by 0.4% and mass markets declined by 0.3% Fios total revenue again increased 4.4% in the fourth quarter and increased 4.6% in 2016. Fios revenue growth was primarily driven by an increase in the total customer base and strong demand for higher Internet speeds In Fios Internet, we added 68,000 net customers for the quarter and 235,000 for the year We now have a total of about 5.7 million Fios Internet subscribers representing 40.4% penetration In Fios video, we added 21,000 net customers in the quarter, and 59,000 for the year, and now have a total of 4.7 million Fios video subscribers, which represents a 34.3% penetration Similar to prior quarters we continue to see strong demand for custom TV offerings Our one-fiber initiative in Boston is progressing as expected and we launched consumer and business services to customers late in the fourth quarter We continue to innovate with our Fios platform utilizing our fiber assets and earlier this month we introduced instant Internet, which is a new service that offers both upload and download speeds of 750 Mb per second This service was introduced in New York, New Jersey, <UNK>adelphia, and Richmond and other markets will see this service soon Let’s turn to Slide 11 and cover enterprise and wholesale as well as the wireline segment in total Global enterprise revenue declined 4.5% and on a constant currency basis was down about 4% in the fourth quarter For the full year, global enterprise revenue declined 3.6% and on a constant currency basis was down about 3% In our wholesale business as expected revenues declined 7.5% in the fourth quarter due to the impact of non-recurring items in the prior year For the year, wholesale revenue declined 4.9% Total operating revenues for the wireline segment declined 3.1% in the quarter and 2.3% for the full year The impacts of the labor contract, workforce reduction and tight cost control supported improved profitability, while maintaining strong customer satisfaction The segment EBITDA margin was 24.1% for the quarter and 19.6% for the year We expect to see continuing improvement on an annual basis with seasonal fluctuations Capital spending in wireline was $1.6 billion in the fourth quarter and totaled $4.5 billion for the year Regarding our pending wireline transactions, we expect the acquisition of XO Communications to close in the first quarter and the data center transaction to close in the second quarter Let’s move next to Slide 12 to discuss our strategic position Entering 2017, we are confident in our strategy and priorities for future growth and profitability The foundation of the three-tier strategy begins with our commitment to invest in our best in class networks Above the network layer resides our platform layer, which we are developing and creating new business models to monetize the ever-increasing digital traffic growth Our goal is to be the trusted provider of connecting people and things and providing scalable solutions and analytics Network quality and leadership is the cornerstone of this strategy and at the forefront of our brand value proposition to our customers Today we are in the largest and most reliable 4G network in the country with market leading fiber assets To expand our network leadership, we are executing on our strategic efforts to densify the 4G network, increased fiber resources and enhance spectral efficiency As I noted earlier, we have initiated our next generation fiber network deployments in Boston Fiber is an important element of our wireless networks as it allows us to strengthen our 4G LTE capacity, which also preparing for 5G Our pending XO Communications acquisition will add to our fiber footprint and provides us with additional metro rings in 45 out of the top 50 US markets 5G wireless technology is a focus for us We are now launching about 10 pre-commercial pilots across the country with multiple use cases including dense urban and suburban neighborhoods Our goal is to test the 5G fixed wireless technology in different environments in order to successfully operationalize 5G for a commercial launch As noted earlier, we are expanding platforms and building new business models to monetize digital mobile video traffic on our network In our media assets, AOL’s content and ADTECH capabilities have enhanced our video offerings With a focus on delivering timely, short form versions of video clips we have seen digital video consumption gain traction in the last year At the content and solutions layer of our three-tier strategy, the combination of AOL, go90 and other content has enabled cross-platform sharing This strategy expands our distribution and revenue opportunity globally across carriers and networks We have seen increased usage in the go90 application through this exchange and we are expanding our unique content offerings The average daily usage in go90 was consistent sequentially at about 30 minutes per viewer, with less than 20% of traffic surfed on the Verizon wireless network in the second half of the year We are actively leveraging our content portfolio and have strategically focused on an add-supported model In 2016 through our joint venture with Hearst, we launched unique content through Complex Media and AwesomenessTV, and we are looking forward to expanding these offerings this year In addition, our extensive digital rights portfolio including sports such as NFL and NBA provide enhanced viewing experiences such as launching [stream pass] for Verizon wireless customers across multiple demographics Our pending Yahoo acquisition will further increase our opportunity to scale in the digital media space with its 1 billion plus monthly average unique viewers We are still working with Yahoo to assess the impact of the breaches and we have not reached any final conclusions yet The Internet of Things including Telematics, is an area of opportunity due to this rapidly growing as it connected world expanse Ubiquitous and reliable coverage to support the vast number of devices expected on these various platforms is a comparative advantage and we are developing this ecosystem to leverage our best-in-class networks while providing solutions of verticals such as transportation, energy, agriculture and smart cities A great example of this is in the Telematics space with acquisitions of both Telogis and Fleetmatics, we became the market share leader Our Smart Cities Solutions continued to progress and the business is augmented with the acquisitions of Sensity and LQD WiFi As a result, we now have a deep inventory solutions on our IoT platform to provide to our customers Overall, we are confident in our ability to execute deliver results and return value to our shareholders while continuously transforming the business As we look at our current and pending assets in the media in IoT businesses, we will be focused on integrating these assets by increasing global scale organically and further enhancing cross platform content sharing opportunities Collectively, these assets allow us to participate in the global ecosystem of the connected world We see a clear path to revenue contributions from these integrated assets which will drive returns to the overall business in a less capital intended manner Now, let’s turn to slide 13 to review 2017 priorities In 2017, our focus will be leveraging our network leadership positions We will focus on retaining and growing our high quality customer base in both wireless and wire line while balancing profitability in this dynamic environment Enhancing ecosystems in media and the Internet of Things let by Telematics will further drive the monetization of our network and solutions both domestically and globally We expect full year consolidated revenue on an organic basis to be fairly consistent without a 2016. With improvement in wireless service revenue and equipment revenue trends, we also expect full year consolidated adjusted EPS trends to be similar to consolidated revenue trends Additionally, we are targeting the following for 2017. Consolidated capital spending between $16.8 billion and $17.5 billion Minimum pension funding requirement of approximately $600 million and in terms of income taxes, we expect our effective tax rate of financial reporting purposes to be in the range of 34% to 36% based on current legislation We will execute in the long term strategy to position the business for the future With that I will turn the call back to <UNK> so we can get to your questions Thank you, <UNK> for the question So yes, let’s start with the outlook we gave this morning And I’ll start with the revenue So, as you saw for now, we said we expect to see a consistent with 2016 on an organic basis And we continue to see the revenue trajectory of the business improve So, as you saw in the release, we expect that to be fairly consistent on an organic basis So, this is an improvement over 2016, when revenues decline 2.4% on a comparable basis So, let’s unpack that for a sec and see how we get to that improvement from the negative 2.4 up to something is more comparable And obviously, the major driver is wireless, where total revenue is down 2.7% last year and service revenue was down 5.4% So, if we look into the service revenue component there, that trajectory improve throughout the year We started in the first quarter of ‘16 down 6.2%, we ended the year in the fourth quarter down 4.9% and the year as a whole average down 5.4 as I said So, as we expect that trend to continue to get better, we should see a better number year-over-year in wireless service revenue Equipment revenue should also be higher given the higher device payment take rate which we expect to be similar to what we saw in the fourth quarter which was a 77% And so, obviously improve pending wireless, it will be the biggest factor year-over-year And as you look at the other parts of the business, we expect wireline revenue trends to be similar, the 2016. And then Media Cover, we expect that will continue to build off the progress made last year And then within the IoT businesses obviously included Telematics acquire a 21% in the fourth quarter And we expect that business to continue to grow at a very healthy pace So, on a combined basis, we are confident in seeing a better revenue trajectory in 2017 in last year When you talk about the how we gave the outlook on revenue versus what we’ve been saying previously I think the biggest light and you got to look at in there is wireless service revenue So, we continue to make good progress transition the base to unsubsidized service pricing and as customers come out of their two year subsidy plans, we see them quickly migrate to the unsubsidized service pricing And we ended the year with 67% of the post pay customers now on those unsubsidized pricing plans And so, while we were happy to have seen the acceleration, it does provide a head wind to service revenue And then additionally, within service revenue we saw a higher level of migrations and then past pricing changes To the plans that we introduced in the middle of last year and that functionality of those new plans appealed to our base And we saw customers take advantage of that and not to might say a plan So, those two development especially have essentially pushed out our expectation of the timing of the service revenue to return to year-over-year growth from the end of 2017 into ‘18. And as then as you look at the earnings side of it, obviously the largest driver of EPS changes is what happens in the wireless service revenue So, obviously the service revenue being $66 billion, more than 0.5% of our total revenue It’s largest driver and so that’s we continue to work through that service revenue migration It is offset by the strong cost management we had across the business And that’s been a hallmark of our performance over the past few years using the Verizon Lean Six Sigma program that you’ve heard us talk about previously And that will continue to produce significant benefits in 2017 and will also see a full-year benefit in ‘17 from the new labor contracts So, when you factor in all of the above, we expect to produce strong earnings again in 2017 and we talked about the trend we expect on EPS You’ve obviously got the impact in 2016 of one year of the Frontier properties in the first quarter and obviously the work stoppage But in total will be around the revenue lines It will be around where we were in 2016 as the baseline of our view for ‘17. That’s a reasonable starting point, yes Let’s say and that still continue but we saw at a certainly an aggressive pace Initially, after we launch those plans, so that just means the base moved quicker to those plans that we’d seen in other changes So, we’re excited we launch product features where of high level of interest to our customers Yes, the normal number for 2016 would be the comparable against the down 2.4% when you adjust out for the acquisitions over the course of the couple of years <UNK>ip <UNK> So, all right So, exactly the dollar number that we should be starting with as the baseline to build from Correct Consistent on a dollar basis year-over-year and we get that through seeing improvements in the trend on the service revenue trajectory, the equipment revenue trajectory So, in total across wireless and then also the newer businesses whether it be Media Curve or across the Internet of Things businesses, we continue it to expect to see those the revenue from those businesses improve in 2017. <UNK>ip <UNK> Okay, that makes sense And then on earnings is it 386 that we’re using as the baseline from 2016 to jump off into ‘17 or is that a different number? That’s I’d go off with 387 that we had on an adjusted basis, adjusting off for the mouth to market another items <UNK>ip <UNK> 387 got it okay And then if I just add one more new one, you talked about the gap tax 34-36 how should we think about cash taxes in 2017 under the current legislation? Yes, we would expect cash taxes to converge to all the effective tax rate during 2017. <UNK>ip <UNK> So higher cash tax rate in 2017 than 2016? Yes, the cash tax is just purely on income obviously, our cash taxes for 2016 did include $3.2 billion of taxes related to the frontier transaction, we would expect to have cash taxes in ‘17 related to the disposal of the data centers, when that occurs at a lower level, but on the organic tax on earnings we would expect that the cash taxes to be closer to the ETR during the course of ‘17. <UNK>ip <UNK> Okay, and do you have any initial thought on what the different plans of tax changes could be, anything you can help us as we model out the different impacts from border adjustments and things like that? Yes, so as we look at tax, we certainly, we’ll be certainly, look it’s a little too soon to tell, we certainly are supportive to changes in the tax legislation, we believe that we need to get to a more competitive tax environment and we look forward to working with congress and the new administration as Trump put new tax rate forward Certainly a reduction rate would be beneficial, 100% expansion of CapEx would be beneficial initially, but the plans being discussed also include items such as removal of the interest expense deduction, and then as you mentioned, we’re trying to understand exactly how border adjustable as it may or may not work, so certainly believe that tax reform would be a benefit to us, whichever year first it applies to whether applies to ‘17 or whether it initially apply to ‘18. We definitely seeing it being a benefit to the cash taxes we pay, but given the uncertainty on the specifics of the plan, it’s a little too soon to say exactly how much that could be <UNK>ip <UNK> Can you give us an idea of within your CapEx and OpEx what other dollar number or percent comes from overseas and then I will stop? Yes, I don’t think we’ve disclosed that number previously, so we’d have to go back and look that back, we’re not going to be disclosing that at this time <UNK>ip <UNK> Thanks very much Yes, thanks <UNK> for your question, so starting off with wire line, certainly wire line had a good result in the fourth quarter, I would tell you as you say it in our prepared remarks that we would expect wire line margins for 2017 in the year as a hold to be higher than they were in 2016 and you’ll see some seasonal fluctuations in it, as we typically do, so I would tell you be reasonable to expect wire line margins with the year as a whole to be in the low 20’s compared to the 19% that we saw for 2016. So we see a lot of improvements going through the business, there obviously we’re going to have the full year benefit of the new labor contract through there and we continue to manage costs in that business very closely in-line with the revenue trajectories, we continue to see kind of similar revenue to direct these for the enterprise and wholesale businesses and are excited about the files business which was up last year 4.6% on the full year basis, for files revenues and we continue to have more open for sale properties there, the great opportunities as we head into ‘17. On overall margins, when you talk about the wireless margins, this always comes back to where the service revenue trajectory is going to be And so we certainly see improvements in the service revenue year-over-year, but we do go into the year off that 4.9% jump off point from the fourth quarter and we expect to see that continue to improve as we head into ‘17, but as I said we now see the point that which we get back to year-over-year positive number pushing out into ‘18. And so, I would expect us to have continued to a very strong margins in the wireless business but is going to be half of that service revenue trajectory continuing to be slightly negative though in an improving direction We will continue to aim to produce strong margin in that business and certainly believe that we have the ability to maintain a premium pricing in the market and we will, that will certainly be our aim as we go through the year Thank you, <UNK> So I will start with your first question So as we look at our market position it's based off the product offering and we have the best network performance out there which is a major criteria in the user experience Despite the claims of others third parties studies continues to demonstrate the superiority of our network and as network leadership position, I will say allows us to maintain a premium price round service in the marketplace So as I look at our service revenues plus installment billing so the total amount we are actually billing a customer each month I think increased 2% in 2016. So that demonstrates how often it continue to be competitive and resonate in the marketplace We continue to constantly monitor the competitive market We look for opportunities to compete more effectively And as an example of that we have recently launched new single line pricing which we believe was an under-penetrated market for us So our pricing is disciplined to provide a return for our premium service This number of different offers out there, we saw some folks go to unlimited We saw some bundling of content and so on in the marketplace We continue to assess where we are in there and so I will say I think our result we had 167,000 net phone nets in the quarter so I believe our positioning continues to be competitive We constantly look as well out there There is unlimited is one of the things some of our competition has at this point in time There is not something we feel the need to do but I will say we continually monitor the market and we will see where we are heading in the future In terms of your second question, so look there is a lot of changes going on in DC right now Obviously yesterday we saw the announcement that as you mentioned G pie and so that may have a number of impacts across the regulatory space but I think it's just too soon to tell exactly where we are going to be We look forward to working with the regulators for the CFCC or others The other thing I would mention though you think about that we make investments for many years given the nature of the business that we are in and our investment are focused on just who happens to be in office today We make an investments so that for 10 plus years and I think our records stands for itself irrespective whoever the administration is run by and the regulatory regime they were effective and that will be continued to be how we focus on our investment So I will say we look forward to working with the new administration and the new leadership and the FCC and we expect to continue to be competitive in whatever we environment we are operating So as you mentioned that we have been on this path to getting back to the pre-Vodafone credit metrics by 2018-19 and that's part of our overall camp allocation, we have been able to be consistent with investing in our networks on a continuous basis, making that improvement in the balance sheet and also returning value to shareholders and since the Vodafone transaction we had a number of activities that we have done whether that be AOL some of the other acquisitions in IOT such as Fleetmatics, we have also divested of business whether it would be the tower transaction as an example And so we have been able to continually make strategic transactions while staying consistent to each part of that cap allocation policy So that would be our intent to continue to do so And as we head into 2017 we believe that we will out of the two, while continue to maintain that cap allocation policy that allows us to deliver on all three of those key areas So obviously look I am not going to comment on any specific combinations that have been rumored over the years and certainly I am - we are not able to talk specifically about spectrum right now given that we are in the incentive auctions So we will continue to look for to opportunities to expand and grow the business Although we’re not completely aligned that we will be disciplined in any investment activity We evaluate all options whether that's build by our partner for our strategic positioning and the key criteria is creating long term value for the business and shareholders So we will continue to look for the right things to do to position the business to be successful in the future and that's we do that on an everyday basis and we will continue to do so And I think we have successfully done that over the past few years Yes Thanks <UNK> so let me start up with 5G, so look we had a good progress in 2016 as we discussed throughout the year We had a number of technical trials and labs go trials which we completed and so we have now moved on to the next phase of that which is some of these commercial scale pilots that are getting on the way right now in about ten different locations around the country So we are very excited about the opportunities of 5G brings And we will see how those trials go and we look forward to sharing progress with you on those as we move forward throughout the year You asked around key metrics and I think it's going to be the same as any major investment we could be looking at is the combination of what's the cost of rollout 5G, we get into questions about how the distance from the node, how many homes can you cover many particular node, what speeds can we get, what’s the cost of putting that there etcetera XO obviously brings something to that but having additional five to the basis we think about rolling out the infrastructure needed for the 5G and but it's the same as any investment <UNK> we are going to look at the revenue opportunity We think we can get based off the results of the tests around the way right now And compare that with the cost And if it provides a great return for shareholders we will certainly move ahead with launching commercially and if it will be the same as any other investment We will look at the same way In terms of your second question on 2016 you are right The base line is reducing the frontier divestiture and also AOL because Sony had partially part of the year in 2015. So then if you think about total revenue for 2017 it would include obviously the full year of AOL this year We expect XO to kick in later this quarter We expect the IOT business as you are going to have the full year of Fleetmatics in Telogis and the other IOT acquisitions and then assuming the Yahoo transaction closes we will have the revenue from there too So when you think about building on the number that <UNK> mentioned the 121 billion you got all those things to layer on top of that to get to the expectation for the full year Obviously it relates to pending transactions It will be contingent on the timing of those as well But hopefully that answers your questions on that Yes Thanks <UNK>, so as you think about the CapEx as you say the number is reasonable consistent year after year and that's something you have seen for a number of years but as you say within that it changes overtime And so within LTE our spending has continued to transition from coverage to indentifying the network and that continues to evolve as we leverage new technologies around radio and hardware and software and then reforming our spectrum within 4G and identifying with small cells So you will continue to see that densification of the 4G network and that includes how we put fiber out there which obviously is needed for the 4G network but also it's something we think about for pre-positioning for 5G so you will continue to see that - you will continue to see us launch additional pods of LTE advances as we go through that We had the initial launch that last year We expect additional features to come through in the close of this year And we will continue to expand our architecture So within wireless you should expect to see the spending continue to move to make the network more efficient on a cost per gig basis going forward And as we have mentioned fiber is a consistent part of our business So that's something you should expect to see us continuing We have talked about what we are doing in Boston You should continue to see us do that Some of the other businesses aren't as we said previously they are not as capital intensive as our network business So you should expect to see the CapEx will continue to be focused on the network side of the business as we go into 2017. Yes It's not just in the wire-line footprint it's across the country and we certainly see the opportunity to deploy 5G solutions across the country as well once we get comfortable that they are ready to be launched out on a commercial basis Yes that's certainly we are looking at how we would support the 5G network across the country both in and outside the ILX footprint Yes Thanks <UNK>, I will start with the last one, look we certainly like it when customers migrate from feature phones to an LTE smart phone but we are also very happy for those customers that just want a feature phone They are not looking for the additional functionality but they want to be connected to a great network We are very happy to continue to have those as customers and we look forward to continue to have offerings that meet their needs as well In terms of service revenue and I think you talked about the gap between the 46% of our customers who have a device payment plan in the 67% of our base who are now on subsidize pricing That's a factor of those customers come out they are two year service contracts and they move over to that pricing without necessarily upgrading a handset and we expect that will continue That delta between those two numbers will be those customers who have either come out of two year subsidy and moved over to the un-subsidized pricing They could be we now have customers who took out a device payment plan over two years ago who have completed those payments and are now no longer making a device payment every month and as you say BYOD continues to be part of that base too So you should expect they will continue to be delta between those two numbers because not everyone on unsubsidized pricing is going to have a current device plan So we see that continuing as we go into the year and part of that is certainly migrating over to device payment Yes, the vast majority of our two year customers who have gone on to the unsubsidized prices but they've come to the end of that I mean, we typically its customer has to get through their two year price plan if they're on that two year service contract before they were then being able to come to the unsubsidized pricing When you look at our churn, I think what you're trying to get to is that phone shown it was below 0.9% And that is not because we're bringing customers on to that pricing before they've moved their thing Their continued strong churn represents the value out basis and the service they get and the high quality of the network what they have when they're authorizing customer So, it's only when they come out of their two year contract do they move over to ---+ have the opportunity to move over to unsubsidized pricing Yes We expect to continue to compete in the marketplace as throughout 2016, we had various promotions throughout the year I'd expect us to continue to different times of the year, have different promotions out there But I expect base of that, we will compete effectively in the marketplace Yes So, good morning <UNK> Thank you, for that Yes, fiber is going to be a critical asset for us It's a critical asset today and it will certainly continue to be selling as we go into the future So, one thing it allows us to do and is certainly is within our footprint is it replaces the core copper networks that have served us well over the year But from a capability standpoint, or now it's just a maintenance standpoint, it certainly makes a lot of sense for us to continue to replace copper with fiber And then as you say fiber is going to be critical for us as we densify 40 and think about 5G, that it explains why the XO transaction was interesting to us getting those metro rings in 45 of the top 50 markets The other thing you seen us doing in Boston was really look at this one fiber approach which was built in a network in a way that it provides a common fiber infrastructure to serve a number of different needs, whether that be consumers in home or in out of home and then obviously our small medium and enterprise customers too So, you should continue to see us deploy fiber How we deploy that fiber? Can differ from location to location We certainly look where it makes sense for us to own the fiber, but if there's way for us to partner with other people, they can build the fiber on our half, we certainly do that as well So, it a location-by-location, case-by-case basis, we look at the economics and we decide the best way to get to the fiber assets And we need, and we think about that if not justify brands, so we need for what we were doing today, but as we think about the network going out in to the future So, you should continue to see us make investments in fiber as we go forward and position the network to service the business well into the future Yes, so as I think about, look we know they said they're going to they expect to launch that later in the year We'll have to wait to see what is As we said previously, look, we've been in the wholesale business for many years We're happy to be in that business and we'd sign that agreement again if the opportunity came up But look we don’t expect that to necessarily have a major impact during the course of 2017. They got a lot of work to do there and I'll let them talk about this strategy on that But as I thi8nk about the competitive environment as a whole, I would expect to continue to evolve in ways that some of which we may guess, others which we'll have to wait and see how they play out, but what I would remind you is that we've seen many different competitive environments over the past 15 20 years in wireless and I think the one constant is being is the way that we've always competed effectively, whatever the environments and I highly expect us to do the same thing in 2017. Thanks, <UNK> I'd like to close this session with a few key points In 2016, we delivered solid results in the competitive environment We had a quality customers will lead in the industry and network performance and customer retention We had solid financial results generating cash flow and shareholder return We are confident in our strategy and priorities led by investing in our networks, creating platforms to further monetize daily usage, maintaining a discipline capital allocation model and returning value to our shareholders We are positioning the company for longtime growth A key foundational element for our vision of the future is be the trusted network provider Our strong network assets will enable us to be a centerpiece of this new connected world of people and things and give us the opportunity to participate globally and at advancing digital ecosystems We look forward to the opportunities ahead of us to create value for our customers and shareholders Thank you for your - time today

2017_VZ

2017

ALLE

ALLE #Thanks, Dave, and good morning, everyone Thank you for joining the call this morning If you would, please go to Slide 5. This slide depicts the components of our revenue growth for the first quarter I'll focus on the total Allegion results and cover the regions on their respective slides As indicated, we delivered 8% organic growth in the first quarter The strong organic growth reflects healthy markets in the Americas, continued strength in driving electronics growth and the company's focus on channel initiatives The favorable comparable, driven by last year's ERP implementation, was also a factor in the strong growth Pricing was favorable in the quarter in all regions, as the company remains disciplined in taking necessary pricing actions to help mitigate the impact of rising commodity prices During the quarter, acquisitions contributed 2% growth, and foreign currency was a headwind, particularly in the EMEIA region Please go to Slide 6. Reported net revenues for the quarter were $548.8 million This reflects an increase of 9.3% versus the prior year, up 8% on an organic basis I was particularly pleased with the outstanding organic revenue growth from Americas, which adds strong growth in both the nonresidential and residential businesses, as we continue to deliver above-market growth We also had good price realization in the quarter, offsetting the currency headwind seen in EMEIA Adjusted operating income of $100.7 million and adjusted operating margin of 18.3% increased 19% and 150 basis points, respectively, when compared to the prior year All regions delivered improved adjusted operating margins The operational improvement was driven by solid incremental volume leverage, price, productivity and product mix, which more than offset the impacts of inflation and incremental investments I'd also note that we improved our industry-leading adjusted EBITDA margin to 21.1% in the quarter, an improvement of 130 basis points versus the prior year All regions improved on this metric in the quarter The business continues to execute at a high level, demonstrating both strong organic growth and operational margin improvement, while continuing to make investments for future profitable growth Please go to Slide 7. This slide reflects our EPS reconciliation for the first quarter For the first quarter of 2016, reported EPS was $0.60. Adjusting $0.01 for the prior year restructuring expenses and integration costs related to acquisitions, the 2016 adjusted EPS was $0.61. Operational results increased EPS by $0.17, as favorable price, operating leverage and productivity more than offset inflationary impacts A decrease in the adjusted effective tax rate drove a $0.05 per share increase versus the prior year The decrease in rate is primarily due to favorable impacts from discrete tax items, including the benefits from the recently adopted accounting standard on share-based compensation These discrete benefits more than offset unfavorable changes in the mix of income earned in higher rate jurisdictions Next, a reduction in the number of outstanding shares drove a $0.01 per share increase Moving on, incremental investments were a $0.04 per share reduction These investments relate to new product development and channel initiatives, which allow us to grow faster than the market, expand our electromechanical presence and increase our vitality index Next, interest and other income were a net $0.07 per share reduction This was primarily attributable to the positive impact from the sale of nonstrategic marketable securities during the first quarter 2016 that did not repeat in Q1 2017. This results in adjusted first quarter 2017 EPS of $0.73 per share, an increase of $0.12 or approximately 20% compared to the prior year, with the growth driven by operational improvements and organic growth Continuing on, we have a negative $0.02 per share reduction from acquisition and restructuring charges After giving effect to these onetime items, we arrived at the first quarter 2017 reported EPS of $0.71. Please go to Slide 8. First quarter revenues for the Americas region were $407.6 million, up 12.3% on a reported basis and 10.3% organically Strong organic growth reflects above-market performance, driven by our new product and channel initiatives, as evidenced by mid-teens growth in electromechanical products As noted on the chart, we experienced double-digit growth in nonresidential products, driven by strength across the portfolio, as we continue to see solid performance from our organic investments Delays in shipments in the prior year related to an ERP implementation also contributed to the increase Residential revenue also grew mid-single digits, with continued strength in electronics Americas' adjusted operating income of $107.8 million increased 17.7% versus the prior year, and adjusted operating margin for the quarter increased 120 basis points The increase of adjusted operating income and adjusted operating margin was driven by incremental volume leverage, price and productivity, offsetting the impact from rising inflation and incremental investments The operational increase, while absorbing incremental investment spend, demonstrate excellent performance by the entire Americas team Please go to Slide 9. First quarter revenues for the EMEIA region were $118.4 million, down 0.1% and up 1.3% on an organic basis The reported revenue decline was driven by currency headwinds, which offset the contributions from price realization and acquisitions The SimonsVoss business continues to perform well and saw strong growth, especially in the dock region EMEIA adjusted operating income of $8.5 million increased 2.4% versus the prior-year period Adjusted operating margin for the quarter increased 20 basis points, while price and productivity more than offset the impacts from inflation, investment and currency headwinds We continue to see margin expansion despite the inefficiencies we experienced associated with the previously announced restructuring plan to optimize our manufacturing footprint in the region The complexity of the move is challenging As a result, the benefits we expected to realize are delayed Please go to Slide 10. First quarter revenues for the Asia Pacific region were $22.8 million, up 9.6% versus the prior year Organic revenue increased 4.8%, driven primarily by solid growth in the Australia and New Zealand region, as we are seeing good traction on our channel expansion initiatives Total revenue was also supported by favorable foreign currency impacts and contributions from acquisitions Asia Pacific adjusted operating income for the quarter was $0.6 million, with adjusted operating margins up 260 basis points versus the prior-year period Strong volume leverage and improved operational performance led to the adjusted operating margin expansion Please go to Slide 11. Available cash flow for the first quarter was negative $48.7 million, which is a decrease of $40.5 million compared to the prior-year period The decrease is driven by the $50 million discretionary pension funding payment that was made in the quarter, partially offset by higher net earnings Working capital, as a percent of revenues and the ratio for the cash conversion cycle, increased in the first quarter 2017 when compared to the prior-year period The increase is primarily driven by planned increases in inventory levels in certain areas to improve customer fulfillment requirements and the inventory build related to the EMEIA manufacturing move We remain committed to an effective and efficient use of working capital Lastly, we are affirming our full year available cash flow guidance of $300 million to $320 million, which is net of the $50 million discretionary pension funding payment I will now hand the call back over to Dave for an update on our full year 2017 guidance Yes It's heavily weighted towards Americas That trend will continue As we kind of indicated last time, it's probably 80:20, Americas versus rest of the world Similar ratio for Q1, and we'd expect that to continue throughout the balance of the year I would - we had a strong quarter As we indicated, some of that strength, just driven primarily from the - not only growth and the initiatives and the returns on investments we're making, but some of it because the easier comparison because the delayed shipments last year, as you're aware of Tougher comps in Q2, but markets remain fairly strong and tracking towards the organic revenue growth we had indicated at the beginning of the year, 6% to 7% for the full year Probably a little bit because of tough comps in Q2, I would anticipate a lower revenue growth But the outlook for the full year still remains fairly positive, just given the activity in the marketplace, response from our customers, order intake, et cetera So you're right We've seen a significant movement in commodities across the board The biggest impact for us relates to steel, brass and zinc Steel, year-over-year, is up, at least at the end of the quarter, over 40% And it's moved since then, another like 20%, so significant movements And as you indicated, we've been able to move faster in price to offset the commodity headwinds What I would see through the balance of the year, just kind of given where the current commodity prices trade today, is continued pressure on the cost side It will escalate a little bit in Q2, Q3 because if you recall, we hedged some of our exposure on a forward-looking basis And so we're protected And to the extent the commodity prices stay in place for an extended period of time, the exposure becomes greater So continued pressure, Q2, Q3. The comps get a little bit easier in Q4 because that's when we start seeing big movements in the cost base But we will endeavor to mitigate that, offset it, et cetera And that's our current plan through pricing actions <UNK> <UNK> Got it That's helpful, <UNK> And just maybe that - is the base case there that price cost stays positive as we progress through the year? Or is it possible that in the next quarter or so, you could go negative there, and then you'd make it up in the back half of the year? It could be a little negative, but I would think we'd be neutral to slightly up is the expectation, certainly as we look on a full year basis And maybe if I could sneak in one more When I went and visited you guys, spent time with you guidance at ISE West, it seems like you guys were really excited about the - your ENGAGE platform I'm just wondering, like how much opportunity is there with the platform? How much is that adding to your share gains in recent quarters? Just maybe expand more strategically, that would be helpful So I would characterize it as every year, we - particularly in Americas, we go out to price increase in Q4. And so we start realizing the benefits basically beginning of the following year, as a lot of the activity is price-protected, if you will So what you saw in Q1 was in line with our expectations in the market We are not - I'd say we're competitive in the market We're not being overly aggressive from a discounting perspective, either on residential or nonresidential products I would anticipate the pricing improvement to continue throughout the course of the year, maybe get a little bit better than the 1-point improvement that we saw in Q1. And that kind of continued throughout the course of the year They were actually fairly equal in Q1. But normally, you're right I mean, we get - we have the ability to push price a little bit stronger in non-res than res That is still the case As we continue to invest in both our channels and new products, there's, obviously, carryover from the prior year But funding the new initiatives starts to really ramp up more so in Q2, Q3. So you see a little bit heavier investment in those quarters relative to Q1. So no change in the outlook in terms of our available cash flow for the full year The long-term target is to continue to drive cash flow to be at 100% plus of net earnings Feel good that that's sustainable, given the low investment requirements, particularly in working capital and CapEx So we'll continue to drive that And the deployment of the capital, as we indicated in Investor Day, is we've got certain things that are designated, whether it be CapEx, dividends, debt repayment, et cetera, but we've got a big bulk of capital available for strategic investments, either through M&A or opportunistic share repurchase And we'll continue to look at those opportunities as we progress throughout the year, but no change relative to our short-term or long-term guidance in terms of cash generation going forward

2017_ALLE

2015

APEI

APEI #Thank you, operator. Good evening, and welcome to the American Public Education conference call to discuss financial and operating results for the third quarter of 2015. Presentation materials for today's call are available in the webcast section of our investor relations website and are included as an exhibit in our current report on Form 8-K filed earlier today. 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, amounts in nature of anticipated charges, expected registration and enrollment, expected revenues and expected earnings, and plans with respect to recent and future 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 and the company's other SEC filings. The Company undertakes no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future. On the call today we will also discuss certain non-GAAP measures and our outlook for the fourth quarter of 2015. Although these non-GAAP measures are not intended to be a substitute for GAAP results, we believe they will allow investors to better compare results to prior year periods. This evening its my pleasure to introduce Dr. <UNK> <UNK>, our President and CEO, and <UNK> <UNK>, our Executive Vice President and Chief Financial Officer. Also available for questions today, is <UNK> <UNK>, Executive Vice President, Chief Development Officer, and CEO of Hondros College of Nursing. Now at this time, I'll turn the call over to Dr. <UNK>. Thanks, <UNK>. Good evening, everyone. In today's call I will provide a summary of our recent results and commentary on our strategic priorities. Then our CFO, <UNK> <UNK>, will discuss our financial results and provide perspective on the Company's outlook for the fourth quarter of 2015. Before we begin I want to take a moment to thank <UNK> <UNK> for his service to our company. <UNK> recently informed us that he will retire in December from his current roles as Chief Executive Officer of Hondros College of Nursing and Chief Development Officer of American Public Education. <UNK>'s involvement with APUS and APEI goes back to 2001 when he was hired as a consultant. <UNK> was instrumental in helping the company receive private equity funding in 2001 and 2002, helped us obtain approval for participation in the Federal Student Aid Program and he served as a board member through 2006. <UNK> became our CFO in 2007 and ably guide us to an IPO later that year through SarbOx compliance and two secondary offerings in 2008. He led the team that identified and acquired Hondros College of Nursing and has led Hondros as its CEO since November of 2013. More importantly, to me, <UNK> introduced and recommended me to APUS in September of 2002 and the two of us have worked together since that time. I want to thank <UNK> for his service to our companies, I wish him well in his retirement and I appreciate his willingness to work with us as we transition to new leadership at Hondros. Its been a wonderful experience working with you, <UNK>. In the third quarter of 2015 overall net course registrations at APUS decreased 6% and net course registrations by new students declined 19% year-over-year. The overall decline was primarily driven by a 35% decrease in net course registrations by new students using federal student aid. We believe that efforts to improve our quality mix of students through new admissions processes, more targeted advertising, and increased competition for civilian students contributed to the decline in net course registrations in the third quarter of 2015. It is also important to note that overall net course registrations by returning students declined only 3% year-over-year, indicating that our goal of attracting better students is working. Net course registrations by new and total students using military tuition assistance, or TA, decreased year-over-year by 7% and 3% respectively. We believe the decline is primarily the result of decreased utilization of military tuition assistance benefits by active duty military professionals. That said, in the third quarter the year-over-year decline represents a sequential improvement over the year-over-year (inaudible) decline we experienced in the second quarter of 2015. Furthermore we believe that the perceived risk of a government shutdown has lessened with the bipartisan budget agreement recently passed by Congress. Although we expect continued volatility in TA course registrations we are pleased at the volume of net course registrations by students using TA has turned positive, thus far, with December advanced registrations. Although net course registrations by new students using veterans benefits were approximately flat year-over-year total net course registrations by veterans increase nearly 10% in the third quarter of 2015. We attribute this increase to AMUs strong reputation among military affiliated communities and increased retention of students using GI Bill benefits. While net course registrations by students using cash and other sources were approximately flat year-over-year net course registrations by new students using cash and other sources increased by approximately 5% compared to the prior year period. We believe that this increase was aided by our ongoing efforts to pursue corporate and strategic partnerships. We launched new academic programs at APUS during the quarter including an MS in Nursing as well as MS and BS in Health Information Systems to expand our presence in the growing health care field. We continue to focus on several key initiatives to increase student persistence and to attract students with academic intent and greater college readiness. It appears that these initiatives are positively influencing our quality mix of students as evidenced by a 19% year-over-year increase in the first course pass and completion rates of undergraduate students at APUS and the continued reduction of bad debt expense. In September of this year we changed the method by which we disperse federal student aid from a single disbursement method to a multiple disbursement method for first time APUS undergraduate students. In the fourth quarter of 2015 Hondros College of Nursing increased student enrollment by 3% year-over-year while new student enrollment declined by 11% year-over-year. ADN program enrollments at Hondros declined as a result of strengthened completion requirements in the Practical Nursing program, which is the primary source of new ADN students in the Practical Nursing program and the addition of night and weekend courses which has resulted in students taking fewer total courses each academic term as some students that would otherwise have studied on a full-time basis are now pursuing courses on a part-time basis. We believe that the negative revenue impact could continue in future periods. Additionally, Hondros has transitioned its LMS and IT systems to those also currently used APUS and the new evening programs, which were launched last fall, continue to be very popular with new and current students. Moving on to slide number four, recently we've increased our focus on four important areas of our strategic plan and increased our emphasis on managing costs. Although our lead flow has increased year-over-year we believe that, among other cost control efforts, its prudent to continue to selectively target our advertising spend while we work to improve the application assessment processes and/or until our conversion rates improve. With several initiatives already underway we hope to realize improvements in our conversion rates next year. In addition to cost management we are seizing the opportunity to further increase our focus on four strategic priorities, number one, optimizing targeted outreach, number two, refining the assessment and application process, number three, improving student engagement, number four, enhancing the university experience. We've made good initial progress on these priorities. In the third quarter of 2015 we were, again, able to generate a year-over-year increase in leads. That said, we continue to adjust our marketing outreach by reallocating marketing dollars to more cost effective channels and utilizing an enhanced geographic targeting and analytical capabilities and outreach the perspective students who have a greater potential to succeed. In addition, we believe we are seeing signs of improvement in persistence related in part to the changing quality mix of students and the use of ClearPath, Civitas and other initiatives aimed at increasing engagement and interactivity. We continue to be challenged by low conversion rates and competitive market conditions for civilian students. Thus, we are allocating additional resources to the early stage of the lead to enrollment lifecycle. Specifically we are working to optimize and improve the effectiveness of our online application process and our new admissions course. We plan to launch a new version of the admissions assessment and release updates to our application form by the end of the year, which we hope will result in an increase in conversion rates in 2016. Once these tasks are completed and our conversion rates increase we may then increase our outreach efforts to yield a better return on our investment in marketing and attract more qualified students to our institutions. As you know, we are laser focused on creating a best in class student experience, an experience that is affordable and differentiated from our competition. Our Native Classroom App, APUS Mobile, is just one example of our efforts. I'm pleased with the increase in the adoption rate of APUS Mobile, which is now installed on over 20,000 Apple and 14,000 Android devices. In October there were more than 1.2 million average weekly page views within the application. In addition, I'm pleased that we have opened our Learning Relationship Management System, ClearPath, to our of our undergraduate students. As of October 30th there were more than 21,000 undergraduate students using the platform and well soon be inviting alumni to join the network. Our focus and success is also reflected in the growing recognition that we receive each year, from the rankings in US News & World Report to the awards from the online learning consortium, I'm very proud that AMU, APU and Hondros regularly earn the recognition of our students, alumni and the various communities we serve. Given our focus on key priorities we plan to suspend the majority of our international development efforts until we see greater enrollment stability at APUS. While certain international relationships will continue to move forward we plan to reduce our international outreach thereby allowing us to focus more on key initiatives. In closing, we believe the pieces of the puzzle for our future stability are starting as an academic institution with a higher purpose we just make sure that we manage the institution with a long-term perspective, build it to overcome big challenges and ensure that we continue to server our deserving students and other audiences with distinction. At this time I will turn the call over to our CFO, <UNK> <UNK>. <UNK>. Thank you, Wally. On to slide five. American Public Educations third quarter 2015 consolidated financial results include a 9.9% decline in revenue to $76.3 million compared to $84.7 million in the prior year period. Both our API segment and our HCON segment reported revenues, declines in revenue when compared to the prior year period. In the third quarter our API segment revenue decreased 10.4% to $69.2 million compared to $77.2 million in the prior year period. The decline in API segment revenue is due to the decline in net course registration. HCON segment revenues decreased 5.3% to $7.1 million in the third quarter of 2015 compared to $7.5 million in the same period of 2014. The decline in HCON segment revenue is primarily due to decreased enrollment in HCONs ABM program and the addition of evening and weekend classes which has resulted in students taking fewer total courses each academic term as they pursue their studies on a part-time basis. On a consolidated basis cost and expenses decreased 6.1% to $65.8 million compared to $70.1 million in the prior year period. The decrease was primarily due to a decrease in selling and promotional expense in our API segment. On a consolidated basis operating margins decrease to 13.9% in the third quarter of 2015 as compared to 17.2% in the prior year period. The year-over-year decline in operating margins is due to our revenue decreasing at a rate greater than the decrease in cost and expense. For the third quarter consolidated instructional costs and services expense, or ICS, as a percent of revenue, increased to 38.2% compared to 36.2% in the prior year period. The increase is due to our API segments ICS expenses declining at a rate less than the decline in revenue. At APUS the cost of course materials continued to decline year-over-year to approximately $22.00 per net course registration in the third quarter of 2015, compared to approximately $28.00 per net course registration in the third quarter of 2014. Selling and promotional expense, or S&P, as a percent of revenue, decreased to 18.4% of revenue compared to 21.2% in the prior year period. Year-over-year S&P cost decrease 21.2% to $14.1 million compared to $17.9 million in the prior year period. Accordingly the year-over-year decrease, as a percent of revenue, is due to S&P costs declining at a rate greater than the decline in revenue. General and administrative expense, or G&A, as a percent of revenue, increased to 23.1% from 20.6% in the prior year period. Our G&A expenses increased 1.7% to $17.7 million compared to $17.4 million in the prior year period. The increase in G&A expense was the result of an increase in G&A expense in our HCON segment. For the three months ended September 30, 2015, bad debt expense decreased to $2.6 million or 3.4% of revenue compared to $4.3 million or 5% of revenue in the prior year period. We believe the improvement in bad debt expense is the result of a change in our mix of net course registrations away from students using federal student aid, as well as our ongoing efforts to attract students with greater academic intent and college readiness. During the three months ended September 30, 2015 31% of net course registrations were by students using primarily federal student aid compared to 36% in the prior year period. Income from operations, before interest income and income taxes, decreased to $10.5 million compared to $14.6 million in the prior year period. In the third quarter of 2015 net income was $6.8 million or $0.45 per diluted share compared to $8.8 million or $0.51 per diluted share in the prior year period. Total cash and cash equivalents, as of September 30, 2015, were approximately $113.8 million with no long-term debt. For the nine months ended September 30, 2015 capital expenditures were approximately $19.6 million compared to $15.3 million in the prior year period. The largest increases were related to our new IT Center located in Charles Town, West Virginia, an increased investment in software development and academic program development. The new IT Center is now occupied and we do not anticipate any major new building projects in the near term. Depreciation and amortization was $14.2 million for the nine months ended September 30, 2015, compared to $11.9 million for the same period of 2014, an increase of 19.3%. During the third quarter of 2015 we repurchased 129,849 shares of our common stock under existing repurchase authorizations. As of September 30, 2015 we had approximately $12.1 million available for stock repurchases. On to slide six. Our outlook for the fourth quarter of 2015 is as follow, APUS net course registrations by new students in the fourth quarter of 2015 are expected to decrease between 22% and 19% year-over-year. Total net course registrations are expected to decrease between 10% and 8% year-over-year, compared to the prior year period. We believe these declines are primarily a result of increased competition for students and the various measures we have put in place to improve our quality mix of students as well as our targeted approach in advertising spend as we work to improve our student conversion rates. In the fourth quarter of 2015 total student enrollment at Hondros is forecast to increase by approximately 2% year-over-year. However, new student enrollment is expected to decrease by approximately 11% year-over-year. In the fourth quarter of 2015 we anticipate consolidated revenue to decrease between 10% and 6% year-over-year compared to the prior year period. In the quarter ending December 31, 2015 we anticipate that we will incur a charge of approximately $1.8 million in connection with a workforce realignment, which we anticipate will result in approximately $3 million in savings in the year ending December 31, 2016. We also anticipate that we will write off approximately $1.4 million in information technology assets in our API segment during the three months ending December 31, 2015. EPS for the quarter is expected to be in the range of $0.40 to $0.45 per fully diluted share, which includes the impact of anticipated charges that are estimated to be approximately $0.11 per diluted share. Excluding the impact of the anticipated charges non-GAAP adjusted EPS is expected to be $0.51 to $0.56 per fully diluted share. Management believes that the adjusted EPS guidance for the quarter ending December 31, 2015, which excludes charges for employee realignment and the write down of information technology assets. Its useful because it will allow investors to better compare results to prior year periods. On to slide seven. At the start of 2015 we outlined several key initiatives for the year. I am pleased that we have completed most of these initiatives including the initial rollout at Elis ClearPath, Civitas and other student retention pilots. The launch of APUS Mobile, the introduction of a new student assessment course, the launch of multiple disbursements for undergraduates, first time APUS students using federal student aid and the previously announced tuition increase. Recently decided to suspend our investment in international outreach to manage costs and we made improving conversion rates by optimizing our application and assessment processes, one of our current priorities. API continues to be challenged, including the challenges associated with increasing competition, a difficult regulatory and unfavorable full profit environment in matters relating to attracting students with academic intent and college readiness. However our initiatives to improve our quality mix of students and student persistence appear to be gaining traction. We believe APEIs in a position to stabilize enrollment in the future and execute our strategic plan. For the balance of this year and into next we will continue to explore ways to optimize our operations in manage costs. At the same time we plan to refocus our efforts on four key areas to aid in stabilizing our enrollment and help emerge as a more competitive and efficient organization in the long run. Our management team remains committed to our mission, in particular the success of our students, the quality and uniqueness of our academic programs and creating effective and engaging learning experiences that will set us apart from the competition. We believe these are central to creating long-term value for all stake holders, including more than 57,000 alumni working around the world to improve their lives and the lives of others. Now we would like to take questions from the audience. Operator, please open the line for questions. Well I don't, we still are leaving our enrollments open and what were really not doing is opening new countries. We found when we went to utilize agents that by utilizing agents we needed to be compliant in every country where there was an agent and so the country by country compliance, given that our tuition is so low, while that would seem to be attractive the cost of doing it didn't appear to provide us with a return. So, while on the good news side is we have some partnerships in place and we have legal agreements, you know, indicating that we will be in compliance with the regulations of those countries, we decided at this time not to add any new countries. We don't know of any negative impact on enrollment. We did note in our Q that with the July increase that only 20% of our students actually received the increase because we grandfathered our tuition rates for both students using tuition assistance as well as military spouses and veterans. I would also point out that, that was effective for registrations after July one and so it really didn't affect the entirety of the third quarter. Well, I think the, you know, I guess there's a couple of big things. First of all the cost of buying leads related to online education has gone up, these are leads through Google and Yahoo and other sources, has gone up 20% a year for the last two years indicating more people bidding on them and bidding on those terms. And, at the same time, we have see a decline in our conversion rates so, you know, to me I think that, you know, we have the same group of internal people buying those leads that have bought them in the past, we've, you know, judiciously thrown away leads that don't work for us, either they cost too much on a net student basis or they're just ineffective. And we've managed to get our leads up but our applications are down because the conversions are down. That indicates to me there's just much more, many more options, as well as something we didn't mention but I've seen mentioned several times is that when the economy starts to improve working adults tend to not go back to school. <UNK>, not anything that we, you know, have seen and could attribute to that. We've seen a pick up in our TA registrations but we believe that's attributable to the start of a new fiscal year. So, you know, our returning TA students only declined by 2% this quarter which was basically a 7% improvement over the quarter before but I think that a lot of that was our retention initiatives and then what were seeing so far, particularly in November and December for TA students, is good registration rates but we think that's because there's no potential, knock on wood, of a budget problem, at least through this presidency. H Yes, this is <UNK>. We actually, were up a little bit with our LPN students, the LPN program, which is, kind of, the way were building Hondros is that the LPN program leads to progression to the AND program, leads to the BSN program. What we've seen is a large decline in BSN students, new BSN students. And I think, it seems like we had a big backlog of alumni that were interested in the BSN program and we, I believe, we've gone through that now and we haven't, we still, we haven't had enough ADN graduates yet go on to the BSN program. So we had a rather large, almost a 30% decline in BSN enrollment for new students in the fall. We don't know yet whether that's a long-term trend or just a blip. That really contributed to it. We also increased the requirements needed to graduate from the LPN program to matriculate into the ADN program and we think that's caused a little bit of a delay in some students who would like to matriculate into the ADN, being able to do that. We thought we needed to make the changes in the program to improve the quality of the program so the decline was really in ADN and BSN students, LPN program, which is our real key to us going forward actually increased a bit. So, that's what caused that and, you know, hopefully, that'll work its way through the process and those increased LPN students will go on and get additional degrees. No, I think we tried to explain, <UNK>, that, you know, while were targeting advertising specifically, so talking about radio and TV advertising, were also looking at whether or not, in the markets where were doing that advertising, were getting acceptable conversion rates. I think once we can pick up the conversion rates in those markets we would actually spend more so its just a matter of tinkering with our targeting and where its beginning to work well spend more and if its not working were just going to hold back. It crosses all lines. Tax rates about 38%, share counts probably 16, yes, I was gonna say its about flat with where it is, it'll be down slightly, were still repurchasing shares. Great. Thank you, Operator. That will conclude our call for today. We wish to thank all of today's callers for participating and for your interest in American Public Education. Thank you and have a great evening.

2015_APEI

2016

ASNA

ASNA #We, certainly, have some impact from the storms from late in January, but I'd also say that, as you know from where we pre-announced at ICR, that things actually strengthened quite a bit from what we were expecting from a margin standpoint. So we did start to see some significant strengthening at the LOFT business, and we also saw Justice came in above where we'd hoped. So they were able to release some margin hedge that they had in their numbers. The business actually did start to strengthen mid-January, so regardless of the comps through holiday, we were very pleased with how we came out of January. In terms of the port issues, this quarter benefited from about $8 million both at Ann and at the legacy Ascena bands. There was some benefit in the gross margin rate this quarter from prior year impact. The total ports probably represented about one quarter of the total gross margin rate improvement from the prior year to this year in the second quarter. And we had at the legacy Ascena brands roughly, call it a comparable $8 million in the third quarter that was a bit of help. So hopefully, I think that addresses your questions. And Q3 comp guidance. I'm sorry, I missed the Q3 comp guidance. What I'll generally tell you is for the spring season, the missy brands are all planned up modestly to up low single digits, and Justice is planned down mid-single. In the third quarter, that's generally consistent with all the brands, and Justice is planned mid-single. In the third quarter, that's generally consistent for all the brands. And again, Justice is high-negative single in the third quarter. <UNK>, you're on mute. Yup. So, <UNK>, we have a portfolio. It's just like if you're the Magellan fund, you don't talk about this stock or that stock in a lot of detail. You're saying, I'm investing in great companies, we've got great brands. There is going to be some movement over the course of the year. Nobody's plan at the beginning of the year ever holds true to the penny at the end of the year. What we've seen is that we've got strength across all of our brands, some more than others. We have all these levers, not just on the top-line but through synergies, through a lot of the programs that we're running to cut costs, et cetera, that are going to enable us to hit our numbers, and while there may be a little bit of softness in one brand, invariably, we've been able to make it up if not more in other areas. <UNK>, your question on Maurices. As <UNK> mentioned, the gross margin was actually up quite nicely, up $11 million. We did have some OpEx growth. <UNK> mentioned earlier, the marketing test that they're doing, which we're very excited about. That was a bit of an offset. They continued to build out new stores, which, again, longer-term, wonderful profit drivers in those stores and new openings are all achieving or beating expectations. They did have a benefit last year with the sale of the Des Moines distribution center when they came into Green Castle that unfavorably impacted this year on a year on year compare basis. Product is really resonating there. Brand is still tracking, very happy with where things are. Sure. We have a really strong ability to generate cash. And with this cash, as we've said all along, we really want to pay down our debt. We'd like to de-lever to a great extent as soon as possible. So that hasn't changed. What has changed is, as I'm sure those of you that follow our stock, hopefully all of you do, you've seen this fairly unbelievable selloff, which we don't really understand why, and a subsequent rebound. Not really sure we understand why that, either. But what we saw was an opportunity to buy back our stock. As you may recall, the Board authorized a share repurchase and we started buying back stock. We are trying to do this in a delicate balance with our debt retirement. So we want to continue to buy back our debt, or retire our debt, and we want to buy back shares. We constantly look at where the relative value is, where the opportunities are. We've been able to buy back our stock ---+ I'm sorry, our debt on the open market at below par, and that creates, obviously, significant savings. So we're doing both, <UNK>, and we'll continue to do both very thoughtfully, and each month, each season, you know, we'll be looking at this. We look at it carefully with the Board and try and determine what that right balance is. But I would tell you that it's at least ---+ always going to be at least [50%] will be going down to pay down debt. Thanks, <UNK>. Well, it doesn't mean anything in terms of our guidance. Easter, as I've mentioned, is a huge week for us. For our missy brands, it's really our Christmas. We are ready to go, and you tell me what the weather is, and I'll tell you how strong our business is going to be. You know, it's one of those old adages. If it's cold and snowy or rainy, women aren't going to run out get a new dress to wear on Easter. If it's sunny and beautiful, they will. Obviously, that's an overstatement, gross overstatement on either side. But at the margin, it is accurate, and we're looking forward to some decent weather. Obviously, the milder winter we're having and the outlook for the next three weeks is encouraging, but until we get there, obviously, we'll never know. Yes. That's for sure, but I'd probably take it a step further. Rather than say more normal, I'd say it's been unseasonably mild. That's helped a lot. So when you look at any of these historical weather things, generally, it's been a warmer February across the country. And while there have been weeks up and down, where we have seen unseasonably warm weather, we have seen improved traffic. Thank you. I'd just thank everyone for their attention and appreciate your support of Ascena, and we look forward to talking again next quarter. Everyone have a good evening. Thank you.

2016_ASNA

2015

KFY

KFY #<UNK>, this is <UNK>. I think if you go in and look at the growth, we're getting really good growth from both the markets piece, which I refer to as a single search site, as well as the RPO. Even if you go back to last year, the business grew over 20%, and both of those categories contributed to that growth, and that's continuing in Q1. I think in the single search side, a good portion of the success, Burn has made some real good hiring decisions into that business as well as our strategy of cross line business referrals with executive search are able to refer quite a bit into Futurestep single search. And we're seeing some of that on the RPO side as well as the fact that in this business, I will say success begets success. So the more success we have, the more advanced we get, the more demonstrated ability that we put forth, the more success we have. So I think Burn has this business on a really good in cadence right now. When you look at some of the hiring he's done on the RPO side as well as some of the intellectual property development that we've had over the course of the past year with our KF4D that he's putting into that line of business, I think those are the attributes that you're seeing result in the outsized growth. Well, I think our return on capital this quarter, what was it <UNK>, 11%, 12%. So this quarter was about 12%, and our cost of capital was probably 11% or so. So we are pretty mindful of that as you indicated. Our playbook continues to be the same, to number one, invest in the business. I really believe that this is a multi billion-dollar opportunity. You talk about Futurestep market share gains, that, I don't know if that is market share gain. That is ---+ that market is 10 times the size of the executive search market, so I would hope there's runway there. Listen, we are pretty mindful of that, and if we're not returning the cost of capital, then we're going to do something about it. So I'm not going to go beyond that except that as you said, the balance sheet is pristine. It's probably under levered, and we are very aware of that. Feels from what perspective. Well, I think we are all trying to be very urgently patient. I think that we have this insatiable appetite use this brand to become the people advisor. I think that people are engaged. I think that we've demonstrated that we can take this flagship search business and add adjacent solutions and it would fuel a deeper relationship with clients. So I think it's urgently patient, fired up, and insatiable appetite to learn and grow. It feels pretty good to me. It's ---+ the China business is about 2.5% of the firm, so it's a relatively small percentage, but we do have pretty good line of sight. I think it's really too soon to tell. In terms of my channel checks, there is nothing that would thing an alarm bell here per se. We haven't seen a deterioration in their appetite for talent. Our China search business is essentially, if you look year over year, it's going to be flat to up a little bit. The Futurestep business in China year over year is going to be up about 16%. So we haven't really seen it. I would also say, <UNK>, it's probably too soon to tell given the holidays. Yes, our Australian business is actually up quite considerably year over year. All of the data points, they point at each other. Now, we haven't really seen anything that would say we should be ringing an alarm bell. The engagements range from culture shaping kinds of assignments to leadership development to creating more engaged and inspired teams. That would be three examples. I think of a major organization, we're very prominent, you would know it. We are being asked to help shape the culture and align the culture to the business strategy of this organization. It ranges from the very high end search to the RPO activity now that is really around professional workers. And on the leadership development side it's from succession to teambuilding to culture shaping, obviously assessment is a pretty big piece of it as well. Yes, it does. And I would say that the RPO in the Futurestep work has been particularly strong in North America. It's been, again, it's been good in Europe and Asia, but real strength in North America. And it layers in over 4 to 12 quarters, so it's not necessarily overnight. I will think of ---+one of the things we have seen is a nice uptick in financial services now, admittedly off a low base. When you look at it, it really is around commercial consumer banking insurance. But one of the RPO projects that came to mind when you asked the question was a large commercial bank that asks us to put in many bankers in a relatively short amount of time. And that was done over the last quarter or so. So it's generally, I would say North America has been a big tail wind, and it's really been professional knowledge workers. Yes, L&TC target range is somewhere between 15% and 18%. This quarter was 15.6%, there was a little bit of downward pressure from the hires that <UNK> referred to that we made, but we expect that back over 16% by year's end. Well, listen, it is definitely, and I think this is very consistent with what we have said, it is a much slower ramp for those types of individuals. I think that what you have to believe, well, number one, the market opportunity is there, and I think that anybody would look at that space ---+ how does the CEO create the motivated, inspired, engaged and developed and compensated workforce, and you would say that is $50 billion to $100 billion, that there is a market there. You would also say that it is extraordinarily fragmented. In terms of our success, you would have to believe that we could bring these people in, that we can have them learn our IP and the different kinds of solutions that we have, and that you'd also have to believe that the search channel would be very advantageous to those people. And I think that our past history demonstrates that yes, we can onboard them, we can train them in new solutions and that the search channel is extremely effective. When we look at it, you will find that quarter on quarter, 60%, 70% of whether it's the Futurestep for the LTC business, it comes from the access that the brand provides. So I think that we've demonstrated that they can do all the things you'd have to believe to say, could this be a billion-dollar business on its own. I think it can. But again, it's not a question of just a quarterly snapshot of this. I think it's probably not an industry that grows at 15% or 20%. That's probably not what the characteristics of the leadership business are in the marketplace. I'd just add a couple of points. <UNK> mentioned the on boarding. We have significantly stepped up our ongoing efforts in that business to help the individuals with the ramp and with the view that by investing in the onboarding process, we can shorten the time frame to improve productivity. And the other thing we do too, is quite honestly, we very closely monitor and manage by person what they are doing, what the new business levels are. So I think with the assistance we give them on the way in and the close monitoring and management throughout their time here, I think we accomplish everything that <UNK> talked about. Well, I think that we have been much more aggressive. You go back a year ago, and I had it as a personal goal that I wanted to add 100 more LTC partners. I go back to last August, and we only got 40% of that. But we've certainly for quite some time have turned up the heat in terms of bringing people in. We haven't necessarily changed the places we are looking for. But I think this is a business that is very fragmented, and frankly, I think there needs to be somebody who defines a category here. And just like when CEOs turn to MacKenzie or Bain for strategic advice, they don't have a firm to turn to when it comes to people advisory. And I think that is the opportunity to define the category to be that firm, and that is a multi billion-dollar opportunity for us. No, again it's a little bit hard because we are only eight days into September, right, and people are just literally back from holiday, so it's hard to get a clean read on that. But I would say, no, it doesn't. Obviously, the next 30 to 60 days we will have much better visibility on that question, but, no, I don't think that the feeling is significantly different. Okay. Well thank you everybody for joining us. Again, I'm very proud of the quarter and I really do believe there is an opportunity here to define a category, and that is how we are looking at it. And this organization is absolutely committed to make a powerful impact on people and organizations and at the same time producing positive returns for our shareholders. So with that, thank you very much, and we will talk to you next time.

2015_KFY

2016

HSC

HSC #Thank you. As I mentioned, there's a couple of items that occurred in the second quarter for Metals and some asset sale gains coupled with some, as I mentioned, some very positive results from our applied products, in particular, Reed Minerals businesses, which we don't expect to be retained. I think the margins should be, they should be consistent with the preceding quarter, previous year's quarter, a little better, and slightly down sequentially from where we saw in the second quarter. Improved margins over ---+ there's going to be improvement year-over-year, but it will be more or less down from the sequential quarter in this year in the matters I just mentioned. I think we've, over the past couple of years, shown that the aftermarket business has continued to exceed our expectations. My view and expectation is that the aftermarket business continues to grow. In terms of cost reduction, as you know, we've largely built the global Rail business internally, as opposed through M&A. So we have had some pretty significant expectations for further investment this year that we're just dialing back a bit. It's a few million dollars. To put it in context, so if you compare the prior year, the improvement in SG&A is roughly $2 million, about a similar amount in the quarter year-on-year in the aftermarket improvement as well. No, there is not, only to say, one of them was brought back in and relaunched. So that process is effectively starting over. Another one, we would expect to hear probably in the next six months or so. And then another one could be much sooner than that. Yes. The guidance we put forth, and I mentioned earlier, for Brand, the equity income pick-up is reflective of the dilution that we've already talked about. That's assuming we don't make any more payments for the rest of the year, which is what our plan was to be.

2016_HSC

2016

PRI

PRI #At least through 2017, yes. There are some things that will emerge over time, so we want to continue to keep a close watch on that, but we believe for the next, let's say, three, four, five quarters, that's a good rate to look at. And again, there is some seasonality with it, as you saw, this particular quarter, second quarter is usually a little bit stronger than the others. Hello, <UNK>. It's <UNK>. Those details are emerging a little more slowly than our expense details are, obviously, as it is an industry moving, not just Primerica moving. A lot of discussions, as we've said before, we anticipate there will be some standardization of products and to a certain extent, even compensation of those products. Early on, I think the good news is the industry's being very thoughtful about this process. I know it's frustrating that, that means it's somewhat slow, but the industry's being thoughtful and that means there's no knee-jerk reactions or jumping to conclusions. So we are not seeing radical proposals of changes that would cause us a great deal of concern. And I think we are traveling in the pack with most of the rest of the industry that shares characteristics of our business model, so while we don't have the details yet that I know everyone would like to hear, I think the standardization concept is something we keep in mind and we see kind of a slow methodical movement as it goes and we are encouraged by both of those. Yes, we do, <UNK>. There's been a lot of discussion about that and, quite frankly, some misinformation that I've seen in the media discussion of that. Class A shares are an important part of the brokerage platform and will continue to be and, based on my understanding, will continue to be for the entire industry not just for Primerica. Where we see other companies and where we are no longer using Class A shares is in the managed account platforms going forward. So make sure that everyone focuses on the difference between those two pieces of the business. I think Class A shares are being replaced by institutional shares throughout the industry on managed account platforms, but will continue to be sold on brokerage platforms including ours going forward and we believe that is accommodated under BICE. Yes, <UNK>. Good morning. Most of the time at Primerica, it's never one or two factors, it is a host of factors. So we are continuing to see a high-level of confidence in the middle market on Main Street, so we're getting great response to our recruiting messages, so we are seeing our recruiting numbers continue to be strong. We've also focused our sales force and a tremendous amount of the credit for what we see on the distribution side of our business, obviously, goes to our field leadership. We have strong alignment with them at this point. We are communicating with them effectively, they are communicating with us effectively and that's how we come to the best answers and best conclusions on what we need to do. So if there was a standout characteristic, as you've asked for, I think it is that alignment with our field leadership and the fact that we are on the same page like we've never been before. And, of course, they're leading that process, they're also focused, like we are, on growth of the size of the licensed sales force. That, with improvements to how we get people licensed, which is something we've worked on a lot over the last couple of years and continue to work on, all of that kind of adds up to the kind of success that you are seeing. So it's several different factors, the strongest ones I think are the field leadership and alignment at this point, but we are getting some tailwinds from continued confidence in the middle market, we are very effective in our messaging to prospective recruits and clients right now. I think we've improved that, and so those are some of the secondary characteristics I would add to the list. Yes, as I mentioned in my prepared comments, we've, over our history of almost 40 years now, we see our business swing back and forth between focus on insurance, focus on investments appropriately, and that's part of one of the strengths of our franchise. So we have generated a tremendous amount of excitement around our term insurance business in the last few quarters. We believe that can continue. There's a lot of strength there, there's a lot of focus, and so we would expect to continue to see that strength going forward. And, of course, the uncertainty that we continue to discuss about the investment business, whether it be uncertainty in the market or uncertainty in regulations, is a bit of a headwind there, but we are continuing to see good performance in that area at the same time. And the 10% was really when we were using that pie chart we've used in the past just to say what pieces could be subject to the change. As I mentioned earlier, I think that, so that was really looking at which components of our business, and at this point, we now have to peel the onion down a little further and say, step one is we said we're going to use BICE. So theoretically, there's a construct for us to retain all of that business. The question then becomes the things that <UNK> was talking about earlier is what industry-wide changes might there be to product sets or compensation structures and the like and fortunately, unfortunately, that's a very slow process. We want to make sure we've in step with what we're hearing throughout the industry, throughout product providers, et cetera. So a little bit more detail on that will hopefully be able to be provided towards the end of the year. But we continue to work toward minimizing that as much is possible. Sure. Be happy to do that. There has been a lot of media coverage of the Herbalife settlement and, quite frankly, as is often the case, a lot of poor media coverage. The Herbalife settlement was particular and specific to Herbalife and their dynamics. There's been no rule change at the FTC since that settlement. However, it's obviously wise of us to monitor what's going on in that part of the world and make sure we are seeing the changes in wind direction and so forth, so we are very close to that, we keep our finger on the pulse. Specifically to your question, on differentiation points, Primerica, we are a financial services company that is a model based on the traditional insurance agency model. That's what we grew up from over the last 40 years. We began as an insurance agency and an insurance agency model has different levels of competition between branch managers and area managers and representatives, and so there's some similarities in the compensation structures of the traditional agency model and some of direct selling and, quite frankly, some with refranchising. Over time we've evolved to adopt different characteristics of several business models, but one is our history. We come from a different history than that company does. The second thing, obviously, is we operate in highly regulated set of industries, insurance and securities being the two biggest ones, so we've got a set of regulations dictating how we do business that's unique to the financial services industry. Our sales are to end consumer, by the nature of our products. We don't have an inventory, there's no ---+ a lot of the Herbalife controversy was around inventory loading and representatives buying inventory and, of course, we have no inventory in our products. We have intangible services and so there's no way to load anyone with inventory in our model and of course our reps are not required to purchase our products. The vast majority of our sales are to clients with absolutely no affiliation to Primerica in any way other than being clients. 70% of our life insurance sales are to end clients that have no affiliation with Primerica at all. They are not our reps, they not our recruits. And so, and then other things, we don't pay to recruit. Our recruiting mechanism is something that's not a profit center for the Company or for a representative, there's no money made on that. So we think that we've got a very strong case of how we differ from Herbalife and stand apart from the kinds of issues that were dressed in their settlement. Glad to help. Revenue sharing is clearly contemplated under BICE. I do think, however, that you will see a standardization. Revenue-sharing agreements, I think, are very unique to each distributor. In today's world, my guess is, over time you will see standardization of those agreements, but we do anticipate that they will continue going forward on our brokerage business under the BICE agreement. Thank you, everyone, for joining us. If there are other questions we can help with, just let us know. Everybody, have a great day.

2016_PRI

2016

TRST

TRST #Thank you. As the host said, I am Rob <UNK>, President and CEO. Joining me on the call today are <UNK> <UNK>, our CFO; and <UNK> <UNK>, Chief Banking Officer. Also in the room is Kevin Timmons who most of you know. As boring as it might be, we are going to stick the usual format. I will hit the highlights then turn it over to <UNK> for the detail in the numbers, then <UNK> will touch on our operations especially the loan portfolio, which will leave us plenty of time for questions and answers. Let's get started. Another solid quarter at TrustCo Bank. We ended the quarter with total assets of $4.763 billion, mostly consisting of a loan portfolio of $3.3 billion, a new record. The majority of this portfolio was one- and two-family owner-occupied residential mortgages. We continued to reduce our exposure to commercial loans with a portfolio hanging just under $200 million. At this point in the market cycle, we prefer a risk profile that contains the diversity of many smaller residential mortgages spread across all of our service areas. The seasonality seems to have returned to the mortgage business. As spring arrives, our backlog is beginning to build. We hope to have a good 2016 with regard to new loans booked. We also, as you know, most maintain a sizable investment portfolio and a strong liquidity position. While, loans are the best place for us to invest our cash position and liquidity give us the ability to capitalize on opportunities as they come up. Our deposit performance has been great. We have grown our core, demand, checking and savings while reducing our exposure to hotter money market accounts and rate shopping time deposits. As a reminder, we do not accept brokered deposits or offer incentive rates for jumbo CDs. Our effort is really to grow the customer base profitably. Our balance sheet management resulted in margin expansion to 3.13, resulting in an increase in net interest income of over $1 million when compared to the same quarter last year. Our expenses were elevated to roughly $23 million for the quarter, greater than the same quarter last year. Regulatory compliance is certainly a factor. As a reminder, we are under a formal agreement with the OCC. While we are unable to give great detail on this agreement, we will tell you almost all activities of the bank are under review or validation. We do not know when but we are confident we will emerge a better bank with the commitment to remain compliant. Our expenses seem to have stabilized and even at this level, we continue to maintain a strong efficiency ratio. Our net income for the quarter was $10.4 million, up from the quarter end at 12/31 and down a little bit from the same quarter last year. Our nonperforming assets fell to 0.76% of total assets in the first quarter of 2016 and our charge-outs continued the positive trend. Our tangible equity ratio rose to 8.87 at quarter end and we actually closed one branch this quarter which is not typical for us. We had an opportunity to consolidate two branches close to each other. We plan on selling the closed branch. We are pleased with our results, profitable growth, some margin expansion, and improving operations should have put us in a position for continued solid performance. Now I'll turn it over to <UNK> to give you some detail on the numbers. Thanks, Rob. I will now review TrustCo's financial results for the first quarter of 2016. Net income was $10.4 million in first quarter of 2016 compared to $10.2 million for the fourth quarter of 2015. Despite the continue added costs in response to recent regulatory concerns, net income continues to be solid. For the quarter, our net interest margin was 3.13%, up 3.8% in the first quarter of 2015, resulting in a taxable equivalent net interest income of $36.2 million this quarter compared to $35.2 million in the first quarter of 2015. The increase in the net interest margin comes from both sides of the balance sheet. On the asset side, we had a 2-basis-point increase in the yield earned on average interest earning assets over the same period last year. This increase came from the 25-basis-point rise in the Fed target rate and the continued positive shift in the balance sheet from lower-yielding investments to higher-yielding quarter-long relationships. In addition, our cost of interest-bearing deposits decreased 3 basis points from the first quarter of 2015 to 39 basis points for the quarter, which continues to reflect our pricing discipline with respect to CDs and other non-maturity deposits. This is also a direct result of the growth of our core deposits, which consists of checking, savings and money market deposits. Our core deposit accounts typically represent longer-term relationships and are lower cost than our time deposits. We saw continued rolling growth during what is a normally quiet banking season due to the holidays and weather. The loan portfolio averaged $3.3 billion during the first quarter of 2016, an increase of $122 million on average from the first quarter of 2015 or 3.9%. The sustained growth continues to be concentrated in residential real estate portfolio. Total average investment securities which include the AFS and the HCM portfolios slightly decreased during the first quarter of 2016 by $11.4 million or 1.7% on average from the fourth quarter of 2015. This is primarily the result of cash inflows in the mortgage-backed securities portfolio. In addition, we had approximately $30 million of agency securities called in the middle of the first quarter of 2016, which we replaced with a mix of $30 million of agency and mortgage-backs during the latter part of the quarter. On the deposit side, as mentioned a moment ago, we continued to be successful increasing balances throughout our branch franchise. Total average deposits for the first quarter averaged $4.1 billion, which is an increase of $39.9 million over the same period last year. Average core deposits increased $85.8 million or 3% when compared to the first quarter of 2015. Our average balance of overnight investments was $676 million for the first quarter of this year, up $6 million over the average balance in the fourth quarter of 2015. In addition to the liquidity that is on our balance sheet, in the current rate environment, we expect that we will have between $200 million and $400 million of loan payments coming in over the next 12 months, along with approximately $100 million to $150 million of investment securities cash flow during the same time period. This continues to give us opportunity and flexibility during the remainder of 2016. Our provision for loan losses has decreased to $800,000 for the first quarter of 2016 compared to $1.3 million in the fourth quarter of 2015 and is in line with the first three quarters of 2015. As you may recall, the increased level of provision in the fourth quarter of 2015 was a result of a single commercial loan charge-off. Asset quality of loan loss reserve measures mostly improved versus March 31, 2015, but we're mixed as compared to year-end 2015. The slight increase in MPAs was due to residential real estate nonperforming loans in the New York region. Prior experience has shown us that this slight uptick in MPAs is seasonal and not unusual in the first quarter of the year coming out of the holiday months. We would expect the level of the provision for loan losses in 2016 will continue to reflect the overall improving credit quality in the portfolio and economic conditions in our geographic footprint and ongoing resolution of existing problem laws. Non-interest income came in at $4.6 million for the first quarter, up from $4.4 million in the fourth quarter 2015 and flat compared to the same period last year, which included $249,000 of security gains. The most significant reoccurring source of non-interest income is derived from our financial services division, which recorded their annual tax return preparation fees in the first quarter of $150,000. Our financial services division had approximately $844 million of assets under management as of March 31, 2016. Now onto interest expenses. Total non-interest expense came in at $23.4 million, up $331,000 from the fourth quarter of 2015. For the first quarter of 2016, salaries and benefits expense $9 million, up $961,000 compared to the fourth quarter of 2015 and $522,000 over the same period last year. The increase over prior quarters can be broken down into several pieces. First, as you remember, the fourth quarter of 2015 salary benefits expense benefited by approximately $300,000 net as a result of a couple items. The primary item was the decision of management to eliminate the $850,000 liability related to the 2015 annual cash bonuses of senior executive officers. Offset by normal year-end payroll re-class entries of $550,000. Second, and something we have discussed in prior calls, we have now started to see an increase in the salary and benefits expense line as new hires start the process of replacing the consultants. And finally, the first quarter of the year always bears the cost of increased employee federal and state payroll taxes and the bank also saw the impact of increased healthcare costs as the new contracted rates for 2016 took effect. Other expenses saw a decrease compared to the fourth quarter of approximately $880,000, primarily due to approximately $400,000 in cost of issuance of new chip cards, and $200,000 of property tax expense on problem loans during the fourth quarter of 2015 with no comparable expense in 2016. We continue to expect the estimated total annualized cost of implementing the recommendations in the agreement will be approximately $5 million annually. These added costs reflect the Company's continued investment in our systems within the retail loan and deposit areas as well as enhanced regulatory compliance measures. Over the next several quarters, we will continue to experience increased professional services expense. However, that will start to level off later in 2016 and into 2017 as we complete implementation of the requirements of the formal agreement. ROE expense came in at $519,000 for the quarter, which is down slightly from last quarter. It stayed consistent within our expectations for the last five quarters. We continued to expect ROE expense to stay in the range of $500,000 to $1 million per quarter going forward. All the other categories of non-interest expense are inline with prior quarters and our expectation. Going forward, we would expect a total reoccurring non-interest expense to be in the area of $23 million to $23.5 million per quarter. Our efficiency ratio continues to be strong despite the increased costs discussed earlier. We will continue to focus on what we can control by working to identify opportunities to make the processes within the bank more efficient. First quarter of 2016 came in at 56.22%, up slightly from the fourth quarter's of 53.37%. As noted in prior calls, first-quarter numbers continue to be negatively affected by our decision to retain a large amount of overnight investments and the increased costs associated with implementing the recommendations in the agreement. I would expect that the efficiency ratio to end 2016 in this range. And finally, capital ratios continue to improve. The consolidated tangible equity to tangible assets ratio increased to 8.87% at the end of the first quarter, up from 8.44% compared to the same period in 2015. Now <UNK> will review the loan portfolio and nonperforming loans. Thanks, <UNK>. That's our story. We would be happy to answer any questions you may have. No, it's the same focus we've always had, Alex. If I said it the wrong way, I'm sorry. But no, it's the same approach we've always had. We have a very strong commercial capacity. And it's not like we dislike commercial loans. We just prefer the risk profile the way it is right now. Yes, I mean $225 million wouldn't kill me either, Alex. If the right opportunity came ---+ we continue to work with our existing customers. We have a great group of good, solid customers that we're very familiar with and very comfortable with, and we continue to do that. Well I think there's always a little bit of opportunity, Alex, but the big slugs, I think, are behind us at this point time. Thanks. Hi, <UNK>. No. It's nothing on our part. We haven't made the choice to slow down or back off. I think there is a little bit to be said about the market, but I think we are very encouraged by the results that are coming out right now with regard to the pipeline and the application volume we are seeing. We have very strong performance in the state of Florida, and we are very pleased with that. And the effort is the same as it is in the other markets we serve. The product is essentially the same, the processing is the same, the approvals are centralized. So we take a very cautious approach, but we're very encouraged by the activity in the state of Florida. No. I think we've built a solid, good group of employees there and a good, solid group of branches that are very customer friendly and very convenient. And I think when you compare us to some of the big players that are in the Florida market, we compete very, very well against them. Yes. You know, no. What you really see is ---+ I mean, sometimes in the first quarter, you actually do see a little bit less of some of the fees. Fourth quarter, people usually tend to spend a little more. You see a little more of those overdraft fees, but nothing that really jumps out. We're going to stay in about the same page. I mean you've seen net charge-offs in the range where they've been, in that $1.1 million, $1.2 million, and then provision around $800,000. So it may come down a little bit, but we're going to stay in about the same spot. Thank you for your interest in our Company, and have a great day.

2016_TRST

2018

DLX

DLX #Thank you, Takia, and welcome, everyone, to Deluxe Corporation's First Quarter 2018 Earnings Call. I'm <UNK> <UNK>, Deluxe's Treasurer and Vice President of Investor Relations. Joining me on today's call is <UNK> <UNK>, our Chief Executive Officer; and <UNK> <UNK>, our Chief Financial Officer. At the end of today's prepared remarks, <UNK>, <UNK> and I will take questions. I would like to remind you that comments made today regarding financial estimates, projections and management's intentions and expectations regarding the company's future performance are forward-looking in nature as defined in the Private Securities Litigation Reform Act of 1995. As such, these comments are subject to risks and uncertainties, which could cause actual results to differ materially from those projected. Additional information about various factors that could cause actual results to differ from the projections are contained in the press release that we issued this morning as well as the company's Form 10-K for the year ended December 31, 2017. Portions of the financial and statistical information that will be reviewed during this call are addressed in more detail in today's press release, which is posted on our Investor Relations website at deluxe.com/investor. This information was also furnished to the SEC on Form 8-K filed by the company this morning. Any references to non-GAAP financial measures are reconciled to the comparable GAAP financial measures in the press release or as part of our presentation during this call. Now I'll turn the call over to <UNK>. Thank you, <UNK>, and good morning, everyone. Deluxe delivered a very strong quarter to start the year. We reported revenue and adjusted earnings per share above the high end of our outlook. Overall revenue grew 1% from last year, driven by Small Business Services growth of 3%, with Financial Services flat and Direct Checks declining 10%. On an organic basis, revenue declined less than 1% and was in line with our expectations. Marketing solutions and other services revenues grew more than 12% over the prior year and represented over 39% of total first quarter revenue. Adjusted diluted earnings per share grew over 11% from the prior year. We generated strong operating cash flow of $81 million and were drawn about $741 million on our credit facility at the end of the quarter. We renewed our credit facility for another 5 years and repurchased $20 million in common shares in the quarter. We continued our brand awareness campaign to help better position our products and services offerings and drive future revenue growth. We also advanced process improvements and delivered on our cost reduction commitment for the quarter On March 19, we completed the acquisition of [LogoMix], which further enhances our Small Business Services, marketing solutions and other services product set by adding more logo and web services capabilities. Additionally, we are working on another acquisition in the treasury management space, which we expect to close in the second quarter. In a few minutes, I will discuss more details around our recent progress and next steps before I turn the call over to <UNK> to cover our financial performance. If you did not see our second release issued this morning, here are some highlights. We announced my intention to retire from Deluxe. I have agreed to serve as CEO during the succession process to provide continuity and leadership to facilitate a thoughtful, well-planned and deliberate transition process. A CEO succession committee of the board has been formed and has engaged a leading executive search firm to assist in the succession planning process, which will consider both internal and external candidates. This is the right time for this transition on many fronts. With $2 billion in expected record revenues for 2018 and a strong strategic and financial momentum, I can begin to explore new interests and opportunities knowing that we have laid the foundation for continued transformational growth and success. It is a true privilege to lead this great company. I look forward to continuing to work with the talented team at Deluxe and with you, our investors, until my successor is named and to provide counsel and support in the transition to new leadership. As I'm not going anywhere yet and will be here for a while, you can count on me to be working as hard as ever to ensure we continue our great transformational momentum during this transition period. And now I'll turn the call over to <UNK>. Thanks, <UNK>. On behalf of the entire management team, congratulations on your retirement from Deluxe. We all look forward to working with you throughout this transition process. Now back to the call. Revenue for the quarter came in at $492 million, growing 0.8% over last year. Organic revenue, which excludes acquisitions, FX and other noncomparable items, declined less than 1% and was in line with our expectations. Shifting to our segments. Small Business Services revenue of $316 million grew 2.7% and 3.5% on a days adjusted basis, and we delivered continued growth in marketing solutions and other services. From a channel perspective, our online major accounts, Canada and dealer channels grew. Financial Services revenue of $141 million was about flat on a reported basis as well as organically compared to the first quarter of last year. Growth in marketing solutions and other services revenue more than offset the impact of lower check orders. Direct Checks revenue of $35 million was down 10% from last year, ending right on our expectations. From a product and services perspective, check revenue was $210 million, representing 43% of total revenue. Marketing solutions and other services was $193 million or about 39% of total revenue. And forms and accessories were $89 million or about 18% of total revenue. Gross margin for the quarter was 61.6% of revenue and was down slightly from 2017. The impact of higher delivery and material costs and acquisitions were only partially offset by the benefits of previous price increases and improvements in manufacturing productivity. SG&A expense declined $6 million in the quarter compared to last year and was well leveraged at 43% of revenue compared to 44.5% last year. Benefits from our continuing cost reduction initiatives in all 3 segments and lower legal expenses more than offset SG&A associated with recent acquisitions and higher innovation investment spend. Excluding restructuring, integration and transaction costs and impairment charges, adjusted operating margin for the quarter was 18.8% or flat to 2017. Small Business Services adjusted operating margin was very strong at 19.9%, 0.8% better than the prior year driven by product mix and cost reductions and lower medical costs, but partially offset by higher acquisition spending and increased material and delivery costs. Financial Services adjusted operating margin of 13.4% was down 1.2 points from 2017. In addition to check usage declines and continued pricing allowances, the loss of revenue and operating income from Deluxe Rewards highlighted on the fourth quarter earnings call and increased material and delivery rates in 2018 were only partially offset by the benefits of our continuing cost reduction initiatives, lower legal expenses due to a settlement in the prior period and lower medical expenses. Direct Checks adjusted operating margin of 30.9% decreased 1.0 points from 2017 driven by lower check order volume and increased material and delivery costs, only partially offset by cost reductions and lower medical costs. Diluted earnings per share for the quarter was $1.31 and included $0.08 per share primarily for restructuring, integration and transaction costs and asset impairment charges. Excluding these items, adjusted diluted EPS was $1.39, growing 11.2% from the first quarter of 2017. Additionally, first quarter adjusted diluted EPS of $1.39 was $0.06 better than the high end of our outlook driven by lower medical expenses, which contributed $0.03 of the benefit; and higher revenue and mix flow-through to profit, which contributed $0.02 of the benefit; and lower information technology expenses, which contributed $0.01 of the benefit. Both the favorable medical and information technology expenses are timing related and are expected to be incurred over the balance of the year. Turning to the balance sheet and cash flow statement. We were drawn $741 million on our credit facility at the end of the quarter, primarily due to acquisitions. Cash provided by operating activities for the quarter was $81 million, a $7 million increase compared to 2017, driven by higher earnings and lower income tax payments and lower prepaid product discount payments that were partially offset by higher interest payments and higher payables. Please note that prepaid product discount payments were previously referred to as contract acquisition costs. Capital expenditures for the quarter were $14 million and depreciation and amortization expense was $31 million. On March 19, 2018, we completed the acquisition of [LogoMix] for approximately $43 million in cash. For the year, we expect LogoMix to contribute approximately $16 million in revenue and be neutral to adjusted earnings per share before transaction and restructuring costs. We financed the acquisition through a draw on the credit facility. Now moving to our outlook. We are tightening our previous consolidated revenue outlook for the full year to a range from $2.065 billion to $2.085 billion, which equates to about 5% to 6% overall growth. The high end of the range has been adjusted down by $20 million, primarily due to data-driven marketing driven by lower-than-expected financial institution marketing spend and more complex and elongated pay-per-performance initiatives, but also due to a delay in closing the treasury management acquisition and FX rates. We are also tightening our adjusted diluted earnings per share to an expected range from $5.60 to $5.80. Here are several key factors that contribute to our full year outlook, including Small Business Services revenue is expected to increase 4% to 5%, with expected growth in our online, dealer and major accounts channels; price increases; double-digit revenue growth in MOS offerings; and continued tuck-in acquisitions. Partially offsetting our growth are expected volume declines in core print business products. We expect Financial Services revenue to increase 10% to 12% driven by continued growth in MOS categories, including data-driven marketing solutions and treasury management solutions as well as continued acquisitions. Partially offsetting Financial Services growth is the previously discussed departure of Verizon and expected recurring check order declines of 7% as well as some check pricing pressure. In Direct Checks, we expect revenue to decline approximately 11% driven by lower check order volume stemming from secular check declines. While we believe the economy is beginning to strengthen, we remain cautious and are monitoring how businesses and financial institutions plan to spend and invest tax-related savings. We delivered on our first quarter cost and expense reductions commitment and expect full year reductions of approximately $50 million net of investments. Approximately 70% of the expected reductions will come from sales and marketing, another 25% from fulfillment and the remaining 5% coming from our shared services organizations. We expect to see continued increases in material costs and delivery rates. We continue to plan for revenue growth investments, including approximately $8 million that we will exclude from adjusted earnings as incurred in technology and integrations, primarily in data-driven marketing, treasury management and web services. In addition to this, we now plan to invest $8 million, which is slightly lower than previously communicated, in data-driven marketing and treasury management, in talent, technology and process improvements to accelerate strategic sales and drive more development innovation. Additionally, we paid a onetime bonus for all management employees in the first quarter and implemented other employee-related initiatives to ensure we remain competitive in the current war for talent in a tight marketplace. We expect our full year effective tax rate to be approximately 25%. We are assessing the overall impact of the Tax Cut and Jobs Act, particularly the new international provisions, including the toll charge on previously deferred foreign earnings. We currently expect there will be approximately $0.03 per share negative impact from the global intangible low-taxed income tax compared with our earlier guidance of an immaterial impact. We still do not believe there will be any base erosion and anti-abuse tax impact. We expect to continue generating strong operating cash flow, ranging between $360 million and $380 million in 2018, reflecting stronger earnings and lower tax payments, partially offset by higher interest in employee medical payments. We expect prepaid product discount payments to be approximately $27 million for the year. 2018 capital expenditures are expected to be approximately $55 million, $7 million higher than 2017 as we plan to accelerate growth investments even more in 2018. We plan to continue to invest in key revenue growth initiatives and make other investments in order fulfillment and IT infrastructure. Depreciation and amortization expense is expected to be approximately $143 million, including approximately $89 million of acquisition-related amortization. For the second quarter of 2018, we expect revenue to range from $492 million to $499 million and adjusted diluted earnings per share are expected to range from $1.29 to $1.35 per share. We expect to have lower brand spend and higher cost reductions in the second quarter compared to the first quarter. Shifting to our capital structure. On March 21, 2018, we replaced our 5-year revolving credit facility, increasing the size slightly to $950 million. The new facility has an accordion feature that provides us with the option to increase the overall size to $1.425 billion, if needed. We expect to maintain our balanced approach of investing organically and through acquisitions to drive our growth transformation. Additionally, we expect to continue paying a quarterly dividend and periodically repurchase common stock. To the extent we generate excess cash, we plan to reduce the amount outstanding against our credit facility. We believe our growing cash flow, strong balance sheet and flexible capital structure provide us well to continue advancing our transformation. Now I'll turn the call back to <UNK>. Thank you, <UNK>. I will continue my comments with the recap of the 3-year strategic direction outlined on our last earnings call and then highlight our progress in each of our segments, focusing on the 3 primary MOS key growth areas to provide a perspective on how we progressed in the first quarter and outline what we expect to accomplish during the balance of the year. For 2018, we expect to deliver continued growth in MOS revenue and a ninth consecutive year of total revenue growth. If achieved, 2018 will mark the first time in the history of Deluxe that our revenue exceeds $2 billion. Additionally, 2018 represents the first year of our 3-year goal through 2020 to pivot for faster organic growth and moderately more aggressive acquisitive growth. While accelerating progress towards our 3-year strategic goals and growing EBITDA, there may be an impact to operating income and GAAP EPS depending on the mix of acquisition growth, including acquisition valuations, performance and synergies and the organic performance of MO<UNK> There is a cost to transform more quickly, so we may experience small near-term GAAP EPS dilution in 2019 and 2020, but we expect immediate cash flow and cash EPS accretion. We are committed to delivering a plan that we believe enhances shareholder value while we continue to pivot for faster organic and moderately more aggressive acquisitive revenue growth. We expect to deliver a slight organic growth in 2018 and approximately 3% organic growth in both 2019 and 2020. We are also targeting to increase our overall MOS to total company revenue mix to be approximately 45% this year, growing to approximately 60% by year-end 2020. To achieve the 60% MOS mix level, we expect to drive more organic growth and make larger investments principally in data-driven marketing and treasury management solutions and to optimize web services. We have worked hard to give us some expected sustained core check runway with all large financial institution contracts now extended through at least 2020. And we have about 25% fewer bank contracts up for renewal in 2018 compared to 2017, and we have more competitive opportunities that are coming due. In 2018, in marketing solutions and other services, we expect revenue to be approximately $910 million to $925 million, up from $756 million in 2017 with an expected 20% to 22% growth rate, including 4% to 7% organic growth with about $90 million in new tuck-in acquisitions and $45 million in carryover acquisitions, partly offset by $15 million in other noncomparable items. The [LogoMix] and treasury management acquisition referred to earlier are expected to generate $16 million and $46 million of revenue, respectively, or $62 million in total for 2018. These 2 acquisitions are expected to deliver about 2/3 of the $90 million new acquisition revenue, so we have made good progress thus far but still have work to do to deliver the remaining $28 million of new acquisition revenue to reach our outlook. The 4% to 7% organic growth is driven by data-driven marketing expected organic growth of 11% to 16% and treasury management solutions expected organic growth of 9% to 12%, with all 3 of the other categories expected to grow low single digits. As <UNK> highlighted, the delayed timing of the treasury management acquisition close drove some of the MOS revenue reduction at the high end of our outlook. But the primary driver of the reduction was in data-driven marketing. We continue to be bullish in this space and are forecasting 11% to 16% organic growth, which is higher than the market growth rate of 9% to 13%. Our focus is on growing existing FIs through cross-sell and program expansion, acquiring new FIs and expanding pay-for-performance. Here are some encouraging color on our accelerating pace of new customers and expanding pay-for-performance. For all of 2017, we added 7 new FMCG customers. So far in 2018, we have added 5 new FMCG customers. For all of 2017, we only had 1 pay-for-performance customer but have added 4 more customers in 2018. In spite of these very positive trends, we are lowering data-driven marketing revenue as we did not see the expected increase in marketing spend from a combination of tax reform, anticipated regulatory relief and ascending interest rates, all of which typically improve bank earnings. In addition, while pay-for-performance is generating demand, the sales process is more complex and elongated. If we achieve the $910 million to $925 million, this performance would translate to a total revenue mix of approximately 45%, up from 38% in 2017 and 33% and 30% the previous 2 years. We are excited with our progress here. And with a more cooperative economy and even more acquisitions as catalyst, we could potentially grow MOS even faster. Now shifting to our segments, including updates on our key strategic and MOS revenue focus areas. In Small Business Services, Q1 revenue grew approximately 3%. As highlighted on our fourth quarter 2017 call, we expect a more favorable economic environment for small businesses in 2018 and saw some signs of this in the first quarter through better performance in small business marketing solutions, which is where more of small businesses discretionary spending occurs. However, the impact of 4 nor\ I think it's just a question of the marketing spend. And will it get any lower. I think we appropriately put the right range in there, Charlie, so I feel very comfortable with that right now in terms of where we are, hitting that overall range that we've laid out there not only within the MOS table, but also, obviously, for the total company. And what could generate it to go higher is just getting through the pace of CMOs deciding to spend and spend more quickly and campaigns taking off, therefore, more quickly within there; and also whether we can get the ---+ we've already seen a movement in pay-for-performance. We've seen it. We highlighted that today. Can we get that even moving more quickly at this point. And I think what we're seeing is what we ---+ we've talked about earlier, Charlie, around the lumpiness of some of the stuff. It's a great solution. We believe we're growing faster than the market. We believe we're going to continue to grow faster than the market. It's just this tempering of how fast do people spend in the FIs. And what we saw in the quarter is just the pace not what we expected when we first put the initial guidance together for the year. We've elapsed that now, so this would be the final quarter that we would see that. We wouldn't ---+ we guide exactly where we feel it's going to be. You know from past discussions that we have a lot of ways that we try to get at this. We talk to the financial institutions. We try to understand what are they ---+ what is their commitment to the check program. We use a lot of statistical work, both internal and external work, to try to determine where we think those rates are. And we ---+ I think we were actually somewhere around 6.5% in the quarter, call it, 7%. So that's in line with what we expected and 7% is the number. And we had said earlier, we expected this to pop up a little bit. I think we talked about it in the first quarter ---+ or the fourth quarter call. And principally, just because there's so much out there with this ---+ for the consumer and almost ---+ he or she is almost a confused consumer with all the different electronification things that are out there right now. And with the new payment rail being thrown around a lot as well, we just felt that all the indicators that we were seeing in talking to FIs and in some of that statistical nature of the trends we were seeing kind of led us to that. I can't speak to past right now and this year, Charlie. That would be going way too far out on a limb right now. But I don't ---+ we've been asked questions whether we will ask them to open lower at this point. I think the best I can tell you is the range that we're at, about the 7%, we feel comfortable with. And again, the great story for us is as this becomes less a dependency on us, it means that small blips in the space don't have the material movement. Again remember, annualized, every 1%, so if it went from 7% to 8%, that would be $2 million in a total year. So ---+ and as far as deals that are out there, yes, we're still competing. We're still seeing opportunities. There are things that are out there. Banks ---+ you've seen this already from us. Banks are inclined not to generally switch, switch from us, switch from competitors on average. But no, there are still things and there are still opportunities that we're bidding on right now and we're ---+ and those are not ---+ everybody thinks they're just price. They're not. They're can you bring me new things with my program, can you bring me new technologies, new ways of thinking about the check production, new ways of thinking about how to work with my clients. And those are all things that we're in the middle of and things that we're working. Yes. If you think about what we're doing within ---+ it really is a strong focus in data-driven marketing and treasury management. And what we're doing is we're spending on the sales and marketing to try to get more strategic salespeople. I'll give you a great example. We are so fortunate, we've got somebody from the industry that we have been working with in the treasury management space for years. And he is a proven expert in treasury solutions, and he came onboard. And it's people like that, so that they can go out and help as we're trying to bring more solutions in the marketplace. Same thing on the data-driven marketing side. We're also expanding in capabilities around our product. As our products evolve in data-driven marketing and treasury management, Chris, we want to make sure that we're spending more there. We're spending more on committing the pay-for-performance in the data-driven marketing space. We've had success in that in First Manhattan, and we're bringing that also now into the Datamyx front as well. So those are examples of where ---+ how we're spending. We think it's smart spending and we think it's spending that's going to pay off in the long run for us to have ---+ to help us drive more organic growth. I think it's balanced and I think it's appropriate. I think if we felt that we could drive this even further ---+ Do I think it would drive stuff in 2018. Probably not immediate but more for 2019. But I think we feel very good about where we are and the balance that we have in there. And if we believe that it makes good sense to continue here, we would do it and we'll pull back in other areas is how we're looking at it. Yes. I feel that the treasury deal will get done. As we, both <UNK> and I, mentioned in our comments, that it's not getting done at the pace that we would like, but it's not for both parties not doing a super job trying to work through to get that done. So ---+ but yes, I think both of us see a very clear line of sight with the team to get this done, so I've got a good degree of confidence there. As far as the balance, the $28 million we need, obviously, we've got to get a lot more done to get that. The way <UNK> and I look at it is to say, well, if that's coming in the second half of the year, that means that we've got to have a $56 million stream on an annualized basis to make that happen. And we have a rich pipeline of opportunities that are out there right now and that we're working. So we wouldn't guide to that right now if we didn't think that we could get it done. And I think that's the best way to think about it right now. The areas that we're targeting right now outside of what we've done are in the data-driven marketing space and ---+ as well as that continued capability, smart moves that we made. We love the [LogoMix]. It's done really well so far. And by the way, I'll just give a shout out to my new team at LogoMix , they're doing a super job so far in the first month or so. But things like that from more of a tuck-in standpoint, we're also looking at as well. Thank you, Takia. Thank you, everyone, for your participation and thanks to Charlie and Chris for your questions today. Just 3 things I want to leave you with. First, we delivered a very strong quarter to start the year. Second, marketing solutions and other services revenue grew more than 12% and the mix improved to 39% of total company revenue towards our goal this year of 45% for the total year and then approximately 60% in 2020. And lastly, we have established a solid baseline first quarter to propel us towards revenue growth again in 2018 for a ninth consecutive year. We're now going to roll up our sleeves, we're going to get back to work, and we look forward to providing a positive progress report at our next earnings call. And I'm going to turn it over to <UNK> for some final housekeeping. Thanks, <UNK>. Before we conclude today's call, I'd like to mention the Deluxe management will be participating at the following conferences in the second quarter where you can hear more about our transformation. On May 16, we'll be attending the Needham Emerging Technology Conference in New York. And on June 5, we'll be attending the R. W. Baird consumer, technology and services conference in New York. Thank you for joining us, and that concludes the Deluxe First Quarter 2018 Earnings Call.

2018_DLX

2016

IIVI

IIVI #Can shortly. Ask your second question. We are feeling the effects of continued strong demand in China from China broadband and across the board. As you know or as we have talked about in the past, we are a significant supplier of amplifier components into that market. And so pumps and passives are experiencing quite a strong demand for that ---+ pumps and passives, in general, for that part of the market. The ongoing demands and the baseline demands in North America combined with both the anticipated metro buildouts in North America and also the gradual adoption of 400G in North America and in Europe are driving demand across the board for everything, starting with amplifiers, for the amplifiers. Yes. So <UNK>, I was about to say amplifiers, optical channel monitors, our new optical time domain reflectometers and tunable optical filters. So the suite of those components that will be deployed, are being deployed alongside amplifiers and in line with the transponders, we are experiencing significant demand across the board. Sorry, <UNK>. And finally, since you asked me, regarding ---+ earlier Fran made the comment regarding 980 pumps. And that is for the OEM market, for our own internal amplifiers but also for the submarine market, which is growing in response to the large increase in data center interconnect traffic, as you know. So regarding our capacity, we are managing our capacity very, very closely, very tightly. We have expanded and authorized increased capital investments this year above what we had budgeted. We have turned on our new laser chip on carrier line in the Philippines, offering us expanded capacity, as well as a path for lower costs. And we do have some constraints that we are managing ourselves, but also we are managing our own supply chain constraints as part of that. And I think that the team are doing a great job at it as well. With respect to your question about the backlog, so the backlog in the sequential quarter in the first quarter was $61 million compared to this quarter's backlog of $85 million, and it was $54 million in the second quarter of last year. I'm not sure, <UNK>. Can you clarify your question regarding lead time. I think across the board, across our entire supply chain, <UNK>, lead times are extremely important to our customers. We stay focused on that. In cases where we are surprised either by sudden demand or by shortages in the supply chain, where we have done everything we possibly can, in that case we may have to extend the lead times. But we are absolutely focused on serving the customer, making sure that we've done everything we can for that. Regarding pricing, I would say on ---+ in general, despite the demands, the pricing environment continues to be competitive, and we've had some success in slowing down the price erosion. In some cases, we have actually increased the prices. In other parts of the portfolio, where there were multiple sources that we are competing with, we have stayed on our typical track of 2% to 3% reduction in the quarter. It's a great question, David, and you answered it with a great answer. So coming back to my comment earlier and my response to <UNK> <UNK>, 35% to 50%, in that range, of the bookings were really laid out for us over a longer time horizon than we generally get. So we're delighted to have it, and it will help us improve our planning for the next one or two quarters, and do our best to be able to break the constraints and increase our outlook to keep up with the demand. And I would say we always need to have some headroom because we have been very, very aggressive about positioning both the performance and the ability of our teams to scale to meet market demands, to win business and to take share. So we have been very aggressive about that, and we will continue to be. Right now it's on, and we are expecting, based on our checks, our discussions with our key customers, we are expecting that the momentum that we currently are caught up in and creating should continue at least through this fiscal year. We will have to update you again on April 26, <UNK>. That's our best view as today. Thanks for your question. Give us just a sec. In terms of whether or not there's a very, very significant movement from the first quarter, not really particularly in laser solutions. As we said, our book-to-bill has been in the 99-100-101 type of range for a long time. And to move some large amount of points on the whole quarter, almost 10 points on the whole quarter, we are really talking about the grade of movement that we ended up seeing in performance products. So I don't know that we are seeing a really hugely big difference. I think performance products, however, which has our main markets to serve, the semiconductor capital equipment market and the military market, those bookings as a factual matter are very, very lumpy. So, in fact, we spent---+ <UNK> spent some time talking about the sequential growth in those just in revenue in those markets because some of those bookings were had, say, six months ago. So it's tough to say we had big, big differences in performance products when the bookings are lumpy, anyway. I do think we think it has a little to do with the economy and how the use of the lasers is ---+ it goes up and down as the economy does well and people slow down on their capital procurement. The cutting head market, one of them, we think has that. So a little bit of seasonality, but we are coming into the better part of the curve on that here in the first, third and second or the third and fourth quarter. So seasonality, a little economy driven, quite a bit. We are not giving, really, any forward-looking numbers on really any of the parameters for the acquisitions at this point in time. I think, one, it's preliminary. But do we think there is an advantage across a few dimensions, whether they are economic or technical on the 6-inch. Yes, but I think in terms of its exact or even its ballpark movement on the margins, we are not commenting on that, really, at this point. I don't think that you should expect as a conceptual matter that the R&D spending is declining. Sometimes there are slightly seasonal factors of when various things happen or are delivered, particularly among prototypes. But generally speaking, our R&D spending is fairly steady. <UNK> <UNK>, I could add ---+ just to add, <UNK>, to what <UNK> <UNK> said, our teams more and more in this environment, especially in an environment which is demanding new products and is coming at our customers a little faster than what they expected, we typically will ask for NRE in certain cases. And our teams more and more are finding that they can be successful in that regard as an offset to the R&D expense. So when you see that, it's not necessarily a slowdown of the activity, but in some cases the treatment of how we paid for it, basically. Thank you, Candace. Well, first of all, thank you all very much for joining us this morning. If there is a follow-up, anything on what we've already talked about, we would be pleased to talk to you later. Fran, is there anything you'd like to conclude with. Just to tell everybody that has been following us, stay tuned for how we proceed on with these acquisitions, and we are upbeat about the third and fourth quarter of our base business. Thanks for attending. All right. Have a good day. Thanks. Bye-bye.

2016_IIVI

2017

LECO

LECO #That's a great question and it's one that, when we talk about our automation business here at Lincoln, our value proposition is all centered around the welding and the cutting that, at the end of the day, you have a multitude of other participants in the market you might be able to provide some competencies relative to doing automated-like systems, whether those are material handling systems or welding systems or other systems. But at the end of the day, the OEM that has fabrication as a key competency is looking towards Lincoln Electric to drive that solution. And that value proposition for us is just that. We believe we bring a level of competency and expertise on welding and cutting that cannot be matched by the other competitors in the marketplace. And that's really a driver for us as we continue to grow this business in the broad global markets. No. We already have an existing welding tech center and school in Cleveland. This is a replacement and an expansion to improve our capabilities and our opportunities to demonstrate the solutions that we can drive into the market as well as a greater capacity to demonstrate those welding capabilities. The increased expense will be relatively modest. Right. I would put it less than that, actually. It's under $400 million. No, it's not a noticeable piece of our sales. That question was related to whether some of these new technologies in some of these closely adjacent markets are yet material for the business. And we have some very unique technology there that we are working with a multitude of companies with, but it's not material to our business, nor do I expect it to be a material portion of our business near term, although I do believe our ability to show the competency and the technology and to advance it could create opportunities for us as we move forward. No, I don't think that, looking at the performance in the fourth quarter, that we would be able to cite that kind of phenomenon. We did have some very nice wins in the regions that we talked about. We've been talking about an improvement in our commercial channel in retail in North America that has been very successful. Because it was some larger orders and was fairly broadly achieved, I wouldn't cite any particular, if you will, flushing phenomenon at the end of the year. My view at this point is that I'm not sure that equipment will sustain these kind of double-digit improvements. My view, at this point in time, albeit early in the year, is they will probably migrate a little more towards each other, that consumables will likely improve a bit and equipment should back off a bit, because we did have a very, very strong fourth quarter on the equipment side. And I think it's a little too early to argue that that's a sustainable trend. Thank you, Candace, and thanks, everyone, for joining us on the call today, and your continued interest in Lincoln Electric. We very much look forward to discussing the outcome of our first quarter and the progression of our strategic programs in the future. Again, thank you very much and good day.

2017_LECO

2016

KALU

KALU #I would say the entire change that you see in price per pound, fourth quarter to first quarter, almost all of it would've been mix related to the long products change. No. I wouldn't go there, but most of the new product launches that we have this year are bumper programs. So, as the car companies replace one platform with a new platform, we'll typically be involved there. In some of those the old platforms they are replacing may have been steel bumpers and now they are moving over to aluminum bumpers. But it's just the general migration that we've seen over the past several years of growth in bumpers. Although the really rapid growth here is for bumpers were probably five years ago, and that growth has tapered off some, but continues, and we expect it to continue, at a reasonable growth rate. But not double-digit growth rate like we were seeing a few years ago. I'm sorry, which was that. Value added revenue quarterly. And seasonality (multiple speakers). Oh, quarterly value added revenue. Again, that's a question I'm glad you asked. The first quarter in any year is almost like the fourth quarter; it's hard to tell what's going to happen in the first quarter. Our typical pattern is the first quarter is strong, the second quarter is stronger, then we taper off in the third quarter and the fourth quarter is the worst quarter. However, what happens in the fourth quarter ---+ and coincidentally, what happens in the first quarter ---+ is often a function of what customers are doing with their inventories at the end of the year. So, we got hit pretty hard in the aerospace long products in the fourth quarter, as we said. It's rebounded here in the first quarter. What we can measure, however, is when we look at our total first quarter, how much of the strong value added revenue that we had was a function of other customer activities at year end that might've been under our radar screen because we were so preoccupied with what was going on in long products. So, this year we don't expect to see a significant increase like we normally do in the second quarter compared to the first quarter, but we still expect the typical longer-term seasonal pattern, which is a strong first half and the weaker second half. Sure. During the quarter I believe the number is about 83,000 shares that we purchased. It was about $6.4 million that we spent during the quarter. And we have a lot of room still on the existing plan. I think it's $117 million as of the end of the quarter, I believe that's authorized, yet to be purchased ---+ for purchase by the Board. Okay. Well, thanks, everyone, for joining us on the call. We've got a nice start to the year and we look forward to updating you again in the second quarter call in July. Thank you.

2016_KALU

2015

CVLT

CVLT #Okay. Clearly Veems had an impact in the market, in the mid-market, and through their mid-market distributors they have gotten ---+ from an admin standpoint, they've gotten themselves positioned in the enterprise, not big-scale, but positioned there. And they're a viable competitor in the market and they've done pretty well. On the EMC side, in terms of our ability to compete and the things that they're doing in terms of including backup as part of their converged solution set, I think I have a different perspective on that. I mean, clearly your data protection market is being commoditized and being substituted with disbased replication and things like that. But from a customer standpoint, and the way the market is going to move and what you need to do with your data, I think that's only part of the story. And I think we believe that at the end of the day, how data is captured, indexed and managed is not going to be done through disbased replication over the long term. Near term, yes. Longer term, I think the technology we're developing, and managing ---+ I got to think, maybe I can put it this way. You are dealing with massive scale. And you can't just be putting data inside ---+ in a box inside an array, because data is moving. You're going to have massive data moving into the cloud, you've got data in array, you've got data on mobile devices. And doing a backup or doing a replication, if you think about that long term, it's just not going to work. It's a key technology for today, but I think if you look at what we're doing with our Edge drive, which we've just launched this quarter, is a pretty good indication of that in terms of a new and different way of managing data. I think our next-generation platform, which I just talked about, has got a much different way of managing data. So I think those are good things, what EMC's doing for their customers, but I think we have a different view on how this market is going to evolve and the fundamental technologies that we've built to more align with a big-scale cloud environment, which is ---+ which makes things a lot more complicated because you've got your data center, you've got your private cloud, you have your public cloud, you have virtualization and then you have containerization coming in. So you have a lot of technologies that need to be dealt with seamlessly and holistically, whether it's for a small enterprise or a large enterprise. And I think we have ---+ let's just put it this way, a different view on how data should be managed in those new emerging types of environments. Good question. As we have gained more confidence in this transition, another major initiative here is healthcare and business analytics. And what we're doing today and with the new technology is we're going to bring it out to market later this calendar year. Is pretty clear to us that as we go forward that we see more and more opportunity in the business analytics area and the unique things we can do with the platform we've developed, which is unique in the market. This is clearly going to open up opportunities. We have always been a Company, by the way, that's developed ---+ 100% of our growth has been organic. And it looks like with the new technologies that we've developed here, we're going to have opportunities in selected areas of business analytics. And there may be some acquisition opportunities. As we think about creating shareholder value, we think it would be prudent and smart on our part to keep our powder dry, because the odds of that opening up as we move through this year are high and we think that would be a better use of creating value than share repurchases. Doesn't mean we won't do share repurchases, by the way, but I think our point of emphasis and priority is going to be more on building the Company for longer-term growth. And some of that will be in unique, I'll call them business value-added solutions, in the business analytics area; just likely, over time. No. I think this would be selective niche acquisitions that we can add to our platform in certain markets, and healthcare is certainly one of them. I mentioned it on the call, but we have launched our healthcare platform and we're going to be expanding that as we move through this year. We're getting good traction on that. And that's going to become a ---+ number one, it's our third largest vertical today. We're making a big investment there. We're expanding partnerships there. And there's big opportunity in that market, and we have a good leader driving it for us. I think there'll be some good opportunity for us there to tuck in some analytics capability in that market and some others as we move forward. Veem is gaining share. You've got ---+ none of our large competitors are gaining share. You had a massive shift in this market on ---+ in the core data protection market, some of it's gone to disreplication, some of it's has gone to Veem, some of it's gone to converged, but that ---+ some of it has gone to the ---+ <UNK>'s just mentioned some of it's gone to the cloud. This is what we were talking about 1.5 years ago. You can see the shifts. These are substantial changes. I just went through this on the call. These were not tweaks to the business. This was substantial changes to our technology, monetization models, pricing, distribution, I mean tied to the shifts. So yes, there are a number of competitors, smaller ones, cloud, that are gaining share in the core, but the market is, I won't say completely wide open, but it's pretty wide open for these other areas, whether it's healthcare or it's compliance or it's legal, or it's, I call it inside incident the firewall mobile for applications. So I think you've got to look beyond the core. If you talk to a CIO, they're going to tell you that in a big enterprise, they want their data protected. So data protection is still important, and the big companies, these big deals, they would still like do that on a holistic global basis, the big banks. Got two of the large banks in here recently. They want it all tied together. So data protection, they need that locked down. But they need compliance, they need legal, they need business analytics, they need all their operations for these more complex environments automated. This whole process automation managed service piece becomes more important. It's a significant shift in the landscape of where the value is going in the market and how do you monetize that to maximize your revenue and earnings growth. It's different. It's taken us a while to put it all this together, but we're getting pretty close. But it's a substantial change. Pretty exciting. Maybe not exciting at your end, but pretty exciting at this end because we have the foundation laid to build a pretty interesting Company going forward. But it's a ---+ and companies that aren't making these massive radical changes, you end up where we are right now. You stall out your revenue and earnings growth. But the market's got massive potential in front of us here if you position yourself to take advantage of it.

2015_CVLT

2017

ATO

ATO #Thank you, Adam, and good morning, everyone. Thank you all for joining us. This call is being webcast live on the Internet. Our earnings release and conference call slide presentation are available on our website at atmosenergy.com, and we expect to file our 10-Q by the end of the day. As we review the financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Our forward-looking statements and projections could differ materially from actual results. The factors that could cause such material differences are outlined on Slide 24 and more fully described in our SEC filings. Our first speaker this morning is Chris <UNK>, Senior Vice President and CFO of Atmos Energy. Chris. Thank you, <UNK>, and good morning, everyone. We appreciate you joining us and your interest in Atmos Energy. The successful execution of our growth strategy to invest in our regulated assets continues to drive our performance. Net income from continuing operations for the second quarter increased to $162 million or $1.52 per diluted share compared with $143 million or $1.39 1 year ago. For the current 6-month period, net income from continuing operations reached $276 million or $2.61 per diluted share compared with $245 million or $2.38 per diluted share for the same period 1 year ago. Slides 4 and 5 provide financial highlights for each of our segments for the 3- and 6-month periods. Rate relief generated about $40 million of incremental margin in the second quarter and almost $68 million in the current 6-month period. Approximately 70% of the incremental margin was reflected in our distribution segment. Period-over-period decreases ---+ or increases rather were $29 million in the quarter and about $47 million in the current 6 months, with the largest increases in our Mid-Tex, Mississippi and Louisiana Divisions. Margin in the pipeline and storage segment rose almost $11 million in the quarter and over $21 million in the current 6 months from APT's GRIP filing approved in fiscal 2016. We continue to experience customer growth in our distribution business, primarily in Texas and Middle Tennessee, resulting in a $2.5 million gross profit increase quarter-over-quarter and about $4 million in the current 6-month period. Over the last 12 months, we experienced net customer growth of about 0.8% or about 26,000 customers. As everyone is aware, the winter heating season this year was extremely warm. Weather this year's second quarter was 34% warmer than normal and 23% warmer than last year's quarter. The first 6 months of fiscal 2017, weather is 29% warmer than normal and 12% warmer than the same period 1 year ago. However, our weather normalization mechanisms, which cover about 97% of our distribution margins, worked as intended to substantially mitigate the effects of this extremely warm winter. As a result, we only experienced a decrease in gross profit of about $1 million for the quarter and year-to-date periods. Moving on to our spending. Consolidated O&M for the continuing operations increased by $4 million in the quarter and about $9 million in the current 6 months, mainly due to higher employee-related costs, incremental pipeline maintenance activity and increased line locate activity, which is an indicator of the growth we're experiencing. For example, in the first 6 months of the first fiscal year, we had 515,000 line locator requests in our Mid-Tex Division alone. This equates to a 4% increase compared to the same period last year. The incremental pipeline maintenance spending reflect increased levels of monitoring, integrity assessments, continuing activities being conducted at APT, combined with incremental spending related to the recently acquired North Texas pipeline and related compressors. As a reminder, we acquired this asset during the first quarter for $85 million to provide additional capacity to serve our growing North Texas customer demand. It also provides increased access to the Barnett Shale, Oklahoma and Northeast gas supply bases. Capital spending increased by $23 million to about $559 million in the first 6 months of fiscal 2017. Distribution spending increased about $90 million as we continue to focus on system safety and new infrastructure spending. Pipeline and storage spending decreased about $67 million, reflecting the substantial completion in the prior year of an APT project to improve the reliably of gas service to its LDC customers. Approximately 77% of our year-to-date CapEx was associated with safety and reliability spending. And we begin to earn ---+ expect to earn on over 95% of our capital spending within 6 months of the test year end. Our capital spending is still expected to range from $1.1 billion to $1.25 billion for fiscal '17, inclusive of the pipeline purchase. Moving now to our earnings guidance for fiscal '17. Our financial performance for the first 6 months of the fiscal year came in line with what we expected to be and our fiscal 2017 earnings guidance and assumptions remain unchanged. We still expect fiscal 2017 earnings from continuing operations to range between $3.45 and $3.65 per diluted share. Slide 18 details the key assumptions supporting our earnings guidance. We expect the continued execution of our regulatory strategy to be the primary driver for this year's results. We remain on track to begin implementing between $90 million and $110 million in annualized operating income increases during fiscal 2017. Slides 7 through 14 provide details about the progress we have made during fiscal '17 in pursuing our regulatory strategy. I will now turn over the call to <UNK> <UNK> for closing remarks. <UNK>. Thank you, Chris. Excellent, excellent report. And it's in the time to enter our favorite week here, this is derby week. And we've recorded another solid quarter, very, very steady results, no surprises, and we're extremely encouraged with the positive outlook for the remainder of our fiscal 2017. Progress with our rates and regulatory work continues. We enjoy very positive relationships with our customers and the regulators in the states that we serve, which is critically important. And with our investments in our regulated assets of over $1 billion annually through 2020, we continue to demonstrate our absolute commitment to safety and reliability. And regulators and customers very much understand how important these investments are to make our system as safe as possible as we continue our journey of becoming the nation's safest utility. Rate relief continues as the primary driver of our financial results. And as of May 3, rate outcomes have provided annual operating increases of about $30 million thus far in this fiscal 2017 year. And you can see that on Slide 17. We do currently have request pending which are requesting adjustments of about $132 million, with the lion's share of that amount coming from our Mid-Tex Division rate review mechanism, which seeks an adjustment of some $43 million as well as the pending APT rate case seeking an adjustment of $55 million. And as we've discussed, the APT case was filed proposing no changes to any existing policy or precedent, particularly as it relates to cap structure and return on equity. Our team did an excellent job of presenting our case to the hearing examiners about 2 weeks ago, and we're expecting that initial decision by June 6 and then the statutory deadline for decision in the case by the Railroad Commission is July 10. So we'll know something by then. Looking forward with our upcoming rate activity, we do expect to submit another 5 to 7 rate filings by our fiscal year-end that, in total, would request another $15 million to $20 million of additional adjustments to our operating income. And with the sale of our nonregulated gas marketing business now fully complete, Atmos Energy is now a fully regulated pure-play natural gas utility, making the company an even more attractive investment with a stronger valuation. We continue to honor the commitments that we've made to all of our constituents, with expected earnings per share growth of between 6% to 8% annually, and providing a solid dividend we're offering our shareholders a total return proposition of between 9% and 11% on an annual basis. We very much thank you for your time this morning, and now we'll open the call up for questions. Adam. You wouldn't take your eyes on those midstream. I mean, it's a classic add-on to our intrastate pipeline, very integral part of the intrastate. So it's just another high diameter ---+ or high-pressure, large-diameter pipe that's bringing additional supply from very important areas to our system that is experiencing some wild growth up on the north end. Core GRIP ---+ GRIP and other rate regulated activity that we're doing from last year. Organic good old-fashioned growth, <UNK>. From new business. No, no, that's the total shareholder return. The 6% to 8% earnings per share growth and then the dividend on top of that. You have not updated your note here recently. You used to write about that. But you're right about the rate base growth, it's doing about 10% to 11% with our investment of about $125 million through '20. Yes, we came out of ---+ this is Mike. We came out of '16 at about a rate base of $6 billion, and we expect to end this year somewhere $6.5 billion to $6.9 billion. And 2020, $8.5 billion to $9 billion so. No, <UNK>. This is Mike. It's ---+ I mean, excluding short-term debt has been preestablished precedent and it's the standard. I mean, I would say, that's for the hearing examiners to decide, but really, we just want to take you back to the point that we communicated all along. And that's, our case and our filing was very, very straightforward based on previously established policy and precedent. We weren't asking for anything new and really, the environment and the way we operate the pipeline business hasn't changed since the last case. So we're very comfortable with our case and our team did an excellent job presenting that case during the hearings. I think the method that was really established or set as a result of the last case, the framework created by the Railroad Commission was to use a pipeline peer group and that's what we did. And our experts referred to a pipeline peer group to establish the ROE that we recommended in the case. Sure. This is Chris. Again, we have WNA coverage in 97% of our margins. Colorado is the only one who doesn't have WNA. Most of the mechanisms utilize a 30-year normal NOAA. That's the period where to calculate the adjustments under the various mechanisms. In Texas, it's a 10-year derivation that's based upon a 30-year normal. So our coverage period generally cover November to April. We have a couple of that go even further. And then Virginia, although it's the smallest territory, that is an annualized ---+ a full year worth of WNA coverage. We haven't taken it yet. I said we haven't taken it yet. It would be opportunistic. We ---+ <UNK>, this is Mike. We have a small amount of capacity right now, maybe 100 million a day. And that's really where we are in terms of our ability to move additional gas west to east. You might talk about what we'd have to do to add it. Yes, I mean, to add it, we'd add compression. And I think we add compression along our system that would allow us to bring more gas into the Metroplex and then deliveries down into Katy. I think we're looking at maybe 200 to 300. So clearly, the primary driver is for the benefit of the rate paying customer. No. Yes. You have a question now. Okay. Just to remind you, a recording of the call is available through August 2 on our website, and we hope to see many of you at the AGA Financial Forum in a couple of weeks. We appreciate your interest and thank you for joining us. Goodbye.

2017_ATO

2015

ABG

ABG #Thanks, Operator, and good morning, everyone. Welcome to Asbury Automotive Group's second-quarter 2015 earnings call. Today's call is being recorded and will be available for replay later today. The press release detailing Asbury's second-quarter results was issued earlier this morning and is posted on our website at AsburyAuto.com. Participating with us today are <UNK> <UNK>, our President and Chief Executive Officer; <UNK> <UNK>, our Executive Vice President and Chief Operating Officer; and <UNK> <UNK>, our Senior Vice President and Chief Financial Officer. At the conclusion of our remarks, we'll open the call up for questions and I will be available later for any follow-up questions you might have. Before we begin, I must remind you that the discussion during the call today is likely to contain forward-looking statements. Forward-looking statements are statements other than those which are historical in nature. All forward-looking statements are subject to significant uncertainties and actual results may differ materially from those suggested by the statements. For information regarding certain of the risks that may cause actual results to differ, please see our filings with the SEC from time to time, including our Form 10-K for the year ended December 2014, any subsequently filed quarterly reports on Form 10-Q, and our earnings release issued earlier today. We expressly disclaim any responsibility to update forward-looking statements. It is my pleasure to hand the call over to our CEO, <UNK> <UNK>. <UNK>. Good morning, everyone, and thank you for joining us today. For the second quarter, we are once again reporting record results, diluted EPS from continuing operations of $1.52, an increase of 28%. Our stores continue to produce excellent operating results, despite new vehicle margin pressure. We responded with higher volumes, improved F&I PVRs, incremental service opportunities, and continued expense control. In total, second-quarter revenues were up 12% and gross profit was up 9%, and we achieved a record operating margin of 4.9%. These results and our strong balance sheet enabled us to continue our balanced capital allocation plan, repurchasing over $50 million of our stock in the second quarter and acquiring a Ford and Nissan store with approximately $160 million in combined annualized revenues. Over the last four quarters, we have deployed over $425 million of capital to share repurchases and acquisitions. Looking forward to the remainder of 2015, we believe automotive sales will remain healthy and we continue to plan our business around a $17 million SAAR. We will continue to execute our two-part strategy, driving operational excellence and deploying capital to its highest returns. We are extremely proud and thankful for our team's hard work to achieve these outstanding results. Now, I'll hand the call over to <UNK> to discuss our financial performance. <UNK>. Thanks, <UNK>, and good morning, everyone. This morning, we reported record second-quarter diluted EPS from continuing operations of $1.52. This represents a 28% increase from last year and there were no adjustments to earnings for the second quarter of 2015 or 2014. For the quarter, same-store revenue increased 6% and same-store gross profit increased 4%. Controlling our expenses enabled us to decrease SG&A as a percentage of gross profit 130 basis points from last year to a ratio of 67%. Q Auto, our three-store standalone used vehicle initiative, continues to progress in line with our expectations and resulted in an EPS loss of $0.02 in the second quarter. Looking to near-term expectations, we estimate this initiative may reduce EPS by $0.01 to $0.03 in the third quarter of 2015. We continue to focus on our objective of achieving run rate profitability for Q. In terms of capital deployment, we invested $12 million in our facilities during the quarter, with year-to-date CapEx totaling $20 million. In addition, during the quarter we repurchased a piece of land for $19 million. This land purchase was the first step in a market realignment plan with one of our major manufacturing partners in Atlanta, Georgia. This project includes the construction of two new dealerships on a major traffic artery in metro Atlanta, ultimately allowing us to exit three existing operating leases and the construction of a new dealership in a high-growth Atlanta suburb for which we have been awarded an open point. The investments made in this market realignment will position our dealerships in excellent retail locations and provide us with significant growth opportunities across all business lines. We expect to be operational in these new dealerships during 2016. On our first-quarter call, we discussed the CapEx budget for 2015 of $65 million, which included $45 million associated with our core annual CapEx plan, with the remaining balances related to renovations of recently acquired dealerships and construction projects that allow us to move franchises out of currently leased facilities. With the announcement of the Atlanta market realignment, we are now increasing our CapEx budget, excluding real estate, to $75 million for the full year of 2015. In addition, we will continue to seek opportunities to purchase property in anticipation of future lease buyouts. As <UNK> mentioned earlier, during the quarter we returned $54 million to our shareholders through the repurchase of 620,000 shares of our stock. And over the last 12 months, we have repurchased over 12% of our outstanding shares. Turning to the balance sheet, from a liquidity perspective we ended the quarter with $2 million in cash, $28 million available in floor plan offset accounts, $51 million available on our used vehicle line, and $165 million available on our revolving credit line. With respect to leverage, during the quarter we drew the remaining $83 million balance on a $100 million real estate facility and swapped it to an all-in fixed rate of 4.8%. In summary, we made progress during the quarter in deploying our available liquidity, resulting in total leverage of 2.6 times, in line with our targeted leverage ratio of 2.5 times to 3.0 times. Going forward, we will continue to deploy capital on an opportunistic basis. Now I'll hand the call over to <UNK> to discuss our operational performance. <UNK>. Thank you, <UNK>, and good morning. We are extremely proud of our Company's performance this quarter. In an increasingly competitive market, we increased revenue 12%, increased gross profit 9%, and controlled our expenses to deliver an operating margin of 4.9%. For the balance of my remarks, I would like to remind you that everything I'll be covering with respect to operational highlights will pertain to same-store retail performance in the second quarter. New vehicle revenue increased 5%, but gross profit decreased 7%, compared to the prior year. Our new vehicle retail unit sales were up 5%. More importantly, in the face of declining margins, our stores managed their overall front-end gross profit, which is a combination of new, used, and F&I gross, to be essentially flat with the prior year. Turning to used vehicles, our used-vehicle performance is critical to the health of our dealerships. During the quarter, we drove our sales volume up 6% while maintaining healthy inventory levels. In pushing volume, we sacrificed some margin, but this was more than offset by our incremental F&I opportunity and our robust reconditioning growth. Our used vehicle days supply was at 36 days, which is slightly above our targeted range of 30 to 35 days. Turning to F&I, our second-quarter F&I revenue grew 8% compared to the prior-year quarter. F&I per vehicle retailed for the quarter was $1,373, up $42 on a year-over-year basis. The lending environment remains favorable. Turning to parts and service, in the second quarter our parts and service revenue grew 8% and gross profit grew 10%, compared to the second quarter of 2014. Our customer pay business, which represents approximately 54% of our parts and service gross profit, increased 5% from the prior year. In addition, reconditioning work was up 15% and warranty work was up 26%. Finally, we would like to express our appreciation to all of our teammates in the field and in our support center who continue to produce best-in-class performance in many areas. Our Company continues to deliver record results and this is a direct reflection of your passion and dedication. Again, thank you. We will now turn the call over to the operator and take your questions. Operator. <UNK>, it's <UNK>. Maybe I'll start with that question and <UNK> or <UNK> may have something they want to add. But overall, I would say we saw an increasingly competitive environment in the second quarter. It was most intense in the midline import sector and that ---+ midlines alone represented about two-thirds of our decrease in gross profit, and we believe that was largely attributable to the impact of very low gas prices. It hit particularly hard in the car segments, as opposed to the SUVs, but we also saw, as you see in the (technical difficulty) we saw some pressure in luxury as well, and what we sensed there is it's a shift in consumer preference to lower-priced vehicles. I don't know if, <UNK>, you have anything. I would say on the used side, we're very focused on continuing to drive volume there. We see the benefits from our reconditioning growth in our incremental F&I dollars and feel like we have a pretty good balance offsetting that margin pressure to increase that volume. <UNK>, we are seeing a lot of activity. I would say more than we have seen in years. It's almost as though a light switch was flipped within the last three, four months. I would say, broadly speaking, luxury stores still seem to be expensive, but ---+ and at the other end of the spectrum, the domestics, which we are finding very attractively priced, I mean, we bought three Ford stores here in the last six months or so. The Nissan store, we're very happy with. We think, generally speaking, stores are still expensive, but we are optimistic that there's some transactions that we might be able to get done as we move forward. That's a great point, <UNK>. And you know we saw the same thing with BB&T with this flat fee that they've moved to. I would say our average reserves are going to be in about the same range of the caps that Honda has put in place, somewhere between 100 and 125 basis points. So we are still learning more about the details of the program. There's some additional funding available from Honda, but I think from a 50,000-foot perspective, these caps and fees seem to be very much in line with the types of income that we are realizing today. We don't believe it will have a material impact on our business and we feel pretty good about being able to manage with these programs and any other programs of a similar nature that might come along. I would ---+ for us on a year-over-year basis, our days supply is actually down slightly in the midline imports. I would say it's a supply and demand issue more on the model series. The crossover in SUVs and trucks are very popular right now. The cars have become a little bit more of a commodity and a little bit more intense pressure on pushing them and sacrificing margin to move them. Correct. We are ---+ this is <UNK>. We're seeing obviously a lot of warranty work. Our internal is up significantly. So that's most of the rise in our margin comes from those two categories. <UNK>, this is <UNK>. I'll just jump in real quick. Obviously for us with how we account for our reconditioning and preparation work, that's 100% margin business in our results. So as we grow that business at a greater rate than the remainder, we'll have margin expansion. We did see slight margin expansion during the quarter inside the warranty and the customer pay segment as well. It's a mix. Most of our increase is in certain lines and it's a pretty fair mix between recall and warranty work. We are keeping up with it now. I mean, with the laws changing and the way the consumers get notified, a lot of times we don't have the parts available when the notification comes out. It seems like every week there is a recall for something, and that continues. It's tough to predict the future, but it's very consistent and we are keeping up with it. It's approximately 20% of our overall business. That's up about 5% over the prior year. There's only ---+ we just have to keep in mind there's only three Q stores. That inventory build would have very little to do with the Q stores. They are running at inventory levels that are pretty much in line with what we do at our core stores. So I think that is just a build in the core stores. It's just a little bit higher than what we would normally expect, so we don't see that as being unusual in any way, shape, or form. This is <UNK>. I would add we are also in the heat of our selling season. July and August are some of the bigger months, so carrying that excess inventory is a strategic and smart move, I think, on our part. I'll start with new and maybe <UNK> can talk a little bit more about used. But I think it's actually quite difficult for us to forecast these margins. It is ---+ like <UNK> said earlier, I think it's very much a function of supply and demand. It's a function of how much inventory we see in our stores. And to a certain extent right now on, I think, the new margin, we are somewhat reacting to what we're seeing happening in the marketplace. It does make it difficult for us to forecast from here. <UNK>, I think the used situation is a little different. Maybe <UNK> can talk about that. I would say on the used at least for now, because it's tough to predict the future, we're focused on our reconditioning work and we feel that's a value add. So when we increase the costs into the vehicle, it's certainly going to depress some of the margin. But we feel it's a more than fair trade-off and we've been happy with our results so far. Big broad strokes, we produce about $300 million in EBITDA, let's just take that as a round. And you're talking about a half a turn. So that quick math is about $150 million. <UNK>t, I think we want to be opportunistic. If we see transactions or opportunities that we find extremely attractive, we would be very comfortable going to the three times range. If there's nothing in the marketplace that makes sense, we are very comfortable at the low end of the range. I think that over time opportunities will come our way. Philosophically, the way we think about the business is we work hard every day to make this a better and better company. Making a better company positions us take advantage of opportunities as they come down the road. But we can be patient if that's the smart thing to do. We are not going to let that capacity burn a hole in our pocket. Yes, that's ---+ I would just recap we think Q Auto has the potential to be a huge business for us, but we've got to solve the riddle. I think we're very much in the mode today of solving that riddle. We think the three-store format is an ideal way to go about it. We've got a medium, a small, and a large format that are in three different markets. It allows us to experiment with a lot of different things, including technologies. We've got a major piece of technology that we are actually rolling out in the stores as we speak. We think it will significantly improve our customer experience and make our employees in the stores more efficient. I would also point out that we take about 35,000 cars a year to the auction and we see this as a way to retail some of those units. But it's not easy. If it were easy, there would be many others out there selling used vehicles in a standalone format in a big way, and we know that's not the case. So it takes some time and it takes some commitment. We feel like we're making very good progress. We lost $0.02 this quarter. Our objective is to drive this thing to profitability before we take the next step and we feel like we're on that path. Hey, <UNK>, this is <UNK>. Yes, it is in fact a record for us. 4.9% is a record for the Company. We've done ---+ over the last five years, really, we've done a lot of work on our infrastructure. We've done a lot of work on shared services, and it goes without saying our operators are incredibly disciplined inside the stores as far as managing their expenses. So it's been a lot of work in a lot of different areas. We are in a pretty good place. We finalized our shared service buildout in the second quarter. There is some enhancements to come from that, but in large part not a ton. I would also say that you see some of our capital dedicated to continue to buy out leases, which produces a run expense over time, and we'll continue to deploy capital in that fashion. But largely speaking, the infrastructure is in place. It is sound. And we'll continue to add assets and grow the business, and that will allow us to increase the operating margin from here. But it will be at a more stated pace. This is <UNK>, <UNK>. I'll take a shot at that. That's difficult to answer. There's a balance, in our eyes. We want to be good partners with our OEMs, keep up with our market share, keep the throughput through our fixed operations. It would be tough to quantify what that would be. Absolutely, and that plays into our 4.9% margin. We have really good operators that are really ---+ when they're structuring that deal, they are looking at all the different avenues and how to maximize their opportunities, and I think the results show they've balanced it well. <UNK>, this is <UNK>. First of all, you know, there's opportunity just getting these stores in the right locations. We talked about a major artery and it really is a premier location that is being fully renovated. It's the old GM site here in Atlanta. It's going to be a fantastic location right on 285. The second one is a high-growth market up a little bit further north of Atlanta proper. We look at ---+ when <UNK> mentions deploying our capital to the highest levels of returns, we don't outwardly disclose what our rates are and what our targets are, but we are always looking at what we can do internally. We think that we understand our business first, and then secondly look at acquisitions. And suffice it to say that we expect an excellent return on this investment over the next two years. It will be done ---+ second quarter or third quarter of next year, we'll be completed with the project. <UNK>, this is <UNK>. I'll take a shot at it. Our focus is on product sales and we feel like that's what's driving our growth, and it's tough, again, to predict the future, but we see opportunity to grow more. Rate is not nearly what it used to be as far as the percent per car and it's down dramatically. So it's really all on the product side. As far as finance penetration year over year, it's pretty flat. <UNK>, it's <UNK>. I'll take that one. We do have an internal cap. We also fix the prices of the product we sell in the F&I office. We've got a very aggressive internal audit program that's in these stores constantly, and we augment that with an external audit program. So we feel pretty good about the program we have in place. The ultimate objective is to make sure we treat all of our customers fairly. I mentioned earlier that with Honda and BB&T moving to these flat rates, flat fees or rate caps, essentially if you were to convert that into a dollar basis, that would allow us to generate F&I finance PVRs that are pretty much in line with what we already see today. So we think that is something that we can manage through and really don't expect any bump in the business as we continue to move forward. <UNK>, we've read the same things in the press that you have about those two captives. We don't know, to be honest, but I think what we would say is if they all go the same direction that Honda and BB&T went, that's something that we could be comfortable with. No, we are definitely open to bigger platform deals. We prefer larger stores over smaller stores. We think they are actually easier to operate. We'd prefer stores that are in our footprint. We think proximity matters. We run an organization structure where we allow our general managers to run the stores, but we do have support teams that are there to help them. And if it's easier for those support teams to get to a store, we think there's real incremental value that comes from that. And price matters to us. The basic threshold for us on any acquisition is we're not going to pay more for it than where our Company trades. So, typically, we look to pay less and then hope to bring synergies so that we can bring real incremental value out of an acquisition. With respect to brand, though, we are pretty much wide open. We're just looking for things that make economic sense. I think that's difficult for us to say, to talk about the quality of the demand. There's clearly been a shift in consumer preference. Trucks are now 55% of the market. If we went back five years ago, cars would have been 55% of the market. So we see that shift. I think fuel prices, as I mentioned earlier, have definitely enabled the consumer to think about something that's not quite as fuel efficient. We believe that has put some pressure on the very high mileage midline imports. But to quantify the quality of that demand for us is very difficult. The only thing I would add to that is the midline imports, when you look at their core cars or their volume products, they are all in the sedan series. So that is ---+ even though they are not necessarily popular, it's being treated as a commodity and that's really what we're seeing as the largest pressure point. Sure thing. We don't have that kind of insight, <UNK>. At the end of the day, we are a retailer. We don't have that insight into what is happening within the manufacturers. Obviously, the weak yen plays some part, but I'd point out that many of these Japanese imports have as much content as most of the domestic brands. So I think it's ---+ it's somewhat difficult to hang it on the yen. I'd come back to I do think the market has become more competitive. Everybody has got great product, there's good consumer demand, everyone wants to take share. And we're just ---+ we're seeing it conform to that in the marketplace. I would start with Lincoln. We have a number of Lincoln stores that do quite well for us. We would be more than happy to expand our presence there with that brand. We don't have any Cadillac stores, though that's something that would be new to us, but certainly something that we would consider. Yes, I would just ---+ big picture, True Car is one of our partners. They represent very little of our sales at the end of the day, somewhere in the mid-single digit range. Unlike AutoNation ---+ and again, we only know what we read, but our arrangement with True Car is we do not provide them with any data, so we don't have the data sensitivity that we've read about in the press. The other thing I would call to your attention is that we allow the general managers to make decisions about whether or not they use True Car or even many of the other third-party lead providers. And our general managers will make those decisions based on the returns they see on those investments. And that seems to be working well for us and we'll continue that type of an arrangement. That wraps up our questions for today. We appreciate you joining us and look forward to talking to you again next quarter.

2015_ABG

2015

DIS

DIS #On the motion picture side we see global motion picture consumption actually growing. A lot of that is obviously due to the number-one growth market in the world in terms of grosses, and that's China, where we've seen just massive increase in moviegoing over the last even 2 to 3 years. I know a lot has been said about the window and whether technology and the opportunity to view under higher-quality circumstances in the home is going to compress the theatrical window. For the kind of movies that we make, which are largely what I'll call tentpole films, we actually believe the theatrical window is incredibly important to us. And at the moment we don't really see any need to aggressively compress it. We time our, I'll call it, the home video product that goes into the marketplace very carefully, mostly to track the retail opportunities that we have as a Company, retail opportunities to both sell the movie into that window and retail opportunities to take advantage of the Consumer Products sales that we generally get at retail from a lot of the movies that we make. So, we think that generally motion picture consumption is increasing in the world. It has been relatively flat in the United States, by the way; I don't think that's going to change. And for at least us, we don't really see taking steps to decrease the theatrical window because, frankly, it's working for us. On the Star Wars front, <UNK>, we know that there is just incredible interest in this film. We've put two teaser trailers out and the response has been enormous. Anything that moves gets a lot of attention, and anticipation is obviously huge. And we've seen some examples already of Star Wars product going into the marketplace on the Consumer Products front including in markets like China that are very, very encouraging. That said, as enthusiastic as we are for what we know of the film, we have not seen a Star Wars film, any original one, since 2005. And there are markets around the world that are less familiar with Star Wars than, say, the United States, for instance. So, while the enthusiasm is, I think, rather apparent, we just want to be careful that the world doesn't get ahead of us too much in terms of estimates. And we have seen them as well. We are making, at this point, no estimates whatsoever in terms of what we believe the film will do. We know we have probably the most valuable film franchise that ever existed. We know we have the ability as a Company to leverage it in very, very compelling ways, whether it's in Disney, Infinity, whether it's at parks, as <UNK> cited, whether it's on the Consumer Products front or on the TV front. And we fully expect that the success of this film will reverberate throughout the Company not only in 2016 but in the years beyond because we obviously have a rich slate of Star Wars films coming. So we just want to be careful here that the market doesn't get too far ahead of us or ahead of itself, even, on this. Let's all continue to anticipate the movie and be optimistic about it. But we have to take a wait-and-see approach in terms of what it will do. On the Shanghai front I'm going to let <UNK> talk about the economic impact in 2016. But you know, there, too, like Star Wars in many ways, there's huge anticipation. As I mentioned in my comments, the reaction to what we revealed a couple of weeks ago in Shanghai was extraordinary not just in terms of the level of interest but a level of enthusiasm and the positive reaction to the fact that we were building a park that was of such scale and was so unique in many ways, particularly in its blend of what I will call traditional Disney theme park experiences and a lot of things that are both original and very, very specifically tailored for the Chinese market. Okay, <UNK>. Your question about ESPN ---+ the new NBA deal will occur in 2017. And we still believe that ESPN has plenty of room to grow. On the question about China, the announcement that was made about a deal with Youku, I think you mentioned, was not correct. We have not entered into a partnership arrangement with them. The home video market in China is obviously challenged by the fact that it's a market that has been, as you know, rife with piracy. And so, there wasn't ---+ a legitimate home video market never quite develop there. That said, there are a number of new platforms that have launched or that are expected to launch. And we are in a number of conversations, none that we can discuss because we're not ready to announce it, with some of them about output deals for our films. And we feel good about essentially digital delivery of these films into a window that is likely to be lucrative for us over a long period of time, and essentially enable us to put legitimate product into the marketplace swiftly to hopefully counter what we have encountered in a lot of Asian markets, which is piracy. Okay. <UNK>, on the $500 million, that's another good question regarding foreign-exchange. It's not the simplest subject. But if we had not hedged at all, the FX impact would have in more significant in fiscal 2015. But the reason I say that is we don't know what rates are going to do in fiscal 2016. But right now for fiscal 2016 we are expecting that $500 million adverse impact. And the hedge ratios that we have in place are actually more favorable than current levels. So if there were changes in different directions during the year, we would continue layering in during 2016 for 2017. But right now the hedges that we have in place for 2017, albeit more modest than where we are for 2016, they are ---+ right now they look like they would benefit us in a strong dollar market. ESPN, in particular ---+ the FX issue there is separate and distinct from the $500 million that we talked about. The foreign-exchange impact for ESPN is over that three-year period. And when we talked back in 2014 at the Investor Day for that outlook, at that point in time the US dollar had not started it's a significant strengthening. That was in the summer of 2014. So during that period the dollar has significantly strengthened across a number of key currencies for our cable nets, including the yen, the euro, the pound as well as the Brazilian real. So that FX impact is part of that outlook guidance that we gave. It's a combination. It's both the adverse impact of lower expected sub levels and the adverse impact of the stronger dollar. No. I think just the way we've explained that is what we can do. We are seeing real growth. But it's still relatively small in terms of total dollars versus what we see on the traditional platforms. In ESPN's case, as we have said before, they package their ad sales across all of their platforms, basically their linear, more analog platforms as well as all their digital platforms and platforms like radio and even their magazine. But we think that there's going to be tremendous growth from a percentage basis of digital. And we are going to continue to work with advertisers and with the research firms that are out there to work to not only get more creative but to provide more details, essentially more consumption research so that we can grow the business even more. The demand is clearly there. What you see in the advertising community ---+ not only do you see much more opportunity for what I'll call addressable advertising, but you see a huge demand from the advertising community as well. By the way, while we're on the subject of ESPN, because we have been on it a lot, so why not, I want to make one other point about it. First of all, we've set a number of times when you think ESPN you have to think about the NFL, NBA, Major League Baseball, the best package available in college football, college football championships, college basketball, events like Wimbledon, U.S. Open, et cetera. The other thing you have to consider is that in many of these cases we're only at the beginning or, in some cases, not even at the beginning, like the NBA, of new deals that kick in. Those new deals all provide for more programming, more opportunity for content on digital platforms which will enable us to increase consumption on digital platforms and grow that business even more. And generally, more flexibility in terms of how we distribute this product. So the NBA's a great example. You are going to have a huge increase in essentially inventory on ESPN across its platforms. So while there is definitely increase in cost, there's huge increase in terms of opportunity as well to reach more people, to serve advertisers more effectively, and to grow our digital platforms. Thanks, <UNK>. You can think about the 53rd week in terms of it being an additional week of operations. So it's relatively proportional in the year, so that would be a benefit here in fiscal 2015 and it would have the reverse effect in fiscal 2016. You are absolutely correct. Our leverage has reduced as the Company has continued to perform. We generate cash flow that we deployed to returning shareholders as well as businesses, doing strategic acquisitions. So when we look at our leverage, the number that you quote is actually a gross number. And we do look at our leverage in terms of the way the rating agencies look at it. So they will make some adjustments to that for things like pension obligations. So it's actually a little bit higher from a rating agency perspective. That being said, we do enjoy a mid single A credit rating. We also are a tier 1 commercial paper issuer. So as it currently stands, we feel like we are returning capital to shareholders as well as investing in businesses, doing acquisitions. And at the same time we are maintaining financial strength and flexibility. Thank you, <UNK>. And thanks again, everyone, for joining us today. Note that a reconciliation of non-GAAP measures that were referred to on this call to equivalent GAAP measures can be found on our investor relations website. Let me also remind you that certain statements on this call may constitute forward-looking statements under the securities laws. We make these statements on the basis of our views and assumptions regarding future events and business performance at the time we make them, and we do not undertake any obligation to update these statements. Forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from the results expressed or implied in light of a variety of factors including factors contained in our Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. Thanks again for joining us today.

2015_DIS

2018

SBSI

SBSI #Thank you, <UNK>. Good morning, everyone, and welcome to Southside Bancshares First Quarter 2018 Earnings Call. We reported first quarter net income of $16.3 million compared to first quarter 2017 net income of $15 million, an 8.4% increase. Our diluted earnings per share for the first quarter ended March 31, 2018, were $0.46 per share, a decrease of $0.05 or 9.8% compared to $0.51 per share for the same period last year. During the first quarter, we experienced only a slight increase in total loans of $15.3 million on a linked-quarter basis due to higher-than-anticipated payoffs. When compared to March 31, 2017, total loans increased by $770.7 million or 30.4%. Approximately $621.3 million of the annual growth was a result of loans acquired in the acquisition of Diboll State Bancshares last quarter. At March 31, 2017, our loans with oil and gas industry exposure remain minimal at 1.66% of our total loan portfolio. We recorded loan loss provision expense during the first quarter of $3.7 million, an increase of $2.5 million compared to provision expense recorded in the fourth quarter. As reported earlier today in our earnings release, the higher first quarter provision expense was a result of 2 commercial real estate loan relationships that were placed on nonaccrual status. Nonperforming assets increased to $42.4 million or 0.67% of total assets during the quarter ended March 31, 2018, an increase of $32 million compared to $10.5 million or 0.16% of total assets at December 31, 2017, and $14.1 million or 0.25% at March 31, 2017. Next, for a brief update on our securities portfolio. On a linked-quarter basis, the size of the securities portfolio decreased $220.1 million during the first quarter, primarily due to the sales of lower-yielding CMOs and lower-yielding short-duration agency debentures. The duration of the securities portfolio at March 31, 2018, increased to 5.3 years from 4.8 years at December 31, 2017, due primarily to the sale of the agency debentures. At March 31, 2018, we had a net unrealized loss in the securities portfolio of $48.6 million. Primarily as a result of the decrease in the securities portfolio this quarter and the loans acquired last quarter, the mix of our loans and securities increased to a 60/40 mix compared to a 57/43 mix at year-end, and a 52/48 percent mix at March 31, 2017, moving closer to our long-range goal of 70/30. During the first quarter, our net interest margin increased 7 basis points to 3.19% and our net interest spread increased 4 basis points to 2.95% on a linked-quarter basis. The increase in both the net interest margin and spread were primarily a result of the full quarter of purchase loan accretion from the Diboll portfolio, which positively impacted the average yield on our earning assets. We recorded $1.2 million of loan accretion this quarter, higher than we expect on a recurring basis due to the early payoff of 3 purchase impaired loans, resulting in approximately $329,000 of accretion. January 1, we adopted the accounting standard related to revenue recognition. In connection with the adoption of this guidance, we netted debit card expense of $796,000 previously included in ATM and debit card expense with deposit services income. And we also netted brokerage service expense of $151,000 previously included in other noninterest expense with brokerage services income. Due to the guidance under the modified retrospective method, prior periods have not been adjusted and are not comparable. During the 3 months ended March 31, 2018, our noninterest expense increased $1.7 million or 5.8% on a linked-quarter basis, primarily due to a full quarter of operational expenses associated with our acquisition late in the fourth quarter of 2017 and several other expense items recorded in the first quarter. These additional expenses include acquisition expense of $832,000 in connection with our acquisition last quarter consisting of $652,000 of change in control, payment accruals and severance payments; and the remaining $180,000 included additional professional fees. We also paid one-time $1,000 bonuses to certain employees in response to the benefits received from the Tax Cuts and Jobs Act totaling $744,000, $249,000 of cost related to the close of a grocery store branch within very close proximity of the branch acquired in the Diboll acquisition, and $827,000 of losses on the sale of securities in the first quarter. Our amortization expense increased due to the additional intangible assets recorded last quarter in connection with the acquisition and a full quarter of amortization compared to only 1 month recorded in the fourth quarter related to the additional intangible assets. On a linked-quarter basis, our efficiency ratio increased for the 3 months ended March 31, 2018, up 1.86% to 51.28% for the first quarter of 2018 from 49.42% for the quarter ended December 31, 2017, and decreased from 51.60% for the quarter ended March 31, 2017. We expect to see additional efficiencies in future quarters as we complete the integration in Diboll. The effective tax rate for the first quarter of 2018 was 11.4%. We recorded a discrete tax credit of $88,000 associated with equity awards that decreased the rate by 48 basis points. At this point, we expect an effective tax rate for 2018 of approximately 12%. Thank you very much, and I will now turn the call over to <UNK>. Thank you, <UNK>. Overall, we experienced a good first quarter. Our net interest margin increased 7 basis points and our efficiency ratio decreased compared to the first quarter of 2017, despite the significant reduction in the corporate tax rate that negatively impacted both. As <UNK> reported, provision expense and nonperforming loans increased during the first quarter. This was driven by 2 commercial real estate loan relationships, one of which was an acquired loan relationship in our 2014 acquisition. We are not wavering on our underwriting standards, and we believe our asset quality remains solid. This last weekend, we completed the core conversion related to the Diboll State Bancshares acquisition. We are pleased at how smooth and seamless the integration has gone. With the integration now virtually complete, we expect to realize additional synergies and cost savings. Diboll's outstanding acquired deposit franchise was a significant factor in the linked-quarter improvement in net interest margin and spread. The decrease in the securities portfolio during the first quarter, mostly to sale of lower-yielding securities, provides additional balance sheet flexibility in this higher interest rate environment. This additional flexibility and the resulting increase in loans as a percentage of earning assets to 60%, combined with the Diboll-acquired core deposit franchise, should enhance our future NIM prospects as the anticipated Fed interest rate increases occur. We will continue to focus on cost containment and process improvement in an effort to further improve our efficiency ratio. At this point, we believe the 2 areas that will yield the greatest future efficiencies are further process automation and continued rightsizing of our branches. Economic conditions in the Texas markets we serve remain healthy. The Austin and DFW markets, fueled primarily by ongoing job growth and company relocations, continued to perform exceptionally well. We are excited about our prospects for 2018 given the completed integration of the newly-acquired balance sheet, benefits associated with reduced corporate tax rates, the dynamic markets we serve, our solid balance sheet, strong capital position and outstanding team members. At this time, we will conclude the prepared remarks and open the lines for your questions. They basically ---+ the 2 facilities just have not leased up as anticipated. They are continuing to lease up, but they're not at the stage where they thought they'd be at this point in time. So we felt it appropriate to go ahead and place them on nonaccrual and put some reserve against them. But they are continuing to show some improvement on a quarterly basis, and that's why we said we'd reevaluate that on a quarterly basis. Our pipeline looks healthy. The issue is we continue to see some payoffs that are going to be coming down the road in the next several quarters. Some of the construction projects have completed and some of those are going on the market. So the pipeline is healthy, but we do anticipate some further drag as a result of payoffs. I'd like to think that the mid-single digit is still achievable. Instead of 7, it may be closer to 5. But we do have a healthy pipeline. We do have some construction loans that are going to continue ---+ starting to fund up right now. So there are a lot of positive things that are happening and it really just depends, <UNK>, on the level of payoffs that we see during the year. Well, if we look at the reclasses that we had, we had estimated around 32 for the run rate. And if you take all the noise out, we would come out about 30. And with the reclass, the expenses that we reclassed that to deposit services income that I mentioned, we would have been around $30,789,000. And that include the onetime bonuses that was around $744,000 and a branch closure, so right there is $1 million. We're thinking ---+ we talked a little bit about that yesterday, 30 to 31, probably. And we would expect it to go down further as the year progresses, probably more in the third quarter even. We'll have some expense related this next ---+ in the second quarter probably to conversion, additional travel and dissolve the expenses that come along with that function. So we're thinking somewhere in the 30.8 range to 31 probably. Right. There was a new accounting pronouncement that allowed us to transfer some things ---+ transfer anything out of HTM that we wanted to AFS. And we felt like with the changing interest rate environment, it made sense for us to move some of ---+ a lot of those items out of HTM to AFS so that we can restructure the securities portfolio as we deem appropriate in this higher interest rate environment right now. So that's what drove that. And basically, we transferred 700 ---+ about $740 million in securities out of HTM to ---+ and they were all callable securities, out of HTM to AFS. Yes. I think it's more of a wait and see in case ---+ depending on the interest rate environment. We're actually glad to see interest rates move up. And that's one of the reasons we sold a lot of securities, and about half of that was in the first month of this first quarter. So we do feel like we have a lot of additional flexibility and we're going to continue to look at potential restructuring going forward. The geography of the other CRE loan is in Little Rock. It\ That is correct. Yes. Just one second, I'm ---+ <UNK>, we're going to have to get you that number. It's not that significant. There's not a lot of it. And that particular loan is $13 million. I do. I was looking at the Omni accretion, and it's gone down but it's pretty flat the last 3 quarters. It went ---+ it only went down around $9,000 this quarter from the fourth quarter, so I expect it to trickle down a little bit more. But overall, I do think between $8,000 and $9,000. There will be the payoffs and there's just no way to predict those at this point. Well, at any point, actually. But I do think that's reasonable. I do. I think there is potential for some additional lift, especially given the fact that the fed is planning on raising interest rates at least 2 more times this year. Well, the total was around, let's see, $800,000 ---+ $950,000. $796,000 was related to debit card and $151,000 was related to brokerage services. So our deposit service still increased if you look at the year-over-year, and that's the result of having the acquisition largely. And then the brokerage services, even with the net ---+ you will notice a decrease because of the netting. But if you add back the $151,000 essentially to that, you all see an increase because the prior periods do not have it netted out. And that should be fairly ---+ I would expect that to be fairly consistent. This was our first full quarter with Diboll activity in it. We just had 1 month of activity in the fourth quarter, so probably we'll be able to have a better feel for what that run rate on the debit card expense will be after another quarter. The magnitude of the payoffs. Gosh, I'd have to go back to fourth quarter and see what payoffs were then. But I do think we did experience higher payoffs this quarter than we did in the fourth quarter and certainly, higher than what we had in the third quarter last year. But I'd have to go back and check the exact dollar amounts. It really is hard to determine. Most of the 2 markets that we've lent a lot of money into, the Austin and the DFW markets, continue to be very, very healthy and there's a lot of continued sales of different properties that take place. And as I tell the loan officers we agonize over are they going to pay off, and then we get upset when they do pay off. So it's just part of a healthy economy, I think, that we are experiencing payoffs. Thank you. We believe Southside is well positioned for the future, and look forward to reporting the results for the remainder of 2018. Thank you for being on the call today, and we look forward to hosting our next earnings call in July.

2018_SBSI

2018

CCMP

CCMP #Thanks, <UNK>. Good morning, everyone, and thanks for joining us. Before we get started, I'd like to note that on December 12, we announced Bill <UNK>'s retirement after nearly 15 years of service as our CFO and the appointment of <UNK> <UNK> as our new CFO. I want to thank Bill for his many contributions to the company over the years and welcome <UNK> to his new role. Bill, we'll definitely miss your leadership, and I want to thank you for your service to the company. We all wish you the best in your future endeavors. Thanks, Bill. I'm delighted to introduce <UNK>, who brings over 20 years of broad and deep experience in a range of business environments, most recently as the CFO at Stepan Company, a $1.8 billion publicly-traded specialty chemicals company supplying materials to a variety of consumer and industrial end markets. I look forward to the leadership and expertise that he will bring to his new role. <UNK> will discuss our financial results later in the call. This morning, we announced results for our first quarter of fiscal 2018, and we are excited about our continued strong execution and performance. We achieved another record level of quarterly revenue and very strong operating performance, driven by the continued successful execution of our strategic initiatives and healthy semiconductor industry demand. We continued our momentum from last year in 3 key product areas: CMP slurries for polishing tungsten, dielectric slurries and CMP pads. During the quarter, we realized record revenue of $140 million, approximately 14% higher than in the same quarter last year. Our gross profit margin was 52.9% of revenue, our highest level since 2002. <UNK>ke most publicly-traded U.<UNK> companies, our net income was significantly impacted this quarter by the onetime effects of U.<UNK> tax reform enacted in December, which resulted in a GAAP loss of $3.1 million or $0.12 per share. However, non-GAAP net income this quarter was a record $31 million, and non-GAAP diluted earnings per share were $1.19, both excluding the onetime impact of tax reform as well as amortization expense related to our 2015 acquisition of NexPlanar. Non-GAAP net income increased by approximately 33%, and non-GAAP earnings per share increased by approximately 29% compared to last year. In addition, we continued our strong cash flow generation trend with cash from operations of $31 million. <UNK> will provide more detail later in the call. To provide some context for our first quarter results, let me offer some perspectives on the global semiconductor-industry environments. As forecast by several of our customers and industry analysts, industry demand was firm during the December quarter, and our results are consistent with this as well as the expectations we discussed during our Fourth Quarter Conference Call in October. Reports suggest that overall semiconductor demand was driven by a continued robust memory market, generally due to the growing requirements for storage in a wide range of end-use applications as well as a healthy logic market, driven by mobile product launches. As for the March quarter, recall that it is historically seasonally soft, although the consensus is for an overall continued strong demand environment in calendar 2018. Views from various sources suggest that memory demand should remain firm, but industry participants more closely tied to logic may experience softer demand conditions during the March quarter. We serve all semiconductor manufacturers and have broad exposure across the memory, foundry and logic sectors. And through January, we are seeing continued solid demand for our IC CMP consumables products. As in previous years, we remain mindful of potential order fluctuations and volatility around the Lunar New Year, which this year begins on February 16. Later in the call, <UNK> will provide commentary on our current view on revenue for the March quarter. Considering a longer-term view, 2 weeks ago, our company participated in SEMI's Industry Strategy Symposium, or ISS, in California. This annual event early in the calendar year represents a great opportunity to compare views with other industry participants. The theme of this year's conference was smart, intuitive and connected semiconductor devices transforming the world. Discussion focused on future drivers of semiconductor demand, including: cloud connectivity, which should continue to drive strong memory demand; as well as augmented reality; artificial intelligence; automotive applications; high-performance computing; and cryptocurrencies, which should all be drivers of advanced logic. The event emphasized that the semiconductor industry is delivering evermore sophisticated semiconductor devices through collaboration across the supply chain, which are transforming electronics. Higher-performing chips with smaller feature sizes and requiring lower power consumption can only be realized through innovations in equipment, materials, design and packaging technologies. We believe we are well positioned to benefit from these longer-term industry trends and remain confident about the critical role highly-engineered materials and highly-formulated CMP solutions like ours will play in the semiconductor industry going forward. Now let me turn to company-related matters. During the quarter, we experienced strong demand for our tungsten and dielectric slurries and pad solutions across a wide range of applications and technology nodes. This drove approximately 11% year-on-year revenue growth for the quarter for our IC CMP consumables products. Of particular significance, we also achieved year-on-year revenue growth for the quarter of approximately 34% in China and 36% in Korea. Our strong positions in these countries are notable, given industry expectations for long-term overall semiconductor growth in China and continued memory growth in Korea. Turning to CMP slurries, during the quarter, we continued to grow with the ramp of our customers' advanced technologies, including 3D NAND and FinFET. As we have discussed in the past, 3D NAND and FinFET applications require more CMP steps, mainly tungsten and dielectrics. In particular, 3D memory requires roughly twice the number of CMP steps as 2D, and many of those steps are tungsten. This growth opportunity is significant for our business, given our leadership in this product area. We expect the industry transition from 2D to 3D memory will continue over the next several years. As a result, we achieved record revenue in our tungsten product area in the first fiscal quarter and year-over-year revenue growth of approximately 14%. Over the years, we have seen sustained revenue growth from our tungsten products, which reflects our continued leadership and commitment to this important product area. In addition, we achieved significant growth from our dielectric slurries with revenue up approximately 8% compared to the same quarter last year. This was primarily driven by demand for our ceria and colloidal silica-based dielectric solutions for advanced applications. We believe these CMP solutions provide benefits of higher removal rate, improved defectivity and lower cost of ownership. Dielectrics represents the largest application within the CMP slurries market. Here, we expect continued growth as we aim to displace incumbents and replace some of our own legacy solutions and continue to improve profitability. Turning to CMP pads. This quarter, we achieved record revenue and year-over-year revenue growth of approximately 16%. This was driven by continued strong customer pull for our products. We have a rich pipeline of new pad business opportunities spanning a wide range of customers and applications. We continue to leverage our global sales channel and technical resources to speed the qualification and adoption of our pad offerings as we have previously discussed ---+ and as we previously discussed, we continue to experience significantly shorter qualification times than in years past, given the unique attributes of our NexPlanar technology. We've recently broadened our product portfolio with a family of new pad configurations and continue to win new business for advanced and legacy applications. We continue to believe we can grow our pads revenue to over $100 million in fiscal 2019, which would reflect compound annual growth of at least 20%. I'm pleased to report that during the quarter, we were awarded a Best <UNK>pplier Award from SK hynix, a leading memory device company and a strategic customer. We were one of only 5 recipients and the only CMP slurry and pad supplier to be honored by SK hynix. This award is their highest level of supplier recognition. Our company was recognized for delivering best-in-class CMP slurries and pad solutions for their NAND flash and DRAM applications and demonstrating outstanding performance in technology innovation. We believe this recognition, along with the many other awards we have won over the years from a number of other important customers, is evidence of our long-term commitment to collaborating closely with our customers and our ability to deliver a broad portfolio of best-in-class CMP solutions to the highest standards for quality, performance and technology. Over the last several years, we've been very focused and committed to performance and growth in our 3 key product areas: slurries for polishing tungsten; dielectric slurries; and CMP pads, including slurry and pad consumable sets. Looking forward, I am confident of continued momentum in these areas, which we believe provide the foundation for continued profitable growth for our company. We remain focused on delivering innovative, high-performing and high-quality CMP solutions. We believe that ongoing effective execution in these key product areas, combined with our focused business model and global resources, capabilities and infrastructure continue to differentiate us among leading suppliers of specialty materials to the semiconductor industry and position us well to deliver another year of strong performance. And with that, I'll turn the call over to <UNK> for more detail on our financial results. Thanks, Dave, and hello, everyone. I'm honored to join the leadership team of Cabot Microelectronics and look forward to building upon the very strong foundation that already exists within the company. We have a tremendous opportunity for continued growth given the strength of our business and the industry in which we operate. Revenue for the first quarter of fiscal 2018 was a record $140 million, which represents an approximately 14% increase from the same quarter last year. This increase reflects the continued successful execution of our strategic initiatives and continued strong global semiconductor industry demand that we have seen over the last 7 quarters. Drilling into each ---+ drilling into revenue by product area. Tungsten slurries accounted for 45% of total quarterly revenue. Revenue in this area was up 14% compared to the same quarter last year, and we achieved record revenue of $63 million in the current quarter. Our tungsten growth was driven by strong demand from both memory and logic applications, including 3D, memory and FinFET. We expect this key product area will continue to drive profitable growth for our company. Dielectric slurries, representing the second key product area, provided 23% of our revenue for this quarter with sales up 8% from the same quarter a year ago. We look forward to winning more business in this area with our higher-performing, lower-cost and higher-profitability products. Sales of polishing pads, our third key product area, represented 13% of our total revenue for the quarter and increased 16% compared to the same quarter last year. This product area achieved record revenue during the quarter. Sales of slurries for polishing metals other than tungsten, including copper, aluminum and barrier, represented 12% of our total revenue and increased 4% from the same quarter last year. Finally, quarterly revenue from our Engineered <UNK>rface Finishes business, or ESF, which includes QED technologies, represented 6% of our quarterly ---+ total quarterly sales and was up 70% compared to the same quarter last year. Gross profit was 52.9% of revenue compared to 49.9% in the same quarter a year ago. This includes $1.2 million of amortization expense related to the NexPlanar acquisition. Excluding this, non-GAAP gross profit was 53.8% of revenue, which is up 290 basis points compared to last year. Factors impacting gross profit for the quarter compared to last year include higher sales volume, higher value product mix, partially offset by higher fixed manufacturing costs, including higher incentive compensation expense. Our full fiscal year GAAP gross profit guidance range is 50% to 52% of revenue, which remains unchanged. This includes approximately 100 basis points of NexPlanar amortization expense. Now I'll turn to operating expenses, which include research, development and technical, selling and marketing and general and administrative costs. Operating expenses this quarter were $36.9 million, including $0.5 million of NexPlanar amortization expense. Operating expenses were $3.5 million higher than the $33.4 million reported in the same quarter last year, primarily due to higher staffing-related expenses, including cost related to the company's CFO transition and higher incentive compensation expense. We currently expect our GAAP operating expenses for the full year to be between $145 million and $150 million. Our prior guidance range was $142 million to $147 million. This includes approximately $2 million of NexPlanar amortization expense. Recall that we typically experience an increase in expenses in the March quarter due to certain factors related to the new calendar year, such as merit salary increases, higher payroll taxes and also costs around our annual meeting in March. Operating income from the quarter represented 26.5% of revenue, which is 370 basis points higher than the same quarter last year, a significant year-over-year increase representing operating leverage driven by revenue growth combined with the company's ongoing attention to controlling costs and progress toward achieving our multiyear financial objective of expanding profit margins, which we introduced during fiscal 2017. Our reported effective tax rate for the quarter was about 108% compared to 20% in the same quarter last year. The significant increase is primarily related to the onetime impact of U.<UNK> tax reform, which increased our income tax expense by approximately $33 million. Excluding this onetime effect, our tax expense would have been approximately $7 million, and our tax rate would have been 19%. We currently expect our effective tax rate for the rest of the fiscal year to be within the range of 21% to 24%, including the benefit of a lower tax rate in the U.<UNK> Before the enactment of tax reform, we had estimated between 24% and 27% for the full fiscal year. The additional income tax expense associated with tax reform resulted in a net loss for the quarter of $3.1 million. But non-GAAP net income was $31.1 million, excluding this onetime impact and the previously mentioned amortization expense. Non-GAAP net income was approximately 33% higher than the same quarter last year and increased primarily due to the higher revenue and higher gross profit margin, partially offset by higher operating expenses. We reported a diluted loss per share of $0.12 this quarter, or diluted earnings per share of $1.19 on a non-GAAP basis, excluding the onetime impact of tax reform and the referenced amortization expense. Non-GAAP diluted earnings per share were approximately 29% higher than in the first quarter of fiscal 2017. Now turning to cash and balance sheet-related items. Capital investments for the quarter were $4 million. For the first ---+ for the full fiscal year, we continue to expect capital spending to be within the range of $18 million to $22 million. Depreciation and amortization expenses for the quarter were $6 million, and we generated cash flow from operations of $31 million. We ended the quarter with $426 million in cash and short-term equivalents and $141 million of debt outstanding. So net cash was approximately $285 million. Our strong cash generation model has enabled us to implement a balanced capital deployment strategy over the years, for which our priorities continue to be: funding organic investments to improve our global capabilities and our core CMP consumables business, paying dividends, acquisitions in closely related areas and share repurchases. We expect the tax reform will provide greater flexibility as we continue to implement this balanced approach with less friction in repatriating cash to the U.<UNK> I'll conclude my remarks with a few comments on demand for our IC CMP consumables products. During the first fiscal quarter, we saw a 3% sequential increase in revenue from our IC CMP consumable products compared to the fourth quarter of 2017. This is in line with the expected slight increase that we referenced during our call in October. Earlier, Dave talked about a range of general industry expectations for continued firm demand for memory devices and somewhat softer demand for logic devices during our second quarter of fiscal 2018. Within this environment, we currently expect demand for our IC CMP consumables products in the March quarter to be flat to slightly higher than the record level of revenue we achieved in our first quarter. This is notable since the March quarter is traditionally seasonally softer than the December quarter and sometimes includes volatility in orders around the Lunar New Year holiday. However, I would caution that we have some limited visibility towards near-term revenue. To summarize, from a financial standpoint, we've now delivered strong performance for 7 consecutive quarters and achieved another record level of quarterly revenue, along with strong operating performance and cash flow for our first quarter of fiscal 2018. Our expectations are for continued firm near-term demand, sustained solid gross margin performance and ongoing prudent management of operating cost. Based on all this, we believe we are well positioned to deliver another successful ---+ a year of another successful performance in fiscal 2018. Now I'll turn the call back to the operator as we prepare to take your questions. Yes, <UNK>. This is <UNK>. Good question. I think as you think about the P&L, we've had a number of reclasses and some moving parts within each of the buckets. So I think the best way to look at that for the quarter is to focus on the total operating expenses. And as we think about those expenses, at the December quarter last year, were $33.5 million going to $36.9 million this time with the primary item being the cost related to the CFO transition, of which the majority of that is related to cash and noncash items for the longer-term items that were related to Bill's performance over a long period of time with the company. So it's going to be ---+ it's difficult to look at those buckets, it's a good question. But if we focus on the total, we can drill it down to that item. So I'll take that, at least the first part here, <UNK>. And our raws are favorable year-over-year. And I think in the prior quarter, we talked about raws being higher based on previous contract prices, and those were working the way through our balance sheet and also ultimately through the P&L. So that is behind us now from an impact perspective in the total quarter. The largest raw material that we have are the abrasive products that you mentioned, where we have a buying agreement with the former parent company, which ---+ Dave, I don't ---+ if you have a comment about 2019. Yes, I think, I'll be just going ---+ looking beyond, I think we've been very effective to control our raw material costs, and we would expect that to continue to be the case going forward. Our ---+ you referenced the former parent, that's one of the article suppliers we currently use. There are several others as well. So I wouldn't want to put a number out there beyond 2019, but you would expect continued strong management of the supply chain as we've demonstrated in the past. Yes, thanks, <UNK>. We continue to see memory as a really important driver of growth for us. As we've mentioned, that transition especially on the NAND side, going from 2D to 3D, is really still in the relatively early stages. So you mentioned SK hynix, who ---+ we received their highest-supplier honor this past quarter, a really important customer of ours. And if you look at that overall conversion, we're still about ---+ we would estimate, or based on what's out there today, only about 1/3 of the 2D NAND today from a wafer start basis has been converted to 3<UNK> So still a lot of runway to go. And I also saw their comments about the kind of continued strong demand in DRAM and continued expected strong demand in NAN<UNK> So that's a really important part of the business for us, of course. That transition is really key as well because there's a doubling of CMP steps and so ---+ and most of those are tungsten and dielectrics. One thing I'd comment also is, when they talk about some of the growth rates, memory, of course, is really sensitive to the pricing. So when they talk about what their expectations for growth are, some of those are intermixed with what they expect the ASPs to do as well. But overall, we see a really strong memory growth environment. That was also a consensus at ISS, that memory is going to drive the unit growth in 2018, and that should position us really well for continued growth in that area as well. Right. So we've gone through many, many cycles as part of the industry, and the memory pricing from our customers is something that really, for us, when I think there's ---+ what we've seen historically is when there's pressure on memory pricing, it's really not as profound of an impact on materials, but they may pull in CapEx. So it may impact the equipment side a lot more. What happens with the material side is they have those really significant investments in place with their fabs, and they just continue to run them. So from a material side, although the CapEx or equipment side may be peaking, we see the material side is still a lot of upside going forward and not as affected by memory pricing at the end markets. Well, Mike, we ---+ we've benefited here from a great history of cash and operating performance. So we do sit here in a position of strength today in terms of where we're coming from and opportunities for the future. I think as we outline our deployment of capital priorities going forward, they continue to be as they've been in the past with spending on organic growth to drive the business; paying dividends, which we've recently initiated, and we have continued to do; M&A; and then share repurchases as a fourth. We won't comment a lot about the M&A pipeline, but we're very cognizant about where we sit from a capital deployment perspective, where we sit with the balance sheet today. We're going to continue to look at M&A. That is going to leverage our core capabilities, and then also, it needs to be actionable, of course. So there's a lot of activity going on. We're working very hard. We would hope at some point to be able to speak about some of those things, but we're going to continue with the cash deployment that has been a strength, I think, in terms of staying disciplined in the past, but we're also interested in using our capital strength to help drive the future of the company. Right. So <UNK>, first, just for context, we're coming off a record quarter for dielectrics last quarter, and we still saw year-over-year growth. So quarter-to-quarter, there's going to be some volatility, but we're really excited. We're, obviously ---+ about just the execution of our strategy. And just to remind, we're really trying to transform that portfolio. So we've introduced really 2 new families of products: one is ceria-based, and one is colloidal silica-based. Both of them offer better cost of ownership, better performance, a better defectivity. In some cases, we're replacing ourselves. In some places, we're replacing incumbents, so we've seen a lot of really encouraging growth in that area. And so ---+ and part of that strategy, of course, is also to improve our profitability in that product area as well. So we're encouraged by the prior-year progress. I think quarter-to-quarter, you could see some volatility but overall, a good trajectory for this product line. <UNK>re. So obviously, I spent quite a bit of time there, and China continues to be a really exciting area for us. We've always had a very strong position on the slurry side. We, of course, have our partnership on the pad side with KFMI, which is just starting. We did realize revenue in this fiscal year from that early collaboration in pads. I would say also, just to qualify, some of the revenue from China was also due to strong QE<UNK> So that could be lumpy quarter-to-quarter. But overall, what we see is continued strong investments in ---+ just the China government investing in the semiconductor supply chain, and we see a strong growth trajectory in the future as well. So we look forward to growing with China. It's a really important region for us, and we feel like we're really well positioned. Yes, it is unusual that we ---+ that we've said flat to slightly higher for Q2 revenue because historically, revenue's been down about 4% on average over a number of years. I think fundamentally, the business has changed. There's more structural factors in the marketplace now to uplift our demand as we think about memory, logic, artificial intelligence, automobiles and the ---+ and all of the items that go into that in terms of connectivity. So structurally, there's less seasonality and less seasonality throughout the year with our business. QED is really not a ---+ not much of a factor with its low percentage of our revenue right now, Chris. So that's not really part of the story. And it's a relevant question that you ask about what we've delivered this quarter in terms of even GAAP gross profit but then keeping our projection for the rest of the fiscal year, where it was at 50% to 52%. And I think you could just think of that in terms of: It's early in the year. And I think you said those words as part of your question. It's early in the year, so we're going to continue with the guidance that we had. On margin, there is a little bit of a seasonality effect because of our Q1 being the ---+ the December quarter. As we go into March, we do pick up some extra costs with merit increases and some equity grants and things like that. So there is a seasonality impact to the margin percentage and the margin metric. And with it being early on in the year, we're continuing to be comfortable with the guidance that we had. Yes, and Chris, just to add, longer term, we've put out there that our expectation is to expand margins. I think we're pleased with our performance so far, what we've demonstrated, not far from satisfied. But what we see is if you look at those 3 key product areas, tungsten, as you mentioned, is above our corporate gross margin. We see a really strong future for growth there. Dielectrics is ---+ we're transforming. That product area should also be positive from a margin standpoint. And then pads, pads is our ---+ a strong growing area for us. Very excited about that, but it is a headwind versus our corporate gross margin, obviously positive for gross margin dollars. So there's also some mix in there that will affect overall company gross margin, as you know. Yes, I think we're seeing both. And we look at the pipeline, there's really balanced across advanced and legacy, across the different segments: logic, memory and foundry. There is a distinction. The memory producers seem to prefer a ceria-based solution. That's more aggressive on dielectrics. The logic and foundry customers tend to prefer colloidal silica. So there is some segmentation by customer. And overall, what we're doing there is taking innovation to a space that hasn't seen a lot of innovation in the past and bringing some really innovative solutions to the market. So we're able to really reduce the percent solids while providing better performance, in some cases, higher throughput, so really exciting area for us. And so we're excited both on the legacy and advanced side and see a lot of runway. As you might have ---+ as you might know, dielectrics is the largest portion of the CMP slurries market. So a lot of room to grow there. Yes, thanks. We're always ---+ it's always going to be competitive out there. We've really been delighted with the growth we've seen, 17% this quarter year-over-year. We reaffirmed our expectation to grow the business over $100 million by 2019, which would be a 20% CAGR, so really healthy growth and continued growth from what we've seen at the start. What we've seen in terms of PORs is sometimes a customer will bring this pad in for one application, really see the performance benefits as well as the cost of ownership benefits and then proliferate it to other portions of their CMP process. So we're seeing both new POR wins and just more proliferation within the same customer, which is exciting. Well, we are excited about the impact of U.<UNK> tax reform, like most companies are. We have, as you know, 80% of our business is actually in Asia. So we have ---+ and 60% of our cash today is in Asia. So ---+ or is outside the U.<UNK> So we have a little bit less of an impact in terms of ongoing tax rate but a potentially greater impact in terms of less friction of moving cash across the world and back to the U.<UNK> So fundamentally, the less friction, the ability to repatriate after paying the deemed repatriation tax or expensing that this quarter, that should assist all of the ---+ ease of getting to cash in order to implement our cash priorities that we outlined. Yes, we follow the same things you do, <UNK>, which is to look at when the equipment sales are going in, that construction is being completed. So a lot of those new customers like [YNTC] and Anotron, they're still not only finishing construction, but I think an important element to China's growth, domestic customer growth, is demonstrating that they can achieve technology and an acceptable yield, right. So we're working closely with many of them. Most of the consensus would be that, that capacity comes online really starting second half of 2018, and that varies by customer. Of course, we've seen strong growth there already. So a lot of that ---+ some of that's coming from domestic customers that are already in production, like SMIC and [WALL-E]. Some of that's coming from the international players like TSMC, Samsung, hynix, who are continuing to ramp up their fabs, also Intel and Dalian, very active. So it's not just the domestic customers, but also the international customers that are very active in China ramping up their facilities.

2018_CCMP

2017

VRSK

VRSK #I would say that we are investing across all the different verticals that we are in and pretty excited. International growth is certainly a highlight, as well. So, I think is pretty broad-based. We have noted for you all in the past that there is an increasing software intensity to our business, which is essentially another way of saying that we are solutions-oriented company. And I think that's a true statement. We have moved into that position over the last couple of years. I don't know that the relative software intensity is going up from where we are but that's a drum beat inside the business. I think that best way to think about it is in aggregate. And there are, as we think about the business and the cost of revenue versus SG&A, sometimes there are things that balance between those depending on where we are in development versus implementation of those solutions. So, I don't think there's any conclusion to draw from that as you look forward to 2017. I think that's certainly a starting point. Again, I think there are a number of things that go on within numbers but that would be the baseline. I don't think you'll see any grand shifts in that. Let me start there and then maybe <UNK> will fill in with a little bit of detail around the insurance vertical specifically. But, at the general level, first of all, we have beefed up our corporate development capability in Europe, and we are in the process of beefing it up in Asia, as well. So, it's really an around-the-globe view of our opportunities. That expresses itself both as acquisitions. You have seen some of that in the more recent acquisitions. Also partnerships. We really like both flavors and we will be spending time on both of those flavors. But I really compliment the question, <UNK>, because it really is the case that if you are a data analytic company, and you take the data dimension of the data analytic agenda seriously, then you have to find a third way to operate basically, if you want to be global, because there's the one form which is you make it wherever ---+ Copenhagen, Detroit, whatever ---+ and you export it around the world. That tends to relate more to physical goods. And then there's the second form, which is you become utterly local, completely local, in what it is you do, and the whole really doesn't become greater than the sum of the parts. If you are a high intellectual property company with a database, you actually have to find a third way, which is, you can manufacturer your methods centrally but ---+ I think in line with what you're trying to get at ---+ you actually have to occupy each marketplace because there is in the world today, and will be in the world increasingly in the future, what I called data nationalism. Most countries work very hard to make sure their data physically resides in their country. And, in fact, the follow-on to the Safe Harbor, in the EU, which is just a particular example of the general case where there is just concern about where do our data physically reside. And so you do actually have to become local in order to have access to the data. So, you have to be the third way ---+ or, we have to be the third way, anyway. So, we are working very hard on that. And that is everything from where we place our people to how we deploy our people. And so here is where I now want to turn it to <UNK> because he led us through a very significant reorganization towards the end of last year with respect to our go-to-market folks in overseas market. So, <UNK>, maybe you want to talk about that, including how broadly based this particular program is. Maybe that's more than you expected, <UNK>, but we really care about this, actually. You tapped into something that we do a lot of work on. Yes. I think we are progressing as expected. That was really a comment as it related to the revenue that would be received in 2016. I'm sorry, you cut out for just a second. We shouldn't expect ---+ could you repeat that part. I actually think we have expanded ---+ and I know that Steve Halliday spoke about this on investor day ---+ we've actually expanded our customer base fairly significantly through some of the new solutions and companies that we brought into the Wood Mac mix. So, actually, what we're looking to do is we're looking to grow those customers into broader solution purchases throughout Wood Mac. I think you have to think about the customer base a little more broadly than just the core you might have thought about when Wood Mac first came into the family. Let me just put your question in a slightly different context, which is, we continue to feel the proprietary data is an advantage and one that we always pursue. We recite it as one of the four distinctives. So, it's always there in our minds. There are two ways you can build a proprietary data set. One is, you can have an a priori discussion with the market you are trying to serve and essentially get agreement that, let's all join hands and take the plunge together and start putting our data into one place where we haven't previously put it. That's the history of our early roots in the insurance industry. Argus has proven to be very effective at doing that. Wood Mackenzie is always about proprietary data and it ends up being a consortium. But want to relate it now to the second way that you can build a data set, which is you can also go customer by customer, and you provide them solutions. And as a part of having earned their trust, you ask for the opportunity to use and repurpose the data which is flowing through your application. We do it both ways. We have always done it both ways. In some markets, it may be that we can lead straight to the consortium. Argus has had particular success at that. And in other markets, whether they are defined by vertical or geography, we may have to do more of the second method, which is on a customer-by-customer basis. I just want you to have that perspective because we never lose sight of the goal to create proprietary data assets. It's more a question of how you go about it. Specific to the insurance industry, what goes on, particularly if you look at especially Europe, is you have got differences in terms of both regulation and market structure. And, of course, those two things go together. Regulation has an effect on market structure. And essentially European primary P&C markets generally tend to be more concentrated. So, the larger share player is naturally going to say ---+ let me think about it a little bit more before I make my data available. So, that's really just a condition that we deal with. But we are not deterred in the least in terms of trying to move towards proprietary data asset. It's just the pathway may be a little bit different. No, I would not draw that conclusion. If you look of the most profitable parts of what we do, whether it's in insurance or other places, there is a very nice mix of businesses which are built on a priori consortium data and businesses which are not built on a priori consortium data. So, you can get there both ways. Okay. Thanks, everybody, for your time and your interest today. I know that we're going to be following up with several of you even later today. We're going to have events in the course of the coming months. Some of you will come see us in the office and we're looking forward to being with you. So, thanks for your time today.

2017_VRSK

2017

LNC

LNC #Yes, <UNK>, I think of the year as almost perfectly in line with what I've said in the past, which is that this business is about $125 million a year business, or $500 million for a full year ---+ Yes, excuse me. And if you think about the year, we made $550 million and that included $17 million positive unlocking. So right at that $125 million guidance. In terms of the quarter, the $154 million, we had strong variable investment income. That was largely offset, as I mentioned, by expenses. So at the end of the day, what you just had was mortality, really good mortality driving the $154 million of earnings; which, just coincidentally, was almost an exact mirror of the first quarter of the year. As I said in the first quarter of the year, about $20 million of expected seasonality. We had about $10 million of additional; total of $30 million this quarter. About $29 million of benefit overall, compared to an average quarter, from good, strong mortality which we expect to happen in that quarter of the year. It was strong across all areas. So the PE and hedge funds, I think as <UNK> might have mentioned in his script, the return was about 12% for the quarter. And we expect 10%, long term. So we had good, strong performance from the alts portfolio. And then, prepayment income was above what we've experienced over the last 4 to 5 years, and was over what I would expect over a much longer cycle. In total, it came up to about $13 million after tax, as I mentioned in my script. I would say that was fairly evenly split, maybe a little skewed towards prepayment income. If you broaden this out, and you think about alternatives and prepayment income over a longer cycle, and you look at the last couple of years, what you've seen is that alternatives in both of those years were a little below our long-term expectations. So for the full year, we were about $40 million lower than we would expect on the alternative side, whereas prepayment income was a little stronger. When you add them together, I don't think we are materially different from what a longer-term expectation might be for the sum of those two items. M&A is always a tool. And over the last 22 (laughter) 20 years or so, we've used it pretty effectively to really achieve what would otherwise would be our plan anyway. And so whenever we do M&A, it's because we're trying to accelerate a strategy; not to do it for the sake of doing it. You are correct; we have said that we have a longer-term strategy of increasing the percentage of our income that comes from mortality and morbidity; and that sort of in terms of our businesses, we would probably think the group business as the top priority. So, that's the strategy. Deals coming into market come episodically. We'll continue to look at things. We've looked at some properties in the last 24 months, and back to our allocating capital to the best use, it was way more expensive. Properties sold for way more than what we think would make sense for our use of capital. But it made a lot of good sense for the people who bought it. I don't know what their strategies were. So, prices would probably have to come down a little bit before we got real interested in a deal. But we'll keep looking. We are good at assessing M&A. We are good at integrating M&A. And if something comes along that fits with our long-term strategy, all of which points we have articulated, we would take a look. I will say that we wouldn't do anything that would materially affect our share buyback program over time. Maybe let's back up a little bit as I answer that question. We have, over the past four months, have had an internal team at Lincoln; the core team, eight or 10 people. We have had another 25 or 30 people from our outside consultant, and then we've involved overall probably another 100 people from Lincoln. And what we've spent our time doing is really trying to understand where the best opportunities are to both improve the customer experience ---+ I don't want to lose that concept ---+ improve the customer experience; and then as we are doing that, make sure that we find ways to finance that investment. And so the numbers that we are talking about are not just pulled out of the pocket. But they are the consequences of four months of pretty hard work and detail and math. Now, having said that, as we move into the execution, and repeating what <UNK> said, we're going to have to pay attention to short-term earnings as well as long-term opportunity. And the execution phase is very important. And I think it would be pretty premature to try to identify exactly what line of business is going to get the most benefit. Thank you all for joining us this morning. As always, we will take your questions at our investor relations line. And we'll follow up with those that were remaining in the queue. You can reach us at 800-237-2920, or via email at investorrelations@lfg.com. Thank you again for your participation, and have a great day.

2017_LNC

2015

AVY

AVY #I think retailers ---+ this is always a challenge for them. I hate to say this because most of you guys are in the Northeast. Kind of hoping for a polar vortex so we get a lot of sales of warm clothes for cold winter but it's the same thing every year. If they can't move the goods, they'll discount them. We hope they don't have to. I think retailers are generally pretty disciplined about inventories and now they will focus on them and make sure they have accurate inventory so they can meet customer needs whether they're ordering online or online picking up at the store and all the other ways consumers can buy products. From what we're seeing, North America, we expect to see some modest growth coming out of that is what we'd expect the market to do. Europe we'd expect to be a little more challenged. If you look at the import data you can see imports into the US tracking above what we're seeing in Europe which makes sense some of the currency headwinds they have as far as apparel unit cost and so forth. Great question. We built up a pipeline of possibilities in I would say graphics, in tapes, even in the medical converting area. A lot of the companies are private so takes time and we're working on it and again, we're disciplined about how we do it so we feel good about the pipeline but these things take time. As I said before, we're going to be disciplined and patient. That's our strategy in M&A. I'm a native Clevelander so I remember those days. (Laughter) So if you look at graphics, the primary end market, think of signage. These are very large pressure-sensitive labels if you will that would go on the side of trucks, that would go on the sides of buildings and so forth or as you've seen in our materials, car wraps, which is the fastest growing area for cast films within the graphic space. So a lot of that is share gain with the exception of some of the car wraps. That whole market is actually growing from various small base. Within the specialty label area, we've traditionally had relatively high share in speciality labels and that's more application specific so it's going out and finding new opportunities to drive new application, adoption of pressure-sensitive materials. Absolutely. Thank you. Okay, first of all, just thanks again for listening. I want to thank our team at Avery Dennison for another solid quarter. We're pleased with our trajectory, especially given some of the headwinds that we face this year, especially around currency. And armed with the knowledge that we can do even better. Our overall strategy is working. PSM is delivering at or above the 2018 levels. The graphics business is now profitable. And our strategy change in RBIS will get us back on track to hit those 2018 targets. The business continues to deliver strong free cash flow year-to-date and as I mentioned we are building a pipeline of small bolt on acquisitions in the medical, tapes, and graphics materials business. And we're going to continue to be disciplined and patient about our capital allocation. Thank you.

2015_AVY

2016

GEO

GEO #Thank you, operator. Good morning, everyone and thank you for joining us for today's discussion of The GEO Group's third-quarter 2016 earnings results. With us today is <UNK> <UNK>, Chairman and Chief Executive Officer; <UNK> <UNK>, Chief Financial Officer; <UNK> <UNK>, President of GEO Care; and <UNK> <UNK>, President of GEO Corrections and Detention. This morning we will discuss our third-quarter results and current business development activities. We will conclude the call with a question and answer session. This conference call is also being webcast live on our website at www.geogroup.com. Today we will discuss non-GAAP basis information, a reconciliation from non-GAAP basis information to GAAP basis results is included in the press release and supplemental disclosure we issued this morning. Additionally, much of the information we will discuss today, including the answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations, with respect to various matters. These forward-looking statements are intended to fall within the Safe Harbor provisions of the securities laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors contained in our Securities and Exchange Commission filings, including the Form 10-K, 10-Q and 8-K reports. With that, please allow me to turn this call over to our Chairman and CEO, <UNK> <UNK>. <UNK>. Good morning, everyone. Thank you, <UNK> and thank you everyone for joining us on this call. We are very pleased with our strong third-quarter results and our outlook for the fourth quarter and full year. We believe that our financial performance and continued organic growth is reflective of the diversified nature of our real estate and service platform. As a [re], GEO has provided essential real estate and management solutions to government agencies in the fields of detention, corrections and community reentry facilities for over three decades. Today, we own or manage over 87,000 beds worldwide in a diversified network of real estate assets. Additionally, as a service provider, The GEO Group continues to expand its organizational and financial commitment to be a world leader in the delivery of offender rehabilitation and community reentry programs. At the corporate level, within our GEO Care business unit, we have continued to expand our GEO Continuum of Care division which presently has an annual cost of $5 million. It is led by an executive vice president overseeing two dozen subject matter experts in treatment, education, vocational training, case management, and specialized training for all facility employees. Most recently, we have added a director for post-release services, overseeing several post-release services case managers who would assist inmates in returning and reintegrating into their communities. Every day in the US, GEO has approximately 30,000 men and women in GEO facilities participating in evidence-based in-prison rehabilitation ranging from academic and vocational classes to life skills and treatment programs. Additionally, through our network of community reentry facilities in the United States, approximately 7,000 individuals on a daily basis participate in programs aimed at helping their reintegration into their communities. We presently have 13 GEO facilities that involve more than 15,000 inmates in nine states which are in various stages of fully implementing the GEO Continuum of Care rehabilitation model. Our GEO Continuum of Care integrates enhanced in-prison programs, which are evidence-based and include cognitive behavioral treatment, with post-release services. Typically, released offenders' critical needs will include assistance in housing, food, clothing, transportation and employment. In the state of Victoria, Australia, GEO is developing the 1,300 bed Ravenhall Prison which we believe will have the most comprehensive inmate rehabilitation program in the world. In an effort to expand the knowledge and participation of the GEO Continuum of Care program, we held two international conferences recently in Boca Raton, Florida. In two separate two-day sessions, 400 GEO professionals, comprised of corporate executives, GEO Australia, and GEO facility administrators, rehabilitation program managers, case managers, and information technology managers participated in the interactive conference format. We now feel confident that there has been a company-wide adoption of the GEO Continuum of Care mission, a deeper understanding of its interrelated components, and the sense of ownership to properly document the participation and progress of the inmates as they participate and progress through our program. These industry-leading efforts underscore our continued belief that, as a company, we are most effective and at our best by helping those in our care reenter society as productive and employable citizens. Now, I would like to turn the call over to <UNK> <UNK>, our Chief Financial Officer. Thank you, <UNK>, and good morning to everyone. As disclosed in our press release today, we reported net income attributable to GEO per share, or GAAP earnings per share, for the third quarter 2016 of $0.59, which represents the 13% year-over-year increase. We reported adjusted funds from operations for the third quarter 2016 of $0.96 per share, which represents a 7% year-over-year increase. Our revenues for the third quarter 2016 increased to approximately $554 million from $470 million a year ago. Our construction revenue for the third quarter was approximately $70 million, which was below our previous estimate of $84 million. As a reminder, our construction revenue is related to our Ravenhall project in Australia and has little or no margin. For the third quarter 2016, we reported NOI of approximately $145 million, or a 10% increase year-over-year. Compared to third-quarter 2015, our third-quarter 2016 results reflect the activation of an expansion to the Karnes Residential Center in Texas in December 2015, the assumption of operations at the 3,400 bed Kingman, Arizona prison in December 2015, the new GEO Care contract with the Department of Homeland Security for case management services in November 2015, and $70 million in construction revenue compared to $25 million in construction revenue for the third quarter of 2015. These revenues from both periods are associated with our Ravenhall Prison project in Australia. Moving to our outlook for the balance of the year, we have increased our full-year GAAP EPS guidance to a range of $1.88 to $1.90 per diluted share, and our adjusted EPS guidance to a range of $2.11 to $2.13 per diluted share. We have also increased our full-year AFFO guidance to a range of $3.65 to $3.67 per diluted share. We expect full-year revenue to be approximately $2.18 billion, including approximately $253 million in construction revenue related to the Ravenhall project. For the fourth quarter 2016, we expect total revenues to be in a range of $552 million to $557 million, including approximately $71 million in construction revenue related to the Ravenhall project. Our fourth-quarter 2016 GAAP earnings per share is expected to be in a range of $0.54 to $0.56 per diluted share, and we expect fourth-quarter 2016 AFFO to be between $0.94 and $0.96 per diluted share. With respect to our liquidity position, we continue to have ample borrowing capacity of approximately $360 million under our revolving credit facility, in addition to an accordion feature of $450 million under our credit facility. With respect to our uses of cash, we expect our project and growth CapEx to be approximately $35 million in 2016, of which approximately $27 million was spent during the first nine months of the year. We also have approximately $17 million in scheduled annual principle payments of debt. Additionally, as a reminder, we will also make our investment of approximately $87 million related to the Ravenhall project in Australia during the first quarter of 2017. As it relates to our dividend payment, as we announced a couple of weeks ago, our Board has declared a quarterly cash dividend of $0.65 per share, or $2.60 annualized, which currently represents approximately 70% of our annual AFFO guidance and is below our previously targeted payout of 75% to 80% of AFFO. We will evaluate our dividend payment again during the first quarter of next year, at which time we expect to have additional clarity on the pending opportunities we are pursuing, including the ICE Houston RFP, and the Grafton, Australia facility project, among others. With that, I will turn the call to Dave <UNK> for a review of our GEO corrections and detention segment. Thanks, <UNK>, and good morning to everyone. I'd like to give you an update on our GEO corrections and detention segment. As you may be aware, GEO has enjoyed a three decade long partnership with the Federal Government. And we currently provide services for the Federal Bureau of Prisons, US Immigration and Customs Enforcement, more commonly referred to as ICE, and the US Marshals Service. Additionally, we owned and/or managed correctional facilities for 10 states, including Florida, Georgia, Louisiana, Oklahoma, Arizona, New Mexico, California, Vermont, Virginia and Indiana. Our business relationships with our state customers began in the mid-1980s and now involve more than 20 facilities that are almost all medium security or higher. With respect to international business, GEO is the only US publicly traded company providing corrections and detention services overseas. We presently operate in the UK, Australia and South Africa. With respect to our federal market, as you recall, the Department of Justice made an announcement in August related to the Federal Bureau of Prisons facilities, which are currently under private contracts. In its announcement, the DOJ expressed concerns over the quality of operation at BOP contracted facilities and directed the BOP to evaluate the future renewals of private contracts in order to reduce the use of privately operated facilities over time. As we expressed to you when the announcement was made, we believe it is extremely important to understand both the quality of metrics for our BOP facilities, as well as the overall needs of the BOP, given the continued levels of overcrowding in BOP operated facilities. Our Company has enjoyed a long-standing public private partnership with the Federal Bureau of Prisons dating back to the 1990s. And we take great pride in the operational quality of our owned and managed BOP facilities. We currently own and manage five federal prisons on behalf of the BOP, totaling approximately 11,000 beds. And we believe strongly that all of our BOP facilities meet or exceed quality standards, comparable to government operated facilities. All of our BOP facilities are independently audited based on standards and requirements set by the BOP. And the agency employs several onsite contract monitors. Our facilities received exemplary ratings across all audited areas during the most recent audits conducted by the BOP. Given this high level of performance, we are pleased to have announced the renewal of our BOP contract for the D Ray <UNK> facility in Georgia for a two-year term through September of 2018. Like our other BOP facilities, D Ray <UNK> has consistently achieved high quality ratings and we believe the negotiation process we went through for this renewal should serve as a good barometer for future renewals given the continued overcrowding challenges facing the BOP. As you may know, our company-owned Big Spring facility in Texas is currently being re-bid under the CAR 16 procurement. And its contract expires at the end of March 2017. Additionally, the Reeves County owned facility, from which we have a modest management consulting fee agreement, is also being re-bid under CAR 16. We are hopeful of retaining our contract for the GEO-owned Big Spring facility. We believe that strong consideration will be given to the quality of operations at the facilities and are currently part of this bid. Like other BOP facilities, the Big Spring facility received exemplary ratings across all audited areas during its most recent BOP audit. We also remain supportive of the Reeves County re-bid submission. With respect to our other federal customers, as you may be aware, the Department of Homeland Security recently the Homeland Security Advisory Council, or HSAC, to review ICE's currently privately operated facilities in light of the DOJ announcement. As we said publicly at the time, we welcome this independent review. Our facilities are highly rated and provide high quality, cost effective services pursuant to strict contractual requirements and the Federal Government's national standards. Over the last 30 years, our Company has partnered with the Federal Government to develop special purpose facilities that provide needed services in safe, secure and humane residential environments. Our public private partnership has allowed ICE to transfer services from older public jail facilities that did not meet the most up-to-date national standards to our highly rated, cost effective facilities. During the most recent independent audits commissioned by ICE, all of our facilities were found to be in compliance with Federal Government's national standards. Additionally, during the most recent American Correctional Association's independent accreditation reviews, our facilities scored an average greater than 99.5%, with about two-thirds receiving perfect accreditation scores of 100%. We've received significant and constant oversight from ICE, which employs several full-time, on-site contract monitors who have physical presence at each facility. We also provide extensive office and court room space for ICE, personnel, immigration attorneys, immigration court judges, non-governmental organizations and other constituent groups who have ongoing access to each facility. We're proud that our facilities provide extensive recreational and educational amenities, including state-of-the-art artificial soccer turf fields, flat screen TVs in all housing areas, and modern classrooms with interactive smart boards for educational programming. Approximately three weeks ago, myself, along with other members of our leadership team, had the opportunity to make a presentation to answer questions from the HSAC panel currently reviewing ICE's privately-operated facilities. During this presentation and subsequent to it, we were able to provide the HSAC panel extensive documentation related to the quality of our facilities and our long-standing partnership with ICE. And we invited and encouraged the panel to visit any and all of our ICE facilities. At this time, we have no reason to expect further reviews from our state customers or any other federal contracts which entail the provisions of diversified services, including pre-trial detention for the US Marshals, community reentry halfway houses, and electronic monitoring services. However, we would welcome any such reviews. With respect to future growth opportunities, we currently have approximately 3,000 beds in idle facilities and have several active efforts to reactive this available capacity. There are a number of publicly known opportunities in the US and overseas, totaling several thousand beds. And we are also exploring a number of non-public opportunities that relate to both new project development and potential asset purchases. At the federal level, ICE has a pending procurement for a 1,000 bed detention center in the Houston, Texas area. This is a re-bid of the ICE Houston contract detention facility. The RFP requires proposed facilities to be within a 50 mile radius of the ICE Houston office, complied with the most recent ICE detention standards, and provide extensive ICE offices and support areas. A decision on this procurement has been delayed at this time and we would not expect a decision on this contract until closer to the end of the year. Additionally, as has been widely reported in the media, ICE is experiencing a significant and unprecedented surge in activity along the southern border. Today, ICE is detaining approximately 44,000 individuals with internal projections forecasting a high of 47,000 during fiscal year 2017. ICE is actively procuring capacity to respond to this need. We are having ongoing discussions with ICE about our capabilities to assist during this difficult time. These discussions include several GEO facilities which have significant capacity, are immediately available, and would meet ICE's national detention standards. We believe that this development underscores the importance of our public private partnership with ICE and our ability to respond swiftly to provide high quality, cost-effective services in safe, secure and humane environments. Now moving to the state level. Several states continue to face capacity constraints and inmate population growth. And many of our state customers are facing challenges related to aging, inefficient prisons which need to be replaced with new, more cost-efficient facilities. For instance, in the states we currently operate, the average age of state prisons ranges from approximately 30 to 60 years. There are several states, including Arizona, Ohio, Michigan, Kentucky, and others which are considering public private partnerships for the housing of inmates, as well as the development and operation of new and replacement correctional facilities. In Ohio last year, the legislature approved the sale of a state-owned prison totaling 2,700 beds. This opportunity would represent the second such sale of a corrections asset for the state of Ohio. In Michigan, the legislature passed budget language this year, directing the state to explore options for the potential lease or purchase of available private correctional facilities in the state to replace older, more costly facilities. And finally, at the local level, Hamilton County, Tennessee is exploring a public private partnership project for the development of replacement jail facilities totaling approximately 1,800 beds. With respect to our international markets, our GEO Australia subsidiary has continued to work on our project for the development and operation of the new 1,300 bed Ravenhall Prison near Melbourne. This large-scale project is expected to be completed in late 2017, and will provide an unprecedented level of in-prison and post-release rehabilitation programs. The project is being developed under a public private partnership and GEO will make an investment of $87 million, with expected returns on investment consistent with our company-owned facilities. Also in Australia, the state of New South Wales has issued a procurement for a 1,700 bed facility known as the Grafton Prison. This large-scale project will be developed under a public private partnership structure, similar to our Ravenhall Prison project in Victoria, and results in a 20 year contract. GEO is pleased to have been approved to be on the shortlist of three bidders who are required to submit proposals this month. We've also been approved to be on a list of three bidders for the 400 bed John Morony facility in New South Wales, which is a managed only opportunity with a decision expected in February 2017. At this time, I'll turn the call over to <UNK> <UNK> for a review of our GEO Care segment. <UNK>. Thank you, Dave, and good morning everyone. As you may remember, our GEO Care segment is comprised of four divisions, our GEO reentry division manages 21 halfway houses, totaling over 3,000 beds and over 60 day reporting centers nationwide with the ability to serve approximately 4,000 participants. Our youth services division oversees 12 residential facilities with approximately 1,300 beds and seven non-residential programs with approximately 1,200 participants. Our BI division monitors approximately 142,000 offenders under community supervision, including 102,000 individuals through an array of technology products, including radio frequency, GPS and alcohol monitoring devices. Finally, our GEO Continuum of Care division oversees the integration of our industry-leading, evidence-based rehabilitation programs both in prison and through our community-based and post-release services. The diversified nature of our divisions has allowed GEO Care to achieve approximately 17% year-over-year revenue growth for the first three quarters of 2016. We remain optimistic about our growth prospects going forward, and we continue to be enthusiastic about the opportunity to expand our delivery of offender rehabilitation services through the GEO Continuum of Care. We believe that our focus on improved offender rehabilitation and community reentry programs have been in line with current criminal justice reform discussions. We view these discussions as positive and believe these efforts will create growth opportunities for our company. Each of our divisions continues to pursue several new growth opportunities. GEO reentry continues to work with existing and prospective local and state correctional customers to leverage new opportunities in the provision of community reentry services. These services are provided through real estate and programmatic solutions in residential settings, as well as case management and support services and non-residential day reporting centers. We are pursuing several new opportunities for residential reentry centers at the state and federal level, and for new day reporting centers, primarily at the state and local level. These new opportunities total more than $47 million in potential annualized revenues. Our youth services division continues to work towards maximizing the utilization of our existing asset base. Our youth services team has undertaken a number of new marketing initiatives aimed at increasing the overall utilization of our existing youth services facilities. These important efforts have resulted in consistent and stronger census levels at several of our facilities over the last couple of years. We're pursuing additional referrals, working with local jurisdictions for our Pennsylvania facilities and are exploring additional expansion opportunities of our community-based programs in Ohio. Finally, our BI subsidiary continues to grow its supervision electronic monitoring services at the local, state and federal level nationwide. BI is currently bidding on new business opportunities in the state of Massachusetts, as well as a number of other jurisdictions. With respect to our contract for the intensive supervision appearance program, or ISAP, as we have updated you over the last couple of quarters, the utilization in this program has been increasing rapidly. Currently, the program is tracking above 60,000 participants. Similar to this important contract, over the course of this year, GEO Care has implemented a new family case management program under partnership with the US Department of Homeland Security. Under this new contract, GEO Care provides community-based case management services for families going through the immigration review process. Working collaboratively with all of our divisions, GEO Care has been able to build upon existing relationships with local community providers and expand our network of community partners in order to provide comprehensive case management services. We believe this program is indicative of our leadership position and the provision of community-based and case management services through our comprehensive GEO Continuum of Care. At this time, I'll turn the call back to <UNK> for his closing remarks. Thank you, <UNK>. Over the last 10 years, GEO has acquired every major acquisition available in the corrections industry involving detentions, corrections, community reentry facilities and electronic monitoring. In each of these service lines, we have become a world leader and recognized as best-in-class. In fact, GEO is the seventh largest correctional organization in the world, with 87,000 beds and more than 20,000 employees located in the US, Australia, UK and South Africa. More recently, we have invested and reorganized the Company to deliver the GEO Continuum of Care providing enhanced offender rehabilitation, integrated with post-release services. It is gratifying to see GEO's continued financial success based on its successful diversification and commitment to operational excellence. It also underscores our ability that, as a company, we are most effective and at our best when we're helping those in our care reenter society as productive and employable citizens. This concludes our presentation. We would now like to open the call to your questions. With respect to detention capacity, I think the private sector is really the only logical solution for organizations that can move quickly and meet the detention standards that ICE needs for a residential type of detention. Other than detention, they could put additional people on the ISAP program under electronic monitoring. I think those are their two most logical alternatives. I would add to that, so what we've said is that where in the past many years there's normally been a downturn in the census during the fourth quarter because of what we call the seasonality of ICE detention. We don't expect that to take place this year. In fact, we're seeing an increase in our census likely in the fourth quarter from our third-quarter. And that's very different than we've ever experienced. They are actually due next week. So, that's very soon. And I think the timeline for tentative awards is spring of next year. And there's only three bidders in this case. And Grafton will be the largest facility, correctional facility, in all of Australia at 1,700 beds. (multiple speakers) The largest private provider in Australia. I think during last quarter, or maybe it was this quarter, we restructured some facilities maybe on the youth side with some of our Illinois contracts. We consolidated facilities that we had nearby, Woodridge and DuPage in Illinois are youth facilities, but that's what that was. It is a significant contract. There's currently a competitor incumbent. It's probably about $3.5 million annualized a year. And we'll be competing aggressively for that contract. So, it's a nice opportunity. And the sustainability year-over-year, we have several of the key contracts in the electronic monitoring division. We continue to enhance our technology products and services. So, as we're offering solutions to our customers, we have enhanced products that we're offering through our data analytics and other things along with our suite of technology that we believe will be able to sustain and continue to grow that division. That would be approximately. I'm just trying to think about what we've actually said about the capital requirements for bids that are under review. I don't think that we've specifically stated what those amounts are. Once we announce the contracts, we'll announce the actual absolute dollar value. But they are obviously significant projects. The ICE opportunity is 1,000 beds and the Hamilton County opportunity is approximately 1,800 beds and Grafton, as <UNK> discussed, is 1,700 beds. And that equity commitment will be similar to, or possibly a little bit larger than, Ravenhall. So, all three of those are substantial projects. And using consistent averages, there's several hundred million dollar's worth of capital requirements for those. Currently, we believe we can fund those with our revolving credit facility. So, we'll probably look to use debt first and if we need to supplement with a little bit of equity, we might. But between cash flows above our dividend payment and debt, that would be our first choice. (multiple speakers) three year project, it doesn't require all the capital up front. It's different traunches over a three year period. On an annualized basis, approximately $40 million to $60 million. It's still in progress. There has not been a best in finals. So, that's approximately all we know. And maybe other than thinking that there will be a decision before the end of the year. I think the answer and our response is along the lines of existing capacity, not new construction. And as we said in our presentation, we do have approximately 3,000 beds that are available and could be easily provided, and quickly, in meeting their needs. And all these beds meet the ICE detention standards. It would be very mutual for governments to have such beds quickly available or be able to meet the ICE detention standards. So, we think the logical path for ICE will be to look towards the private sector for these beds which may be short term, and may be longer term. I don't think anybody knows that answer to that as yet. There are characteristics that, at that facility, are similar at our other facilities, certainly. And I would start with the knowledge that that particular facility has received very high and exemplary performance ratings. And those are conducted by teams of subject matter experts who come in annually and review various areas of the facilities from medical, housing, different types of security services. So, overall, that facility, it's done very well on a performance basis. And we know that was one of the concerns by the DOJ. But all of our facilities, as we've said, are outstanding with regard to performance. There was a cut down on some of the beds that were needed. So, instead of a full 2,500 beds, the bed capacity under the contract was reduced to approximately 1,900. But there was an opportunity to negotiate reasonable financial provisions to provide for those, for the reduction of those incremental beds based on an incremental cost reduction. What is the question. As I said, we've seen a significant increase in the census. We get census reports every morning about what is the census at every one of our facilities. And we track the census reports that are done on a daily basis, so we put them on charts that show monthly progress and we compare them to previous years. I've said previously, in previous years, the fourth quarter usually shows a downturn in the census. This year is an anomaly that there's actually an uptick in the census that we expect to see continue for the balance of the year at least. And it will be reflected in our operational and financial performance. And it's the basis for what is publicly known as an increase in capacity for ICE as there are more people coming across the border. The equity infusion is in January of 2017. And the contract start date, after construction completion and commercial acceptance, is November of 2017. And I believe they begin paying for 1,000 beds immediately. So, there's an actual ramp up to some degree in the population. But they start paying for the first 1,000 beds immediately. And then ultimately, it's a 1,300 bed facility, so depending on their needs, they may use the remaining 300 beds. But when they decide to do that, then they'll be paying for 1,300 beds on a guaranteed basis. Right now we're not changing our view with regards to our leverage level. I think we've said we are comfortable operating between 4 and 5 times. We've averaged probably 4.5 over the last several years. The primary covenant level leverage limit is 6.25 times. And so we have significant additional capacity, yet we're at about, currently we're at about 4.6, 4.7 times. Thank you for joining us on this conference call. We look forward to addressing you on our next one. Thank you.

2016_GEO

2017

O

O #Thank you all for joining us today for Realty Income's Second Quarter 2017 Operating Results Conference Call. Discussing our results will be <UNK> <UNK>, Chief Executive Officer; <UNK> <UNK>, Chief Financial Officer and Treasurer; and <UNK> <UNK>, President and Chief Operating Officer. During this conference call, we will make certain statements that may be considered to be forward-looking statements under federal securities law. The company's actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail the factors that may cause such differences in the company's Form 10-Q. (Operator Instructions) I will now turn the call over to our CEO, <UNK> <UNK>. Thanks, <UNK>, and welcome to our call today. Our business continued to perform well in the second quarter with healthy AFFO per share growth of 7%. During the quarter, we completed $321 million in high-quality acquisitions and increased portfolio occupancy to 98.5%, while maintaining our conservative balance sheet. Given the confidence we have in our business, we are increasing our 2017 acquisition's guidance from $1 billion to $1.5 billion. We're also increasing our 2017 AFFO per share guidance, as we now expect 2017 AFFO per share to be $3.03 to $3.07, which represents annual growth of 5.2% to 6.6%. Let me hand it over to <UNK> now to provide additional detail on our financial results. <UNK>. Thanks, <UNK>. I'll provide highlights for a few items in our financial results for the quarter, starting with the income statement. Interest expense increased in the quarter by $6.3 million to $63.7 million. This increase was primarily due to a higher outstanding debt balance in the second quarter following our March issuance of $700 million of long-term unsecured bonds. Our G&A as a percentage of total rental and other revenues was 5.5% for the quarter and 5.1% year-to-date. We are still projecting approximately 5% for the year, and we continue to have the lowest G&A ratio in the net lease sector. Our nonreimbursable property expenses as a percentage of total rental and other revenues were 1.6% in the quarter. Our guidance remains 1.5% to 2% for all of 2017. Funds from operations, or FFO per share, was $0.75 for the quarter versus $0.70 a year ago. We are revising our 2017 FFO guidance to a range of $2.96 to $3.01 per share. Our reported FFO follows the NAREIT-defined FFO definition, which includes various noncash items such as quarterly interest rate swap, gains or losses, amortization of lease intangibles and the $0.05 charge incurred in connection with the redemption of our Series F preferred stock in April. This $0.05 preferred stock redemption charge is the primary difference in our FFO and AFFO guidance. Adjusted funds from operations, or AFFO, or the actual cash we have available for distribution as dividends, was $0.76 per share for the quarter, representing a 7% increase over the year ago period. Briefly turning to the balance sheet. We've continued to maintain our conservative capital structure. During the quarter, we raised $55.1 million in equity, primarily through our ATM program. Our senior unsecured bonds have a weighted average remaining maturity of 7.9 years, and our fixed charge coverage ratio is 4.4x. Other than our credit facility, the only variable rate debt exposure we have is on just $23 million of mortgage debt. And our overall debt maturity schedule remains in very good shape with only $213 million of debt coming due in the remainder of this year, and our maturity schedule is well laddered thereafter. And finally, our overall leverage remains modest with our debt-to-EBITDA ratio standing at approximately 5.6x. In summary, we continue to have low leverage, excellent liquidity and continued access to attractively priced equity and debt capital. Now let me turn the call back over to <UNK> to give you more background on our results. Thanks, <UNK>. I'll begin with an overview of the portfolio, which continues to perform well. Occupancy based on the number of properties was 98.5%, the highest occupancy we have achieved in 10 years. We continue to expect occupancy to be approximately 98% in 2017. During the quarter, we re-leased 53 properties to existing and new tenants, recapturing approximately 113% of expiring rent, which is well above our long-term average. This quarter was the fourth consecutive quarter of leasing recapture rates above 100%. For the first half of 2017, we re-leased 102 properties to existing and new tenants, recapturing approximately 109% of expiring rent. Since our listing in 1994, we have re-leased or sold over 2,400 properties with leases expiring, recapturing over 99% of rent on those properties that were re-leased. This compares favorably to the companies in our sector who also report this metric. Our same-store rent increased 0.4% during the quarter, primarily due to the timing of percentage rent increases on a year-over-year basis. For the first half of the year, our same-store rent increased by 1%, which is consistent with our projected run rate for 2017. Our portfolio continues to be diversified by tenant, industry and geography and, to a certain extent, property type, which contributes to the stability of our cash flow. At the end of the quarter, our properties were leased to 250 commercial tenants in 47 different industries located in 49 states and Puerto Rico. 80% of our rental revenue is from our traditional retail properties. The largest component outside of retail is industrial properties at about 13% of rental revenue. Walgreens remains our largest tenant at 6.7% of rental revenue, and drug stores remain our largest industry at 11% of rental revenue. As you all know, due to regulatory concerns, Walgreens terminated its agreement to purchase Rite Aid and instead plans to purchase about 2,200 Rite Aid stores. While the proposal must still clear regulatory approval, the completion of the transaction would have benefits for both companies. Walgreens would fill in gaps in its geographic footprint and achieve additional financial and operational synergies. And Rite Aid has stated it would delever its balance sheet, and it would remain the third largest player in the industry, while gaining access to Walgreens' purchasing network. Within our retail portfolio, over 90% of our rent comes from tenants with a service, nondiscretionary and/or low price point component to their business. We believe these characteristics allow our tenants to compete more effectively with e-commerce and operate in a variety of economic environments. These factors have been particularly relevant in today's retail climate, where the vast majority of U.<UNK> retailer bankruptcies this year have been in industries that do not share these characteristics. We continue to have excellent credit quality in the portfolio with 46% of our annualized rental revenue generated from investment-grade-rated tenants. The store-level performance of our retail tenants also remained sound. Our weighted average rent coverage ratio for our retail properties remains 2.8x on a four-wall basis, and the median remains 2.7x. Our watch list has declined by approximately 15 basis points and remains in the low 1% range as a percentage of rent, which is consistent with our levels of the last few years. Moving on to acquisitions. We completed $321 million in acquisitions during the quarter at attractive investment spreads. We continue to see a steady flow of opportunities that meet our investment parameters. We remain selective in our investment strategy, acquiring less than 4% of the amount we source. Our low cost of capital allows us to simultaneously acquire the highest-quality properties that provide favorable long-term returns, while also creating meaningful near-term earnings growth. Given the continued strength in the investment pipeline, we are increasing our acquisitions guidance for 2017. We now expect to complete approximately $1.5 billion of acquisitions, an increase from our prior estimate of $1 billion. This estimate does not account for any unidentified large-scale transactions. Now let me hand it over to <UNK> to discuss our acquisitions and dispositions. Thank you, <UNK>. During the second quarter of 2017, we invested $321 million in 73 properties located in 27 states at an average initial cash cap rate of 6.6% and with a weighted average lease term of 13 years. On a revenue basis, approximately 33% of total acquisitions are from investment-grade tenants. 91% of the revenues are generated from retail and 9% are from industrial. These assets are leased to 23 different tenants in 16 industries. Some of the most significant industries represented are health and fitness, quick-service restaurants and theaters. We closed 26 discrete transactions in the second quarter. Year-to-date 2017, we invested $692 million in 126 properties located in 30 states at an average initial cash cap rate of 6.3% and with a weighted average lease term of 14.8 years. On a revenue basis, 51% of total acquisitions are from investment-grade tenants. 95% of the revenues are generated from retail and 5% are from industrial. These assets are leased to 34 different tenants in 20 industries. Some of the most significant industries represented are grocery stores, automotive services and health and fitness. Of the 37 independent transactions closed year-to-date, 2 transactions were above $50 million. Transaction flow continues to remain healthy. We sourced approximately $7 billion in the second quarter. Year-to-date, we have sourced approximately $18 billion in potential transaction opportunities. Of these opportunities, 46% of the volumes sourced were portfolios; and 54%, or approximately $10 billion, were one-off assets. Investment-grade opportunities represented 35% for the second quarter. Of the $321 million in acquisitions closed in the second quarter, 72% were one-off transactions. We continue to capitalize on our extensive industry relationships developed over 48 years of operating history. As to pricing, cap rates continued to remain flat in the second quarter with investment-grade properties trading from around 5% to high 6% cap rate range and noninvestment-grade properties trading from high 5% to low 8% cap rate range. Our investment spreads relative to our weighted average cost of capital remained healthy, averaging 221 basis points in the second quarter, which were well above our historical average spreads. We define investment spreads as initial cash yield less our nominal first year weighted average cost of capital. Regarding dispositions. During the second quarter, we sold 14 properties for net proceeds of $12.3 million at a net cash cap rate of 6.6% and realized an unlevered IRR of 9.5%. This brings us to 28 properties sold year-to-date for $43.5 million at a net cash cap rate of 7.9% and realized an unlevered IRR of 9.7%. In conclusion, we remain confident in reaching our 2017 acquisition target of approximately $1.5 billion and disposition volume between $75 million and $100 million. With that, I'd like to hand it back to <UNK>. Thanks, <UNK>. Last month, we increased the dividend for the 92nd time in the company's history. The current annualized dividend represents a 6% increase over the year ago period. We have increased our dividend every year since the company's listing in 1994, growing the dividend at a compound average annual rate of just under 5%. We're proud to be 1 of only 5 REITs in the S&P High Yield Dividend Aristocrats Index. Our dividend represents an AFFO payout ratio of approximately 83% based on the midpoint of our 2017 guidance. To wrap it up, we are pleased with our company's operating performance and remain confident in our outlook. Our real estate portfolio is performing well, our acquisition pipeline is robust, and our balance sheet is conservatively capitalized. Our cost of capital remains a competitive advantage in the net lease industry, which we believe allows us to continue generating favorable risk-adjusted returns for our shareholders. At this time, I'd like to open it up for questions. Operator. Yes, 24 of the supplement, I think, is what you're referring to. Virtually all of that was related to an expansion of an existing industrial distribution property where we double the size of it and extended the lease term with an investment-grade credit by 10 years. Our incremental yield on that investment capital was 7.5%, which is about 150 basis points above where our acquisition yield would be on this type of property. So the value creation exercise for the company and its shareholder. So we were pleased with that. We hope so. I mean, these expansion opportunities are quite attractive for us and deliver attractive risk-adjusted returns and returns beyond what the acquisitions typically yield the company. So I think as we move forward, we'll see that number grow a bit. And we'd like to see it grow a bit. Right now, overall, we have $90 million under development, of which we have $16 million to fund. We'd like to see that number pick up. That does include expansions and redevelopments. Sure. We're not seeing buying slow. Year-to-date, we've sourced $18 billion in investment opportunities, and we're still remaining quite selective in what we're investing in. Year-to-date, 4% of what we've sourced we've actually closed on. When we look forward, we're seeing a combination of some larger portfolios but also strong activity in our aggregation program where we're looking at assets on a more granular basis or small portfolios. So the increase is predicated on both types of acquisitions, smaller portfolios as well as a couple of large sale-leaseback opportunities we're working on and would expect ---+ we would hope to hit those as well. So again, not seeing any sign whatsoever of the transaction opportunities slowing, <UNK>. Well, on the retail side, we continue to focus on service, nondiscretionary and/or low price point businesses which we have done now for nearly 10 years. And we do that because those types of tenants have been much more resistant to the impact of e-commerce. So we've not changed our investment parameters on the retail front or on the industrial front. We continue to adhere to those investment parameters. And when you look at the selectivity, as I said just a moment ago, we're not increasing the percentage of opportunities we see in terms of what we're closing on. Over the last few years, it's averaged probably 8%, and this year we're running at 4%. So again, I think that selectivity metric is something the market can look at and be comfortable that we're not changing our investment parameters. Just on the pipeline ---+ or sorry, the watch list. You mentioned some ---+ that watch list declined. Can you maybe give us some color what actually fell off the watch list. And has the composition changed in any way. Well, the overall watch list declined by 15 basis points. It's still in the low 1% area. And that's a combination of some sales we made and also some improving financial metrics on some properties that were in that watch list that we took out given the improvement in the financial metrics for those particular properties. So <UNK>, that's a fluid concept. That's changing almost on a daily basis based on conversations we're having with our tenants and the information we're receiving in our research and credit group. But it is trending down. And I would add to that, that our credit watch list has been running around 6%. But this past quarter, it was less than 5%. So we're seeing the credit profile within the portfolio improve as well. Okay. That's helpful. And then just as a quick follow-up. In your expirations over the next 2 years, are any of your top 10 or 15 tenants, are any of them in there. Anything sizeable we should be aware of. No. Nothing sizable in our top tenants rolling within the next 1 to 2 years. Well, our line of credit has a base amount of $2 billion with an accordion feature at our option of another $1 billion and has 2 years remaining in terms of term, plus a 1-year extension option at our ---+ in ---+ at our option. So we are seeing ---+ we have plenty of liquidity today. As we look forward, what we'll do with regard to financing is we'll look at all of the markets, the unsecured market, the debt market, the hybrid markets and at the appropriate time pick the right form of capital to term out our line balance. So as we sit here today, we don't have any specific plans in terms of what we want to issue. But as that line balance grows, we're comfortable with it, up into the billions, but we want to be opportunistic in excess capital at the appropriate time and certainly the right types of capital. Yes. NPC has been a relationship and a tenant for us for probably 20 years now, and they are the largest Pizza Hut franchisee in the U.S, and they are the largest Wendy's franchisee in the U.<UNK> And we did a Wendy's portfolio last quarter that brought them back into our top 20. They've been in our top 20 before, but it's a result of a portfolio acquisition of Wendy's. Well, it's been a trend. We've had, over the last 5 quarters, strong numbers on that front. And I think it just speaks to the portfolio, the health of the tenants, the quality of the properties and, specifically, those tenants' operations at those specific properties. So we've been pleased with it. Over the life of the company, we have had recapture rates right at about 100%, just a hair below, I think it's 99.4%. So realizing these recapture rates in the 113% range, very healthy. And I think it speaks to the quality and health of the portfolio. I'll tell you, we have a tremendous team in our portfolio management group that is working these properties, in some cases, years in advance, negotiating with our tenants to retain them in those assets, and it makes sense for their business but also for our business. So it's been a real focus of ours over the last several years and one which we continue to have. And we hope it'll yield similar results. It'll vary from quarter-to-quarter, but the trend certainly has been positive for us. Yes. We went out with same-store rent guidance at the beginning of the year of 1% to 1.2% growth. So as we're here at the midyear point, we've got more visibility in what the same-store pull is going to look like for the remainder of the year. And it looks like it's going to be in ---+ closer to 1%. And this is the time of the year typically that we update our guidance numbers. And we thought it'd be appropriate to move back to 1%. It's not related to any tenant credit issues. As I've said, our credit watch list as well as our overall watch list have continued to decline. It's just fine-tuning at the midyear point. Really nothing to read into that. Okay. Well, we have, Dan, about 0.75% of rent that is current but on vacant assets, and that's in line with where our company has been for a while now a number of years. The average lease term remaining on those properties ---+ it's about 60 properties, it's 6 years. 61% of those closed current, as we refer to them, are investment-grade rated tenants. And we remain in close communications with those tenants in terms of re-leasing or subleasing. And we're not re-leasing those primary tenants from their rental obligations. We're spending more time working on those properties expected to roll in the near term, so within the next 3 years, of course, than we are properties that may not roll for 6, 7, 8, 9 years and have an investment-grade tenant paying rent. So, yes, that's part of the business and has been for a long time. Sure. Well, Gander is interested in the majority of our properties, and they're being purchased by Camping World. So we know FreedomRoads, Camping World very well. They've been a tenant of hours for a long time. We're in discussions with them. The list that are being put out there, I'd say, aren't always completely accurate. But in some cases, Gander may want to stay but not at a rent level that makes sense for us. So we're having conversations with other tenants beyond Gander for those properties that may yield a better result than what Gander's staying would be. So clearly, they'll stay in a handful, and we'll see what happens to the others. We've been ---+ we're current on Gander rent through the month of July. And we have factored, I think fairly conservatively, our expectations of the impact of Gander into our guidance for this year. And so we're not expecting any surprises from that standpoint. And collectively, on an annualized basis, Gander is less than 0.5% of our rent. So that's not completely insignificant, but it's not a large material issue for us. And we think the locations that we have are attractive, in major metropolitan areas. And again, we're seeing good interest from other tenants in those locations. So I think we're going to be fine there. No. Our renewal rates are up, more are considering expansions. In our conversations with them, <UNK>, they're optimistic about their business. The portfolio overall is in very good health. And I'd say, we're not experiencing any more tenant credit issues than we have in any year in the last 4 or 5 years of this cycle. So this year has been pretty much business as usual. The largest issue we just talked about, and that's Gander, that's not that material for us. And then once you get beyond that, there are a few moms and pops that have had some credit issues. But even on a collective basis, they're not material for our company. Well, I think retailers that are e-commerce resistant and have proven to be to this point and are well-capitalized, high credit, well-managed businesses are going to trade at cap rates that are more aggressive. And fortunately for us, we've got, overall the lowest cost of capital in the business. We have the greatest access to capital, and we have the ability to do larger-scale transactions with these larger companies without creating tenant revenue concentration issues for the company. So we're really in an advantageous position. We've developed great relationships with these ---+ those tenants tend to be larger. And those relationships are resulting in some opportunities on the acquisitions front that are being done on a purely negotiated basis. So we're happy with that. Yes. <UNK>, the yields vary from quarter-to-quarter. The yield this quarter was 6.6%. In the first quarter, it was 6.1%. Year-to-date, it was 6.3%. That fluctuating yield is really a ---+ between the first and second quarter the function of 2 items. One is we did more investment grade in the first quarter than we did in the second quarter, and that's really a function of the opportunities available to invest in, in the market. And then the lease terms were slightly longer in the first quarter than the 13-year term that we had in the second quarter. And hence, you had a bit of a pricing differential on cap rate. But year-to-date, the leasing terms of 15 years. And over the course of the last 3 or 4 years, our lease terms by quarter vary quite a bit. Sometime they'd been as low as 10 years and as high as 17 years. So coming in at 15 year-to-date is fine. And the cap rate, we're still guiding to something for the year in the low 6s. And what'll impact that is just simply ---+ the quality of the properties in both quarters were very strong. And when you do get investment grade on top of strong real estate location with strong operating metrics, you are going ---+ that is going to be reflected in a more aggressive cap rate. Sure. I'll start with Amazon on the grocery front. Obviously, there's been a lot in the news about that. Our grocery exposure is just under 5%. Virtually all of that is with 2 of the leading grocers in the marketplace, that's Walmart Neighborhood Markets and Kroger, which have both developed successful online businesses, omnichannel businesses and continue to expand those businesses and incorporate their real estate locations, which are favorable. They're also very well-capitalized companies who have the ability to continue to invest in their e-commerce initiatives, and they've shown with their results to date in terms of their investments in those initiatives good growth and good results. So they're well positioned to compete with the Amazon-Whole Foods. And I think we'll see how this plays out. But we have very strong grocery stores there, and we have the ones we want. I think the ones that are going to be impacted are the ones that are smaller, regional, don't have an omnichannel presence and don't have the capital strength to invest in that business. On QSR traffic, <UNK>, you want to take that. Yes, sure. So we continue to invest in QSRs. And we feel that this particular subsector in the restaurant space has continued to improve. Our specific portfolio has coverages in the high 2s in this particular area. The fact that <UNK> alluded to a Wendy's portfolio that we just closed on, this is an area that we feel very good about and will continue to invest in. Thank you, <UNK>y, and thanks everyone for joining us today. We look forward to speaking with all of you as we head into the fall and conference season. Have a good afternoon and a great remainder to your summer.

2017_O

2016

SXC

SXC #Thanks, Sean. Good morning and thank you for joining us to discuss SunCoke Energy's third-quarter 2016 earnings. With me are <UNK> <UNK>, our Chairman, President, and Chief Executive Officer; and <UNK> <UNK>, our Senior Vice President and Chief Financial Officer. Following the remarks made by management, we will open the call for Q&A. This conference call is being webcast live on the investor relations section of our website and a replay will be available for a few weeks. If we don't get to your questions on the call today, please feel free to reach out to our investor relations team. Before I turn the call over to <UNK>, let me remind you that the various remarks we make on today's call regarding future expectations constitute forward-looking statements, and the cautionary language regarding forward-looking statements in our SEC filings applies to the remarks we make today. These documents are available on our website, as are reconciliations to any non-GAAP measures discussed on today's call. With that, I will turn it over to <UNK>. Thanks, <UNK>, and thank you all for joining us this morning. Starting off on slide 3, I thought I'd share a few perspectives on the quarter. In our cokemaking fleet, similar to what we saw in the first and the second quarter of this year, we continued to achieve solid safety, environmental, and operating performance across the fleet and on track for performance in line with our targets for 2016. Middletown particularly has had a very good year and is on track for a record year. In Indiana Harbor, we continue to see meaningful improvement and traction in the area of cost control and with operations and maintenance spend year over year favorable. And we've recently begun our 2016 oven rebuilds here in the fourth quarter. On the logistics front, we saw modest improvement over our Q2, with sequential improvement over our Q2 logistics volumes. But overall volumes remain below our targets. We were encouraged by recent developments across the logistics fleet, actually, as we look into the fourth quarter at KRT, as well as the Convent Marine Terminal, and we are going to touch on that a bit more later in the call. From a capital allocation perspective, we continued our deleveraging efforts and reduced debt outstanding by over $25 million on a consolidated basis in the quarter, including $20 million repayment of our revolver at SXC, leaving the parent in a positive net cash debt position. And so, we felt good about what was achieved at both the MLP, as well as at the parent in the quarter. And finally, we are reaffirming today, with nine months in the books, our adjusted EBITDA guidance of $210 million to $235 million for 2016, based upon the stability of our business model and our take-or-pay contracts. A few thoughts on the next chart on market conditions. Most notably within the quarter, our two primary customers at Convent Marine Terminal reached clarity on a number of items that were up in the air earlier in the year. Foresight Energy successfully executed its out-of-court restructuring with its bondholders in the quarter and Murray Energy successfully ratified its contract with its labor force and received covenant relief after reaching agreement with its lenders. Our customers are pleased and we are pleased as a result with this development, and we look forward to supporting their future export coal needs through our Convent Marine Terminal. Another point, in the quarter and most recently we have seen a resurgence in the API2 price. We have seen it over the last two quarters, but we have seen it accelerate more recently. <UNK> will have a chart where we will walk you through our estimates of export profitability. Actually, we did this earlier on the SunCoke Energy Partners call, but when you look at that chart, exports are solidly profitable for our two customers at the Convent Marine Terminal. And we do expect increased volumes in the fourth quarter relative to what we saw in the first, second, and third quarter this year. These encouraging signs in the logistics business come at the same time we are seeing continued stability in the steel sector. So while we have seen pullback in hot rolled coal prices in the third quarter, we are still well ahead of where they were at the beginning of 2016. US steel producers continue to petition the government against unfairly traded imports, and their efforts have provided some price support in the market and reduced level of imports, which are down approximately 20% year to date. What we have seen is ---+ we have seen volatility in the equity markets within our steel customers, but the credit markets themselves showed significant improvements in the quarter relative to where we were in June of this year. Then finally, most importantly, I thought we'd point out even with the volatility we have seen, the cyclicality we have seen over the last 12 months, our basic earnings power hasn't been impacted, once again demonstrating both the stability of our business model and the strength of our take-or-pay contracts. At this point, I would like to turn it over to <UNK> to discuss the quarter's results. Thanks, <UNK>, and good morning, everybody. For the third quarter, consolidated adjusted EBITDA of $49.4 million was flat to 2015 as cost improvements at Indiana Harbor and lower costs due to the divestiture of our coal business were offset by lower coke and coal logistics volumes, as well as the impact of scheduled outages. Before moving forward, and as a reminder, our adjusted EBITDA results exclude coal logistics deferred revenue, which, in response to the new SEC guidelines, is recognized in adjusted EBITDA when it is recorded as revenue under GAAP accounting, in our case typically by December 31 of each year. Deferred revenue in the third quarter was $8.8 million. From an EPS perspective, earnings were $0.10 per share, up $0.46 versus the prior year. The comparison to the prior year is impacted by the lapping of a $0.30 per share impairment loss on our India joint venture that occurred in the prior year. Turning to the next slide and looking at our adjusted EBITDA results, you can see the $3 million performance improvement at Indiana Harbor that was driven by disciplined cost management, but was partially offset by lower volumes and yields. <UNK> will discuss Indiana Harbor in more detail on a later slide. Excluding Indiana Harbor, the remainder of the coke business was impacted by several items, including lower volumes, due primarily to the timing of shipments; lower energy sales as a result of scheduled outages, primarily at Haverhill; the timing of O&M spend at Jewell; and $1 million of coal transportation costs that were shifted from coal mining to Jewell coke. Moving on from coke, our corporate segment benefited from the lapping of severance costs and Convent deal costs, which were recognized in Q3 of 2015, but was offset by higher stock compensation expense that was driven by favorable changes in our stock price during the quarter. At coal logistics, the $4.3 million contribution from our Convent facility was comparable to Q3 2015, and KRT and Lake terminals were impacted this quarter by lower throughput. Volumes across all terminals remain below expectations, but we expect a sequential improvement in volumes in the fourth quarter. And finally, we continue to benefit from the divestiture of our coal mining business and realized $3.3 million in cost savings as a result. Looking on slide 7 at our domestic coke business, we delivered solid second-quarter adjusted EBITDA per ton of $52 on about 1 million tons of production. While our quarterly results were impacted by the previously mentioned factors, including continued cost improvement at Indiana Harbor, the timing of coke sales, and lower energy sales, we remain in line with expectations and are on track to achieve strong coke-adjusted EBITDA results in 2016, which are underpinned by our record performance at Middletown. I'll now turn it back over to <UNK> to provide some additional comments on Indiana Harbor. Thanks, <UNK>. As I mentioned earlier, Indiana Harbor continues to realize the benefits of a holistic cost management approach that has netted us about $13 million in O&M improvement year to date and was the driver of the improvements in the third quarter versus the third-quarter 2015. However, as I discussed, in the second quarter we continued to experience operational disruption, driven partially by higher-than-expected oven degradation across non-rebuilt ovens at the plant. Looking at oven rebuilds after evaluating another quarter of data from our oven rebuild pilot ---+ our oven rebuild program from 2015, we remain encouraged by the sustained performance across the 48 ovens we rebuilt last year. We continue to analyze and monitor results, and incorporated our learnings from those ovens rebuilt into the 2016 rebuilds, which are underway here in October. This wave of rebuilds will be targeted across our C battery ---+ the Indiana Harbor plant has four batteries, A, B, C, and D ---+ and we are targeting the lion's share of our rebuild activity on the C battery this year. And it will be done in distinct blocks of ovens, with each block being taken out ---+ entirely out of service, excuse me, in order to perform the rebricking in the walls and the floors. Including capital and expense, in total we expect to spend about $15 million on those 38 ovens. Moving forward, and as we wrap up the 2016 rebuilds, we will continue to optimize scope and incorporate lessons learned into our 2017 capital plans, which we anticipate will include a substantial amount of oven rebuilds at the Harbor. And we will provide an update on this when we provide our 2017 guidance and targets. At this point, I would like to turn it back over to <UNK>. Thanks, <UNK>. Looking at slide 9, in the quarter we had sequentially higher coal logistics volumes. However, we were below our targeted run rate. On the domestic coal logistics side, low natural gas prices and high inventories pushed volumes down in the first half of the year, but with the favorable natural gas price movements and warmer summer weather, especially in the South, volumes increased over Q2. On the met coal side, higher inventories drove lower-than-expected volumes, but the recent upswing in prices should encourage additional volumes in Q4. At Convent, we earned $4.3 million of adjusted EBITDA in the period on 841,000 inbound tons. As I mentioned on a previous slide, these results do not include the $8.8 million of deferred revenue earned for pay tons in the quarter. While we saw below-target volumes at CMT, we are encouraged by the continued rise in API2 prices and expect sequential improvement in volumes in the third quarter. Fourth quarter. I'm sorry ---+ in the fourth quarter. On slide 10, we have a few recent developments at Convent that we wanted to highlight. First, we are excited to announce the piloting of a new line of business at CMT. We have engaged a US-based utility to move volume through Convent for the domestic thermal coal market. While the first trains have just recently arrived at the terminal, we expect the fourth-quarter opportunity to be between 50,000 to 100,000 tons and look forward to proving out our domestic-facing capability, with a goal of securing additional merchant volumes. Secondly, we are in the process of commissioning our new ship loader and expect it will be fully operational by the end of November. With the new machinery in place, our annual transloading capacity will increase to 15 million tons per year, which positions us well as we continue to develop additional lines of business and pursue new customer relationships. Lastly, we have reached an agreement with Murray and Foresight to provide some volume-based incentives in the form of ancillary revenue rebates in exchange for a limited one-year contract extension. These rebates, which phase out as API2 prices rise and are only in place for 2016 and 2017, are intended to incentivize our customers to ship more coal during periods of low API2 prices. Most importantly, this arrangement does not impact our base take-or-pay volumes or rates, and there is no change to our full-year 2016 CMT adjusted EBITDA guidance. Looking at liquidity on slide 11, we ended the quarter with nearly $300 million of consolidated liquidity, including $105 million of cash and more than $190 million of combined revolver availability. In the quarter, over $40 million of operating cash flow was used primarily to pay down debt and to fund CapEx and distributions to SXCP unitholders. Including outstanding letters of credit, SXC has now fully repaid all borrowings under its revolving credit facility. Moving on to page 12, we are looking at capital deployment for the first three quarters of the year on this slide. And as you can see, we have generated very strong operating cash flow of over $166 million year to date and have put that cash flow towards value-enhancing actions, including divesting of our coal mining business; funding targeted investments at our operating facilities; and repurchasing a significant amount of debt at a discount. Additionally, as I just mentioned, we entirely repaid the SXC revolver through the first three quarters of the year and now maintain cash in excess of our remaining debt at SXC. With that, I will turn it back to <UNK>. So we will talk about Indiana Harbor in 2017 and longer term when we publish our targets for next year. What I would say is when I step back and look objectively at 2016's performance, I think ---+ about a year ago, when it was clear that we weren't ---+ I didn't feel we were going in the right direction at Indiana Harbor, we took a number of actions and made a number of changes, one of which was to be more holistic in our evaluation of the plant and secondly is to make sure that we stopped and monitored our performance and gathered data so that as we took action, we did it in a more measured way. And that manifested itself in two ways this year in terms of Indiana Harbor's performance. One, what you've seen is improved O&M because I think we have been much more disciplined. We have been very disciplined in terms of the cost management of the plant. Second is we have doubled, basically, the ovens we intended to rebuild from that which we had actually identified earlier this year when we entered 2016. So instead of doing the 19 ovens that we had originally planned, we have doubled it because we've been encouraged by the results we've seen with the 48 ovens we rebuilt last year. That being said, we took the lessons learned because while we've been pleased with our performance, there are areas where we could continue to improve. And so, we've factored that lesson learned into the 38 ovens we are rebuilding. And then, we'll make an assessment as we measure the performance of the ovens we are rebuilding in 2016 and we'll make a final call as to what we want to do in 2017. I do anticipate a significant rebuild activity in 2017, but we'll have more to say about that when we publish our targets for next year. I would say, as I think about it, volumes ---+ what we've seen is cost control has been solid; yields, which is something that we had concerns about last year, we've seen improvements in our yields through 2016. In the third quarter, actually, it was slightly favorable year over year, slightly. But production has been below our target. And what that's been a result of is both accelerated ---+ the degradation of the non-rebuilt ovens, as well as driving stability across the plant in terms of our management of the plant, workforce, equipment reliability, and the basic blocking and tackling of running a coke plant. We need to continue to improve in that regard and we will do so while we take on these oven rebuilds and work to change the culture of the plant. I would say, as I think about it, <UNK>, we've stopped going backwards is the way I would put it. But I am not at all satisfied with where we are. I think what we need to do as we rebuild these ovens is continue to make progress on operational stability, equipment reliability, and then use the time to measure the effectiveness of our actions as we plan out 2017. I'll have more to say about both 2017 and longer term the Harbor's potential when we publish our targets for next year. Our Board obviously continuously evaluate your structure. In this case, obviously, the MLP structure is something that the Board would regularly look at. You know, I would say we don't have anything to announce today. But I would say when you look at it, we have been encouraged by the improvement in yield at the MLP. And it has basically been from the price going from the low $5s to where it is today. But nonetheless, when you look at the absolute level of yield at the MLP, it's not a cost-effective financing vehicle for us ---+ and in an MLP, that's what it is ---+ to finance growth. So I would say this is something the Board will continually look at as part of continuously looking at the business, and we'll update investors as appropriate. When I say the current yield is not effective, if you just look at it where it is, it couldn't be used ---+ you can't really do drop-down transactions that could be accretive and attractive to parent. You can't use it to finance a growth project. And so one alternative is, obviously, wait to see how things correct, but I would say many companies ---+ I wouldn't say many, but a number of companies in the MLP space are in our position and are evaluating the cost-effectiveness of their MLPs prospectively. Beyond that, I'm just not prepared to comment. Thank you. Okay. Thank you very much for your time this morning and your interest in and investment in SunCoke Energy. Thank you.

2016_SXC

2017

CTL

CTL #Thank you, Brian, and good afternoon, everyone, and welcome to our call today to discuss CenturyLink's First Quarter 2017 results released earlier this afternoon. The slide presentation we'll be reviewing during the prepared remarks portion of today's call is available in the Investor Relations section of our corporate website at ir. centurylink.com. At the conclusion of prepared remarks today, we will open the call for Q&A. As you move to Slide 2, in the deck, you'll find our safe harbor language. We will be making certain forward-looking statements today, particularly as they pertain to guidance for second quarter and full year 2017; the pending Level 3 transaction; and other outlooks in our business. So we ask that you review our disclosure found on this slide as well as in our press release and in our SEC filings, which describe factors that could cause our actual results to differ materially from those projected by us in our forward-looking statements. As we move to Slide 3, we ask that you also note that our earnings release issued earlier this afternoon and the slide presentation and remarks made during this call contain certain non-GAAP financial measures. Reconciliations between these non-GAAP financial measures and the most comparable GAAP financial measures are available in our earnings release and on our website at ir. Now turning to Slide 4. Your host for today's call is <UNK> <UNK>, Chief Executive Officer and President of CenturyLink. Joining <UNK> will be <UNK> <UNK>, CenturyLink's Chief Financial Officer; and also available during the question-and-answer portion of today's call will be <UNK> <UNK>, CenturyLink's President of Enterprise Markets; and <UNK> <UNK>, CenturyLink's President of Consumer Markets. Our call today will be available for telephone replay through May 10, 2017, and a webcast replay of our call will be available through May 24, 2017. Anyone listening to a taped or webcast replay or reading a written transcript of this call should note that all information presented is current only as of today, May 3, 2017, and should be considered valid only as of this date regardless of the date heard or viewed. Now as we move to Slide 5, I will turn the call over to <UNK> <UNK>. <UNK>. Thank you, <UNK>, and thank you for joining us today on our call. As we begin our discussion, I want to remind us all about the significant changes occurring within our business as we move through the remainder of 2017. As announced this week, we close the sale of our data centers and colocation business Monday, May 1, and we continue to expect the close of the Level 3 acquisition by the end of September. Both of these transactions aligned with our strategy announced in late 2015 focusing on first ---+ focusing first on network and taking a less capital-intensive approach to complementary offerings, such as hosting, cloud, IT and Managed Services. And we remain committed to our network-focused strategy as we look to the future. So the company we expect to be by late 2017 will clearly be much different than we were coming into this year. I'll discuss these 2 transactions in more detail a little later. So as we move to Slide 6, I want to cover a few highlights for the quarter, as well as some important trends in our business. Our first quarter total revenues were below our expectations as we had lowered data integration, and IT and Managed Services, however, results for core revenue, operating cash flow and adjusted diluted earnings per share were all within our guidance and expectations. When you look a little deeper, we believe the trends we are seeing in our business offer strong validation of the rationale for our investment in high-quality, high-bandwidth, broadband network infrastructure, as well as for the sale of our data centers and colocation business and for our pending acquisition of Level 3. We believe these steps will position CenturyLink well to become one of the leading network providers to enterprise customers in the world. Enterprise high-bandwidth data services revenues for the quarter ---+ first quarter 2017 are up more than 4% year-over-year and up 2%, sequentially. If you adjust for a first quarter 2016 contract termination fee and the transition of a large enterprise customer from Ethernet to dark fiber in recent months, enterprise high-bandwidth data services revenue increased 6.5% year-over-year. So our team is performing well in this part of the enterprise sector, and we remain confident that the future growth opportunity for these services will remain significant for a number of reasons. First, the average size of new opportunities and deals closed are increasing as we see more enterprise customers increasingly take advantage of the efficiencies and security our products and services offered. Also our increased focus on customer retention is improving churn, and we are seeing lower credits and adjustments. In addition, CenturyLink continues to be one of the leaders in network virtualization for the deployment of software-defined networking and Network Function Virtualization capabilities, SDN and NFV, which provides efficiencies for customers and a better customer experience. Also our strong network and cybersecurity capabilities position us as a leader ---+ leading provider of security services that is so important to enterprises. And lastly, third-party research reports forecast mid-single-digit compounded annual growth rate in U.S. enterprise high-bandwidth data services through 2021 and mid- to upper single-digit compounded annual growth rates in U.S. Enterprise Managed Network Services through 2021. These forecast gives us even more confidence and the opportunity to continue to grow our Enterprise business in the months ahead. They are high-bandwidth data services revenue stream represents approximately 70% of our total strategic enterprise revenues and over 80% excluding colocation revenues. But it is important to note that following the close of the pending acquisition of Level 3, we anticipate this revenue stream will represent a much higher percentage of our total strategic enterprise revenues. And our combined company will have greater scale along with broader and enhanced solutions that should position us to drive future growth in high-bandwidth data services revenue. Second, our IT services revenue, which is primarily driven by IT consulting, cybersecurity, IT services management and integrated SAP solutions is growing. While we do not necessarily expect to be the industry leader in IT services, they are a significant value add to our enterprise network offers and they open the door to opportunities to build stronger relationships with enterprise customers. In addition, they provide a low capital growth vehicle for our company. On the other hand, I am not pleased with the performance of our managed hosting business, with sale of our data centers and colocation business created some market confusion and sales momentum disruption in this area of business. However, we do expect to turn this around in the months ahead. We recently completed upgrades to improve the capabilities and performance of our dedicated hosting/cloud environment and introduced our new cloud application Manager Suite. This service enables us to help customers better manage their public, private and multi-cloud environments and it enhances our capabilities to assist businesses in their digital transformation. Next, consumer broadband subscriber trends have been improving the last several quarters and improved again this quarter. The key thing to note here is that in areas where we are investing in higher speeds, we are growing customers and average revenue per user. Speed enhancements remains a priority as we enter the first quarter with nearly 9.2 million 40 megabit and higher addressable locations and more than 3.5 million 100 megabit and higher addressable locations, representing an increase of approximately 200,000 addressable locations in each tier during the quarter. Consumer video revenues were down slightly year-over-year primarily due to the restructuring of one of our satellite TV agreements that lowered satellite video revenues in the first quarter by about $15 million. So we expect second quarter broadband and video subscribers and revenues to be negatively impacted by a typical second quarter seasonality. And we do expect to see improvement in consumer broadband and video subscribers and revenues in the second half the year. This improvement is expected to be driven by simplifying offers, customer experience improvements, continued progress on our broadband speed enhancement roadmap and a broader range of video offerings. Another important thing to note from the chart on the slide is that more than 75% of our strategic revenues today are driven by enterprise high-bandwidth data services and consumer broadband services and we expect this percentage to increase over time. Next, as you know, revenues from legacy services, primarily Switchboard services and low bandwidth data services, have been declining for a number of years due to regulatory change, wireless displacement and technology transition to an IP-enabled services. Our focus has been on managing these legacy service revenues and related cost within for the cash flows they provide, enabling us to invest in our strategic services ---+ service offerings and effectively compete in today's marketplace. We believe the decline in our legacy revenues has been better than most of our peers and we will continue to manage these revenue streams to drive cash flows to invest in strategic services that meet the needs of the Enterprise and Consumer customers. However, taken altogether, the performance trends in our strategic services that are the growth drivers of our business give us confidence that we have the foundation to deliver good growth and revenues and cash flows. In addition, these results are key strategic ---+ in our key strategic service revenues give us even greater optimism regarding the significant value creation opportunity associated with the Level 3 transaction. Now let's move to Slide 7, I want to provide a few additional thoughts on the completion of the sale of our data centers and colocation business, as well as our continued progress regarding the Level 3 acquisition. First, we are pleased to have completed the sale of our data centers and colocation business on May 1. We retained our managed hosting and cloud assets and have entered into a strategic relationship with the buyer to continue to offer colocation services, enabling us to offer our customers a full suite of managed services, including network, colocation, hosting, cloud, and IT services. CenturyLink received approximately $1.86 billion of net pretax cash proceeds subject to certain post-closing adjustments, and an approximately 10% equity stake in Cyxtera Technologies, the new company formed by BC Partners led consortium. The net after-tax cash proceeds, which are anticipated to be approximately $1.75 billion are expected to be used to partly fund the acquisition of Level 3. Now moving to the pending Level 3 acquisition, we're making good progress in obtaining the necessary approvals to complete the transaction. As I am sure, you are aware, shareholders of both companies approved the merger in March at each company's respective special meeting of shareholders and several states have already approved or cleared CenturyLink's pending acquisition of Level 3. Additionally, our integration planning process is going very well. Part of this process is continuing to evaluate the potential annual run rate cash synergies we believe can be achieved from this strategic acquisition. And we are highly confident that we will be able to achieve the $975 million annual run rate operating and capital cash synergies target we provided when we announced the transaction on October 1 ---+ October 31 of last year. Additionally, late last week, we announced the new senior leadership team for the combined company that will report to me effective at the time of closing. I believe we have assembled an incredibly talented and experienced executive team that is well positioned to lead the combined company post-closing and drive our increased enterprise focus. The sale of our data centers and colocation business and acquisition Level 3 reflect our pivot back to focusing on network and taking a capital-light approach to complementary IT and Managed Services. We believe this combination of CenturyLink and Level 3 will create significant benefits and growth opportunities for all stakeholders, including customers, employees and shareholders. This combination will enable us to build scale and deliver agile network-based projects, products and services to customers. We really will be creating a new chapter with the combined company. We also believe this strategic combination will significantly improve CenturyLink's growth profile, it will better position the combined company to improve its revenue trends and growth. We expect it to be accretive to operating cash flow and generate more than 10% growth and free cash flow per share in the first full year post-closing, including synergies as realized and including integration cost. And we expect to drive significant improvement in free cash flow per share in subsequent years. Finally, I want to say a word about full year 2017 guidance. As you know, during our fourth quarter earnings call in early February, we provided full year 2017 guidance that included the expected results of the data centers and colocation business for the entire year since the actual closing date of the sale had not been finalized. At that time, we provided monthly revenue expense and free cash flow estimates for the data centers and colocation business. So if you adjust the previously provided full year 2017 guidance for the May 1 close, by reducing operating core revenues by $400 million, cash expenses by $200 million to $240 million, free cash flow by $40 million $80 million and the depreciation expense about $150 million, we currently expect full year 2017 results to come in near the lower end of the adjusted guidance range. Now I'll turn this call over to <UNK> to discuss the results for the first quarter in more detail and review our second quarter guidance. <UNK>. Thank you, <UNK>. Over the next few minutes, I'll review the first quarter results and provide an overview of second quarter 2017 guidance we included in our earnings release issued today. Please note that I'll be reviewing some of the results, excluding special items, as outlined in our earnings release and associated financial schedules. Slide 9, today, CenturyLink reported first quarter results with core revenues, operating cash flow and adjusted diluted EPS all within our previously provided guidance ranges. The operating revenue came in below the guidance range primarily due to lower-than-expected data integration and IT and Managed Services revenues. First quarter operating revenue on a consolidated basis was $4.2 billion, a 4.4% decrease from first quarter 2016 operating revenues. Core revenue, which is defined as strategic revenue plus legacy revenue, was $3.8 billion for the first quarter, a decline of 4.4% from the year-ago period. Operating income was $631 million for first quarter 2017. We generated operating cash flow of approximately $1.53 billion for the first quarter and achieved an operating cash flow margin of 36.4%. Cash expenses for the first quarter declined $40 million year-over-year, primarily due to lower salaries and wages expense related to the headcount reduction in fourth quarter 2016. Free cash flow defined as operating cash flow less cash taxes paid for taxes, interest and capital expenditures along with the cash impact of pension, OPEB cost, stock-based compensation and other income was $492 million for the quarter. Diluted earnings per share for the first quarter was $0.30, a decrease from $0.44 in the year-ago period. Moving to Slide 10 and our enterprise segment. Under the realignment announced last quarter, the Enterprise segment has been redefined to exclude IT and Managed Services revenue. All historical periods have been restated to reflect this change. In first quarter, the enterprise segment generated $2.36 billion in operating revenues, which decreased 3.5% from the same period a year ago. First quarter enterprise strategic revenues were $1.08 billion, an increase of 2.9% compared to first quarter a year ago, driven primarily by the continued growth in high-bandwidth data services revenues. Legacy revenues for the segment declined 9.3% from first quarter 2016 due primarily to a continuing decline in the voice and low-bandwidth data services revenues. Data integration revenues increased slightly year-over-year, and total Enterprise segment expenses were basically flat from first quarter 2016. Now turning to Slide 11 in the Consumer segment. This segment generated $1.41 billion in total operating revenues, a decrease of 5.2% from first quarter 2016. Consumer strategic revenues declined 1.3% year-over-year to $764 million due primarily to the restructuring of the satellite video contract. Legacy revenues for the Consumer segment declined 9.2% from first quarter 2016, primarily due to access line declines. Operating expenses were basically flat compared to the same period a year ago. Now turning to Slide 12. For second quarter 2017, we expect operating revenues of $4.07 billion to $4.13 billion; core revenues of $3.66 billion to $3.72 billion; and operating cash flow between $1.4 billion and $1.46 billion. Adjusted diluted EPS is expected to range from $0.46 to $0.52. As a result of the colocation sale, which took place on May 1, 2017, second quarter results will have approximately $100 million lower total and core revenue and approximately $50 million to $60 million less cash expenses when compared to first quarter 2017. Excluding this impact, CenturyLink expects growth in strategic revenues in second quarter 2017 to be offset by anticipated declines in legacy revenues, resulting in lower operating revenues and core revenues compared to first quarter 2017. The company expects second quarter 2017 operating cash flow to be lower than first quarter 2017 due to the impact of the sale of the colocation business, the decline in core revenue and higher seasonal cash expenses. And as <UNK> discussed previously, we expect our full year 2017 results to be near the lower end of the adjusted guidance range. We expect our dividend payout ratio to be in the mid- to high 70% range for 2017. While we continue to face pressure related to strategic revenue growth and our legacy revenue declines, we're confident in our business and our ability to improve the revenue and operating cash flow trajectory over time. Now I'll ask the operator to begin the question-and-answer portion of the call. Yes, so <UNK>, so we're currently estimating that we'll be about $100 million to $140 million below the previous forecast for the first half of '17. About $40 million of the variance is related to the Consumer segment. Some of which is related to the restructuring of the video contract that we described, as well as a little bit lower broadband revenues. We expect that to turn around in the back half of the year and I'll talk about that in a minute. Of that amount, $40 million ---+ $20 million relates to broadband, again, $10 million in IPTV and $10 million to Consumer Board. Approximately $30 million of the $100 million to $140 million relates to IT and Managed Services and about $45 million to lower-margin data integration revenues. So what gives us the confidence to believe that we'll see ---+ this implies improved revenue performance in the second half of the year. And let me talk through for just a minute why we believe that, that will happen. Basically, the improvement that we think we'll see in the second half from the first half is about $70 million related to high-bandwidth data services revenue. This should result from improved sales closed as we saw increased sales in the first quarter and expect the second quarter of sales closed be our highest level since 2015. Additionally, we continued to see improvement in our churn rate and reduce customer credits. So we anticipate a significant portion of the second half improvement to be driven by the improvement in the churn rate. We also expect about $70 million of improvement in IT and Managed Services due to the interest in a new product that we have rolled out, the Cloud Application Manager. And in closing the sale of our data centers in colocation business we believe will help because it will eliminate some of the market confusion that we've had about our staying in the managed services and IT services business. Also traction by our separate overlay sales force that we put in place in late fourth quarter 2016, and then recent work that we've done to reinvigorate the sales by the top salespeople in our network sales group, who previously had sold managed services and IT services. We also expect about $90 million of improvement in our data integration revenue performance in the second half of the year. But as you know, this is low margin revenue. So if we don't achieve this, it will only have a minimal impact on our operating cash flow. Yes, <UNK>, they're moving forward. I think we have 14 state approvals or confirmations so far. They're going well. Nothing that's of really major significance there. There is always going to be an outlier or 2, and you just can't control the regulatory process. But we're ---+ right now, we don't see anything that could ---+ anything that we believe will stop us from closing by the end of September. The DOJ process we've had our second request for information there. We filed those answers to their requests. We that's going well. We've don't expect any major issues there. There is certainly a possibility we can close earlier than September but as you know, the regulatory process and all we can do is just aggressively seek those approvals and provide information they want and the good thing is that this is not impacting the consumer business. So we should have less concern from the state regulators than you would in a normal or we would be buying a consumer assets for our business. Yes, so, Mike, with respect to the dividend payout ratio, I mean we're comfortable where it is. Again, with the closing of the Level 3 transaction and the additional free cash flow per share, we will see associated with that, even including the integration cost, we'll see ---+ we should see the dividend payout ratio decline at least after 2018. And again, I think when we announced the transaction, we said we expected about a 10-point improvement in the dividend payout ratio, I believe, in the first year after we closed. And Mike, one of the things we're doing on the legacy losses we're attaching voice to our bundles. It's on the high-speed Internet bundles, as well as our video bundles, and we have to think that's is going to have some. I think it is partially the reason we are ahead and a little above the industry in terms of ---+ better than industry in terms of those legacy losses. And so we'll keep aggressive marketing in those areas, and we have a strong retention plan as well going on, which we think has been effective and we have improved that in the recent months oh that's why we're optimistic we can improve that some. I'll start with the question on the BDS. We have not really quantified it, but it's ---+ the vast majority of our markets will be considered competitive. So with that in mind, there should be very little impact on us going forward. So we feel very ---+ we're very positive about it. It could have been pretty negative for us, a provisional proposal by the previous Chairman, but we are very pleased where we're headed there. And it's really ---+ we're pleased with this, the recognition by Chairman Pai and the FCC of the reality of the marketplace, competitiveness in the marketplace and also the recognition of what significant harm can be done to investment in infrastructure and future services for customers by overregulation, overzealous regulation. So we feel good about where we're headed with BDS. And I ---+ actually, in other FCC regulatories who's facing the FCC. The ---+ on SD-WAN, we believe that is a product that we can grow, and that it can ---+ we're not ---+ we don't ---+ aren't concerned that it's more of a competitive ---+ competitor's advantage. We see it as an advantage for us. Our customers are wanting that product. It's ---+ it won't be ---+ we sell the product, it's not going 100% from MPLS to SD-WAN. It's usually hybrid network solution. So we are confident that we can compete in that arena, and we have as a good a technology there as anybody in the world, we believe, right now, and have more coverage than most as for as 60% of our major IP Pops are virtualized now, are capable of SDN and virtualized services. And we believe that it's going to be a real win for us. We believe when we complete the full buildout of that by 2019, we could see significant impact, positive impacts on capital expenditures. We already said at least $200 million reduction in our annual CapEx from the buildout of these virtualized networks. So we are very excited about the opportunities here. And <UNK>, I guess, on the last question, the only thing I could add to the response to <UNK>'s was basically, I mean, we've seen the improved sales closed during each successive month, during 2017. January started off a little bit slow, a little bit slower than we had thought it would be. But it picked up somewhat in February, March. We closed more sales than we did in February. And again, in April, it looks like that's going to be a good month as well. So we think we're building momentum with respect to the network sales. And we're also seeing some of that momentum in the IT and managed services as well, especially with the cloud application manager product that we have. And that's really, I think, reinvigorated a lot of our salespeople in terms of being able to help them have a product that we can serve our customers with that allows them to move their workloads from one cloud provider to another, from home premises to all premises. So I think that we're more confident now that we have products that we can use to develop the revenue stream, and we ---+ that sales force, the separate sales force that we have, they're doing a good job getting traction. We have just put them in place and it took a little while to get them up to speed, but they are making progress now, as are some of the top salespeople in the network side that all sell IT services and Managed Services products. That's really why we're more confident now. Why we have came down somewhat from a quarter ago when talked is basically more or less just due to kind of the slow January that we had and a little bit slower February than expected. But again, we think we're making progress there. So <UNK>, we had about a $15 million onetime positive adjustment to expenses in the first quarter related to taxes, property taxes and sales and use taxes. From the standpoint of going from first quarter expenses to second quarter expenses, first, you need to take about $55 million out related to the colo sale. We had some merit increases that will add about $10 million to expense. We ---+ operating taxes, again, that onetime benefit will not be there, so that will be up probably $15 million or so. We're also, as a result of the colo sale, we're leasing space from the provider ---+ from the data center owner to basically provide the Managed Services and the cloud products that we have, that's about $15 million of an increase in the second quarter. And then there were just numerous other small increases that make up the balance. Yes, this is <UNK> <UNK>. So we are still in the process of technically trialing the product in 4 markets. It's going well. We do plan to launch the service in early ---+ early next quarter. And we will look at the results. We'll evaluate the pricing strategy, the packaging strategy and then we will phase-in the launch over the rest of the year. What we've done in Prism TV is we did a rate increase in February of this year to capture the higher-value customers. And so we're targeting those customers differently than we have in the past to maximize the overall customer lifetime value. So our video strategy will be one of offering multiple options to the customers based on their purchasing needs. Yes, so, first of all, I guess, in the consumer business, you're right, there is continued pressure there. But we think we can turn the strategic revenue portion of the consumer business around, which essentially is broadband, by the network expansion that we're doing. And so for instance, we have ---+ we now have about 3.5 million living units that can get a 100 meg or better versus 2.6 million a year ago. We've had an increase in the customers who can get 40 megabits or higher. That's increased to about 9 million from about 8.3 million a year ago. So we continue to do more and more from a network standpoint to provide our customers with the ability to get higher speeds. More of our customers are taking 40 megabits or how higher now. Those customers have a less propensity to churn and they pay a little bit more than our traditional customers that are starting to roll off that basically had pretty good discounts when they signed up. So we think we'll see the ARPU change over time and start increasing on the broadband side, and we think we can take some market share away by some of the offers that we're making. And on BDS, it ---+ well, we were concerned about the headwind. It's a major concern we had. We don't know if we'll ever see BDS as a huge upside opportunity for us right now. But it certainly took away the headwind that we were concerned with, what was irrational regulation in this competitive market. So that's the biggest benefit to us right now. So on the new satellite TV agreement, so we did receive an increase in our onetime payments that we receive the when we sell that service. So there will be some offset in the coming months because we are selling more of that product year-over-year. So it won't be $15 million a quarter. It will step down a bit. Regarding the potential conflict in sales force, Level 3 and CenturyLink, that is the #1 focus of our integration work, really is try to avoid any impact on revenues, on sales, on the sales process. Obviously, we have ---+ share some of our customers. In many cases, we're working with our customers ---+ we plan the work when we can, work with our customers in that issue. We can't do that until close. But we can begin working on sales with our sales force, rationalizing the number of salespeople we have in certain areas. It is a major, major focus of ours and the one we'll be spending probably more than any place else. We have a lot of great sales folks out there and we're going to try to put them in the best places where they can be successful and work with them going forward. So we need all the good salespeople we can have out there. We are just going to work with them to divide up the accounts and share the accounts in some cases to make them ---+ to optimize those folks who are so capable at working with our customers. So this is <UNK> <UNK>. With regard to the larger peers wrestling with some softness in the large enterprise marketplace. We're actually seeing some strength in the large enterprise marketplace. For example, our MPLS is up 6.1%, and that's better than the marketplace in general. And so, we really do see strength in that high-end data services for our enterprise customers. And we don't see that abating anytime soon. And the reason I say that is that we're ---+ we had an extraordinarily strong March, as <UNK> indicated, and we're seeing that same strength in the sales activity going forward in April, as well as looking out to towards the second quarter. Let me add to that, <UNK>. I'll just tell you that we have not seen the softness in the market maybe some have seen. But we have not ---+ we have now also not seen the great improvement in the market than we would expect with the improved economy. So we're still waiting to see. We're still seeing elongated decision-making processes. We haven't seen a jump in demand like we would hope to see. So we're hoping we'll see that and maybe it's lagging the overall improvement of the economy, but that's still an upside for us possibly if ---+ as businesses begin to have more confidence in the better economy. Yes, regarding consumer. So in the first quarter, the majority of our benefit we saw was in churn reduction versus inward activity. As you recall, last year, we made some changes to our credit policies, which lowered our overall inward. For the second half of the year, our anticipation is that we'll continue to see those improvements in churn but we'll also drive more inward activity as a combination of the result of the increased broadband enablement that we spoke of, as well as we're trialing some new pricing activities that in early stages, we're seeing improvement in our inward activity as a result of the simplified pricing offers. Yes, so if you recall last August when we reported second quarter earnings, <UNK> walked you through our 3-year ---+ actually 3.5-year broadband build plan. We're just now 3 quarters into that plan and we are on track. Really, the determination on future capital allocation will rely on our success in penetrating those network investments. <UNK>, I think ---+ our target is having the total sales design ---+ redesign complete by January 1. That's not going to be an easy process. That's an aggressive process. But we think we can do that and it's ---+ there are always concerns about when you make those kind of changes, bring 2 companies together, where you're the only 2 companies in a building or in a business. So those ---+ we'll try to work to deal with those issues. But we're really confident that the quality of people we have in this process, with the collaboration that's going on already, of course, we cannot talk about individual customers or customers ---+ what we're serving customers, we are making progress probably ahead of the pace normally than I've seen in our previous transactions in terms of identifying opportunities and getting the leadership in place to address the issues that could cause problems, as I'm sure everyone is concerned when you bring 2 companies. You don't want to lose momentum, and that's going to be our objective. So <UNK>, the credits that I mentioned earlier is part of the conversation associated with why we're comfortable being able to increase revenue on the Enterprise side in the second half, really are credits related to business customers, and some of those credits have been related to some network outages that we had in the past. We haven't had those outages here recently and things have improved quite a bit. Credits related to other things as well, related to managed services, and those have declined quite a bit, and we're paying a lot more attention and have increased the level of the person that has approve a credit and so they are really vetted quite a bit more now than they were in the past, I think. So we're just seeing our credits that we're giving to business customers for different reasons decline and expect to see that to continue to decline over the second half. And again, a big part of the improvement, we think, we'll see too is coming from reduced churn that we're seeing in the Enterprise segment. In terms of the reorg structure and how long we think it will take us to show traction. I don't think it will take that long. I mean, typically, we are ---+ do a great job and with the leaders that we have responsible for the integration, they are making a lot of headway in terms of basically how the integration is going to take place. We typically get good synergies, quite a bit of synergies in the first year or so, first 6 months to 1 year. I think we expect to get 80% of the operating expense synergies over the course of the first 3 years, but a fair amount of that will be pushed into the first year as we integrate the 2 companies, as we integrate the IT systems, things like that. The ERP system, for instance, we're pretty well on track to hopefully get that changed to where we'll be on one ERP system, except for certain of the overseas areas, international areas by January 1. <UNK>, the ---+ what we are seeing, we mentioned earlier, we're building capacity. We're seeing growth. We're seeing high take rates on the higher speeds. So we're winning the marketplace when we have those speeds out there. The question, as you say, is capital allocation. That good thing is that a lot of these builds we're doing, not only benefit consumer, they benefit the businesses as well, SMB, and they put fiber closure to large businesses, where we can locate Pops that are just hundreds of feet away. So to the extent we can build for both Consumer and Business, it's helpful. Maybe we share that cost to those fiber builds. That's a positive. We always have the opportunity to consider monetization but right now, it's ---+ that business is driving good cash flow. We have a shared-network complexities we'll have the deal with, but it is, as always, an option to look. But right now, we ---+ the cash flows (inaudible) of that business are strong. The other thing that we've done on the SMB is, basically, as part of the reorganization that we did earlier, where we separated out the consumer group and enterprise group. SMB had really been served in the past by our folks that ran our call centers. And what we're doing now is we've moved that business and responsibility for those customers over to the enterprise segment. So there are more dedicated resources now that are trying to win the hearts and minds and wallet share of the SMB customers. The ---+ regarding the structure, we really like the GM structure that Level 3 has in place, and we are going to plan to really build more around that. We've got ---+ we still have our focus on SMB and other areas, but we like the general ---+ that local presence, really, is what it provides and we think that makes a lot of sense. We have done a lot of work around that and so to the extent that we look at the structure, the org structure around enterprise, we expect to go more with the Level 3 plan there, which works for us because it's really been successful, I think, in getting in the local market in the past. And one thing I'd just point out here again, the impact of this business. Today, our biggest issue at CenturyLink has been the legacy revenue. We're losing close to $600 million a year in legacy revenue. We know that we can do very little off that. With this ---+ and when we get ---+ and the same ---+ what that requires us to reduce work ---+ to reduce cost in the legacy areas in the business while trying to drive growth in strategic revenue. With this acquisition, we're going to ---+ our legacy revenue will move from 50% of total revenue to 35% of core revenue. So from 50% to 35%, a huge impact. And what it does, in essence, it gives us a much stronger opportunity to grow revenue and eventually cash flows, as well, as a result of the acquisition. So a lot of benefits here, including just bringing 2 great sales forces together and the scale we get, along with the cash ---+ the operating cash flow accretion we expect to see and free cash flow accretion we see. The over-the-top experience is honestly, a skinnier bundle from what they have today with linear Prism TV service. It will be at a lower rate and it will not require a truck roll. So it will be something that the customers can sign up online, get their service immediately. They can add-on other genre packages. So they can buy as little or as much as they would like based on the different package offers we have. And it will be targeted to those more cost-conscious, tech-savvy type of users. Yes, so if you recall, last year, what we communicated was by the end of '19, that we would have over 10 million addressable units at 40 meg, which is about 85% of our market, about 42% or 11 million would have 100 meg and then we'd have about 3 million that would have 1 gig or above. About 20%. And we're on track for that build. Thank you, Ray. And I am pleased with the progress we continue to make in transforming CenturyLink into a leading global enterprise network provider. We're encouraged by the continued demand from businesses and consumers for advanced network services and the related trends we are seeing in our business, along with the associated opportunities to provide IT and managed services to help enterprise customers enable their digital transformation. And we believe our continued progress in the virtualization of our network, enhancement of our broadband speeds and improving our customer experience through simplification and automation help position us to drive future growth in our business. Additionally, the completion of the sale of our data centers and colocation business and the pending acquisition of Level 3 move us forward toward our goal of being one of the world's leading network providers and provide us, I believe, a lot of opportunity to create a really growth-oriented company here that's one of the leading companies in the world in terms of providing networking services to the enterprise customers. So thank you for your participation today, and look forward to talking with you in the weeks ahead.

2017_CTL

2016

GS

GS #Thank you, <UNK>. First and foremost I would say the thing that drive the strategy is not digitization in and of itself, it is how we engage our clients. You are right to point out that the equity business went through a pretty significant evolution. While that evolution in historical perspective feel short, it was a multi-year process that really began in 1999, and it finished in the mid-2000s and continues to evolve. I don't know necessarily that I would agree that we are at a tipping point. It is all about opinions, but it feels like we're in an evolution where obviously clients are looking for efficiencies and we're looking for efficiencies. But the reality is that a vast majority of the fixed income market is more bespoke. It will not lend itself to that, but to the extent to which we can deliver to our clients and drive efficiencies, we are obviously very focused on it. You've seen some of the evolutionary steps we've taken in terms of the balance sheet reductions and the risk-weighted assets that I talked about earlier. It may be the case that over periods of time, depending on how much client activity there is, but the extent to which it shifts to electronic channels like we've seen under the regulatory framework for our swap execution facilities, those transitions happen very, very quickly. We adjust very, very quickly. Sure. Thank you As you and I have talked about over the last couple of years, I don't think we would've imagined a couple of years ago that the industry would be in a position where three of the largest firms were going through a change in leadership and what appears to be a very significant change in strategy. And that change in strategy is different for all of them. Some of them it is geographically driven some so far, some of it's pulling resources back from certain business like derivatives. To us it feels like the feedback is quite good. Obviously difficult to see that in a really tough first quarter. But I would say on the ground the feedback is good, and it continues to improve our position. With respect to how we're positioned, I think we feel tremendously well positioned given our footprint. So as I spoke about in the early remarks, commodities was down year over year. That really ---+ the VAR reductions you are really seeing are more a reflection of the environment. While there was volatility during the course of the period obviously in commodities, client flows were pretty muted as people really were a bit taken back. I wouldn't say in shock, but a bit taken back by the depressed energy prices and the movement down. It did not translate into lots of activity during the course of the quarter. Yes. As I said before, March was better than February and February was certainly better than January. I would say that's been the general trend, and as I said before the factors that really were impacting the market so severely in the first quarter, at least for now that they seem to have abated. So I would say with respect to the liquidity dynamic, if I had to rank factors, and it's very hard to quantify these things, I would say factors like conviction around the markets because of the sharp decline in the oil price and obviously the negative interest rate environment and the big shift to the buy side holding lots of assets. I think those are as significant a driver in the current environment as is regulation, given the banks are holding less inventory globally. I think that underpinning all of that is when you look at the client base regardless of how much velocity may be in their current trading activities quarter to quarter, the core needs in terms of their need for liquidity and our desire to provided it, that remains. So I think the core of it is the same. To the extent to which we can ---+ sorry, I didn't mean to ignore the last part of your question. I think you're right to say that obviously the big universal banks, they are two or three times our size, they have much bigger lending profile and bigger retail commitment. They will naturally participate in some flows that, given their size, we will not participate in. But the value is really in servicing the client. And so to the extent to which we can provide value to the client, obviously we want to make sure we're doing that. We saw obviously to the extent there were financings in the first quarter that were obviously energy-related financing activity, and we were very involved in that. I would say that, look, this space has been under extreme stress which emerged over a fairly short period of time measured more in months than years. So I think our expectation is that there will be active dialogue across the industry. Whether or not that manifests itself immediately in the near term we will have to see. Obviously the industry is going through quite a bit in this price environment. Thanks. We think of all of our clients as important, but obviously we've had a big commitment to the hedge fund industry across equities and fixed them for a long time. We're always rooting for their performance. And so to the extent to which they have improved performance, it may be a catalyst for increased activity, because in periods like we went through in the first quarter, obviously they have a tendency to derisk. It reduces trading velocity over many months, although it may be for example an active day from time to time. I think sentiment seems to be improving, but we're going to have to see. As I said before, it is still a little fragile. Sure. So as I mentioned, the backlog was down sequentially, but it's up year over year. When you look across the business, the advisory portion of the backlog was down versus a very strong level at the end of the year, but that is up year over year. Versus the end of the year, as you would imagine given what happened in the equity markets, the equity backlog is up. And obviously we had a bit of an outperformance it looks like versus the rest of the industry on debt underwriting, and that is down sequentially. In terms of the high-yield markets, over the last couple of weeks still a bit selective, but they seem quite strong. One of the largest transactions was done just last week. So the markets are quite receptive to good solid transactions. Are you there, <UNK>. No problem. I think you have to give the regulators a lot of credit over the last several years for making the ---+ and I'll focus more on the US financial system, including things like CCAR. I think that the safety and soundness of the large US banks and the whole system, they deserve a lot of credit for driving some of that. And obviously we made a lot of changes to our balance sheet even prior to the regulation. But I think you have to give them a lot of credit for it. I think that all these good benefits which we all benefit from, they come at some marginal cost. It's very hard to measure that marginal cost. I have yet to see a very good analysis that breaks down in great detail the impact of negative rates, the fact that we had declining spreads for multiple years that increase asset holdings for mutual funds compared to the shrinkage of bank balance sheets and come up with something that really does a great cost benefit analysis. I do not think we have seen that. I think we have to argue the benefits are pretty clear. Now as it informs our strategy, we have an obligation to deliver to our client, and we have an obligation to make sure that we comply with the rules in the way that we can most thoughtfully. And so that is how we approach our strategy. To the extent to which there was demand for the balance sheet and client activity picked up and that demand was accretive to returns, we would be happy to grow the balance sheet given the strength of our capital ratios. But we just have not seen that. So you're not seeing us do this, but over time the system is going to have to balance liquidity needs. And I think that will happen, it just may take a while. I think if you go back through history even ignoring the recent regulatory changes that both clients and market providers participate in, if you go back just to the formation of Tradeweb, back into the early 2000s, I think all of those vehicles, and there may have always been challenges at the start whether it's Trace reporting or Tradeweb or things like that, I think over time those generally have been at the margin. Maybe not in all cases, they've contributed to increased liquidity. I think so far the markets have adjusted to things as I said before very well, and the regulators have done a very good job of introducing swap execution facilities and gradually implementing these things. I think the extent to which those things have occurred, it's been helpful. I think where most people talk about liquidity in the marketplace really relates to transacting corporate credit and high-yield credit. I do not know of a technological solution that is a cure-all for that. It's all very bespoke, and that may be an area that for a while the market struggles with. But not just because of regulation, it's because of all the factors I talked about before. So obviously we're paying very close attention to it, whether we're monitoring it from a market and credit risk perspective or from a strategy perspective. As you know, under the framework as we understand it is a multi-year transition to the extent to which Brexit goes under. But we feel when we look at it, again I want to caveat this given there is a lot of uncertainty. When we look at it we feel like in terms of our physical commitment to the region that we are well prepared. But again, there will be a lot that all of us will learn to the extent of which the referendum goes through on June 23. But that will be a multi-year process. We're obviously always focused on running the business efficiently. We do not target a pretax margin for the business. So over time you may see that move as we are investing in the business, as we are taking on different types of asset pools. But we look at it across the whole business. We do not target it. So the preferred that you saw us do this quarter was the exchange of preferreds. So we were net neutral on the preferred order. But you're right to point out that last year ---+ all the things you pointed out by last year are accurate. We'll utilize preferreds to the extent to which they are consistent with our capital plan and our objectives. Generally speaking as you have heard me say before we view them as reasonably expensive securities. I know we're not desirous to use them beyond where we think they fit optimally in a capital structure. There were during the quarter. They were not material, but I do not have that number off the top of my head. There was one large transaction in the marketplace which looks like in part in response to treasury actions. It is no longer in the marketplace; we were a participant in that. But I would say that's a minimal factor in status of the backlog. I would say these are small impacts. It feels like the fundamental conditions for an elevated level of M&A activity, they all feel like they are still in place. And those things are challenged top line growth, slow to very moderate GDP growth globally. And so it all feels like it is still in place. So we really try never to drive balance sheet to different parts of the firm in a top/down way. It really comes bottom/up. And it comes bottom/up because it's in response to exactly what you're describing. It is client activity. If our bankers need more capital and more liquidity for their clients because they are financing M&A transactions, we cannot obviously from the top, we cannot control that from the leadership of the firm. And so it is really in response. I would say velocity broadly, whether it is in M&A, debt, financing, the ICS businesses, that really is the driving motive for the firm. Obviously we look to be as thoughtful and efficient about our balance sheet as capital as we can in the context of that. It really is about velocity and activity levels. Well thanks for acknowledging what we've done over the last couple of years. Look, we're net ROE focused, and that ROE, as I just talked to you about, that's going to be driven in part by client levels of activity. For example as you know at the beginning of the year we go through a firm-wide review of resources. And when you look at that over historical time periods, that has resulted in about a 5% adjustment to resources in the firm. This year as we went through that exercise, parts of the businesses that were more challenged, like fixed income, they elected to take more significant action. And so they would have been greater than 5% during this period. But they are just responding to the market environment and the demand for their services in the short run. Hi, <UNK>. Great question. It's less the absolute price level, it was more the shock and the nature of the decline. And so when you think about the precipitous nature of the decline and you go through the various client segments, so think about producers responding to that decline in prices. And for example, certainly you did not see much incremental addition to hedge portfolio activity. On the consumer side when you get those moves down so quickly they tend to be a delay until you find some price stability. And for investors I think the move was so volatile that it was difficult for investors to participate. We have certainly seen some stabilizing in those flows and increased market participation over the last several weeks. What we saw in the first quarter, really not surprising in terms of client behavior. So I wouldn't ---+ just to get a little ticky-tacky on language, I wouldn't say that there is a shyness or lack of shyness or aggression or anything like that. We very specifically and carefully go through our capital plan and we ask for what we think is appropriate. And so that is the way I would describe it. So, I guess I would say a couple of things. Over the last several years, as you pointed out, we've been a $34 billion firm. However, we have changed. During that time period we sold off $2.5 billion plus worth of businesses, and we replaced those revenues. You've seen us grow our asset management business. Over the time period when you look at our performance versus the peer group, and I thank you for acknowledging we're the best, we have continued to outperform the peers, we have grown book value, we've returned $25 billion to shareholders over the past four years. And so we have done many things. We cannot control, we cannot control what happens in terms of the environment. We do not believe negative interest rates are going to be here forever. We don't believe client activity is going to be low forever. You really have to look at this over long periods of time. Look, I will go back to book value. You look at it over the past decade, we have grown it by three fold. I think that is contributing value. So again, it's all about language. I would agree with some of the things you're saying, I certainly wouldn't agree with your statement that we're sitting here waiting for the world to do what it does. If we felt like there was a client segment or a transaction we could do that would benefit our shareholders and we can deliver to those clients, we would do it. We are open-minded. There's a reason why we're the leading advisory firm in the world. We would take our own advice, Dick. Thank you. At this stage it's our best estimate, <UNK>, in terms of where we think the year will go. Obviously the performance was challenged in the first quarter, and you saw compensation and benefit expense come down 40%. It is pretty meaningful. I understand your point. It really is our best estimate. We're going to have to see how the year progresses. When we budget and plan for it, it really is a process through which because of the nature ---+ again this is a long-term business where we're committing long-term capital. It really is done under a very controlled process where the businesses request that capital. As you pointed out, we had roughly $240 million of NII in there, and now the majority of the balance sheet ---+ and this has been a transitional for several years ---+ the balance sheet has transitioned more to debt and lending activities. But that is not something again that we drove top down that was driven by the client demand and the opportunity set. As I said, you have to look at this over the long term. As I said earlier including their first quarter, it's been an $11 billion of revenue over the last eight quarters. You have to look at this in the long term. Because it's going to be ---+ it's pro-cyclical and there is going to be volatility quarter to quarter. I would say that this has been a pretty extreme quarter. You have to go back to the third quarter of 2011 or back to other periods where markets have been extremely volatile to see this kind of performance. Again, it reinforces what we've told you already which is it is price-sensitive, its pro-cyclical and quarter to quarter, but you really have to look at it over the long term. Well, that's your job. Thanks, <UNK>. Since there are no more questions, I would like to take a moment to thank all of you for joining the call. Hopefully I and other members of senior management will see many of you in the coming months. If you have any questions come up, please don't hesitate to reach out to <UNK>. Otherwise enjoy the rest of your day. Thanks, everyone.

2016_GS

2015

HE

HE #Thank you.

2015_HE

2017

ALLE

ALLE #I would anticipate ---+ well, first of all, the step up here is all related to specific opportunities that we see, specific around the market segmentation that <UNK> talked about, expansion of the channel, discretionary market opportunity, new product development, those type of things. The other thing that's fueling that a little bit is when we acquire companies, there's opportunities that, in order to fully realize that investment and take advantage of that investments are needed to expand the capabilities of that. Republic Doors would be a good example of that where we need some infrastructure spending, if you will, to fully take advantage of that acquisition and to fill out the regional distribution capabilities for fulfillment for customers. So it really is going to be dependent upon what's taking place in the industry, acquisitions, etc. But I would say going forward long term, $0.15 to $0.20 I would say is probably a peak. How much it will taper down from there is hard to say, but each year we'll look at individually. But I think the critical thing is that when we evaluate these, we ensure that there's good revenue growth opportunity, that we can execute on it. The risk of doing that isn't significant. And we have got to demonstrate a proof of concept in the marketplace before we put a bunch of capital behind it. So we have got levers we can pull. If we can't execute, we can throttle back a little bit. I would add to that too, as we move into 2017, a hard squeeze on what I call back-office costs, then any increase in investments in things that we believe that will produce growth for us going forward in the future, including new products. Hi <UNK>. Incremental year-over-year improvement. When you come to investor day, we'll give you a better look at that, what we see long term. But continued step up year over year. I think, as I think about Europe, it's a little bit like three-dimensional chess. We have to continue to improve our geographical position. The northern margins are better than our traditional markets. Second is investment in growth in our spec writing capabilities. It is important. I describe our core mechanical business as more of a flow goods business. That wholesalers are providing it. We do the best in the world where we can drive specs. So I wish I could be more aggressive and say, it's going from this point to this. We've made the moves, but as we look at ourselves versus our competitors with similar geographical regions, we were significantly above them so we have got to be realistic in terms of how it goes forward. Our ultimate goal would be mid teens. Yes. So it is true we have repositioned the portfolio, I think, nicely. It's allowed us to focus on our core business. We are applying the same segmented market approaches that we are in the US to drive growth, and it's yielding results. We will continue to be opportunistic in terms of M&A in the region, but I'd also say patient with a flavor towards electronics. Our Milre acquisition in South Korea, growing quite nicely, and we see the Asia-Pacific region, in terms of the electronic convergence, moving faster. We want to be a part of that. But overall, feel good about our execution, confident in our growth ability. More based on the segments that we're driving. We had some project wins in the fourth quarter. That's a little bit like a license to hunt; we have got to go deliver those, which we're confident we can and continue positive on the region. It's a good aspiration. We again think the improvement year over year, and we'll go into more detail at investor day on how we see the next three to five years in the region. A little bit more difficult, just given the scale and size of the region. But steady improvement, kind of like where we are now with Europe. We'd expect to leverage on top-line growth and continue to drive a price to exceed inflation and just steady improvement. I'd say the first headwind versus the 10% is more the challenge of redeploying our manufacturing capability. We took out over 150 jobs in Italy. We've have gone to some partners in some new production sites. There's always challenges with this. And as we've said in past calls, that didn't go off exactly as we would have anticipated. But we're well positioned for 2017. In terms of ---+ there was a pretty big transformation in the portfolio. We cut parts out, we have added with SimonsVoss, AXA. In 2016, we established what we call global portable security. They're working to forward the strategies on that, which we think will fuel growth and profitability. So overall, we're very pleased with the improvement over the last 36 months. We have not been at this level of profitability since 2008. The other opportunity is continuing to build our specifying capability. This comes with people; it can also come with acquisitions. SimonsVoss helps us in the spec writing capability, but you have to coordinate that across the region. This takes more time, but we think our prospects going forward are positive. I don't see any further changing needs in terms of any environmental exposures we have globally. This is another example, over the last 36 months, we did not inherit from Ingersoll-Rand an environmental department; we had to establish that. Establish a review of the sites that we operate in the world. And the change or investment that we made was more driven by proven technologies. We felt that we could make that investment and remediate those sites at a faster pace versus what we were conducting. We had to work with state and local officials, and take it as our commitment to do the right thing in the places that we operate. Those will be cleaner sites, and I think we have a very good handle on what we own today. Hi <UNK>. So number one, I would look at our return on invested capital profitability margins. We're significantly ahead of the competition. Our engineered order of nature and the varieties of products that we make don't necessarily leverage huge automation investments. In things like polishing, our finishing facilities, you will see a high level. But if you go down here to indy ops or into the facilities at SimonsVoss in East Germany, I think we use a balance of build-to-order human hands and automation to deliver some of the best return on capital. Oftentimes in manufacturing, it's how we eliminate non-value-added work and help our people to improve quality customer satisfaction that yields our margins versus straight automation investment. It's not what I believe get us to the promised ground in terms of effective manufacturing. So we certainly followed the Stanley movement almost from the day I arrived at the door. I think we understood our opportunity there clearly. Was not surprised at all with where that asset held up. I think you got to step back and look at it. The performance of the Stanley Mechanical asset had not grown over time, number one. Number two, kabadorma also made another move, and that was called Mesker Door. And I think they are working to try and position to look more like ourselves and [ASA] in the North American market. I can only say, bringing together companies is never easy. And being able to put together the capability of distribution, specification resources around that, those new acquisitions and portfolio I think open up opportunities for us to grow. Change is never easy, that's my point there, and that's why we continue to segment the market and invest in the US to drive our organic growth. I was not surprised by how those things came out, and have no remorse. No slowdown. I think, we look at this market and think 5% to 8% annual market growth. We're doing better than that. And I think the challenge is for the industry and for Allegion to accelerate the adoption. These are clearly devices that can improve home, commercial, institutional security. As we connect these with mobile devices, people want to be confident in them. And in my mind, this market will continue to progress, and Allegion should outgrow the market in that convergence. We would like to thank everyone for participating in today's call. Please call me with any further questions. Have a great day.

2017_ALLE

2016

KMB

KMB #Sure. Let me take a crack at it and <UNK> can certainly jump in here. Let me start with CapEx. We're fortunate to have a lot of opportunity to invest in high-return capital projects that support both our top line growth and savings. If you think about our CapEx, you can think of the spend in three areas: growth which supports expansion capital, and also investment behind our innovations. Cost savings, which is a second category, a lot of that supports the FORCE savings that you're seeing come through, and that we talk about. And then the third category on maintenance, we fund our operations to adequately maintain a productive and safe manufacturing environment. So those are the three categories. And I think the range of $950 million to $1.050 billion is about right for our business now, given the opportunities that we have and the size of our operations, and the opportunities that we have for expansion in some of the geographies. We'll continue to monitor that over time. As you know, we hired a Head of Global Supply Chain and under her, organizations will work with the finance team and the local operators, to make sure that we continue to make sure that we're optimizing our CapEx spend, as we move forward. On working capital, I said that I thought our working capital usage was a bit higher than we'd like it to be. I think the areas of opportunities that we have in 2016 are around areas like inventory. We talked about strong performance on payables in 2015, and so, again, with our global supply chain organization, working with our local teams, we'll be focusing on what we can do on the inventory side. And then in 2015, we also had some negative impacts on working capital from currency, on our derivatives settlements, that we used to manage our exposures on the balance sheet. And then also, we had a large tax receivable that moved up into AR at the end of the year. So when you look at the numbers, that's in there, too. I think the third part of your question was around buybacks. And that goes back to what I said earlier, that we're very focused on maintaining our single A credit rating. So there's, as you know, a set of metrics around single A and we watch those very closely. Then, look at how do the cash flows come in, make sure that we fund the dividends, invest in our business through CapEx, and then the remainder determines how much we buy back. And we use both cash flow, and then any capacity that we have on the debt side within that A rating, to really fund buybacks. So depending on where the results of the operations come in, will depend on the flex within the range on the share buybacks for 2016. Well, the way to think about it in terms of how we're approaching it is, we're not necessarily trying to cover the translation exposure, which is probably the biggest piece of it. We are trying to cover the transaction exposure. But as you look at our net income impact, that also includes things like the balance sheet remeasurement in Argentina that flowed through other expense or any other hedging gains or losses. They're looking more like the run rate transaction exposure on the impact on imported materials, and what their ongoing cost of goods is going to be, and using that to think about pricing going forward. And then balancing that with what's your innovation plan look like, what other things can we do to substitute a local source material, and avoid the transaction exposure. It is a market by market approach, and again, I would say in Latin America and Eastern Europe, is where you found both those markets are, I guess I'd say, used to dealing with high inflation. And so when you get hit with this, people aren't shy about taking price. But other markets, you're not going to see that in Korea, you're not going to see that in Australia. I think the biggest disconnect is e-commerce in China, <UNK>. So single day was November 11, which was huge for us, as well as for all of the online players. So that probably skewed the Nielsen data, which tends to look at measured and baby stores, because there was a lot of online activity, and particularly in November. But again, I'd say if you were to decompose our growth in China, we increased the number of cities. I think we started the year at 105. We ended the year at 115. We'll be at 130 by the end of this year. Now, each incremental city is incrementally a little bit smaller, but you still are seeing good geographic expansion. We're still growing share in the cities that we're in. We're doing a ton in e-commerce, and that channel is growing pretty dramatically in China. And so it's probably a third of our diaper sales were in e-commerce, which is overweight the rest of the category. We're still seeing good mid-tier super premium segment growth, where we tend to do better. So again, I'd say China, we're pretty bullish, lots of competition but good growth in innovation coming, and some geography expansion, as well. We've been talking about euc for a while. That's the biggest grade that we buy. I don't know, <UNK>, probably what, two-thirds of our fiber mix on the virgin pulp side, I guess. Is that about right. It would be two-thirds, if you're just looking at eucalyptus versus Northern softwood. Then that also consumes some fluff pulp in pers care. Overall, I'd say eucalyptus is still roughly half of our fiber mix. It's the biggest single grade, which is why we started quoting that one versus Northern softwood. We're not giving a range. But it should be down a little bit year on year. Probably just take whatever RISI was looking at, and that's essentially what our forecast would be. I haven't looked at that in a while. My guess would be, <UNK>, is that we're pretty similar to P&G. And GP might have a little bit more variability, just because some of their tissue mills are more connected to their own internal pulp sources. That would be my hypothesis. On the KCP front, we all run with a lot of recycled fiber on that front, so we'd be pretty similar on the KCP front. I think this is probably more fiber morphology than you're interested in on a Monday morning. Eucalyptus helps make tissues soft, but it's not as strong as Northern softwood. So you get that right, now, hardwood makes it soft, and softwood makes it strong. We've been trying to drive more softness and use more eucalyptus, and you're trying to figure out ways to make the tissue stronger using other means, so that you don't give up the strength that Northern softwood would bring you. But I think there are even some markets where we've run 100% eucalyptus sheet, and are able to do that, and still hit adequate strength targets. That's a tough one to call. We tend to just look at the ---+ we take two or three industry forecasts, RISI being one, and I think we look at a couple of others and we don't apply an immense amount of judgment to that. We tend to take a look at what the predictions are calling for. I do think the weakening of the US dollar in some of these local markets may not be fully captured in the forecasters, because they're looking at forward currency rates, as well. And so if you look at a Brazilian producer who is selling their product in dollars, or a Canadian producer who is selling their product in US dollars, certainly, you could make an argument that there could be some price decline. From a capacity standpoint, the Canadian markets should be pretty stable for a while. They have to run the mills this time of the year, or they freeze up. There's some additional capacity coming in Brazil, but I don't think it's going to be until the end of 2016. So we'll see what happens. At this point we're not ---+ we're seeing a little bit of weaker spot prices for Northern softwood, but the eucalyptus market has been relatively balanced, and there's not a huge spot market on that at this stage. <UNK>, I would just add that remember, as we talked about earlier, there's a lot of big moving pieces in our planning assumptions, but think about all of them together. If pulp does weaken more than we're expecting, you could see some offsets and a bit higher promotion spending. I would say the competitive activity has been relatively modest in tissue. We've had a lot of news between Viva Vantage. We've had some improvements on Kleenex. We've had some upgrades on Cottonelle. We want to make sure we get our fair share of quality promotional support, as have some of our other competitors. The good news is, you didn't see much private label movement in the fourth quarter. I think private label shares were pretty flat on bath. I think private label was up half a point on the year on bath, was up a little bit more on towels, but we were up in both categories. So I think it's just the normal competitive environment, and we'll see what happens going forward. If you do see a big move in pulp, that typically would lead to a change. I think the relatively modest moves that we're talking about shouldn't have a major impact on promoted pricing. All right. Thanks everyone for the questions, and we'll conclude with a comment from <UNK>. Well, once again we wrapped up the year with a very solid performance in 2015, and we've got great momentum, and we appreciate your support of Kimberly-Clark. Thanks for joining us today. Thank you.

2016_KMB

2015

FAF

FAF #It was ---+ really it was about 10% on the title side this quarter. I mean we did a couple of acquisitions. The TitleVest deal that we just talked about really closed in March and there wasn't really anything meaningful there. We did a couple of acquisitions in March of last year. But the organic growth was about 10%. This is <UNK>. It is definitely not because of share, we are not reducing our retention for a share gain perspective. It is really geographic distribution right now. So it is really running right in line with what we expect it to be, right around that 80% number. Yes, agent revenue came in a little light and that is really what we think driven by the sharp uptick in refinance. When we see a real quick uptick in refinance, the majority of that business typically goes to direct shops with big central service platforms like ours, our mortgage solutions group. So we think this is really what happens with the market and the type of revenue that is being generated quickly. Let me give the first answer and I will let <UNK> take the second part of it. The 8% is on our purchase only. I'm sorry, can you repeat the question. Yes, refis were up 40% in April on the open side. Well, I think for the next couple of quarters we intend to book at 6.5%. So I think that is our intent at this time. I think over a longer period of time we would definitely expect to see that loss provision rate come down in the 5.5% range. But we are going to be cautious and for the next two or three quarters continue to book at 6.5%. Our claims this quarter came below our expectation and they have done that for the last two or three quarters now, but we're just kind of booking at the conservative end of the range just given our experience in the past. I think it is. I think we are optimistic, we are off to a good start, we had a good first quarter. And if we continue to see the leverage growing on the revenue we will get the leverage on the business, that is our intent right now. So if the business continues the way it is and spring continues to develop positively like we think it will, we are optimistic that we can exceed our margin from last year. They are two separate issues. The pension expenses that we book we wouldn't expect to change for the year. What I talked about in my script, it was a $4 million one-time charge relating to ---+ we terminated an (inaudible) related to a company life insurance policy. So it was really one time, we don't expect it to repeat going forward. The pension will go through personnel costs in the corporate segment. There is a few things driving it. One is, yes, we absolutely are getting more business and so we are investing in those escrow deposits. Another thing is we've started to use some outside managers for our portfolio, so we just had I would say an unusual amount of cash at the end of the year ---+ as of 12/31 that we have invested in Q1. So those are really the two primary reasons why cash is down and investments is up. I would say the yield on those investments are probably slightly higher. I mean right now our yield is running somewhere in 2.0 to 2.1. And I think it would be slightly higher than that, but not materially more than that. But it is not in cash though, they are in marketable securities. Well, two separate issues. We are doing well in our market share initiatives. We did pick up about 100 basis points last year; about 160 basis points over the last two years. So we think that activity will continue. We are really hitting the objectives we have set out for the Company. Separate issue is the new disclosure. We just think that there will be a lot of disruption in the market and we are working diligently to be as prepared as possible. And we think when the new disclosures come on line we will be ready for it. And we just think there may be a little disruption in the market which will allow us to pick up some share at that point also ---+ different than our long-term share gain strategy. It is literally impossible to make the call right now because we don't at this stage know the level of disruption. We will see when the new disclosures go into effect August 1. Paid title claims were unusually high this quarter. We had two large claims ---+ two of the largest claims we have ever paid in our history that hit in Q1. We had a $20 million claim that we paid that was previously reserved for early last year. We had another $15 million claim that we paid this quarter that was ---+ had been reserved for a couple of years. And sometimes when we reserve for them it takes a while for us to actually pay them. And so, our paid claims were $89 million and that was up 14% from last year. But if you take out these two ---+ literally two claims our paid claims were down 30% from last year. So paid claims are lumpy, anything could happen in any one quarter. But over time we absolutely expect our paid claims are going to continue to fall and fall meaningfully from where they are right now.

2015_FAF

2016

OGS

OGS #Thanks, <UNK>. Good morning, everyone, and thank you for joining us. Net income for the second quarter 2016 was $20.3 million, or $0.38 per diluted share, compared with $12.1 million, or $0.23 per diluted share, for the same period last year. New rates in Oklahoma and Texas positively impacted results. This includes the approved rate case in Oklahoma this past January and approvals from various GRIP and cost-of-service filings in Texas over the past year. Operating costs for the second quarter were $110 million compared with $112.5 million for the same period last year. Outside services, fleet-related costs, and IT expenses decreased but were partially offset by higher employee-related costs. Year to date, operating costs were $232.2 million compared with $234.9 million for the same period last year. I will provide additional detail on operating costs as it relates to our updated guidance in a moment. Capital expenditures for the second quarter were approximately $70 million compared with $71 million for the same period last year. ONE Gas ended the quarter with $54 million of cash and cash equivalents, no borrowings under our $700 million credit facility, and a total debt-to-capitalization ratio of 39%. Last week the ONE Gas Board of Directors declared a dividend of $0.35 per share, unchanged from the previous quarter. This dividend is consistent with the Company's guidance for 2016. As we have indicated previously, we expect the average annual dividend increase to be 8% to 10% between 2015 and 2020. Now, on to our updated guidance. As announced in the press release, we updated our net income guidance range for 2016 to $135 million to $140 million compared with the previous range of $127 million to $137 million. Earnings per diluted share is expected to be $2.55 to $2.65 compared with the previously announced range of $2.40 to $2.60. This updated guidance reflects lower operating costs, approximately 2%, driven by lower outside service costs, lower fleet and IT expenses. Day-to-day processes are being improved by leveraging technology throughout the organization, including field operations, customer service, and information technology, enabling our Company to be more efficient and customer-focused. Net margin is expected to be slightly lower, less than 1%, due primarily to warmer-than-normal weather in our service territories, experienced primarily in the first quarter of 2016. We still expect capital expenditures to be approximately $305 million in 2016, with more than 70% targeted toward system integrity and replacement projects. For a line item breakdown, we provided an updated guidance table on the last page in the press release. We expect our earned ROE for 2016 to be 7.6% compared with an ROE of 7.4% for 2015, reflecting the approved rate filings this year. At June 30, 2016, our current authorized rate base, defined as the rate base established in our latest regulatory proceedings, including full rate cases and interim rate filings, was approximately $2.7 billion. Considering additional investments in our system and other changes in the components of our rate base that have occurred since those regulatory filings, we project that our rate base in 2016 will average approximately $3 billion, with 43% of that being our rate base in Oklahoma, 31% in Kansas, and 26% in Texas. And now I'll turn it over to <UNK> <UNK>, ONE Gas President and Chief Executive Officer. <UNK>. Thanks, <UNK>, for that update, and good morning, everyone. I'll start with a brief regulatory update and then I'll wrap up with a few comments on the updated guidance. Beginning with Texas, in June we filed a rate case requesting an increase in revenues of $11.6 million for our central Texas and south Texas jurisdictions. Our request is based on a 10% return on equity and a common equity ratio of 60.5% based on ONE Gas's actual equity ratios as of December 31, 2015. This rate case reflects $43 million of investments in systems and facilities for these service areas. This filing also includes a proposal to consolidate the south Texas service area with the central Texas service area. If approved, new rates are expected to be effective no later than January of 2017. In March of 2016, we filed a rate case requesting an increase in revenues of $12.8 million for the El Paso, Dell City, and Permian service areas. The request is based on a 10% return on equity and a 60.1% common equity ratio. This rate case reflects $34 million of system and facility investments. The filing also included a request to consolidate these three service areas into a new west Texas service area. We recently concluded the hearing on merits at the Texas Railroad Commission, and we expect a final decision by October. Now on to Kansas, where we filed a rate case in May. The procedural schedule for Kansas gas services filing was approved by the Kansas Corporation Commission on June the 8th. The evidentiary hearings are scheduled for October 18 through the 20th, and a final order from the Commission is due December 28. Now I'd like to share my thoughts related to our updated guidance. I'm very pleased with our Company's focus on our processes and the outcomes we are producing. From Day 1 of this Company's spin, I've stated that we will be a focused organization dedicated to our standard to operate and maintain this 100% regulated natural gas distribution business. Every day we focus on the process of maintaining or lowering our operating expenses to sustainable levels. We will continue to invest in our systems and in our technology to further improve the efficiency of our operations, and we'll remain vigilant in driving costs to sustainable levels. These expected improvements will help us better serve our customers as well as moderate future cost increases. I'd like to close by thanking our 3,400 employees for what they do every day for our customers. I appreciate their hard work, dedication, and commitment to delivering our product, natural gas, to more than 2.1 million customers safely and reliably. Operator, we're now ready for the questions. Well, at any time, <UNK>, that you're in a full-blown rate case, it's basically everything that you mentioned. You look at ROE, you look at the equity percentages, the spend, the expenses. So it's all wrapped up into one for our total accounted case. So there wasn't anything particularly focused out on that. It's just a combination of multiple things. So the technology improvements that we're making, <UNK>, without getting into a tremendous amount of details, it allows us to be more efficient in our processes. So it allows us to be more efficient in the way we dispatch people, not only on the customer side, but on the asset side. That was the piece that was actually missing prior to the spin, is we focused on how we dispatched the work on the asset side of the business. So it really boils down to the two pieces, which is internal labor and outside labor, or external labor. So what we focus on is we ask that question, is it better on any particular type of task, both from a maintenance project and a capital project standpoint, to perform that work either internally or externally. So what we're finding out is by putting that focus on there, we're able to optimize the differences there between doing things internally and externally, and that's where we're seeing a lot of the gains. It's actually helped by the technology that we're deploying. Well, I would say, <UNK>, that number one, there's a long way to go between now and a five-year projection. So that's the first thing that I'd say. Number two, there's a lot to regulatory outcomes, which I think that probably has more to do with it than anything. We've always stated that you can either get a high regulatory outcome or a low regulatory outcome, and that's what drives us between that low number and that high number. Certainly, the efficiencies, as we indicated in our script, it's about moderating those cost increases, because you're going to have increased cost to the customer because of the investments in the assets, which is the right thing to do for reliability and safety reasons. So we want to try to offset some of those increases due to ---+ and moderate those increases ---+ by maintaining a certain level of cost structure.

2016_OGS

2016

HON

HON #Thanks. Well, there's no doubt it's a slow-growth environment. That being said, whether it's slow growth or high growth, we believe your best bet is Honeywell, because we do what we say. Our strong, diverse portfolio and our ability to execute really does make a difference. Thanks, guys.

2016_HON

2015

ABG

ABG #You know, I think it's been competitive for a while. I think there's always going to be a little bit of movement up and down between the quarters. There's pressure on used; there's pressure on new. The transparency of the Internet and everything that's involved, I think we are fairly stable. Over the next two years, we will certainly add the techs that we need to. Our facilities aren't at capacity. We have the ability to add the technicians. And with that, the business will come with it. No. No, the business has been pretty stable for us there, and we really don't. Yes. Jimmy, I don't know that there's some spring-loaded benefit to used naturally coming forward from this phenomenon. I would say, though, that we do have the ability, on the reconditioning side and the Parts and Service side, to put additional work into our cars. We have done that over the last couple of years. As you mentioned, we've shown pretty healthy increases in internal rates, and that's built into the cost of the car. And when you consider we've been able to achieve that and hold our margins on used relatively stable ---+ albeit down a little bit this quarter, but relatively stable ---+ I think, overall, it's a pretty good job. That would ---+ that's correct. And over time, we would expect those two to migrate back together ---+ for the (multiple speakers) to be driven by used vehicle volume. Yes, that's correct. The current availability is at $90 million. I don't know that I'm following the question. We look at that as ---+ we only have $10 million borrowed on our used vehicle line today. We have $90 million additional to borrow. It's a very cheap financing source for us that we intend to utilize. But as far as investment in, and from an operational standpoint, how many vehicles we have on the ground, I think is where you're getting to, we are constantly evaluating our dealerships for our day's supply, and having adequate inventory to sell through to our customers. I would look at that $90 million differently. I would look at that $90 million as a line that we can pull on when we want cash to deploy. I don't look at it ---+ well, I look at the operational standpoint of building inventory totally separately. If we have a opportunity to grow our used vehicle business by deploying capital into inventory, we'll go ahead and do that. I was going to jump in and say kind of the way I think ---+ if you were talking to a General Manager in the store, the way they would think about it is, they want to have 30 to 35 days worth of used vehicle inventory on the front line. That ---+ we then roll that up into a dollar investment in used vehicle inventory. We kind of put that completely to one side; work hard to stay in that 30 to 35 range. That seems to be a number that keeps us efficient. We have internal rules that once a vehicle ages much beyond that, we start to force that car's movement within the system or we force it to auction. The line itself we kind of look at as a payable. And right now we are only using a portion of that. And what is the excess essentially is essentially liquidity that we've got available to us to redeploy. Sure thing. I think there's ---+ well, I'll start. It seems we're always talking to someone. We are talking to people today, so there's always a transaction that's being contemplated. But I would say today, at least from our perspective, there seems to be a lot more talk about consolidation in the press than what we see happening on The Street. The ---+ I think seller's expectations continue to increase for a number of different reasons. But there are still people who are willing to sell car stores. We still see transactions that look like they could potentially get done at reasonable prices, but we are seeing fewer and fewer of those. Thank you. Well, maybe ---+ this is <UNK> ---+ maybe I'll take a first shot at it. I think there's a number of things that are happening in the market. Luxury, you're right. Luxury is a higher-price vehicle typically generate larger margins, but many of the luxury manufacturers are also starting to sell more and more lower-priced units, which we move in the market much lower grosses. I think that's playing into the market. <UNK> talked earlier about the transparency that we see in both new and used. I mean, that's a reality today. We look at this $2,100 number that you talk about, and even if you just look us over the last nine quarters, that number has been very stable. It feels to us like it will continue to be stable. I mean, yes, it varies quarter-to-quarter, but we've been in this $2,000 to $2,100 range for quite some time now, and we believe that it will continue to exist. <UNK> or <UNK>, do you have anything to add. No, I agree. No, we're ---+ I think the overriding factor for us is that we think ---+ we don't know exactly what our optimal capital structure is, but we think getting leverage into that 2.5 to 3 times range is where we should be. We are working to head in that direction. We are not ---+ we don't think we are smart enough to determine what is the exact price that we should be buying or not be buying. I think we think of it as more as an exercise in which, with respect to share repurchase, we are returning capital to our shareholders. You could argue that it's essentially no different from a dividend. What we do do, though, is we look at what's the relative return on investment that we can achieve when we buy a share of stock versus pursuing internal opportunities or pursuing acquisitions. That becomes the trade-off for us. But we are very much interested in taking advantage of the opportunity we have to deploy some liquidity, and we will continue to move down this path. I would just point out that we have 88 stores, core stores, and three Q auto stores. So it's a very small part of our business today. It is not a material amount of our used vehicle sales. I don't believe that we are disrupting any markets. I think we've got something on our hands here that's very interesting. We are making progress; we're selling cars. We are learning. We are learning how to solve this puzzle of creating a marketplace where we can retail cars that otherwise would've found their way to the auction. We've still got a lot to learn, but we like the fact that at three stores, it's very manageable. And we think the smart thing to do is continue to work on those stores. There are some more technologies coming to play in those stores. There could be ---+ we are working with our technology partners. We are working with our financing partners. We are experimenting with a number of different things and it's ---+ we think it's just right the way we are doing it, and this is what we want to stay focused on right now. It's ---+ we're trying to figure out who the customers are. And we are learning that the customers in each of the markets are different. So ---+ and one of the markets, for example, is primary subprime. But in another market, we can sell luxury cars. It's ---+ I guess I would come back to kind of our overriding view, is that we are not consuming a lot of capital with this. It is not terribly disruptive to our core operations. We've carved out a group of people who are dedicated to it. And we are learning. And I think that's the important thing. We are learning, I think, a brand is important ---+ obviously, a brand is important. And we do believe that as these stores continue to operate and get more time under their belt, they are becoming more relevant in their marketplace. They are becoming more relevant online. And we think those are some of the things that are helping them continue to improve their volumes. And we've just got to continue down that path. It's going to take some time, and ---+ but we feel like we are headed in the right direction. And it is well worth our effort and your investor, our investor, our investments as shareholders, to give this thing a shot. In fact, we think we would be remiss if we didn't give it a shot, because we believe there's a real opportunity here. Oh, I think it's a great time to be in the car business. Just the fact that the product is absolutely phenomenal, we continue to see new product every day. Interest rates are as low as they have ever been. I don't ---+ I mean, inventories are under control. We've learned, I think, to become much more better with our processes. We continue to find ways to improve productivity, so our flow-throughs have been, I think, very healthy. It's really hard to find much to complain about in today's marketplace. Yes, this is <UNK>. We commented that we think we can be at 69% to ---+ 68% to 69% over the remainder of the year. We think we could operate well within that range. Obviously, a lot of the ratio is dependent upon business growth and gross profit growth. So, as our business grows, we are able to drive that even lower than those levels. Thank you. Well, that concludes our discussion for today. We appreciate you joining us, and look forward to talking to you again next quarter.

2015_ABG

2017

CAG

CAG #Matt, when we look at acquisitions, we start with the strategic rationale, right. So if you're talking about a synergistic acquisition, we are going to go through our acquisition criteria to make sure it makes sense strategically. And then, obviously, all the financial metrics makes sense. Like every other company, we are all looking at what's on the table right now in terms of potential tax reform. Obviously, there is nothing solid, right. So, all you can do is scenario plan, but that is clearly not driving what we are thinking about for acquisitions. It starts with strategy and financial hurdles and then we just look at scenarios and how it could impact acquisitions as we move forward. I think just by its nature there is some volatility in that industry, but if you look at Ardent Mills for the third quarter we had a very solid third quarter. The volumes increased. They took advantage of market opportunities to build share and they are recognizing operating efficiencies at the plants which, a year ago they were actually investing in their infrastructure. So we are seeing some of that pay off. So pleased with the progress they are making, for sure. Let me start, <UNK>, as you look at the quarter, overall we had about 70 basis points of price/mix benefit as a Company, really coming from our International business and price increases that we took there in the last quarter. If you look at both Grocery & Snacks and Refrigerated & Frozen and you peel the onion back, we did have price realization benefits in both of those segments. So we had 50 basis points of price benefit in Grocery & Snacks and 90 basis points and Refrigerated & Frozen. We did have some offsets related to mix and that really just comes down to that certain items had a higher average net sales per unit than the average. So that's really a timing thing for the third quarter. We feel really good about the progress we are making in both our pricing and our trade efficiency and we are seeing that this quarter. It was masked a little bit by the mix, but that is a timing thing. You know, <UNK>, I feel really good about where we are. We'll obviously get into specific guidance next time. But just principally, if you think about it, when you reset your top line for a higher quality foundation, it ought to be just that. It ought to be a higher-quality foundation from which you can build. And then when you initiate a new innovation program like the one that we've really mobilized and some of you got to see at CAGNY and you layer it on top of that stronger foundation where you've taken out a lot of the things that were holding you back previously, I think it sets you up for success. And that's why we, at our Investor Day, gave the long-term topline algorithm that we did is we believe did that what we are doing this fiscal year is essential in terms of creating a foundation off of which to build. And what we are doing in <UNK>'s area with the growth center of excellence is an important investment so we can actually lay those bricks on top of that stronger foundation. So ---+ and in the supply chain, our supply chain team has been doing an outstanding job of delivering productivity for years now and as <UNK> Biegger pointed out at our Investor Day, we anticipate additional benefits and realized productivity going forward as part of our program. So you put all that together and I think Conagra remains a very compelling investment for our investors and we've got very solid shareholder value creation potential here. Well, we are not giving guidance on 2018 today, but I have spoken to the market many times about how I think about our A&P spend, vis-a-vis some other companies I worked for. Our A&P budget is ---+ I think it's very robust. It's competitive. We've been in the mid-4s. It's not the kind of A&P rate that, in my mind, require some kind of A&P rebase. Now what we have been doing on A&P, though, is trying to get more effective and efficient within our existing spend. So <UNK>'s team has a very aggressive program to shift more of our A&P budget from nonworking dollars to working dollars. That is happening very effectively. And then within the working dollars, we are changing the way we use A&P. Not only are we very disciplined in which brands we apply it to, but we are much more digital, social today than traditional TV. The mix of marketing tools that we use is different. It's more effective, and the net of all of this is, I feel like our overall and P level is about right while it continues to get more effective. Yes, <UNK> we are not going to give guidance in terms of sales next year or by quarter, but what I do want to point out ---+ I've said this before is that as you think about ---+ a big part of what we've been doing is walking away from deep discount promotions. Well, promotional activities are long-lead-time planning items with customers, so there is not one given quarter where we lap it and it's over. It varies by customers. Some customers have their events locked in out further into the future than others. So we'll continue to titrate off of these types of super hot deals and that will go on for a while until we get it out of our base. But, obviously, a lot of the heavier lifting in that regard will be behind us as we exit this year. But there will still be ---+ we still have certain customers in certain regions on certain SKUs who even this past year have done deeper discount deals and we'll navigate our way out of those over time. So, that's kind of a principal point around how this thing unfolds. In terms of the building blocks to an improved top line, one is, to get some of the weaker businesses out of our base, to create a more stable foundation. And, two, is to begin to really get ---+ re-engage the consumer to shop our brands off of the shelf based on the merits of the brands not based on the depth of the discount on deal. And you're seeing that begin to happen already. As you look at the velocities on base that we are seeing today, they are higher and what that really is indicating is that we are succeeding in reconditioning our consumer, the shopper, to re-experience our brands in a full-priced, non-merchandise condition. And when you then layer on top of that new marketing and new innovation, we think that's the right way to run a branded portfolio. Yes, those ---+ that was related to our SG&A, and as we mentioned, that we've obviously ---+ our SG&A is very favorable and that's been planned but we've had some additional favorability, primarily from open headcount. We are filling a lot of positions and we are in the process of doing that. So as we continue to fill them, more of those costs will come in in Q4 and into next year. So that's really what we are referring to there. Well, thank you, and apologies again for the technical difficulties we had. As a reminder, this conference is being recorded and will be archived on the Web as detailed in our news release. As always, we are available for discussions. Thank you for your interest in Conagra.

2017_CAG

2015

BKE

BKE #Thanks for the question. In addition to working with the visuals, as Pat mentioned, we are going to continue just to review our paid search programs, as well as looking at strengthening our re-targeting services through display and new acquisition, while making sure that we're watching our e-mail list attrition rate and being wise in how we're spending our dollars there on marketing perspective. And the only thing I can think to add there is we do have the same overlap on to our e-mail approach, which I think is working well. Yes, good morning, <UNK>. It's possible that there could be another one or two added, but for planning stages, it's getting a little late, so I would ---+ my best guess is that we'll stay at nine. Yes. Okay, with no other calls coming in then or questions coming up, we would like to thank everybody for joining us today and wish everyone a great weekend.

2015_BKE

2018

STE

STE #Thank you, <UNK>, and good morning, everyone. It is once again my pleasure to be with you this morning to review our third quarter performance. For the quarter, constant currency organic revenue growth was 5.2%, driven by volume and 110 basis points of price. Gross margin as a percentage of revenue for the quarter increased 250 basis points to 42.6%. Of the improvement, 170 basis points is due to the impact from the divested businesses with the remainder due to favorable product mix, price and productivity improvements, somewhat offset by negative impact from currency. EBIT margin expanded 140 basis points to 20.8% of revenue for the quarter. We are very pleased with our continued ability to expand EBIT margin and leverage revenue growth in addition to the favorable impact from the divested businesses. The adjusted effective tax rate in the quarter was 22.6%, which added approximately $0.05 to earnings per diluted share. Included in the third quarter effective tax rate is the impact of the U.S. Tax Cuts and Jobs Act enacted in December. The tax reform's primary change is a reduction in the U.S. federal statutory corporate tax rate from 35% to 21%. As a March fiscal year-end company, we benefit from a blended U.S. tax rate reduction from 35% to 31.5% in the current fiscal year. Because tax law changes must be accounted for in the period of enactment, we have recorded a benefit in our third quarter tax expense to account for the year-to-date effect of the blended tax rate, which will not be repeated again in the fourth quarter. While our assessment of the effects of the tax reform is ongoing, we do expect the benefit we recorded in the third quarter to result in a tax rate of approximately 25% for the full fiscal year, which is at the low end of our prior expectations. Net income in the quarter was $96.3 million or $1.12 per diluted share, benefiting from organic revenue growth, continued margin expansion and the lower effective tax rate. Segment growth has been detailed in the press release in both the tables and the copy. In terms of the balance sheet, we ended the quarter with $284 million of cash, $1.42 billion in total debt and a debt-to-EBITDA leverage ratio of approximately 2.25x. Free cash flow for the first 9 months was $216.4 million, a 19% improvement from the same period in fiscal 2017, mainly due to higher earnings and lower requirements to fund operating assets and liabilities year-over-year. During the third quarter, capital expenditures totaled $38.1 million while depreciation and amortization was $44.7 million. We now anticipate that free cash flow will be about $300 million and capital spending will be approximately $160 million for the fiscal year. With the enactment of tax reform, we anticipate repatriating about $100 million of cash, which will be used in alignment with our capital allocation priorities. Our capital allocation priorities remain the same: maintaining and growing our dividend relative to our growth; investing in organic growth and our current businesses; targeting acquisitions and adjacent product and market areas; reducing our total company leverage; and finally, share repurchases if the other uses of cash are lower than our desires and do not offset dilution. With that, I will turn the call over to Walt for his remarks. Thanks, Mike, and good morning, everyone. We're now 3 quarters of the way through our year and have delivered constant currency organic revenue growth at the high end of our expectations, growing 5% year-to-date and are on track for another year of record earnings. Looking across our portfolio, we have high single-digit or low double-digit revenue growth across the majority of our businesses, driven by solid underlying market trends and new products and service offerings. In particular, our Healthcare Specialty Service segment has outperformed our expectations across the board, growing constant currency organic revenues 10% year-to-date. Life Sciences, whose capital equipment business has now had 2 strong quarters in a row with continued strong backlog, grew constant currency organic revenue 8% in the first 9 months of the year. Our AST business continues to experience increased volume from our core medical device Customers. In addition, I am pleased to report that our facility in Puerto Rico is now back to normal production and has been since December, much faster than we anticipated. We originally thought that the hurricane in Puerto Rico could impact profit in our AST segment by as much as $3 million this year. Based on where we stand today, we now expect the impact to be just $1 million, all of which was incurred in the third quarter. In addition, we have recently launched our sustainable EO sterilization service offerings, which will assist Customers in developing strategies to reduce the amount of ethylene oxide used during sterilization, and at the same time achieving prescribed sterility assurance levels. That is good for our Customers and good for the environment. Within Healthcare Products, we have solid growth in organic (recurring) revenue, fueled in part by many new launches, including our newest 20-minute biological indicators for low temperature sterilization, named Celerity. This growth in recurring revenue has been a strong factor in our growth in Healthcare for the last couple of years. Celerity is but 1 of about 30 new products we are releasing in our health care product segment this year. Healthcare capital equipment has had somewhat lighter revenue than anticipated with shipments down year-over-year, but that is offset by a nice pick up in backlog on both a sequential and year-over-year basis and a pipeline of potential future business that is solid. As you know, capital equipment businesses can be lumpy, and we had strong shipments last year, especially in our fourth quarter. So we're not particularly concerned with Healthcare capital. Moving on to the impact of tax reform in the U.S., Mike has already discussed the specific impact to STERIS in the third quarter and our expected outcome for fiscal 2018. While we will wait until our fourth quarter call to provide more specific details, our best estimate as of now is that STERIS will have an adjusted effective tax rate in the low 20 percentiles in fiscal 2019, down from the mid-20s this year. Let me be clear ---+ there are many complicated aspects to the new tax law, and we and our advisers will continue to evaluate the impact of those tax provisions on STERIS. And naturally, we'll be working to legally minimize our taxes. As is the case with many companies, the U.S. corporate tax reform results in significant additional earnings for STERIS to use to strategically grow our business and return value to our Customers, our people and our shareholders. This will make us more competitive with our global competitors, many of whom manufacture outside of America. One of our first decisions on that front, that we announced in our press release this morning, is that we will be paying a one-time special bonus to all U.S. employees other than senior executives. The total bonus payout is expected to be about $7 million, which we plan to exclude from our fiscal 2018 adjusted earnings. This is just one example of our continuing investments in our people who are the foundation of our success. Turning to our revised outlook for 2018, we are maintaining our outlook for 4% to 5% constant currency organic revenue growth for the full fiscal year. I would remind you that our fourth quarter last year was extraordinary, so we do have particularly difficult comparisons in Q4. Reflecting our expected operating performance at the high end of our previous guidance, plus the benefit of the lower effective tax rate, we now expect earnings per share to be in the range of $4.10 to $4.16, which is either 9% or 11% growth from prior year levels. We are very pleased with our overall performance so far this year and are on track for another solid year of growth and record performance and look forward to many more. Thank you for joining us today and for your continued support of STERIS. I will now turn the call back to <UNK> for Q&A. A couple for me. First off on the med device kind of Customer demand. If we look across the industry this quarter, obviously pretty solid results for other companies, but seems like your business was a little bit better than otherwise would have been expected. Anything you can point to that might be onetime in nature or Customer specific that helped drive the strength in that business. No, not really. Again, we do seem to be picking up ---+ specifically the AST business, where med device in general would drive that, we do seem to be picking up steam a little bit. Again, I suspect we may be picking up a little share in that space. Okay, great. And then maybe a follow-up on the expense side. Obviously, you have the tax benefit here. And you mentioned the onetime bonus payment to employees. Are there other elements to the tax reform that are going to lead you to reinvest more aggressively on longer-term projects, innovation-related things. Just kind of curious what else you're doing with the windfall here to try and fuel future growth for the business. Sure. We have been long-term in-sourcer, on-shorer people ---+ maybe before it was popular again ---+ for the last 10 years, basically. And so that's something is clearly a part of what we expect to do. We do like ---+ we like to make things. We like to design things. We like to make things. We like to sell things. So all of those things are a natural element of what we do. As a result, we've grown employment and we've been able to bring more money to the bottom line. But the Tax Act clearly incents us to do more of that. And so all things being equal, there are projects that if they were at the margin maybe not as attractive as we might have liked, they may be more attractive. So clearly, capital spending in the short run is more attractive than it was 2 years ago. And almost any, I'll call it, investment that gets a reasonable return in the U.S. is more attractive than it was a year ago. So all things being equal, we would expect to see some more investment in that space. I don't think so. You're correct. You remember last year third quarter, kind of all of our consumable or recurring businesses just had a slump around Christmas. And at the time, we really didn't understand it. And to be honest with you, we still don't really understand it. Our suspicion is it was just the way the holidays fell, and people were taking off more time than normal. And that seems to have come to fruition because we didn't see that in the third quarter. So that ---+ on a quarter-over-quarter, that's clearly the case across the board for all of our consumables. But when you look at it for the year, we're still having a wonderful consumables year across the board ---+ recurring revenue, actually, across the board. And I don't think there's any overwhelming change in the Puerto Rico issue. That is, yes, there were things that were not done. And yes, there's a little bit of catch-up. But it turned out ---+ it turns out that they were not down as long as any of us thought. That is, our Customers were not. We got up in about 1.5 weeks and were able to start processing. And they really have done a nice job. You have to give credit to the Puerto Rican people, they have just ---+ because they're still living in pretty tough conditions. But across the board, for what they're doing in all the medical device companies and then those that feed us, of course, and our plant as well, we're just ecstatic at the work they're doing. Sure. Larry, we spoke a year ago this time. We're having a very different conversation. As you remember, a year ago at this time, we said we overinvested way in front of revenue that ---+ or just in front of revenue we expected, and then not only did we not get what was expected, we lost some. And so that really hurt you in the service business. In this case, we've held back just to make sure ---+ we are once burned. You want to be a little more sure. And now they've begun to reinvest for the future growth. But we will be far more careful, I'm sure. And don't expect a significant reduction as we saw in the past. So you will see some variations quarter-to-quarter. But if you look at it kind of longer term, we don't expect ---+ or we do expect to be where we said we were going to be. So 2 questions, I think, in there, and I\ Oh, yes. Next fiscal year is always next year for us. Yes, exactly. Sure. At a high level, again, I would not characterize ---+ and now I'm talking more about the pipeline, which I think is your question, the hospital spending pipeline, if you will. I wouldn't characterize it significantly different in North America than we have been characterizing it in the past. So we still see a solid pipeline in the future projects that we're seeing for the potential future ---+ or for real projects that we expect to occur in the future still looks very similar to what we've been talking about. It's solid to maybe slightly up. So that always makes us feel good, particularly given the level of uncertainty that's going on in health care reimbursement issues in the United States. In the rest of the world, actually the pipeline, I would characterize, and I think I did last time, the rest of world seems to be picking up a little bit and particularly certain areas. Europe has stayed strong for us. Middle East was pretty much a disaster over the last 18 months. But it is now picking up. So we ---+ and we look at EMEA as one unit. We see, I think, more strength there than we have seen in the past. Asia Pacific was very strong the last couple of years. It kind of flattened out this year, but I think we see a better future there in terms of pipeline. And Latin America, which has been really tough for us, has seemed to have bottomed out. So we have a bottom and maybe a little better pipeline there than what we have in the past. So the rest of the world is actually looking stronger. I will add, we talked about currency and the effects of currency a lot in terms of when it hits the revenue and when it hits the bottom line. But that's, I'll call it, the accounting version of currency. When we have a ---+ when the dollar strengthens to other currencies. It is a headwind for STERIS because we tend to build in North America, and most of those costs are U.S.-based costs. And so they're U.S.-dollar based. Most of our competitors are not building in the U.S. And as a result, most of their costs are other than dollar based. So when the dollar strengthens, we have headwinds selling both in the U.S. and outside the U.S. When the dollar weakens, we have a tailwind. So up until the last couple of months, we've been pretty much running into headwinds. The last couple of months, things are changing. Now I do not try to forecast currency. But ---+ because if I can do that, I wouldn't be working here. But in any event, we do see some relief of the headwinds that we've been facing in terms of currency for the last couple of months. Sure. I mean, no question, if you have 60 plants roughly and if you grow 10% a year roughly, that means you have to build 6 plants a year roughly. Now a plant is not a plant. The U.S. plants tend to be more concentrated and as result tend to be larger, probably closer to 2x larger. And so that's one set of facts. It is very different to have to build a brand-new greenfield plant as opposed to adding a couple of units inside a plant, or adding onto a plant where we already have the ground. And we have a number of expansions, which is a big piece of our capital spending. A number of expansions going on as we speak. I think as many as 7 or 8, I'm doing that off the top of my head, but that type of expansion levels across the world. And we are, in fact, investing across the world in those expansions. And so we think that the growth is there. And we will be ---+ it used to be ---+ if you go back in time, the Isomedix days 10 years ago, when we did a plant expansion, it was a big deal. It caused profitability to fall pretty significantly because a new plant takes a while to get filled and then make that money. We've worked hard to get that more on a routine basis. So we're always expanding, and I suspect we'll always be expanding as long as medical devices keep growing, and which we don't see any end to that, frankly. And so it's much less of a pain now when we ---+ to the bottom line finance of the whole company, STERIS in total and certainly AST when we're doing that. So there are expansion dollars, if you will, a reduction of profitability already in our current operations. And there will always be, as far as I'm concerned. Walt, your ---+ most of your businesses are growing high single digits or even low double digits now. I mean, you had a really incredible quarter in almost everything with the exception of Healthcare capital equipment. Could you give us a little bit of color on maybe the surgical side versus the infection prevention side. And you said you're not worried about it, but why should we not be worried about it. Well, first of all, I'll break it to 2 questions. Why we're not worried about it is if you kind of look longer across the board, it hasn't grown that fast but nor has capital spending grown that fast. So from a long-term perspective, we're not that concerned about it. At any given time, in each of the units, we have product families or products that are doing really well and product families that are not doing as well, and that's ---+ we have that currently. So for example, if you look the last couple of years, our ORI business has just been on fire. It was actually stronger last year than this year on a growth rate kind of issue. And that just happened. A couple of big projects can change that very quickly. The same is true with our ---+ what we call EMS, or equipment management systems. They have very strong growth last year, less strong this year. So it's a mix and match of products across the area. For ---+ in the IPT business, washing has been particularly strong lately; and steam sterilization, less strong lately. Hydrogen peroxide was extremely strong a couple of years ago. Now it's still strong. So it mixes and matches. And when we look across the board in what we're doing ---+ what we have done and what we are doing, we believe we're in a good position in our capital equipment businesses. And again, I mentioned the headwinds of a strong dollar, and that's receding a bit right now. And that's obviously positive for us in terms of relative ---+ particularly outside America but even inside America. Since most of our competitors manufacture outside America, it changes the headwind-tailwind equation. And then you mentioned 30 new products in that area. How much ---+ on average, what are you ---+ what number of products do you intend to release in that area in any given year. Is there any difference in level of importance of a couple of them versus previous couple of years. Yes. Absolutely, there are significant differences to level of importance. And we have continued to pick up product launches in the Healthcare Products group in total. And so we have to continue to grow. I guess, I would say, 30 is a big number. And ---+ but on the other hand, we're not ---+ I wouldn't suspect that number is going to be a whole lot less next year either. So we have picked up our product development. We have a broader product line today. So each of those product lines needs to be refreshed on a routine basis. So I suspect we will see more and more. And when I said the 30, that's a mixture of capital and consumables. So it's ---+ but it is across the board in capital and consumables. We have a number of releases. I mentioned the biological indicator. That's really a nice change for us. We had a 24-hour biological indicator for hydrogen peroxide, which was a state-of-the-art a few years back. We were the first to also have one that went across our line as well as the J&J line, which was state-of-the-art. People have caught up with us and/or passed us. And now we have a 20-minute biological indicator in that space, which is state-of-the-art. So that's just an example, but I could walk through 10 examples like that where either we're refreshing or bringing new products to market. And last 2 for me. I just wanted to follow up on the "more fire than smoke" commentary around Healthcare Specialty Services and that all sites [central to] processing model. What regions are you ---+ is that a U.S.-based comment coming off of Northwell. Or is that in various international regions. And the size or the type of projects you\ I'll answer the first couple of questions. First of all, I was specifically talking about North America. Europe, which is where the outsourced CSDs started, really was ---+ the Europe has been fire for a long time. The Synergy operation, that was one of the principal reasons we were interested in Synergy was the European outsource operations. And they are growing and continue to, but that's not ---+ I'll call it, that's not a novel thing in Europe. I wasn't thinking of them, although they have more opportunities as well. But in North America, as you know, we said this was a long project to create a nascent market in this space. And Northwell was kind of the lone example for a long time. And we do expect to get that up here in the next bit, but has been slow to get started. But we now have a couple of other places that are pretty interested. I think we're closing in on doing a couple of other ones. So ---+ and then generally speaking, I would expect them to be smaller than Northwell. Northwell is a very large local IDN. And so it has a number of hospitals that are geographically concentric. I would expect most situations to be smaller. And then, Matt, regarding the FX outlook. So if we use the forward rates at the end of December, our forecast would be still to have revenue positively impacted by about $35 million from the original outlook, and that EBIT is still about neutral as both the pound and the euro have increased more than the peso and the Canadian dollar. And both being neutral to EBIT. Well, the answer is yes, I think about it as timing when you look at ---+ I'll call it long-term timing and in the third quarter specifically. The fourth quarter, I would say, yes, except for if you talk year-over-year. If you talk quarter-over-quarter, yes. If you talk year-over-year, last year, we had an extraordinary capital shipment quarter. So year-over-year, I would not expect a radically different view based on timing. In fact, if anything, it's going to be tougher in terms of timing. But quarter-over-quarter, yes. Sure. First of all, our Life Science folks have positioned themselves very nicely on the consumable side. We're pretty much focused on vaccines and biologics, which are good places to be. We also think there is still significant upside in terms of, I'll call it, penetration into that space. And so they've had a long history now of high single-digit, sometimes double-digit growth in that space. And we don't see that abating. On the capital side, for those of you who have followed us a long time know that we've had, I don't know, an 8-year drought, if you will, in capital equipment in Life Science. And it's all, again, focused in pharmaceutical plants or largely in pharmaceutical plants, but we had a long drought. And the last year or so, we've clearly seen projects picking up in that space. So what you saw early on was backlog growth. We went from $30 million-ish. We felt happy if were $40 million-ish in backlog. And now we're looking at $60 million-ish backlog. So pretty significant growth in backlog. And of course, it wasn't shipping, it wasn't shipping, it wasn't shipping because Life Sciences projects tend to be longer in nature. They're highly engineered commonly. And so it may take 6 months to a year from the time we get an order till we deliver the order. Well, it's starting to ship now. It started shipping 2 quarters ago. It's now shipped in the third quarter, and we don't really see an end to that at this point in time. So we've seen just strong ---+ we have strong shipping and strong pipeline. So we're quite confident. Now some of that is obviously market. The pharmaceutical guys are putting money back into those spaces. I wouldn't be surprised to see more in the U.S. for the same tax reasons that we talked about. But another piece of it is our guys have done a really nice job of working on the hydrogen peroxide products in that space. In that space we have not ---+ just like in healthcare, we have steam, we have washing and we have hydrogen peroxide sterilization. And the hydrogen peroxide is really ---+ we've really strengthened that product line and has been a real good factor of our growth in that space. Yes. Dave, mainly timing of projects. Some of these large projects that we have, both ---+ largely in AST, we forecast at the beginning of the year and we try and estimate the timing of that coming online. And a couple of those just have had delays that have been normal delays, nothing out of the ordinary. But those will push into next fiscal year. So that in total is about $20 million. You'll see the natural offset in free cash flow as free cash flow now goes from $280 million to $300 million. But it's mainly due to timing. Yes. <UNK>, it's Mike. We are expecting about $10 million this fiscal year and $10 million into next fiscal year. And then we will have captured over $40 million in total, but there's still a little bit left out there. Our first and favorite type of acquisition is something that adds a product or service to Customers we're already serving in the space we're already serving them. And so that would be the first. So I'll call it for lack of better terms, end Customer, end market or whatever you want to call it. That's our first choice. But we're always looking at extensions to that as well. So it could be a different product or service. It's more likely to be with the Customer we're already serving, hopefully in the same space we're serving them; but if not, right next door to where we're serving them. So we do like adjacent or tangential, whatever terms you like, acquisitions a lot better than any other kind. So ---+ but we do look at ---+ we look at both all the time. We evaluate if we can bring something to them and/or they can bring something to us, and we're really happy if the answer is yes to both questions.

2018_STE

2015

PERY

PERY #We've always ---+ our intention is definitely to expand our ---+ the brand like Original Penguin and to develop that higher tier consumer and retailer. And that is our premier brand for that channel of distribution. Our Macy's business continues to grow within golf as well as Perry Ellis, and we feel that our brands do have the opportunity to stretch beyond its current channels, either going ---+ more going up and bringing in a better product assortment, more luxury. Like I've mentioned about Rafaella, adding a luxe assortment which is a higher price point as consumers definitely want better product at value price points. <UNK>, I would like to add that Laundry is currently in the same ---+ in the higher channel of distribution in Bloomies and Saks, et cetera. That's another brand that we have in that level of distribution. Thank you, <UNK>. Yes, <UNK>. We've seen an increase as it relates to the Rafaella business on taking some of that market share that's available. We have grown our knit business as I mentioned. We also feel that there's a big opportunity in linen going into the fourth quarter and spring season next year. And just continuing to develop better product and at the higher level, like the luxe assortment that I mentioned. Also, what it's opening up is an opportunity for Laundry sportswear as we continue to evolve that and hopefully see a launch early next year. And that will create additional opportunity for us as well as we expand the Laundry brand. Retailers are looking to replace the Jones market share with other brands as well, and remember also that both of these brands have continued to perform well. Laundry has a great fit within its evening and dress business currently today, and as mentioned our Laundry licensees are doing exceptionally well, especially our outerwear licensee which has done an exceptional job in developing the Laundry brand. It's a combination of ---+ I'm sorry, it's a combination of growth of current licensees and the acquisition of new licensees. So we are looking at both. So from that standpoint, it's sometimes hard to focus exactly, although we have been growing consistently and maybe next conference we'll have a better ideas of how we'll see the growth on a percentage basis generated for your formulas. But it has to do again with both the growth of each one of our licensees, plus the fact that we almost don't have licensees in Asia. We have very few licensees in Europe. So the potential for growth in the licensing in the international business is really very, very big considering the brand that we have. Yes, <UNK>. As you know, we cut about $12 million out of SG&A and COGS last year. We've realized year-to-date another $5 million this year. And as we look at some of the initiatives that we talked about, like consolidation of our foreign offices, looking at freight negotiations as we go forward, we mentioned on our last call that we saw another $5 million to $6 million kicking in going into the fourth quarter. So I would say in terms of the overall look of the business, we're probably a good 75% to 80% through that. But we continue to evaluate because as we look to invest and grow in international as we have mentioned, direct-to-consumer, shops, et cetera, we're trying to stem the inflationary creep in SG&A as well as those investments. So the ultimate goal as we drive to that 10% EBITDA is get our SG&A to about 28% of revenues. That's our ultimate goal. Thank you. Well, thank you very much to all of you. We are pushing full steam ahead for the future. This quarter is a clear proof of the results of hard work. We have full confidence in the capacity of our people and our organization to achieve great success, making this Company a leading player in the apparel industry. Thank you very much for your support and your interest in the Company. Good-bye.

2015_PERY

2016

VSTO

VSTO #Okay, <UNK>, thank you. Good morning, everyone. Thanks for joining us on our earnings call this morning. We appreciate it. In the first quarter of FY17 we achieved sales of $630 million, up 23% from the prior-year quarter. We delivered gross profit of $171 million. That's up 23% from the prior year. And fully diluted earnings per share were $0.48 compared to $0.53 in the prior-year quarter. The Company achieved year-over-year increases in sales and gross profit. And like many other consumer products companies who have recently reported results we faced a sluggish retail environment. Our performance last quarter was also impacted by shooting sports consumers who shifted their spending to certain firearm platforms outside our firearms offering, primarily modern sporting rifles and handguns, and to certain ammunition products where we are currently capacity-constrained, primarily 9 millimeter for handguns and 556 and 223 ammunition that support the major platforms in modern sporting rifles. We believe the shift in consumer share of wallet impacted the sales of our optics and shooting accessories. We were also impacted by recent inventory liquidations from the outdoor retailer bankruptcies that we have seen and the timing of certain international orders that we have now seen slip to later in our year. We continue to execute on our strategy to create a world-leading outdoor recreation company with a dynamic and exciting portfolio of brands and product offerings to deliver long-term shareholder value. We expect a recovery in the second half of our fiscal year driven by improving retail environment. This is based on: our observation of our point-of-sales data from many outdoor retailers, as well as a return to broader shooting sports consumer spending profile benefiting our shooting accessories, something we also have noticed and is based on our POS observations; receipt of planned international orders in the back half of the year and execution of those orders; and the seasonal nature of the shooting sports, which typically is weak in the first quarter. As we execute our balanced capital deployment strategy we've repurchased approximately 462,000 shares for $22 million within the quarter. We continue to execute our integration plans for Action Sports and the CamelBak businesses. I'm actually really pleased with the talent and the capabilities within these businesses, and we are leveraging the strengths to support the overall Vista's commitment to execution excellence. We are creating improved visibility of our brands, our products, our innovation engine, and performance within the various outdoor markets. We have attracted and retained top talent to ensure we are a stronger competitor and valued supplier of outdoor product solutions. We have numerous products coming online for the upcoming show season. And we have improved our sales and marketing processes and we have invested in our innovation and our branding. I believe the future is bright for Vista Outdoor. We are excited about delivering against our vision for the portfolio and the Company. We have initiated our previously announced ammunition capacity expansion project. And we continue to see opportunity for enhanced long-term growth in our ammunition business, given that we have been operating at or near capacity for some time, while seeing continued demand for more of our products. I'd like to highlight just a few of Vista Outdoor's key brand and product-related accomplishments in the last quarter. Men's Journal named Bolle's breakaway modular B3 golf glasses as their best golf sunglasses. Men's Health also featured the CamelBak KUDU as the best gear for mountain biking. And Outside Buyers Guide featured CamelBak Skyline pack as one of the Gear-of-the Year Award winners. We launched nearly 100 new products at the NRA show in May, and many of these new products are now available in stores, including Federal Premium's micro HST ammunition; American Eagle's revolutionary Syntech range ammunition; the Stevens model 320 turkey shotgun; the Bushnell Trophy and Trophy Xtreme lines of rifle scopes, spotting scopes and binoculars; new BLACKHAWK! holsters; and Bushnell Trophy Cam wireless and Primos Bullet Proof 2 trail cameras. We continue to focus on being a good corporate citizen and a responsible environmental steward. In April CamelBak unveiled its National Park line of water bottles in celebration of Earth Day. We donated $2 to support the National Park Foundation from every limited-edition bottle that we sold. During the quarter, our Bell bike brand celebrated the grand opening of the Devil's Racetrack near Knoxville, Tennessee, which was funded by a Bell-built grant. The racetrack is part of a public trail system that is open year round. We have partnered with numerous organizations to share our commitment to conservation and the responsible use of public lands and waterways, wild places and wildlife. In conclusion, I must tell you I am confident in our Company's strategy and the initiatives that we have put in place to deliver long-term shareholder value. Our balanced capital deployment strategy, our investments in R&D, marketing and ammunition manufacturing capacity expansion, all complemented by value-creating acquisitions, position Vista Outdoor for long-term success. Our acquisition pipeline remains robust with attractive opportunities, and our balance sheet is strong. <UNK> will now provide more details on the financial results for the quarter. And then following <UNK> we will come back around and entertain your questions. Thank you, <UNK>. Good morning, everyone, and thank you for joining our first-quarter earnings call. We've disclosed both as reported and adjusted results in our press release to assist you in your understanding of the underlying numbers and to assist in comparison to prior periods. You will find a more detailed financial presentation of our first-quarter FY17 performance on our website. Today I will discuss the adjusted results, first for Vista Outdoor overall and then for the segments. The Company achieved first-quarter sales of $630 million, up 23% from the prior-year quarter. The year-over-year increase was due primarily to $134 million of sales from our <UNK>my Styks, CamelBak and Action Sports acquisitions, and an increase in the shooting sports segments, partially offset by a decrease in the outdoor products organic business. First-quarter gross profit was $172 million, up 24% compared to $139 million in the prior-year quarter, including $43 million of gross profits from our acquisitions, as well as increased organic gross profit in the shooting sports segment, partially offset by declines in the organic outdoor product segment. Our operating expenses for the first quarter were $114 million compared to $80 million in the prior-year quarter. The increase reflects additional operating expenses incurred by our acquired businesses, as well as ongoing SG&A and R&D investments, as we had previously discussed. We reported operating profit of $59 million in the first quarter, a decrease of approximately 2% from the prior-year period. The decrease was driven by increased operating expense partially offset by increased gross profit. Interest expense for the quarter was $12 million, an increase of $9 million over the prior year, driven by an increase in the average debt balance due to acquisitions and the write-off of deferred financing fees. The tax rate for the quarter was 36.9% compared to 39.9% in the prior-year quarter. The lower tax rate is due to a one-time true-up for a deferred tax asset that occurred in the prior year. For the first quarter we recorded net income of $29 million, down 14% from $34 million in the prior-year quarter, resulting in EPS of $0.48 compared to $0.54 in the prior-year quarter. Year-to-date free cash flow use was $41 million compared to a use of $52 million in the prior year. The year-over-year improvement in free cash flow was largely driven by improved working capital positions partially offset by increased capital expenditures. The Company repurchased approximately 462,000 shares for $22 million in the first quarter under our existing $200 million two-year share repurchase program. Since the end of the first quarter we have repurchased approximately 159,000 additional shares for $8 million. Since the program's inception we have repurchased approximately 4 million shares for $179 million, or approximately 90% of the overall program. The Company will continue to opportunistically repurchase shares under the authorization and we continue to anticipate completing the program this fiscal year. Now turning to our business segments where we report sales and gross profit. Shooting sports recorded first-quarter sales of $343 million, up 3% from $332 million in the prior-year quarter. The increase was due to strong market demand offset by lower international sales of center-fire ammunition. First-quarter gross profit for the segment was $91 million, up 5% from $87 million in the prior-year quarter. The year-over-year increase was driven by volume, calendar year 2015 price increase and product mix. First-quarter sales in outdoor products were $287 million, up 57% from $183 million in the prior-year quarter, including approximately $134 million of sales from acquisitions. Organically the segment was down 16% from the prior-year period. The organic decrease of $29 million was primarily caused by lower sales in shooting accessories, optics and tactical products. Gross profit in the first quarter for outdoor products was $82 million, an increase of 54% from $53 million in the prior-year quarter. The increase includes $43 million of gross profit from the recent acquisitions. Organic gross profit in the segment was down 27% as a result of the decrease in revenue and unfavorable product mix. Turning back to the Company level, we expect to see a return to revenue growth and recovery in operating margins in the second half of FY17. As a result, we are reaffirming our FY17 guidance, with sales in the range of $2.72 billion to $2.78 billion, interest expense of approximately $45 million, an annual tax rate of approximately 37%, adjusted EPS in the range of $2.65 to $2.85, capital expenditures of approximately $90 million, and free cash flow in the range of $130 million to $160 million. With that we will open it up for questions. On the optics side of our business, as we've mentioned in the past, we have been focused on revitalizing that business. If you look at the ads we have issued on our optics brands, particularly the Bushnell brand, you've seen a complete shift in how we have gone to market with that brand, as well as what we have in our pipeline for introducing some new products. Our optics business has lagged a couple of the leading optics brands in that space. As optics have recovered here and there in some various pockets, we didn't participate in that recovery as much as we would have liked to. However, we remain the largest sport optics company in terms of units sold. Our brands are all recognized in all outlets. And I think we have an opportunity for some improvement on that front. So, we are very focused on driving that optics strategy forward again. In general, however, as we look at POS across the marketplace, I wouldn't call optics a highlight nor would I call it a growth engine. Sure. In terms of the portfolio, we are adding capabilities which reduce our seasonality. However, you can look at shooting sports, it's well over $1 billion in our portfolio. So, it's still a large component. And it still has a seasonality in the third and fourth fiscal year quarters for us. In terms of new products, those also have a seasonality in the shooting sports. The show season for new products where we actually introduce and begin to ship, deliver and sell new products really begins in November, and it runs through the show season through about February. So, it definitely is also in the second half of our fiscal year where we are introducing and beginning to ship new products. We put a lot of focus on new products, both in Savage and in our accessories lines, and those will really come out and have an impact in that second half. I think, <UNK>, it's also important, as <UNK> mentioned, we're seeing POS data, which is already suggesting an ongoing recovery in the retail sector. The other thing is, as you look at some of our acquisitions in the outdoor rec space, several of the bankruptcies which occurred in the last six months in the outdoor rec space were outlets which prominently featured the product categories at several of those acquisitions and some of our organic businesses have participated in. So, your question about destocking in optics, it's certainly relevant in several of these other categories, where there was a significant destocking in retail as the inventory of those retailers was liquidated. And that certainly placed significant downward pressure in several categories throughout the first quarter. Sure. If you look at some of the other releases from retailers that have come out, particularly I might point to Cabela's, as an example, in their latest release there was a lot of discussion about promotions and promotional pricing, and sales were driven, it appears, from discounting. So, I think that that has been a trend through this first quarter, where a lot of the retailers were driving revenue and destocking some of their inventories, and leaning down their inventories based on some uncertainties associated with bankruptcies that <UNK> discussed, and other things in the retail sector, which has been slow and sluggish. So, I think that certainly that's been part of it. We have not changed our strategy. We still strive to maintain our pricing in the price categories where we participate across our portfolio. We offer promotions based upon seasonality. We offer promotions based upon a way to manage and support inventories as we bring new products and potentially have obsolescence of others. We offer promotions around holiday seasons to help drive traffic to purchase more of our products and support retailers in those programs. But in terms of broader pricing we're not seeing wholesale pricing in ammunition categories being dropped. We are not seeing wholesale pricing reductions across our portfolio by competitors. And we remain committed to our strategy to offer value in our brands with top premium products, and promote those products through advertising, through rebates and other promoting strategies versus wholesale price reductions. Really, the market seems to be marching along that same path. And certainly, <UNK>, to follow up, unlike some prior quarters as we talk about drivers of our gross profit level in our outdoor product segment, promotional activity is not one of the principal drivers of the year-over-year change. It was primarily driven by the overall value and by the unfavorable product mix, which I referenced in my script. We did not engage in significant promotional activity or price reductions to try to sustain our revenues through the quarter because we believed it would be, on a long-term basis, unfavorable for the business for us to engage in that activity. First off, unfortunately no, because we don't break out individual contracts [in that] piece of our business. That said, the shift we're seeing is extremely common in the international business. Our international contract business is separate and distinct from our international consumer business. Our international contract business is quite lumpy. It can create these year-over-year disconnects as it is not uncommon even when we are quite confident in an order that it may shift by a quarter or two with many of these international customers. Even for several months and several quarters after you have won an award, it can sit on the desk in a ministry somewhere waiting for a final signature before product can be shipped. So, we're just subject to that in our international contract business, so the behavior we are seeing is quite common. It's just uncommon, somewhat, for it to be large enough that it would rise to the level of being mentioned in our quarterly results. But the underlying behavior, it happens all the time that these contracts shift from quarter to quarter. So, this it's not one where we have some future hope-for expectation of winning a contract, it's more that there are just delays in final approval and therefore shifting in revenue recognition on the contract. Yes, let me talk about that. I think that's actually a terrific question. It's certainly a relevant question to what we saw in the quarter. I mentioned previously what we're calling share of wallet. As you look at what happened in the firearms, we had, for example, the adjusted NICS checks in July were up almost 28%, long guns were up 35%, handguns were up 23%. If you look at what's driving long guns, NICS checks ---+ and we've talked about this numerous times ---+ what is driving long guns NICS checks in this current surge is modern sporting rifles. We do not sell modern sporting rifles. That is what is driving that. If you look at Ruger's announcement and release, or you look at other Smith & Wesson's release, that performance, where they are up similar to these NICS checks, it's because they are the primary providers of modern sporting rifles and handguns. So handguns were up 23%. We don't sell handguns. I think what happens sometimes, and I think what people sometimes fail to remember, is when you look at those NICS check surges, that's only one indication of what's really going on. The underlying premise driving NICS checks is MSRs and handguns where Vista does not participate. Also, when you look at ammunition, the ammunition that follows this, if you looked at Winchester's releases or Remington's releases, we outperformed everybody in ammo. But the surge in ammo is also being driven by ammo that feeds those MSR platforms and those handgun platforms. And, as we have said repeatedly, we don't have capacity in those areas. We're at capacity. That's why we announced our large capacity expansion initiative. So, ammo sales in 9 millimeter for handguns is still very hot and we're at capacity. And then when you look at the ammo surge, it's still great for ammo like [556 and 223]. We are buying all we can get from Lake City. We're making all we can make and sell in most categories. But we have limited upside capacity that doesn't allow us to participate at the rates you see in adjusted NICS checks. So, I think share of wallet, where people are spending their money buying handguns and MSRs, impacted our optics business, it impacted the decline you are referring to in our shooting sports accessories business because people were putting their money, obviously, from the numbers you've seen from other manufacturers, into MSRs and handguns. And that diluted the available wallet that they were spending on our accessories business, as well as just a softer retail environment and some of the other things that we have talked about. So, I think those are really the key drivers in what's happening behind those numbers. So, this surge is similar to some we have seen in the past except it's much more concentrated in modern sporting rifles and handguns. And those factors, of course, just exacerbated what we have discussed already which was just the overall retail softness and the impact of the liquidating inventories from bankrupt retailers. So it's a little bit of a perfect storm for us in the quarter in terms of outdoor products. You had liquidations from retailers that carried a lot of outdoor products, a soft retail environment, and an overshadowed focus on share of wallet going to guns. Again, we don't give quarterly guidance. So, we don't want to do that today and try and guide you to some second-quarter outcome. So, let me do the best I can in helping you. One of the things we are looking at when we talk about the fact that we are holding our guidance for the year and we see upside in the back half of the year, one thing we have in the Company, which is actually helpful to us but we don't share it publicly, it comes from information from a lot of other retailers, is our point of sales data. So, we are able to see turns at the register, rings at the register by category in our categories. And we're able to see that through our relationships with these key retailers, which are basically all the big guys in specialty outdoor retail and larger big-box retail. What we are seeing there is we're beginning to see improvements in point of sale across our categories. We began to see that in the trailing four weeks and we've seen in trailing eight weeks. So, we are beginning to see improved point of sale from what we saw in that same data tracking in Q1. So, that, along with the other things we've already talked about is the foundation or basis of why we believe in the second half of the year we will see some of these improvements. Sure you bet. Good question. On POS, I am happy to tell you, yes, we're seeing it across our shooting accessories categories, we're seeing it across the ammunition category, and we're beginning to see it in the firearms category which will allow us to participate with the offering we have in firearms through our Savage and Stevens brand, which is basically long rifles and shotguns. And so, yes, it is across all three categories where we are beginning to see a trailing week improvement in point of sale data. So, we think that's very favorable and encouraging. In terms of the destocking that is not all behind us. Sports Authority, in particular, was a large chain that carried a wide variety of our products. They had a hunting section in those stores, as you may be aware, that carried our optics brands in those stores, they carry Bell helmets in those stores ---+ many of our products. So, that de-stocking is going to continue. We are not past that yet. We think it continues through the second quarter, most likely. So, no, we haven't gotten completely out of that pressure yet. I think it will be a shift into the back half of the year. Sure. On the capital expenditure for the ammo, as we mentioned when we disclosed that capital project, that capital project has really no benefit to this current fiscal year. That capital, a lot of those pieces of equipment, have 12-month-plus lead times. So, we've kicked that project off. We put in place the resources we need from an HR perspective. We are strengthening our position and identifying where we will place some of that capacity in terms of which state and which location we are putting in. So, it is kicked off, it's on schedule. Phase one of that, as you may recall, of that project ---+ and it's a phased capital project, which will allow us to mitigate our risk by not taking a bold throw of a $100 million CapEx facility and building a new factory ---+ it's a phased project, and the first phase allows us to drive capacity in the areas where we are, frankly, just out of available capacity to the current market trends which we experience today. In other words, today, if I had more 9 millimeter I could sell it. If I had more 556 and 223 I could sell it. But I think what happens sometimes, and what may have happened in terms of how we got a little disconnected from Street expectations, is we're at or near capacity in ammo and we cannot participate in the upside when that upside is concentrated in calibers like 9 millimeter and 556. We can't participate in that because we're at capacity. Even though we are procuring from Lake City and we have other partners, including international partners, that are helping supply us ammunition, we just don't have capacity to participate in the upside of ammo. This project is still important, it still appears to be a very good decision for us to execute this. We're on track in terms of our plan for the stage we should be at this time. And that capacity will largely come on next fiscal year, in the back half of next fiscal year. So, as we mentioned when we kicked that off, just to refresh your memories, we said it would occur late in FY18 when we would begin to see the benefit of that. So, that's not factored in our discussions. And then in terms of Orbital ATK we are aware of their restatement disclosure. It has no impact on Vista Outdoor. It has no relevance to our long-term supply agreement. And it has no impact on any of our financials. None of our financials, not our standalone financials nor our pre-spin carve-out financials, are in any way affected by the announced restatement. So, we do not intend to restate financials for any periods. And we can't comment on Orbital ATK's decision. We did not participate in their process. We did not participate in their decision. They are separate company. They are running their company. We have nothing else we can comment or say about that because we simply have not been involved. We just can tell you it does not impact Vista. Certainly our acquisitions, particularly given the spaces they are in, as we have talked about, Bell, Giro in the cycling and ski helmets and accessories categories, and CamelBak in the hydration accessories, and <UNK>my Styks, are all certainly categories which are sold in those retailers which experienced bankruptcies in the last six months. So, undoubtedly, those businesses were impacted, both by the overall retail softness and by the liquidation that took place at those categories. They have experienced those impacts in a similar fashion to how our organic business has experienced those impacts. We don't report financials at the level of any individual acquisitions. I can't account on anyone specifically. That said, we are still very pleased with those acquisitions and we still achieved what we intended to achieve with those. For example <UNK>my Styks, while it faces the same retail malaise we see across all of our categories, you now see <UNK>my Styks paddle boards sold in several of our traditional retailers where they were not sold prior to the acquisition ---+ at Cabela's, at Academy, at Dick's Sporting Goods. So, we have expanded the distribution footprint for those products, as we have described in advance. Action Sports, which recently completed, as <UNK> mentioned, integration is underway and on track. And we have actually been very pleased with several of the personnel who came with that business. They have now become integrated in our business and taken on roles even greater than just the Action Sports role for which they were responsible when they joined the Company. So, overall the acquisitions, we're still very pleased with them. We obviously had a tough quarter for our entire business on the outdoor products and outdoor rec side. But that does not affect the long-term value of those businesses so we remain on strategy with our acquisition plans. It's very difficult to have the microcosm in which I could answer that question with certainty, that we are seeing that the POS trends are driven by a shift at TSA customers finding new outlets and purchasing those products. I actually can't tell you that I have the visibility and clarity within that microcosm to answer that question. What we're seeing is POS trends at the key retailers where we have data, and what we're seeing is a continued liquidation of inventory from that retailer. Putting those two together I simply don't have that visibility. We can't answer that question. That's mainly driven by timing. Partly driven by timing of just when shipments took place around (technical difficulty). Also, because of this international order we discussed, while we have not been able to ship and recognize the revenue on that order we have been obviously preparing the product for that order. That's kind of, if you like, missed capacity for the quarter because it was used to produce product which will be sold in a future quarter. <UNK> is exactly right. And the only other contributing factor is we had a nice international shipment that occurred in Q4, and it just didn't repeat in Q1. So, again, <UNK> mentioned the lumpiness of these international orders. These are largely orders, just to help you understand, that we sell to Ministry of Defenses in various countries. If you know that business then you can appreciate why they are lumpy. Yes, <UNK>, I think that's a legitimate question. Certainly it is. And certainly as we sit here and see that some analysts or some other people expected us to follow these very high numbers in firearms, maybe they didn't fully understand our portfolio versus where the demand was, and maybe the same with ammunition. So, we definitely think about that and should we participate and can we participate in some of those other categories. I think your question, <UNK>, was a little bit towards M&A. I would answer a little bit more broadly, and that is do we have the organic capability to participate in some of those categories. We certainly are mindful of that. I would tell you we are certainly engaged in discussions related to how could we participate in growth segments where we don't participate. And we look at that across our portfolio. We're always looking at the portfolio and evaluating opportunities where there might be market segments which are certainly in our area where maybe we aren't participating, or growth segments that are occurring within the market in outdoor recreation. If we're not participating there, we certainly want to participate there. So, it's a good question. I guess what I can do is assure you that we are aware of this issue, that we are missing on some of these categories, and we are working through a process to make decisions about that. I think our M&A approach, as we have discussed before, we are quite disciplined, particularly with respect to the multiples we're willing to pay for a given asset. If you recall, when we bought Savage Arms, which was near the peak of the last firearms cycle, and given our recognition that we were at near or peak, we paid quite a reasonable multiple for that business. I think of you look at the multiple with which firearms companies are currently trading, it's well above that multiple. I think it would be out of the norm for us to go that high in the multiple range for a target like that. One other bit of color which may be helpful a little bit just by some references to our Company, if you look at Savage Arms, in Savage Arms' history they were the largest supplier of shotguns in the country at one point. They were a handgun supplier at one point. So, they've had a broad portfolio over the years which, through the course of their management and some missteps by prior companies who managed that business, they lost some of those positions or they surrendered them, or they, frankly, exited them. If you look at what we have done with Savage now, <UNK>, I think you follow this closely so I think you are probably aware and appreciate this, but we have relaunched a rebirth of shotguns under the Savage and Stevens brand, unlike has been done in decades. We are relaunching into categories where Savage has not participated recently, but actually has participated in the past. We have a great asset in Savage. The growth there was good. The management team is good. And we're certainly looking at the opportunities that you are talking about. Certainly the candidates who are on the stump are pounding the stump on Second Amendment issues. We saw a lot of that in the last week. Gun-control issues, reinstatement of the assault weapons ban under the Clinton Administration. I was recently at a couple of Congressional Sportsmen's Foundation events which, as you know, is a very bipartisan foundation that works the bipartisan caucus, the sportsmen's caucus, which is the largest caucus in Congress. I was able to have lunch and sit down and have conversations with members. It's a very interesting, obviously a time in which there is a lot of perspective and different opinions. However, that being said, this does not appear to be another 2008 or 2012. It really doesn't. And let me tell you why I think it doesn't I think, in part, because in 2008 and 2012 there was a significant surge in purchasing of ammunition, in particular. As you'll recall, we were out of stock. And I know that you went out and did a lot of surveys. You do your retail survey checks. We've talked about that over the years. There was a real surge in those periods buying ammunition. And I personally believe that a lot of consumers overstocked and built inventory at home and pulled that ammo as quick as they could off those retail shelves and took it home and put it in their own basement. I have talked for years that I believe that there was an over-purchasing in those surges and that that created inventories which are off the books for us, which we can't see, which are in people's personal inventories. I think that could be contributing to why we have not seen a surge like that yet, is people possibly overbought in those prior surges. So, I think that's part of it. I do think, however, on the firearms side ---+ and, again, it's in areas where we don't participate ---+ but I do think you're seeing a similar surge to 2008 and 2012 in firearms, but it is much more concentrated this time, as I referred to earlier, <UNK>, in MSRs and handguns. And that is not helping us. And the ammunition that those platforms consume, we're basically at capacity. So, yes, we are debottlenecking our factories all the time. We're looking for uptime and improvement in operational efficiencies in our factories all the time. I will tell you that we have retooled handgun calibers machining and manufacturing to 9 millimeter. So, anywhere we could retool we have retooled to capture that. But as we have disclosed over the past few quarters, we have done a tremendous job driving upside in throughput and availability of ammunition, but that can only take us so far, and we're to the point now where we just have a limited upside in the categories that are in demand. All right. Thank you very much. We appreciate you all joining us today. We remain very excited about what we're accomplishing with Vista Outdoor and the shaping of our portfolio. I appreciate your good questions today and look forward to talking to you again in a quarter.

2016_VSTO

2016

KOP

KOP #Thank you. I think they both play a critical piece of that. Certainly the restructuring and the taking out of 7 of 11 operating facilities over a three-year period will play a substantial piece of that improvement over that time frame. But a realignment of raw material prices that have just escalated and, quite frankly, have not resembled anywhere close to what's going on in the end markets will also play a significant piece. I mean, the reality is we've been for several years in a declining price environment for the end products that come out of the distillation of that raw material. And this is not a sustainable business, continuing to buy raw material at those sorts of prices and making products. In fact, you can't continue to run a business like that. And so it required a significant readjustment in raw material for us and people like us to be able to actually continue to take that product and distill it. And so savings will be significant from the raw material side. Savings will be significant from the cost alignment and restructuring side. In terms of the proportion, gosh, I don't know. I can tell you it's not ---+ or at least I'm not prepared to tell you on this call ---+ it's not 75%/25% either way, I'll tell you that. It'd be much closer ---+ I think it might be much closer to something that would be a little more towards 50%/50%. But probably ---+ I'm sure not exactly there. But it's large on both ends of the spectrum. Well, we've actually reflected some of the changing environment in our updated numbers, because we did bump up our expectations on pricing relative to the coal tar ---+ to the oil price increases. But we do expect and have seen, right, the ---+ certainly reduced demand. Some of that has been as a result of the decisions we've made to downsize, and some have been as a result of just the pullback in the aluminum industry. The good news, <UNK>, is we are trying to disconnect our future operating results from what goes on in the aluminum markets. Not that we don't want to serve those markets. We're still going to be dependent upon them moving forward, because we are still going to making carbon pitch. But we're going to be so much less dependent upon them as time goes on, just due to the fact that we are distilling less product. So the market can contract; it can move. We think we have other options to move some of that product around to defend against any other additional pullback there. But we're ---+ one of the whole objectives of this strategy was to try and really reduce our reliance upon what we've seen going on in that market over an extended period of time. And we believe that the decisions we're making are going to result in just that happening. So it's always tough to say, you know, as you look out two, three years, I mean, there's so many things that are moving that could ultimately have a positive or negative impact. But aluminum doesn't concern me the way it would have, certainly, two years ago or three years ago. And it shouldn't concern others as much as it did in that time frame, either. It's just a much, much smaller part of our portfolio. And it's intentional. No, we don't. Oil is still going to have an impact on orthoxylene, which will have an impact on phthalic anhydride. Oil will still have some at least indirect impact on naphthalene, which uses a feedstock in that process. Oil will still have an impact on carbon black feedstock, which is priced to benchmark Platts oil prices. So in those product lines, it's still going to have an effect. And that's why we've talked in the past about ---+ again, at the low end of the range in 2018, when CM&C looks like it's fully restructured, moving forward on the low end of the crude oil price range, we think we can make $40 million-plus. If oil would move back ---+ and I know nobody believes it will, but if oil would move back to where it was in the 2013/2014 time frame, high $90s, around $100 a barrel, we think it could be as high as $70. That's still a significant movement between that spectrum. But no, oil is going to continue to have an impact on that business. Our objective is that at the low end of the range, we can still have a adequately profitable business that provides returns on capital in line with the risks associated in that business. You're welcome. I'd just like to thank everybody for dialing in for the call. Again, we are ---+ feel pretty good about where things stand through the first six months. Happy with all the progress that we've made. We will continue to do everything we can to execute on our plan, and look forward to catching up again next quarter. Thank you.

2016_KOP

2015

BMI

BMI #The incremental revenue. Their total sales for the quarter were actually about $9 million. But then you have to eliminate what we sold them, which was about $5 million, and it left about $4 million as incremental. Is that making sense to you. There is seasonality in that they are in the same business we are in, so they tend to have a weaker first quarter and a weaker fourth quarter, and their second and third are the stronger quarters. No, we haven't seen it. And bear in mind that it's a little tricky because, first off, one competitor, Mueller, primarily sells plastic meters. So they really aren't even competing in the brass market. Obviously, Neptune only sells brass meters; they own their own foundry, so they really don't want the market to move to polymer meters. And Sensus has moved more towards pushing their iPERL, which is a plastic meter. So really, the only major competitor we have in the brass area is Neptune, and we have not seen pricing pressure yet. No, no, no. <UNK>, it was a little over $1 million. Yes, I mean we're obviously taking some actions to try and get whatever we can back. But the fact of the matter is, when our customers ---+ when the whole market is down on activity, it's hard to jump around to a ---+ it isn't like it's one customer and you can jump to another. Yes, it's not lost market share or anything like that. It's just that we always refer to business being lumpy. It's the general lumpiness of it. Over the long-term, commercial generally follows residential. When a city switches out, they not only switch out residential; they switch out their commercial meters also. So it's a bit more a function of timing more than anything else at this point. Yes. Exactly. Yes, it should. No, I would say not, because the cold doesn't impact on us as much as snow does; groundcover on snow. Because when there is snow, it's difficult to find the pits where the meters are. And so the utilities simply slow down sending their teams out, because it's just not an easy thing to do. Also, for the meters that are in basements, tracking snow in the basements, they don't want to do it. So, snow has a bigger impact than cold. The first quarter of 2015 is more like the first quarter of 2013, which was a very heavy snow quarter. In fact, if you remember, I remember distinctly sitting here a year ago, talking about the fact that our customer mix weighted more West of the Mississippi last year at this time than normal. And so now we (multiple speakers). Well, the short answer is in California specifically, no. In New Mexico, we did get a contract with Santa Fe right now ---+. Right, we have a large contract in Santa Fe ---+. And they have the same issues, by the way. For BEACON, and it's because they have concerns about wanting to manage their water usage. I will say, though, in California ---+ because the BEACON software was developed in California. And at the time we bought that startup who was working on that software, they were basically using many of the large California utilities as their beta sites for that software. So, we do have very strong relationships with those utilities. And we have a lot of interest from those utilities as to what this software could do for them ---+ the entire system could do for them. And so we are moving forward in those discussions. No. <UNK>, I think your first analysis was right. Once we did that, and we did it very well and we treated the sellers very fairly, other distributors expressed an interest, and we are in conversations with other distributors. So it's not really a one-off. It really is a strategy that we developed where we wanted to start with National Meter, because it was our largest distributor and had very good systems in place; and then look at whether or not we could roll up other distributors who might be interested in getting involved with us, to where we could put them under the National Meter umbrella. So we are in conversations, and that is moving forward. No, I would say it's ---+ our inventory as a whole turns out about four times a year, so three months is still a reasonable assumption. If anything, it might actually turn a little bit less than that because (technical difficulty). Housings are the things ---+ we're hearing a noise. That's why we're pausing here. But if anything, it might change a little bit less. Housings turn a little bit more than some of the other inventory. This is <UNK>. That's a very, very difficult one, and we've wrestled with that for years; our industry has. When we ship our meters to a utility, we never know whether they are going into new housing or whether they're being used as a replacement. The utility has no methodology for reporting back, and neither do our distributors. So we've never been able to say this percent of our sales goes into new and this percent of our sales ---+. And the same is true for commercial meters. Right. And it's the same thing with commercial. So it's really a hard thing. The only way you can kind of do it is to take a look at the ---+ for example, the industry sells about 6 million meters a year. So you could say, well, there are 1 million new houses built; and, therefore, say, 80% of those have been meters and the other ones have private wells. And you could somehow make a conclusion that some percentage ---+ 20% or so, or 15% of the meters are going into new houses. But it's really, it's that high level. By the way, <UNK> is in Boston. We assume the snow has melted there, right. Okay, we appreciate that, <UNK>, the weather report. If you look at what happened to us in the first quarter of 2013, which was a very heavy snow quarter and had a big impact on our sales; we had a very weak first quarter. We followed that up with two record quarters. At this point, when we look at our order entry, our backlog, we see no reason to believe that we won't have some strong quarters coming forward. And so that's one of the things that makes us more confident about looking at the balance of 2015. Obviously the weather shouldn't be an impact ---+ weather only really hits us in the first quarter ---+ but we're going to continue to benefit from copper. The euro will probably remain weak, but it's pretty much a wash on us because of the purchases in the sales, and we know we're probably going to lose $1 million a quarter on the oil and gas. But when we wash all those things together and we say, hey, construction should be improving, housing starts are continuing to improve, all of that, it says that we're pretty optimistic about the rest of the year. We haven't historically seen that because if a utility is on a manual read system, they will go ahead and replace their meters. And then when they go to an automation they will just pop the automation on top. So it's generally ---+ a utility won't say, let's extend the lives of our meters because we haven't made a decision on automation. We don't see that happening. Yes, and this is <UNK>, let me address that. It's generally not an attractive market. And the first reason is that most of the Brazilian utilities use a velocity ---+ a single-jet or multi-jet meter. That's not a type of meter that we make. It's not the type of meter that's used in North America. It's the type that's used in Europe, and a lot of those come out of China at a very low price. So that's the first problem. The second problem with Brazil is that they have some pretty heavy tariffs for importing finished products. So to be effective there, you have to have a partner to do a ---+ so you are shipping in parts, and they are doing a significant amount of the final work on the meter. We found that a key success factor on our meters is the control we exert over the final assembly and test of the meters, and outsourcing that to a third party is pretty risky. So for all those reasons, we have not focused on Brazil as a target for our water meters. On the other hand, we sell a lot of our industrial meters down there, and we will continue to do so. Well, I want to thank you all for joining us. This was a difficult quarter for us. But as <UNK> constantly likes to remind you, we are in a lumpy business. We have these quarters from time to time. History will show you that when we have a bad quarter, driven by whether or other factors like that, we tend to bounce back. And we're fairly confident that we can expect to see some good corridors coming forward. So with that, I will thank you again for your support, and look forward to talking to you in the future. Thank you.

2015_BMI

2016

BYD

BYD #Yes. I think it's strictly a matter of just comps are getting more difficult in an improving environment, and we want to see consumer translate into better performance before we get out ahead of ourselves on that. That's it, <UNK>. Thanks. Well, I think we continue to be very interested in growing the company and acquiring assets that are in markets that make sense for us and that will move the needle for us. And it's a matter of coming to an agreement on price, in many cases. So we'll continue to look around, we continue to look at as many things as we ever have, and one of these days we'll find something that is in the right market at the right price that we think should be part of our portfolio. We tend to be fairly selective. We are not anxious. We are not going to buy something just to have a deal or to do a deal just to do a deal. We will find the right asset in the right market at the right price and then we will execute on it. In the meantime, we will just focus on paying down debt, we'll focus on our non-gaming amenity strategy, and strengthening the existing portfolio until we find someplace else to invest. But we are clearly interested in continuing to grow the company. We just have to find the right opportunity. So they opened in early December. And so we've seen, just the last three weeks or so of the fourth quarter with that competition, and obviously, the first six weeks of this new year. And I would say that the impact is about what we were expecting. It's a little less on the slot side, a little more on the table game side. They're driving a lot of visitation with some aggressive marketing programs/ And like I think all consumers, that they are going to take a look, but that's the nature of our business, when a new property opens, people go and take a look. And so we're just going to have to wait and see how and where it settles in and where they settle in from a marketing standpoint and how aggressive they end up being on a longer term basis. So nothing we are overly concerned with. Once again, the impact about what we would have expected it to be. So we'll continue to monitor it and watch it, but nothing we're really concerned about sitting here today. Thanks, <UNK>. I'm not sure how much more you close that gap, because what drove that gap is what drove the economy generally when you look back at 2005 through 2007. Large part of that here locally were construction jobs and the tremendous amount of construction that was going on in this town. And while we're building construction jobs back, we won't get back to 125,000,135,000 construction jobs in the town, as well as just the freedom at which people, the consumer, generally spent money. And so thinking we'll gravitate back towards that number, it's certainly not in our thinking any time in the near future. Yes. So in reality, it's very similar to the maintenance capital we spent last year and we, in fact, talked to everyone about last year. We generally said $100 million to $110 million last year, and that's essentially what we're saying this year. In terms of slot capital, our budgets are essentially flat, we really are ensuring that our floors have the best product out on them to provide our customers the best experience, and we don't see any need, in order to meet that objective, to spend any more than what we are doing currently. So we feel comfortable about where our floors are and we feel comfortable with the budget we're applying to accomplish that objective. It was not a cash component of interest. We could have chosen to pay a portion of it in cash. We chose not to. It was a note that was put in place in 2012. The first year had 0% interest, the next year, I think it was 6%, and then 8%, and then 10% thereafter. It was just about to reach 10% when we decided to pay off the seller note. It had a principal amount of about $164 million. And so basically, we used our revolver to fund that retirement. The note was recorded at a discount, according to the proper way to account for it, and so when we retired it, there was a charge related to retiring the note, but that's related simply to how it was accounted for on the books. I don't know if that answers all your questions around it, <UNK>, or not. Good. Okay. Thank you. Sure. Thanks, Jamie, and thanks for each of you for joining the call today. If you have any follow-up questions or questions that you would like answered, please feel free to call the Company and we'll be as responsive as we can to get you the answers you need. So thank you for dialing in today.

2016_BYD

2016

ITW

ITW #Yes, <UNK> so price/cost like I said was 20 basis points for the quarter, right in line with our planning assumption, right in line with what we saw last year. And that remains our assumption for the rest of the year. Nothing unusual again this quarter by segment, everything is on track. So that's the color I can give you. The payback is on these projects is typically less than a year. This one is actually quite a bit better than that. It's primarily focused on North America. And we do disclose, the last page in the press release lays out restructuring by segment. And you can see the most significant one was welding this quarter. Like I said, there will be another series of restructuring here in welding in Q2, and then we will update you as we go through the year. This is actually all cash. But not significant. I mean you look at how much cash we generate this does not ---+ don't think of it as having an impact on our capital allocation strategy. No, I wouldn't say there was any pull forward in demand. I mean the reason for the sequential decline is essentially all welding. Typically in Q1 versus Q4 like we said, we would expect our welding business to be up 3%, and it was actually down 3%. Test and measurement, which is the other segment in here, was essentially stable from Q4 to Q1. So it's all welding driven, <UNK>. Well I think, as <UNK> said earlier, other than welding everything is favorable and feels pretty firm as we start the year here. In welding we continue to see the impact from energy, oil and gas, which accounts for the decline on the international side. General fabrication is still challenged, especially going into mining, agriculture, heavy equipment. So the demand environment in terms of capital equipment going into the industrial economy, we would describe as still sluggish. And as <UNK> said, we have not seen any sign yet that ---+ of improvement at this point. That's purely a comparison. Current run rate. So current run rates, if you run those out and you look at on a year-over-year basis, that's when you get 9% decline organic in Q1, you'll get another decline in Q2, and then stable to up in the second half, a bit flat to up in the back half of the year. At current run rates; that can obviously change, but at current run rates given the comparisons year over year that's what we would expect to see. Yes, <UNK>, we feel very good about the first quarter, particularly if you look at North America, up 5% on the equipment side, up 4% service. From a product line standpoint, refrigeration and cooking are the big drivers this quarter. And then by end market it's really healthcare and lodging continued to be solid for us. But really across the board we feel very good about the outlook for the year. We have a number of new products coming in here in Q2, and so we would expect that business to be up similar to last year in that 3% to 4% range as we talked about on the last call. Yes, what I would offer on polymers and fluids is it's basically an MRO business, two-thirds of it, the other one-third is the automotive aftermarket piece. The automotive aftermarket side of it had a pretty solid quarter, up 2%. I think largely how I would characterize the overall growth performance during the quarter is they've gotten to the end of a pretty extensive PLS process and are starting to now ---+ the pipeline is much more stable than its been over the last eight quarters, and they are starting to now turn their attention more to growth. And so very pleased to see positive overall organic out of that segment in the quarter. Salary increases. I'd say very consistent. <UNK>, you're seeing a little bit of seasonality in Q1, but if you look at the first quarter relative to the first quarter last year, really solid working capital performance and nothing unusual. And just look at the free cash flow number, 90% the average is about ---+ the last few years has been 65%. So really strong cash flow performance again in the first quarter. And keep in mind that we typically ramp up from here. So from a conversion standpoint, this is typically our lowest quarter and then we will go up sequentially as we go through the year; just typical seasonality. So nothing unusual in terms of working capital; continued strong performance. Well, what I said was that incremental profit from every dollar of incremental ---+ dollar of organic revenue was the highest value opportunity that we had and really what we were focused on leveraging to its full potential, not the percentage. We've talked about incremental margin, so our target is roughly 35% going forward in terms of conversion to the bottom line from every incremental dollar of organic growth. That will vary up or down a little bit depending on the segment. And if anything I would expect we would comfortably do that or be even a little bit better given the elevated levels of profitability that we're now operating at. What I'd say is 15.5% operating margin includes, as you point out, the 420 basis points of non-cash amortization expense. So you add that back, it's about 20%, it's still on the lower end inside of ITW. We expect all of our businesses to continue to improve margins. Some will do so more than others, and I would probably put test and measurement in that category of more margin potential than some of the other segments. So we expect that segment to continue to improve on the margin side including in 2016. As these amortization charges also bleed off over time. Amortization charges as well as the enterprise initiatives. Underlining operating performance improvement. Exactly. Like I said, I think we expect all of our segments to improve including food equipment. Certainly good progress, but also more to come. And I think we'll give you ---+ if you look at the schedule on the back of the press release, you can see the various components. And so the margin expansion now is half is operating leverage and the other half approximately is the enterprise initiatives. You're talking about within food equipment. Within food equipment specifically, yes. We expect that to ---+ we would expect that business to continue to improve. We're not going to parse it much more than what we did in the prepared remarks and what you can see on page 6. And the outlook for the rest of the year in Asia-Pacific is growth rates very similar to what we saw here in Q1. Certainly encouraged by China automotive of 6% as well as continued progress in construction products, which as you may know is primarily Australia based. So that's how we'd described that. Europe for the year we expect very similar again to Q1, so up in the very low single digits based on current run rates. Well on the first question, that growth target we talked about does not include the acquisition. That's core organic and that's our expectation both for 2016 and our longer-term growth target for the auto OEM segment. With respect to the balance of the year, <UNK> talked about it before. The currency is there is no win in trying to forecast where currency goes. So we've always used current run rates on currency. We use obviously at the quarterly level they move around, so we're not going to forward forecast where currency is going to be. <UNK>'s comment was that if everything stayed exactly where it was ---+ two comments that I'll repeat. One is that we're impacted by more than just the euro; Aussie dollar, Canadian dollar also reasonably material factors as is the pound. And then the other part of that is if everything stayed exactly where it is, I don't know if you're marking the market today, <UNK>, but around right now that there's probably a few pennies of upside on a full-year basis. That's exactly right. Who knows if that will happen. And it may go the other ---+ may be a headwind. Well, I think generally speaking we're feeling like the first quarter was pretty solid, pretty firm. We've talked about this before. We are basically taking current run rates and projecting those through the year, and that's how we derive our growth and earnings forecast for the year. So if things stay where they are today, we are in pretty solid shape. Good morning. Well the drivers would be a variance from current run rates, either better or worse than what we see today. So that would be the primary driver. I think on the things that are within our own control in terms of the so-called self-help enterprise initiatives, we feel very good about continuing to execute the way we have for the last ---+ since we embarked on the enterprise strategy. So I think those are on the margin side very solid. The delta is the demand side. Right. I think ---+ here is what I'd say. I'd say one of the real strengths of the Company, and we talked about this, is this really well balanced, diversified, high quality portfolio of businesses. And so if certain things are better than run rates in one part of the Company, it will offset in other [pre-existing]. So I wouldn't ---+ I can't go down the path of by segment how we think about this. Well, I think like we said earlier, welding did decelerate in Q1 versus Q4. And when you look at the year-over-year decline, more than half of that organic decline is oil and gas. So that is the main driver. And like we said earlier, we haven't seen any signs that things are getting better there yet. Those are fairly stable. The decline is primarily on the oil and gas side. Well, I'm not sure how I'd answer it other than what I said earlier in my prepared remarks and in response to <UNK>'s question. Price/cost was favorable 20 points, no change, and we expect it to remain at 20 basis points as we go through the year. And if that changes we'll let you know on the next earnings call. But we don't expect it to. If you look at our historical performance and what I just said, that would be the conclusion, yes. Well the base cases take the order rates we are getting today on a daily basis and project them through the end of the year. The comps get easier, as <UNK> said, but we are projecting no acceleration or further deceleration from here. And we've talked about that before, we are a fast reactor. We're not a predictor of the future. So embedded in both our organic numbers and our EPS forecast is an assumption that demand stays exactly where it is today across all seven segments projected out through the rest of the year. Maybe. Close. Great. And that takes us to the top of the hour. We appreciate everybody's time this morning, and have an outstanding day.

2016_ITW

2015

EQIX

EQIX #Let me take the first one, and then I will pass it to <UNK> and <UNK> for the second one. As it relates to stabilized assets, right now, as I said we're at 84% utilized. I think for all intents and purposes, we would target between ---+ we think 90% or greater, and realistically somewhere between 90% and 95% is a realistic assumption that we should be able to drive our utilization level to. I think that's an area of comfort, <UNK>, that over a period of time, recognizing some of these assets were very selective in how we fill them up. And what I mean by that, if it's a network dense asset and we don't have a lot of incremental capacity, we are willing to let that asset sit there for a period of time looking for the right customer with the right application to go into that asset. Once we get there, it's reasonable to assume your 90% plus utilized. On the revenue growth and favorable pricing, <UNK>, I would just give you a little color and maybe <UNK> and <UNK> might have something to add. I mentioned in my comments in the beginning that yield across all regions continues to be strong. Our global yield was up $40, or 2% quarter on quarter on a constant currency basis. So that was roughly 0.5% in the Americas, 2% in Asia and Europe. Pretty strong pricing in the regions, primarily because of the focus that our sales and marketing teams have on targeting specific workloads, and focusing our value propositions around that type of application workload. Historically, as we've always mentioned, blended in with that, where appropriate, we are pursuing larger magnetic footprints that are helping the overall ecosystem value, and you should expect us to continue to compete for those. That will advance our cloud agenda. Generally speaking, we are doing a very good job of qualifying and bringing the right types of workloads into the right locations, and that's served us very well from a churn perspective, and that's served us very well from an MRR per cab, and we expect it to remain firm, going forward. <UNK>, we did not hear all of that. I think I have the gist of your question, which was to a comment on M&A and the commentary we see around the world. Is that the gist of it. Sure. I'll start, and maybe <UNK>, if you have anything to add, please jump in here. Fair to say, guys, that we have our eyes on the same consolidation activity that you are all reading about in our industry. We're still focused, as I mentioned last quarter, on our inorganic strategy to extend our current leadership position around fiber network density. Secondly, around scaling our platform, and then third around enhancing our interconnection position. So, we are always evaluating options to accomplish those three objectives, and we will continue to do that. If there was a transaction that might compliment that strategy, and create significant shareholder value, you should feel confident that we'll consider it. In terms of our Europe business, we continue to be very pleased with what's going on over there, and our results off last quarter and certainly this quarter. As we mentioned in previous calls, our business in Europe grew 21% last year, and on a first quarter year on year basis, grew 19% in this first quarter. So, our European business, because it's connected to a global platform is growing faster than the broader EU market. As you also heard, we have significant momentum on interconnection in Europe. All in all, yes, we're watching this stuff, and our business in Europe, we are very happy with. <UNK>, you are dead on. Just as we look to Q2, not only do we have the merit increases that took effect in March, we see the cost associated with that moving into Q2 and beyond, we have all the new headcount, all of the new hires. Then, we have a higher utility line coming in Q2, as well. As you know, typically from a seasonal perspective, our highest cost of utility comes in the second and the third quarter in the Americas region, and so we are absorbing roughly another ---+ if my memory serves, another $6 million to $8 million of utilities in the second quarter, relative to what we were going to spend in Q1. Then, we are continuing to progress with our integration of the ALOG investment. We spent about $1 million in Q1 on the ALOG integration, and so we expect to spend more in Q2 also with the rollout of our eco-initiative. All that to say is, there's some timing. Therefore, that's why you see, despite that, we see some step downs of costs that we had in Q1, will be replaced with costs that I just talked about in Q2. Then, we think that we can hold our SG&A relatively flat for the rest of the year. As it relates, then, just to the net interest expense, my reference to the fact that there's a certain amount of interest that gets capitalized into our assets, and it was roughly a $12 million change from what we previously disclosed. Because of that, although you see an improving AFFO, the real value of the AFFO increase at this stage of the game was the improved operating performance. $10 million was really to capitalization, and that, of course, has no meaningful ---+ even though our AFFO payout ratio goes down, there is no fundamental shift that really took place. Because that capitalized interest, it gets treated differently for tax purposes. So, that's the primary reason for the interest step down. We're seeing all those things, <UNK>. <UNK>, do you want to take a crack. Thanks, <UNK>. <UNK>, that was very thorough. The only thing I'd add to that ---+ and it's a great question, because there's a lot of activity going on. As I said in the comments in the beginning today, our strategy is working. You see the results from the firm yield and the other metrics. Interconnection continues to grow. We feel like we're executing on all the right items. So, you should expect us to continue with more of the same. Thank you. That concludes our Q1 call. Thank you for joining us today.

2015_EQIX

2016

AXP

AXP #In terms of the case, I'd say we could hear anywhere from tomorrow morning to a year from now. There's just no way to know really what the time line is. The appellate court finished their hearing some months back. As you recall, very importantly and very unusually after or around the hearing, they chose to reinstate a stay on the district judge's order. That's quite unusual for a court to do. But we'll have to see where the opinion comes out. And as I said, we really just have no insights into the timing. Is it contemplated in our 2016 and 2017 outlook. Obviously we'll have to see what the judge says. I guess I would make a couple of comments. One, the district judge's order was fully implemented for some number of months until the appellate court put a stay back on it. So it's not ---+ you certainly didn't see any immediate impact in that instance. And clearly, we wouldn't be fighting this case and going to court with the federal government if we didn't think there was a very important and fundamental issue at stake here. I would say it's a very important and fundamental long-term issue. Well, that was some weeks ago, and we haven't heard a word. And you truly we have no insights into when the court might issue ---+ I'm not even sure we had any advanced notice. I think they just post it to their website. We see it as others see it, so ---+ <UNK>, I think you got it just right. Just to confirm, I'll play back what you said using slightly different words. Yes, we expect the Costco gain to come in, in June, approximately $1 billion. Unlike previous years, we are spreading across evenly throughout the year our investment or growth-oriented spend, the biggest chunk of which appears in marketing and promotion. So to be very granular, that means that if you just look at our marketing and promotional line for all of 2016, you should expect it to look about like it did in 2015. And in fact, you just saw us in Q1 raise Q1 closer to an average level that you will see across the next three quarters. So that's what you'll see on the marketing and promotional line. And so really, the gain will mostly, to your point, fall to the bottom line in the second quarter. Although, I do think there's one other important caveat to remind people of, which is we do expect more restructuring charges, including some hard to quantify right now in the second quarter. And those would be some incremental offset to the gain as well. And those restructuring charges, just to be crystal clear, because of our ---+ the challenge in trying to estimate them, we have as we provided our $5.40 to $5.70 EPS outlook, said that excludes all restructuring charges this year, just to give you a clearer, cleaner view into the performance of the Company. A way to think about that, <UNK>, would be to I say if you go to Investor Day, I made the point that as you roll into 2017, you should expect to see our marketing and promotional costs come down $200 million to $400 million. And most, though not 100%, but most of our customer acquisition costs appear in that line. And so that gives you maybe some rough sense of the level of elevation, that line ---+ if that line is $3.5 billion this year and you're talking about a $300 million, let's pick a midpoint, decrease, that says maybe you're coming down 10% next year, which also implies that you're sort of elevated 10% this year. So it's an important increment in light of the goal we have around the spend and lend of the Costco co-brand card members. It's an important percentage in terms of the competitive environment. But I think sometimes people overplay just how big that increment is as we get ever more efficient with our acquisition efforts every year and I made the point that two-thirds of our consumer acquisitions in Q1 were digital. It's those kind of statistics though that give us confidence that we can continue to edge that number down without seeing a significant impact on our acquisition efforts. Well, I'm going to go back a little bit, <UNK>, to some of my earlier comments about what we try to do at American Express with all of our products is leverage all of the attributes of the Company and our brand. And so we are not particularly trying to target, to use your term, the gamers. And in fact will work a little bit to specifically not attract the gamers. So we feel pretty good, I would say on balance, about the economics of the Blue Cash card. And certainly one of the things we watch is the overall portfolio of consumer cards that we have in the US, or for that matter in any market. And so when you look at our card acquisitions, yes, the Blue Cash card has been a particular important acquisition engine in recent quarters. But I'd point out to you that's because part of what we're trying to do is put replacement cards in the hands of people who formerly had a Costco co-brand card. And so the Blue Cash card tends to appeal to that segment of the market. Meanwhile, we've continued our historical acquisition efforts with Gold, with Platinum, the Delta card is going tremendously well. And I think you've heard Delta make some comments about that as well. So we have a range of products and Blue Cash is just one of them which appeals to a particular segment, is lend-oriented, and is producing perfectly fine economics for us. In terms of an overall rewards rate, we don't really look at it that way. I guess what I'd say is certainly rewards cost ---+ the cash rebate reward costs are growing faster than our Company average, because those products are growing faster than the Company average. You see me calling that out a little bit in my discussion earlier about the calculated discount rate. There's still a very modest piece of the overall Company's cards and economics, though, is one important thing to keep in mind. So look, I'd say this is all part of our strategy of having the broadest product line and offering lots of different value propositions. We made sure that all of the value propositions are economic for our shareholders, while providing good value to customers. And I think the Blue Cash card fits right into that vein. Thanks, <UNK>.

2016_AXP

2016

TRN

TRN #Good morning. We don't have that level of detail that we've offered yet, <UNK>. When you look at the 7,000 to 8,000 railcars as <UNK>'s talked about and you see the backlog we have in leasing, it's not too far off from what we've been doing in the past in terms of a pro rata-type level. But we've not provided that detail yet. Yes, we do plan to add lease cars in the first half of the year. <UNK>, we don't at the time. As we've said, we really work with the institutional investors in our RIV platform and our own needs and desires in terms of looking at the diversification of our fleet. So, we didn't include that because it is difficult to predict the timing and levels here as we sit in October, but we do have plans to continue that process into 2017. Yes, <UNK>, I think it's too early to give a sense of what that looks like yet, and that's why we try to just focus on the operational side. In February as we provide our fourth quarter numbers and give more insight into 2017, then we will provide more detail there. Yes. This is <UNK>. We always look at service, technology, competencies that we could acquire from various companies that would enhance our business ---+ our manufacturing platform, our leasing company and/or opportunities in the construction aggregates area. Thanks, <UNK>. <UNK>, this is <UNK>. As we've talked about, expirations are fairly well spread out over the forthcoming years. We don't have anything unusual from a lease expiration standpoint in 2017. We're going to work very hard to keep those cars on lease. Because of the overhang of equipment and weak demand conditions, there's going to be a lot of pressure on those lease rates. So, that is why you look to stay short and hope to execute renewals at probably lower lease rates. Keep in mind that some of the railcars that will be coming off of our leases are leases that we entered into at the peak of the market with very high lease rates. So, the comparison from the incumbent lease rate to the new lease rate will probably be fairly different. We were successful not only with our renewals during the quarter, but we're also successful in putting some other cars that were in storage back into service which helped improve our lease fleet utilization. Thank you. That concludes today's conference call. A replay of this call will be available after 1.00 Eastern Standard <UNK>e today through midnight on November 3. The access number is 402-220-2658. Also the replay will be available on the website located at www.trin.net. We look forward to visiting with you again on our next conference call. Thank you for joining us this morning.

2016_TRN

2015

WRB

WRB #Good afternoon. We were pleased with our year, our quarter, and we are looking forward to an excellent year. I think that I would like to start with <UNK>, our very soon-to-be Chief Executive, and he's going to talk about our operations. Okay. Thank you very much, and good afternoon, everyone. The market conditions during the third quarter were by and large a continuation of what we had seen in the second quarter. Yes, competition is modestly on the rise, but it truly is at an incremental rate. And in spite of some of the recent headlines that we heard about, cat or cat-like events occurring and affecting the industry, the impact has really been quite modest. And one is hard-pressed to find any type of catalyst out on the horizon that is going to shift the direction ---+ or I should say the overall market climate. As far as the domestic insurance market goes, as we've said over the past couple of quarters, worker's compensation, general liability and many of the professional lines remain very attractive, and we think there are sensible places to be deploying additional capital. On the other hand, aviation, much of the marine market, cat-exposed property, as well as offshore energy are product lines that we are increasingly concerned about and do not see a lot of rational behavior in those parts of the market. Another large product line that we have been talking to you about ---+ or I'd say at this stage it probably goes back to 2013 or so, maybe even earlier ---+ is commercial auto, particularly long-haul truck. We have had our reservations about this product line for a very, very long time ---+ it feels like at least at this stage ---+ and the lack of rational behavior that existed in the marketplace. While we have not come out of the woods as an industry when it comes to this product line, I think the fact is that it is beginning to get the attention that is required. And we are beginning to scratch the surface as far as the needed action that one needs to take in order to get this line to return to meaningful profitability. Moving on to the international market, it is a bit more competitive; no different than it's been in the past few quarters. One of the things that we've seen over the past few years has been many organizations have been looking to increase their footprint. And some of the international markets that we have been operating in have become more and more crowded. This is not unique. We've seen this happen in the past, and what tends to happen is that it ebbs and flows. Folks develop an appetite to expand their footprint. And over time they realize that it is not so easy to get the critical mass that they need in order to make their economic model work. They begin to revisit their business plan and, in many cases, ultimately retreat. Our sense is, quite frankly, that we may be over the next couple of years approaching a point of inflection with some of the international markets. In addition to that, we'll be getting on to a couple of comments regarding the reinsurance business shortly, but we all know how competitive it's been. And the international insurance markets tend to be a bit more dependent on the reinsurance market, and that is due to the fact that much of the international market uses much larger limits on a day-to-day basis than we typically see in the middle and small commercial market in this country. So consequently, cheap reinsurance has perhaps empowered less responsible behavior. And to that point, both domestically and internationally, we have seen an increasing correlation between areas of the industries that are under the greatest pressure and those that are most dependent on reinsurance. On the topic of reinsurance, certainly, again, a topic we've discussed with you all in the past. The marketplace remains exceptionally competitive. Having said that, it would seem as though the pace of competition seems to be not moving or increasing as quickly as it has over the past several quarters. I don't think that we have necessarily touched bottom, but it would seem as though we continue to get closer as, again, the pace of erosion is slowing. When we look at the reinsurance market, quite frankly, we are convinced that it is unlikely that the market tomorrow will look like it did yesterday. At the same time, we are hopeful that it will not look like what it appears to be today. Having said that, we do believe that capacity is becoming an increasing ---+ is becoming more and more commodity with every passing day. And ultimately it boils down to the expertise that you can bring from a value perspective to your clients and focusing on clients that actually do value expertise and don't just view you as a commodity. Turning to our quarter ---+ and I've promised <UNK> I would keep this on a very high level and I wouldn't steal his thunder. But I do want to tuck in a couple of quick comments here. Top line came in at $1.57 billion. This is up about 3%. The growth was led by our domestic insurance business, which was up about 6%. Of that 6 points of growth, roughly one point of it was associated with rate. The top-line growth was somewhat offset by our international as well as our reinsurance segments, which were both off, and that was primarily driven by FX. And I will leave the rest of that for <UNK> to touch on. As far as the loss ratio goes, coming in at 60.5%, by and large in line with our expectations. The reinsurance and the international segments both had good quarters or certainly improving some quarters when compared with the corresponding period last year. And the domestic business moved slightly in the wrong direction, and that was primarily driven by non-cat-related property losses. Moving on to the expense ratio, which is certainly something that we have discussed several times in the past. First off, the 33.2% was by and large in line with our expectation. We continue to be pleased with the progress that we make on the domestic front. The reinsurance segment ---+ the internals are flat. The rise that you see in the quarter is due to permissions and related. And <UNK>, I guess you will be going into some of that in some more detail. And then finally on the international front, the tick-up, I think, is in keeping with what we have suggested you would see when we had the discussion about 90 days ago with some one-time expenses associated with some of our operations in the UK. So when you put it all together, the Company achieved a 93.7%, which by and large is right in line with our expectation. We think that the performance of the business is reasonably good at this stage. Having said that, we think some of the obstacles that we have been wrestling with, to date we are getting those behind us. And we are optimistic as to how we are positioned going forward for the fourth quarter, but particularly for 2016. Thank you. Thanks, <UNK>. <UNK>, do you want to take us through the numbers. Okay. Thank you. For the quarter, we reported operating income of $118 million, or $0.91 per share. That's up from $0.80 and $0.81 that we reported in the first and second quarters of this year but below the $1.06 that we reported in the third quarter of 2014, which included significantly higher than average earnings from investment fund. For the quarter, our premiums ---+ our net premiums increased $46 million, or 3%, from a year ago to almost $1.6 billion. As <UNK> said, domestic premiums grew by 6% to $1.25 billion. That was led by 11% growth in worker's compensation business and 8% for other liability business. International premiums declined 5% to $164 million due to the strengthening of the US dollar against the pound, the Canadian and Australian dollar and the Brazilian real, in our case. In local currency terms, international premiums actually grew 7%. That was led by growth in Canada, Germany and South America. Reinsurance premiums declined 7% to $171 million due to the continuing soft market conditions in both the US and overseas. Without the impact of FX changes, they would've declined as well, but by 5% instead of 7%. Our overall pre-tax underwriting profits were up 2% in the quarter to $96 million. The third-quarter accident year loss ratio before cash was 61%; that's unchanged from a year ago. In fact, if you look back for each of the past seven quarters, our accident year loss ratio has been between 60% and 61% throughout that period as pricing and loss-cost trends have generally offset one another. Our cat losses were relatively light again this quarter at $6 million, or 0.4 loss ratio points, down from $15 million in the third quarter of 2014. And on a year-to-date basis, our cat losses were $46 million, or one loss ratio point. We reported favorable deserve development of $15 million in the quarter with modest favorable development in all three business segments. That $15 million is in line with our year-to-date favorable development, which is $49 million. That gives us a calendar year loss ratio after cash and reserve releases of $60.5 million, slightly below the $60.7 million a year ago. Our overall expense ratio for the third quarter was 33.2%. That's down 6/10 of a point from the third quarter of 2014. The domestic expense ratio declined to 30.8%, 3/10 of a point below the third quarter of last year and almost a full point below the full year 2014. On the other hand, the international expense ratio increased 2.5 points to 43.4%. The increase was due to both the decline in premium volume as well as continuing costs relating to Solvency II and the integration of our UK company with our Lloyd's syndicate. And we do expect those costs to decline beginning in the fourth quarter of this year. Reinsurance expense ratio increased by 5 points to 39.0%. The increase is attributable to the structured treaties that incepted earlier in the year. I mentioned those in the second-quarter call. These treaties have higher than average commissions, including profit commissions that are more than offset by lower loss ratios. And if you look at the expense ratio, the noncommissioned portion of the reinsurance expense ratio, it was unchanged from a year ago at roughly 10 percentage points. That gives us an underwriting profit of $96 million for the quarter and a GAAP combined ratio of 93.7%. Turning to investment income, our investment income was $133 million this year ---+ this quarter, compared with $179 million in the third quarter of 2014. Earnings from our core portfolio, including arbitrage trading, declined 8% to $110 million due primarily to lower reinvestment rates available for maturing bonds. The average bond yield for the first nine months of 2015 was 3.3%, down 2/10 from 3.5% in 2014. Income from investment fund were $23 million a quarter, which is an annualized rate of return of 8%. That compares with $59 million in investment income a year ago to well above averages that quarter from our aviation and real estate funds. Realized investment gains were $54 million in the quarter and were primarily due to a sale of a portion of our investment in health equity. At September 30, 2015, the average credit rating for the fixed-income security portfolio was AA minus. And the average duration was 3.2 years, which is a full year shorter than the duration of our loss reserves. Aggregate unrealized after-tax investment gains were $227 million at September 30, 2015. Our overall effective tax rate for the quarter increased by one point from a year ago to 33.3%, and that's due to higher taxes in certain US states as well as a couple of non-US jurisdictions. Cash flow from operations was $620 million for the first nine months of 2015, compared with $646 million in 2014. And in the first nine months, we purchased 4.5 million shares of our stock for an aggregate cost of $224 million. All in, that gets us to net income of $153 million and after-tax ROE of 13.3% and an ending book value per share of $37.18. Thanks, <UNK>. Well, these are especially interesting times. We really do focus on risk-adjusted returns. It means we do some things that some of our competitors don't do. We don't focus purely on accounting results because we are focused on creating shareholder value more than reported earnings, per se. That means we start businesses instead of buying them because it's a better economic return. It's not a better accounting statement return. We are maintaining the quality of our investment portfolio and keeping a short duration because the risks of an insurance company are doubling down if inflation comes. You get hurt with your loss reserves. And if you extend the maturity and duration of your investment portfolio, you are effectively are doubling down. So we've chosen to reduce that risk, the one that we can control. We haven't lowered the quality of our investment portfolio because the risk of an adverse economic turn will have a general adverse view on our business. Therefore, we've chosen not to take the risk. So we're constantly looking at the risk side of how we manage our business because all of our employees are owners. It's the biggest single element of our profit-sharing plan. Clearly, the management of the Company views that as how they bet on their future. We continue to look out and see lots of volatility and uncertainty in the future, but we have a lot of confidence in the things that we see. For every problem, for every change, it creates new opportunities. And we think having the smartest people and the best underwriters and the best teams of people continues to give us a competitive advantage. <UNK> spends a substantial amount of his time out talking to new teams, constantly trying to find the best teams to do particular things, whatever they may be. They can be small niches or big chunks of opportunity, but we are constantly out there looking. And what we really are is a large group of small niches. And we do it in a way that we can compete administratively and cost-wise. We don't look like the people we compete with even though the numbers claim to be the same. So we're very excited. We think the future is coming along today, and we think that the numbers are moving in the direction we like. Clearly, it's a cyclical business, but we think we are well-positioned. And we're constantly investing in that future. It probably costs us $20 million a quarter each year for the new things we've been investing in. Things we invested in three years ago give us a positive return; the new things that we are spending money on cost us money. We think that's how you build the business for the future. We think we're going to have a better business in the future than we have today, and today's business is better than yesterday. So I'm happy to answer any questions. Patricia, we'll take questions. Well, we know that the energy prices are down and that we're going to probably have a small loss there, but we haven't released that number yet. We normally put that in our 10-Q filing. And our net position in our energy fund as it relates to our overall fund has continued to diminish as a percentage of our funds. So it's a smaller and smaller number. But when we file our Q, we'll announce those funds that we know already. It's the same considerations we always give. We consider how to best use the capital owned by our shareholders, which is either buying back stock, paying special dividends or expanding the business. And we are always looking at the balance of those things and the cost to balance ---+ of the balances, the price of the shares, the availability of the shares and opportunities that we see. Okay. I thank Mike [McDevitt] for that. Have a wonderful day.

2015_WRB

2015

AIR

AIR #I would expect that, through the balance of the year, we will continue to see improving results. And ---+ In the back part of the year, <UNK>, right. Not to our expectations, no. That's correct. (multiple speakers) We expect to be positive in Q2. Yes. We expect to do better. I think you are going to see an improvement, a steady improvement, in Q2. And then hopefully, you see more meaningful improvements in Q3 and Q4. And what I was really referring to, Rob, is more from a historical perspective. I think we get into historical return levels by Q3. Yes. Correct. Yes. And ---+ yes, correct. Just we're seeing ---+ just so everyone is clear. We are seeing strength in our businesses in the commercial markets. We see opportunities in the Airlift market. We have softness in the Defense spending for our Mobility businesses. That would be, I would say, a general overview of our businesses And we would expect that the supply chain business will continue to improve, as well as the MRO businesses. And we see a little bit of choppiness, though, in the Airlift business. We feel better about that once we have the Falklands contract operating, versus spending money to get ready for it to operate. I think that's a good way to look at it. Yes, we've predicted close to bottom before. And ---+ And we've surprised ourselves. So what I would like to do is just wait and see how the government reacts to all the different skirmishes and activity around the world. Right now, they have been very passive, as you know, and that has impacted our business. If, in fact, troop levels stay steady or strengthen, and we actually put troops ---+ move troops around, then it should spell opportunity for our business. But we have been a little bit surprised at the softness, and don't know precisely if we are at bottom. But maybe <UNK> <UNK>, maybe you can give a little bit more color on that, if you don't mind. <UNK> <UNK>. Thank you very much. Thank you for your attendance today, and thanks for your very thoughtful questions. We remain very excited about our business. Feel really good about our position, feel really very positively about our balance sheet, and the opportunity pool that we are looking at. So look forward to our next call, and hope everyone has a great day. All the best.

2015_AIR

2016

ANDV

ANDV #Thanks, <UNK>. Yes, so on TLLP, two key points. One is the organic growth opportunities. We're very focused on driving organic growth in the business. We've mentioned that it's been a little bit slower than we expected. We have ---+ we actually have a reasonably good portfolio of ideas that we're looking at right now and we are encouraged by those. So we will talk more about those as they develop in that but that organic growth is a key part of Tesoro Logistics growth. It's actually our preferred way to grow the Company. The second is around acquisitions and the market for acquisitions is probably hasn't changed a lot of what we've seen over time. So the ---+ there's a number of things that we're looking at that we're encouraged by so the ---+ both the combination of the organic growth and the acquisitions look very encouraging to us. Was that a question or a statement. I'm sorry. Okay. The types of acquisitions that we've talked about today, and I mentioned in my comments we see opportunities in the midstream space and some other smaller type opportunities. And we think that we have the appropriate cash generation to allow us to do both. Obviously, if new opportunities come up, we continue to rebalance those and do which ones create the most value for shareholders but I think we're well-positioned right now, when you look at where we are with cash today, what we said about drops, and how we ---+ what we told you about how we expect to operate in the second half that we've got plenty of flexibility, <UNK>. Hi, Faisal. Yes, <UNK>, it's <UNK>. No, you're right; that's an excellent point. If you look at ---+ although, a lot of the growth within our Logistics business has come from organic growth and acquisition. We have done, on a relative basis, a pretty substantial amount of drops in the last several years and I think that also goes back to the question asked earlier about <UNK>. But you're right. If you want to go back and look at our business on a non-drop basis to look over time, we've said about half of the earnings or half of the revenues from TLLP, maybe a little bit north of that come from Tesoro. And so if you want to go back and look at it on a consistent basis, you would need to do that. <UNK>, it goes back to some of the earlier questions about the overall dynamics of additional pipeline capacity coming on in the ---+ I mean, one of the pipelines, the DAPL pipeline was well-established and was always going to come on. The other pipeline maybe was somewhat questionable. So we don't think it has a substantial impact on what happens up in North Dakota, that volumes that will move off of the DAPL pipeline into the Gulf coast were going to be there and then what's important for us is that because of the way that we collect and move barrels up there we feel we are well-positioned to be able to meet our demand for crude oil to take it to the West Coast. I don't know that much about Burnaby, to be quite honest with you so, we look at everything. Like we've always said, we feel like we understand our geographic area reasonably well and we know where there's opportunities that would fit into us. Right now, it's actually very quiet so we would just look at opportunities as they became available. If you're talking about our guidance for the third quarter, it's a very good indicator of what we expect to happen for Q3. Yes, thanks for the clarification. The point that I made regarding what's happening in 2016 relative to what we stated at our Analyst Meeting, part of what we said there was when we looked at how the system ran in 2015, primarily impacted by the work stoppage in that we experienced, the recapture that ---+ in 2016, was worth that $500 million to $600 million and the $100 million that we reduced that by is a reflection of what happened in the second quarter. Yes. We'll capture a lot of that. I would suspect that, by the end of the year, we will have captured all of it. Thank you. That's all right. All right. Thanks <UNK>. Hey <UNK>. As we said before, as we look over the next several years at potential marketing acquisitions, they would need to come from lower-cost sources of capital, as we've talked before. So as we sit here now and look today, it wouldn't ---+ not be our priority to use the types of cash that we talked about on call today to do any material marketing acquisition. The smaller ones potentially but I would not think about marketing acquisitions as a large use of the type of cash flows that we generate from the current portfolio. Yes, I would just add to <UNK>'s comments, as we look forward, we are absolutely committed to taking a portion of our free cash flow and most of it goes back into the big refining projects that we're working on right now. And so we are, one, those ---+ the nature of those projects are very, very valuable to the Company. And so as we go back in, for example, the Los Angeles Integration Compliance Project, that project, I think we said is somewhere around the $450 million capital spend amount and generates over $100 million of EBITDA. And more importantly, provides other benefits like the reduction in CO2 and things like that. That it is a very impactful use of capital. And so we are committed to take a portion of our free cash flow, reinvest it into business into very high returns, value-adding projects and then have that rest of that free cash flow available to do as we've done in the past and make it available to return to shareholders. Thanks, <UNK>. Good talking to you.

2016_ANDV

2016

HR

HR #Yes. <UNK>, the spreads we are seeing some differentiation between our on and off, but generally across the board they've been strong. If you look over the last 12 months, I believe we've been averaging about 4.8% for our on campus and about 1.3 % I think it was for our off-campus. This past quarter with having everything be positive is a great step forward in terms of something we've been talking about for the last year or so of really trying to adjust the tails of the curve and being able to get rid of those, those releasing spreads that have been negative really helps to drive your average over time. And there obviously there can be certain markets where in any particular time you might be getting some better results. We actually had I think it was about eight or nine different markets this past quarter where we had double digit cash leasing spreads. So we think that that's a positive indicator of how we're able to drive those cash leasing spreads across the country and not just in one or two specific. <UNK>, I would add just this past quarter as an example, that range was basically zero to 33%. So it's a broad range but the key as <UNK> said is very few, down at the low end, and no negatives. And it's that distribution that really for us ---+ obviously we don't expect 32% very often, but, those are unusual circumstances, but very consistently we're seeing, as <UNK> said, double digit in multiple markets, many campuses. I think, victim <UNK>, if you really think about the portfolio, we're obviously getting some boost this year as we continue to see some lease up in the development properties, which are now approaching the same as the rest of the portfolio at nearly 87% occupied. But I think we see sort of a more normal level is still two to four but probably as you're pointing out it's more three to four is kind of where we can expect to be. Our goal, much like <UNK> described on the cash leasing spread is within the portfolio to have that same portfolio approach of looking at the tails and saying what's driving the upper end of our performance on the NOI level and the revenue level growth ---+ revenue growth level and then what's dragging us and manage the portfolio that way and kind of eliminate the bad tails and increase the good tails and move that average over time. So I think that's kind of how we view it. But three to four is probably a reasonable range in the near future beyond kind of the development boost that we get. You know, <UNK>, I would say there's obviously a number of large portfolios that have been sort of circulating out there. Other folks have talked about them. Like others, that's really not something we go after. We may find some portions of those portfolios that are attractive but in general we're not interested in those $500 billion portfolios. I would say that right now what we're seeing is just a healthy flow of individual deals. Sometimes it's one deal, maybe two anywhere $20 million to $80 million, or $100 million and for us it's just a matter of figuring out the fit weapon, does the price work. Is the value there. Is the growth profile there. So I would say for us doing two, three, $400 million a year, that's very manageable. I think beyond that you have to kind of move into a whole different category of bigger deals that are just not of the same quality. For us it's healthy volume of what we're after and easily abating a reasonable pace of $200 million, $300 million, $400 million a year. Yes. The quarterly spend that you see, <UNK>, does bounce around and it is up a little bit this quarter. I would remind folks that number is what's spent or accrued to be in that particular period. That may relate to deals that were struck three, four quarters ago that are on - going build out CapEx projects, TI projects or deals that are taking occupancy in a couple quarters. So there's kind of a disconnect between the rate and that's being spent in the quarter versus what you're committing to on the leases that you struck during the quarter. And so I think that's one disconnect you have to kind of watch and that's why that spending will bounce around. We kind of bounce between $8 million and $14 million a quarter on second generation TI. We don't feel like we'll be out of line with our guidance for the year. When you really get down to what are we committing to go on a per square foot per lease year basis, for us on renewals we're spending about $4 on that. That hasn't changed much at all. It's almost flat from 2015 versus what we've been done so far in 2016 and then on renewals that number is about $1.50, which is not a big change from 2015 either. You blend those together it's about $2.18 a foot per lease year in the first half and all of 2015 we spent $2.19 per foot per lease year so really have not seen a big uptick. It's more just about sort of the nature of spending patterns bouncing around, depending on the quarter. Yes, sorry. Exactly. Blends to that $2.18. The leasing volume certainly impacts that. I would say, just if you think about it this way, in the last 12 months if you take second generation TI commissions and CapEx, if you will, if you look at the last 12 months, that number is $40.4 million. That's up 3% over the prior 12 months of $39.1 million. So, again, not a huge change. Maybe if you go back to [13] it's up a little, a little more than that, but that's right at the midpoint of our guidance for those items for this year. In terms of the reposition, and you're right, it does ---+ it has stayed kind of around that million square feet for a while. And one of the things I will point out on that, it has to do with kind of our definition of same store and the fact that we're looking at trailing 12 month basis. So once an asset has reached occupancy above 60% and positive NOI, it needs ---+ it stays in that reposition for eight quarters before it goes back in. So there are actually some properties inside of the reposition that are already in what we would call back into a stabilized level but have yet to move back into same store just because we're waiting on the time period because we don't want to show an accelerated growth once you put it back in same store, so trying to be cognizant of that. In terms of just in general, yes, we do look at the breakdown of those assets. Some of them we do look at as long-term holds and we have done some work as I mentioned many are ready to move back into the same store. There are some that we are looking at potentially disposing of. We have sold some over the last year or two out of that bucket of properties and so, it's a mixture kind of between the hold in it. No. Nothing of concern. No significant space that we're concerned about there. I feel very comfortable with the renewals we have. Sure. I did touch on that. There's two projects. The large one is a new development that is a $62 million budget. 140,000 square foot MOB. We have a commitment for 44% of the building so far and there's a lot of planning underway that we think will take it over 2016 near or around the time we start construction early next year. So that's kind of that general preleasing level. And then, on the other project which is smaller and nine plus million dollar budget, it's really a redevelopment and an expansion of the building we bought last year, that's a 100% prelease. So high levels of leasing there with yields that are in the seven to mid-seven range on those. In terms of additional development, I would say, we've certainly talked about another development in Seattle that's sizeable with a $60 million plus, $67 million budget. That's something that could probably start probably middle part of next year, kind of depends on preleasing I think will sort of see how that goes as we get closer here but we're well underway on planning designing and getting the right various entitlements we need. So that can be another project in the near term. Certainly, our team, as we talked about earlier sort of activity and interest inquiries from health systems even some development partners that we've worked with before talking about some new development. So I think we see a healthy pipeline beyond what we know that we plan to do in the next 12 to 18 months or at least get started. So it's not unlike the acquisition pipeline just a very robust shadow pipeline if you will. Sure. It's ---+ we don't have an absolutely threshold but I would say, case by case but generally a bare minimum for us would probably be something around where we see NOI breakeven which typically is 35%, 40%, 45%, 50 plus or minus is probably a good way to think about it. But again, it's case by case. There's one in Seattle that we haven't started that sort of in the shadow pipeline. That's one where unbelievably tight market and a lot of big users that need space. So we have a lot of confidence there we would like to obviously see some commitments, a lot of discussion, specific discussions before we get started. So, again, maybe lows of 35%, to 40% but. . But and a lot of times the demand is coming from the hospital. That's the candle as to get this project started. So, they often will have one or two or three identified needs. For example, <UNK> mentioned you have 44% commitment on this one out in Seattle with indications that they could go up to 60% that's because they are still doing their programming and their planning. We certainly got enough I think to do the initial work but what we have seen as this hospitals as the process moves along their space needs increase to their finding ancillary physician groups who want to be a part of this project and are being added. So a lot of this is being demand driven and were just meeting that demand. Also as a process of risk management to some degree if you ring out all of the risk and development, you have an acquisition with a lot more risk. So, to some degree its where is that inflection point that you reward matches the risk and so, closure on campus and you have the affiliation, you probably have the opportunity and less risk and better returns if you're in the 35% to 45% range whereas if you do a big on campus and you wait until you get a 70% or 80% lease, just an abstract comparison then you're down in very low acquisition rates. Right. Thank you everyone for being on the call. And any follow up most specially around today. So, we'll be please to deal with any follow up calls and otherwise, we will be on the call in November. So, have a good rest of the summer. We'll talk to you then, good day.

2016_HR

2016

FSS

FSS #Good morning and welcome to Federal Signal's second-quarter 2016 conference call. I am <UNK> <UNK>, the Company's Corporate Controller. Brian Cooper, our Chief Financial Officer, is unable to participate in today's call as he is recovering from a sports-related injury. Brian has had a successful surgery and is expected to make a full recovery. While recovering he is still performing his duties as our CFO and he is currently expected to return to the office in August. In Brian's absence I will be presenting on today's call alongside <UNK> <UNK>, our President and Chief Executive Officer. We are also joined today by Svetlana Vinokur, our Vice President, Treasurer and Corporate Development. We will refer to some presentation slides today as well as to the earnings news release which we issued this morning. The slides can be followed online by going to our website federalsignal.com, clicking on the investor call icon and signing into the webcast. We have also posted the slide presentation and the news release under the investor tab on our website. Before we begin, I'd like to remind you that some of our comments made today may contain forward-looking statements that are subject to the Safe Harbor language found in today's news release and in Federal Signal's filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with US generally accepted accounting principles. In our news release and filings we reconcile these non-GAAP measures to GAAP measures. In addition, we will file for Form 10-Q later today. I'm going to start today by addressing our financial results. <UNK> will then provide her perspective on our performance, current market conditions and our outlook for the remainder of 2016. After our prepared comments <UNK>, Svetlana and I will be prepared to address your questions. Our consolidated second-quarter financial results are provided in today's earnings release. The second-quarter financials include one month of operating results of Joe Johnson Equipment which we acquired on June 3. Please also note that historical and current-year information presented in the release excludes the results of the Fire Rescue Group which was discontinued in connection with the sale of the Bronto Skylift business that was completed in January this year. Consolidated net sales for the second quarter were $172 million, down 16% compared to the prior-year period and operating income of $14.3 million was down from $29.2 million last year. This quarter's reported operating income included $0.4 million of acquisition and integration-related expenses. Consolidated operating margin was 8.3% compared to 14.2% a year ago. Income from continuing operations was $9.4 million for the second-quarter compared to $18.2 million last year. That translates to GAAP earnings of $0.15 per share which compares to $0.29 per share last year. On an adjusted basis, EPS for the second quarter this year with $0.17 which again compares to $0.29 per share last year. Orders reported in the second quarter were $187.3 million, reflecting a 7% improvement compared to the prior-year period and a 38% increase compared with the first quarter of 2016. The increased orders were largely driven by orders acquired in the Joe Johnson Equipment transaction which we completed at the beginning of June. We ended the quarter with a consolidated backup of $150 million which was up $14 million or 11% from the end of the first quarter. Importantly, our financial condition continued to be extremely strong, facilitating investments such as our acquisition of Joe Johnson Equipment as well as returns to shareholders in the form of dividends and share repurchases which exceeded $21 million this quarter. As you can see in our group results, the lower demand from industrial market that we began to see in 2015 has translated into reduced operating results in Q2 of this year, especially when compared to a very strong Q2 last year. Sales at ESG were down 19% versus last year primarily due to decreases in shipments of vacuum trucks and street sweepers. Lower shipments of vacuum trucks are tied primarily to ongoing softness in oil and gas markets whereas the reported reduction in street sweepers sales is associated with fewer large fleet shipments when compared to the prior-year quarter. On this lower sales volume ESG's operating income dropped to $14.9 million. ESG's operating margin for the quarter was 12.5%, down when compared to a record 19.9% a year ago. Orders at ESG were up 18% year over year benefiting from the Joe Johnson acquisition. Excluding the effects of the Joe Johnson acquisition, ESG orders were up $5.7 million or 6% compared to the prior-year quarter and $28.6 million, or 36% compared to the first quarter of 2016. While demand and order flow from our municipal markets continues to be solid industrial markets remain soft. <UNK> will go into more detail on some of the contributing market factors and impact in her remarks. At SSG sales were down 10% compared to last year's quarter reflecting lower sales of industrial products that related to impacts from oil and gas market and softness in industrial markets generally, partially offset by improved sales into global public safety markets. Our US public safety business also delivered improved operating margins and operating income for the quarter. SSG's operating income for the quarter was $6.6 million compared to $7.3 million last year and operating margin was consistent with last year a 12.5%. Orders at SSG were down 14% mainly due to lower orders for industrial products from international markets. As we have noted previously most of SSG's business normally operates with relatively low backlog. Corporate operating expenses of $7.2 million were largely unchanged from a year ago with increases in professional service fees incurred in connection with the acquisition being largely offset by lower employee compensation cost. Turning now to the consolidated income statement, the reduction in year-over-year sales translated to lower gross profit. Gross profit was also negatively affected by a $0.5 million charge, non-cash charge related to purchase accounting. This was the additional cost of sales during the quarter after acquired JJE inventory was stepped up to approximately its sale value as part of the initial purchase price allocation. These step ups will affect our earnings but not our cash flow for the next couple of quarters. On this basis consolidated gross margin of 26.1% for the quarter was down from 29.6% last year. Selling, engineering, general and administrative expenses of $30.3 million were down 3% compared to the prior-year quarter. During the current-year quarter we also incurred $0.4 million of acquisition and integration expenses in connection with the Joe Johnson transaction. Those costs primarily consisted of legal and professional service fees. All of these factors roll into the Company's $14.3 million of second-quarter operating income. Other items affecting the quarterly results include other income of $0.3 million largely related to foreign currency transactions and a $0.2 million reduction in interest expense resulting from our lower average level of debt. Tax expense for the quarter was down as a result of our lower income with an effective rate for the quarter of around 34%, which was slightly lower than the 36.4% in Q2 last year because of a small discrete tax benefit recognized in the quarter. Our full-year effective tax rate for 2016 is currently expected to be about 35%. From a cash perspective we are projecting a cash rate of between 15% and 20%. The difference between our effective tax rate and our cash tax rate relates to the use of deferred tax assets to reduce our tax payment. These assets primarily consist of net operating loss carryforwards and tax credit carryforwards. On an overall GAAP basis we therefore earned $0.15 per share from continuing operations in Q2 compared with $0.29 per share in Q2 last year. To facilitate earnings comparisons we typically adjust our GAAP earnings per share for unusual items recorded in the quarter in the current year or the prior year. In the current-year quarter we made adjustments to GAAP earnings per share to exclude the purchase accounting effects and acquisition expenses that I just discussed. On this basis our adjusted earnings from continuing operations for the second quarter was $0.17 per share compared with $0.29 per share in Q2 last year. Turning now to the balance sheet and cash flow, we generated $10.6 million of cash from continuing operations in the quarter compared to $30 million during Q2 last year. The comparability of operating cash flow between the current-year and prior-year periods is adversely impacted by the non-cash settlement of $11.4 million of accounts receivable that were due from Joe Johnson Equipment as of the acquisition date. As I mentioned earlier, we completed the acquisition of JJE for an initial payment of $96.9 million during the quarter and also received additional sale proceeds of $5.7 million relating to the sale of our Bronto Skylift business that closed in January of this year. With total debt of $67 million and cash on hand of $39 million we ended the quarter with $28 million of net debt. Availability under our credit facility at the end of the quarter was $240 million and our leverage ratio was low at 0.7 times. We are obviously in a strong financial position. At this point we have significant flexibility to invest in organic growth, pursue acquisition opportunities and return value to shareholders. On that note we paid a dividend of $0.07 per share during the quarter amounting to $4.3 million and we recently announced a similar dividend for the third quarter. We also increased the level of our share repurchases during the quarter, spending $16.8 million to buy back approximately 1.3 million shares at an average price of $13 per share. We typically approach share repurchases opportunistically and this quarter's repurchase activity brings total repurchases in the first half of 2016 to $33.1 million. That compares with share repurchases of $10.6 million in all of 2015. We had about $36 million remaining under our share repurchase authorization as of June 30. That concludes my comments. And I would now like to turn the call over to <UNK>. Thank you, <UNK>. I'd like to start by providing some color on the second quarter. Our results for the quarter end this year continue to reflect a tale of two markets. Our municipal markets, which constitute about 60% of our revenues, remain solid. It was pleasing to see us report an increase in total orders which was largely driven by the JJE acquisition. But even after excluding the effects of the JJE acquisition, ESG orders were up about 36% on a sequential-quarter basis and up almost 6% versus the prior-year quarter. Much of that was due to steady performance in municipal markets and we are optimistic about a couple of near-term opportunities for larger fleet orders. While there is some caution in municipal markets in any election year, we continue to see steady demand in the US as well as in Canada. The growth and improving profitability of our US and European public safety systems businesses which are part of our Safety and Security Systems Group were also encouraging. These businesses make lightbars, sirens and related products for municipal customers in the police, fire and heavy duty markets. They continue to gain share and benefit from a number of new product introductions in recent years. While municipal markets remain solid our industrial markets continue to be impacted by the lingering effects associated with the downturn in the oil and gas market. Within our Environmental Solutions Group an overhang of used equipment at reduced prices continues to impact demand for the new equipment we sell from customer service being oil and gas and other adjacent industrial markets. As you have seen this has impacted ESG's revenues and margins. As a result, incoming industrial order activity has remained low with the biggest effects occurring in our vacuum truck line. As we indicated last quarter, we are uncertain how long the influx of used equipment may continue affecting our demand but we are laying our plans to manage through softness that may persist well into 2017. Within our Safety and Security Systems Group industrial orders, particularly orders for our emergency warning systems business, have also been adversely impacted by a number of large projects being canceled or delayed. We're not losing these orders, there just aren't as many opportunities due to the ongoing uncertainty in the industrial oil and gas market. We are sizing or business activity to match current demand and have taken actions to reduce our costs including early retirement, reductions in force, expense control and cost savings on direct material. While we are focused on cost management I also want to emphasize that we continue to invest in top-line growth in key opportunities for the future of the business. These investments include sales resources and the development of additional new products, for example an improved street sweeper design. We are also working on a line of new Jetstream accessory products and we have introduced our new Tier 4 compliant street sweepers ahead of many of our competitors. In addition, we are moving forward with new offerings for the utility market. We have a dedicated and focused team working on the launch of a line of tools for hydroexcavation work and our ParaDIGm purpose-built vacuum truck designed for that market. The ParaDIGm went into full production in the third quarter and while we expect it will take time to earn an expanded position in its market we are encouraged by the initial level of interest in this product. Within our Safety and Security Systems Group we are launching a redesign of many of our industrial product offerings and are adding additional engineering and product manager resources to support a number of new product development projects. Our balance sheet continues to be strong which helps us to navigate through our near-term market challenges, continue our needed investment and return value to shareholders. In the second quarter we paid over $21 million to shareholders in the form of cash dividends and opportunistic share repurchases. That is our highest cash return to investors in a single quarter in almost 15 years. So far this year we've returned almost $42 million of value to shareholders. This time last year we talked about our appetite for adding at least $250 million from acquisitions to our revenue run rate by 2018. With that goal in mind, we were delighted to complete the acquisition of JJE as a meaningful step along that path. Looking further down the road, we continue to seek additional acquisition opportunities. Like Joe Johnson, future acquisitions will need to meet our acquisition criteria and are likely to include businesses with recurring revenue or product lines that leverage our channels or manufacturing capabilities. I'd like to spend a few minutes on the strategic rationale behind the Joe Johnson Equipment acquisition. As <UNK> mentioned we closed the transaction at the beginning of June and our integration team is continuing to make great progress. Joe Johnson is a strong municipal equipment distributor that operates in four areas of business starting with new equipment sales. Although about 90% of their new equipment sales are to municipal customers we plan to use their platform to increase our industrial sales in Canada. They have a strong parts and service business that nicely complements Federal Signal's existing industrial platform in the United States. We aim to leverage their equipment rentals and used equipment business. Rentals and used equipment are additional offerings that will allow us to serve additional customers in both industrial and municipal markets, helping us reach more of the market for Federal Signal equipment. We believe that there are significant opportunities in all of these areas. Now that we've completed the transaction, I also want to take some time to go into the detail on some of the financial reporting implications of acquiring a significant customer and how these considerations impact our outlook for the year. As we noted in February when we announced the JJE acquisition and on our first-quarter earnings call, a likely accounting implication resulting from the JJE acquisition would be a change in the timing of revenue and profit recognition that should normalize over time. With the closing of the acquisition in June, the initial response to our new rental equipment offering has been encouraging. Therefore, we are considering accelerating some investment in the rental fleet, both in Canada as we execute on our strategy of increasing sales of our industrial products as well as in certain strategic US geographies. This temporary deferral of profit results from units transferred to JJE that have either not been sold through to end customers or have been placed in the rental fleet. Previously we would recognize revenue and profit in both cases when the units were shipped to JJE. Now under a common ownership model, those transactions are considered intercompany sales and do not result in immediate profit recognition. Specifically for the units transferred to JJE for subsequent sale to an end customer the associated profit it is not recognized until units sell through. This is more of a short-term profit deferral as those units typically flow through to the end customer within 60 to 90 days. However, for units transferred to JJE for placement in a rental fleet, the profit deferral may be long term as the upfront revenue and profit recognition is effectively replaced with rental income and the profit on the eventual sale as a used piece of equipment. To give you an idea of how the profit deferral works I thought it might make sense to walk through an example. During the month of June we transferred 26 units to JJE. Of those 11 were transferred in anticipation of the sale to an end customer whereas the other 15 units were intended to be placed in a rental fleet primarily in response to demand for rental offerings from our dealer and direct sales force in the US. Prior to the acquisition of JJE, upon shipment of these units to JJE in June we would have recognized approximately $1.8 million of gross profit with a corresponding amount of revenue. However, now that we own JJE these shipments are intercompany transactions and we did not recognize any revenue or profit in Q2 for these sales as the units destined for end customers were not yet sold through to the end customers before the end of Q2 and the units added to the rental fleet would have only generated a month of rental income. In subsequent months we expect to see the reversal of previously deferred sales and profit offset by the addition of new deferrals. For example, of the $1.8 million profit differed in Q2, we expect to recover about half of that during the remainder of 2016 as units are sold through by JJE. The other half will largely be deferred until the equipment is sold out of the rental fleet, a period we expect to be about three years. As a consequence, we expect this should normalize over a period of about three years. With that I'd like to move on to our earnings outlook. As we mentioned, we continue to benefit from relatively steady municipal markets and we remain confident in our businesses and markets for the long term. However, softness in oil and gas and related industrial markets continued into the second quarter. With our strong balance sheet and ongoing actions to bring our construction in line with current demand we are well-positioned to work through the industrial headwind. We are committed to pursuing additional strategic acquisitions and maintaining appropriate levels of investment in our sales efforts and new products to build momentum for future growth. The ongoing softness in industrial demand has weighed on our orders and revenue outlook during the first half of the year, particularly in our businesses that serve oil and gas-related end markets. And we do not believe these markets will recover meaningfully during the second half of the year. On a positive note, some of this decline has been offset by healthy municipal demand, our cost reduction initiatives and sales of newly introduced products. When we provided our outlook for 2016 early in the year we mentioned the likely accounting implication of the JJE acquisition on the timing of revenue and profit recognition which I just described should normalize over a period of about three years. We now expect this temporary profit deferral could reduce our 2016 EPS outlook by up to $0.05. Considering these factors, we are adjusting or 2016 EPS outlook from a range of $0.70 to $0.80 to a new range of $0.65 to $0.75. With that I think we're ready to open the line for questions. Operator. Yes, <UNK>, this is <UNK>. I will take this one. Obviously the cash flow in the first of six months of the year, especially as we just presented, it is impacted by the transaction as we described and the associated non-cash settlement of the receivables from JJE. The working capital that we have is if you look at it as a percentage of sales, it is distorted this quarter largely because of the acquisition as well as the inventory and rental fleet step-ups in value. So that is impacting it for the quarter. We've only had one month of results of JJE. So we expect that to normalize over time, certainly later this year. And we expect that our cash flow is obviously going to pick up in the second half of the year. I think pricing remained pretty stable. It's a combination of both mix and volume. The hydroexcavation trucks that we sell into the oil and gas market have higher margins. So we're feeling the impact of that going forward. But the encouraging news is that we've talked about the improvement in ESG orders, particularly on the municipal side, and they tend to have not as good of margins as the hydroexcavation trucks but healthy margins. On the new product development side we're very focused on our innovation initiatives. Particularly on ESG side we introduced a new product to the utility market and we plan on introducing additional products into that market. We also introduced our recycling product and our trailer jetter product earlier this year. On the SSG side we're undergoing some redesign of our industrial floor products and we continue to benefit from the new products that were introduced on our public safety system side. So as we move forward we're very focused on how do we utilize our existing technologies to open up new market opportunities for us or is there opportunities for some of our existing products in new geographies. Not always. But we think that we're able to differentiate our product. And we've been ---+ we're maintaining pricing. Sure. You know, we have Joe Johnson and one of our Jetstream general manager leading that project. And we have a team focused on the strategic objectives that we set forth behind the acquisition, which is also tied to the earnout that we have previously discussed. And as we mentioned on the call, we have a new product offering, the rental equipment. The initial demand has been encouraging there as we discussed. With respect to used equipment we've done cross-training because we've introduced our Jetstream, our Guzzler and Westech products to Joe Johnson's Canadian salesforce. So they've been trained on those products and we plan on leveraging their service centers and their sales teams to increase sales of those products. Then on the parts and service side we now have aggregated 25 locations across North America that should allow us to better service our products in those strategic areas where our customers reside. Then we also believe this used equipment offering we've sold some used equipment but we will have more of that available to sell and that will ---+ it's something that thus far has been received very positively. So we're encouraged. We're in the early days. We just closed the transaction about six weeks ago. We're encouraged, though, by the progress we've made today. When we announced the acquisition we talked about an incremental $15 million to $20 million investment in their rental fleet. We have obviously certain internal metrics that guide when we make those investments and the market reaction to the rental offering, both by our dealers that we're going to re-rent to and by the industrial salesforce in certain areas, has been encouraging. So we anticipate that the amount likely won't change but we could be making those investments earlier than we originally thought. <UNK>, this is <UNK>. Yes we have. Obviously we have the rental fleet that is going to be an asset that we're going to depreciate over time. You will see, when we file our Q later today you will see how we're planning to depreciate that, the policy that we're going to apply. So we've thought about it, it's obviously, our D&A is obviously going to increase over time because of the addition of the fleet. So you will get a feel for how we're thinking about modeling it when we file the Q later today. We typically don't break out the results of the JJE is not part of our ESG Group and we don't break out those results. Beyond that to state that thus far, and we're in the very beginning period, it is performing at or better than we had modeled as part of the acquisition analysis. When we think about it we obviously ---+ there's a change now because of the interplay between ESG and JJE now it's a different dynamic to what we previously had before the acquisition. So that's really what is reflected in the deferral impact of up to $0.05 that we reference. We're assuming for the second half of the year that it is going to remain the same with respect to the first half of the year. We are ---+ our internal plans have the overhang that we've talked about bleeding into 2017. Over the last couple of months we haven't seen it deteriorate further. So that's encouraging. But we're not expecting any meaningful recovery for the second half of the year and we believe this overhang of excess inventory will bleed into 2017. We have not had any trials in the first half of the year. We put out a press release, we were successful in getting one of the cases dismissed. We have two trials scheduled, perhaps three depending on the timing in the second half of the year and we're moving forward with aggressively defending those cases. Hello, <UNK>. I think it would be up in the second half of the year mainly because we're going to have the effects of the Joe Johnson acquisition for the second half of the year that wasn't in there in the first half of the year. And we also talked about the increased orders and we tried to break it out for you with Joe Johnson, without Joe Johnson. And we are encouraged by the sequential improvement. Some of them, yes. I mean we're not expecting the mix to change significantly. So we're not expecting to see an increase in, for example hydroexcavators, which are higher margin. So I think there are going to be some impacts with the JJE acquisition which you'll need to factor in, but it should be a stable margin basis now. A lot of it depends on mix. We also have the impact of the JJE acquisition moving forward but we do remain confident in our long-term margin target of for ESG sorry. Sure. We have a number of active projects on the pipeline. We look at our management bandwidth, we completed the JJE acquisition so right now we are focusing more on the SSG side but if something were to pop on the ESG side and we thought it made sense and we had the bandwidth we'd move forward. The areas where my focusing on are other adjacent, we're staying pretty close to the core. Does this acquisition give us access to new geographies, can we leverage channels and market. Are there adjacent markets with new products. Those are all some of the acquisition criteria that we're looking at very closely and obviously acceptable returns. So I would say the pipeline is healthy right now. We're pursuing a number of options. We're looking at the more bolt-on less than $100 million-type opportunities. From a standalone contribution, JJE except for the month of June contributed about $10 million of revenue and just a little shy of $1 million of operating income. If that helps. Okay, there are no more questions. In closing I'd like to reiterate that we are confident in the long-term prospects for our businesses in our markets. We'd like to express our thanks to our stockholders, employees, distributors, dealers and customers for their continued support. Thank you for joining us today and we'll talk to you at the end of the third quarter.

2016_FSS

2018

POWI

POWI #Thanks, <UNK>, and good afternoon. As we discussed on our February call, our expectations for Q1 were tempered by the ongoing slowdown in the smartphone market, particularly in China, and by a short-term inventory correction in consumer appliances after a run of very strong growth in that market. We also noted that orders had recovered in January after slowing in December, but that the looming holidays in Asia made the recovery difficult to interpret. At a high level, the quarter played out largely as expected, with revenues landing in the middle of our projected range at $103.1 million, down 5% from the prior quarter. However, looking more closely at the end markets, the softness in the smartphones was somewhat more pronounced than we anticipated, while the appliance market proved more resilient. In fact, while revenues from the Communications category fell sharply from the prior quarter, the Consumer category grew slightly, as did the Industrial and Computer categories. On a year-over-year basis, Q1 revenues were down 2% overall, driven entirely by the Communications category, while combined revenues from the other 3 categories grew approximately 10%. This growth was led by the Industrial category, which grew in the mid-teens year-over-year, driven by the same broad range of applications and big picture trends that drove our growth in 2017. These include the high-power market, where we continue to see steady growth in renewable energy applications and have seen an uptick in the energy sector with the recent rebound in oil prices. We also continue to see growth in a variety of industrial AC-to-DC applications such as IoT devices, USB power outlets, smart utility meters and battery-operated power tools, where lithium-ion batteries are rapidly replacing gasoline and plug-in motors in products such as lawnmowers, chainsaws, trimmers and vacuum cleaners. The interchangeable battery packs used in these devices require chargers that not only deliver high power, but also, in many cases, can charge multiple batteries at once, meaning high dollar content for Power Integrations. In fact, one such design that has recently gone into production contains several of our high-power ---+ Hiper family ICs and over $4 of total content. In the consumer market, revenues increased mid-single digits year-over-year, despite the inventory overhang in the appliance market. We are benefiting from the rising dollar content in all manner of appliances, which in turn is being driven by multiple sub-trends, including the switch to electronically controlled DC motors, the conversion to LEDs for interior lighting and the addition of displays and network connectivity. It is also being driven by tighter energy efficiency specifications, as OEMs look for ways to deliver all of this new functionality with the same or even smaller power budgets. Power Integrations excels at helping designers meet these challenges. In Q1, we won a new dishwasher design with a major European appliance maker, incorporating three of our ICs, a TinySwitch for power conversion, along with CAPZero and SENZero ICs, to achieve exceptionally low standby consumption. We also won multiple appliance designs with InnoSwitch products in Q1, including air conditioners for major Chinese and Japanese OEMs, a refrigerator for a large European customer and multiple designs for a Korean customer using InnoSwitch3. InnoSwitch products are gaining traction in the appliance market, thanks to their dramatically higher level of integration, which not only brings significant reliability benefits to our customers, but also higher ASPs than earlier products. Turning to communications end market. While Q1 revenues were impacted by the softness in demand from the China handset market, we have seen a meaningful uptick in orders in recent weeks and expect significant sequential growth in the June quarter. In terms of the bigger picture, while adoption of rapid charging has been slowed by lengthy development process for USB PD and a muddle of competing proprietary protocols filling the gap in the interim, we believe there is pent-up demand on the part of the OEMs to move forward with a new charging ecosystem that enables not only faster charging, but also greater interoperability, with devices and chargers able to talk to each other using a common interface and deliver the right amount of power for any charger to any device. Power Integrations has been a leader in the initial stages of rapid charging adoption, and we believe this next phase will favor Power Integrations to an even greater extent, as increasingly complex and powerful chargers will require more sophisticated and higher-value power conversion ICs. Several designs incorporating our InnoSwitch3 products have recently been certified for use with USB PD 3.0 and its latest iteration, USB PD 3.0 with PPS. PPS stands for programmable power supply, that allows direct charging, in which the battery charging power management circuitry is relocated from the phone to the charger, helping the designers solve the thermal challenges associated with pumping more and more power into the phone. We have additional designs going through the certification process, including several with our latest InnoSwitch product called InnoSwitch Pro, with Pro standing for programmable. Introduced just last month, InnoSwitch Pro gives designers a level of control and flexibility never before seen in the power supply market, offering precise, dynamically adjustable, micro-stepping of voltage and current in 10 millivolt and 50 milliamp steps, respectively, along with field programmability through a software interface. The new devices may be paired with microcontroller or can take inputs from a system CPU to control and monitor the power supply. This capability is extremely useful in rapid charging applications, enabling designers to configure a base design for use with any fast charging protocol and allowing highly integrated designs for implementing direct charging with the PPS protocol using USB PD 3.0. The ability to precisely control output voltage and current is also useful for designers of specialized applications with smaller production runs, particularly in the industrial market, as they can easily configure a single-board design for multiple product SKUs using software, either at manufacture or during installation. Turning to near-term outlook. The stronger bookings that we saw in January resumed at a healthy clip after Lunar Year New Year holiday, putting us on track for healthy sequential revenue growth in the June quarter. We are projecting Q2 revenues of $109 million, plus or minus $3 million, with growth reflecting typical seasonal strength in air conditioning, in addition to the recovery in smartphones. With that, I'll turn it over to <UNK> for a review of the financials. Thanks, <UNK>, and good afternoon. Our Q1 results are straightforward. So I will just quickly cover the financial highlights and the outlook, and then we will open it up for Q&A. First quarter revenues were in the middle of our range at $103.1 million, down 5% sequentially. As <UNK> indicated, the sequential decline was driven entirely by the communication end market, where revenues fell by more than 20%. Revenues increased slightly on a sequential basis in all 3 of the other end market categories. Revenue mix for the quarter was 40% Consumer, 36% Industrial, 19% Communications and 5% computing. The consumer and industrial markets each gained 3 percentage points versus the prior quarter, while the Communications category fell by about 6 percentage points. This change in mix was the primary driver of the sequential improvement in our non-GAAP gross margin, which expanded by 180 basis points to 53%, its highest level in nearly 3 years. Non-GAAP operating expenses were $33.7 million for the quarter, about $1 million higher than the prior quarter, driven mainly by seasonal factors such as the resumption of FICA taxes and the comparative effect of the year-end shutdown in the previous quarter. We came in below our forecasted range for OpEx, mainly reflecting the timing of headcount additions and other spending. Non-GAAP operating margin was 20.3% for the quarter. The non-GAAP effective tax rate for the quarter was 6.4%, while weighted average share count fell by about 140,000 shares, reflecting activity on our share repurchase program. All in, non-GAAP earnings were $0.67 per diluted share, down from the prior quarter, but up about 6% on a year-over-year basis. Cash and investments on the balance sheet totaled $258 million at quarter end, a decrease of $25 million during the quarter. We utilized approximately $33 million for share buyback during the quarter, buying back just under 0.5 million shares at an average price of $66 and change. Other uses of cash during the quarter included CapEx of $6.5 million and dividend payments of about $5 million. Inventories increased by $6 million during the quarter and stood at 116 days at quarter end. That's within our target range of 110 days, plus or minus 15. And we expect to remain in that range for the June quarter. Channel inventories ticked higher by half a week, a smaller increase than we typically see in the March quarter, reflecting the fact that inventories were already a bit higher than normal exiting the December quarter. We do expect a reduction in distributor inventories in the June quarter. Looking ahead, we expect second quarter revenues to be in the range of $109 million, plus or minus $3 million, a sequential increase of about 6% at the midpoint. With much of the growth coming from a recovery in communication end market, we expect a somewhat less favorable end market mix, resulting in non-GAAP gross margin of around 52%. Non-GAAP operating expenses should be around $35 million, with the sequential increase driven largely by annual merit increases and headcount additions. Our non-GAAP tax rate should be between 7% and 8%. Share count should decline meaningfully, reflecting continued buyback activity as well as the full quarter's impact of the shares repurchased in the March quarter. Specifically, I expect a sequential decrease of 300,000 to 400,000 shares, depending on the movement of stock price between now and the end of the quarter. And with that, I'll turn it back over to <UNK>. <UNK>, yes, the InnoSwitch Pro is basically a higher level of integration on the secondary side, so that we incorporate more of the functionality that will be required for rapid charging, including USB PD. So the only thing that you need to attach to InnoSwitch Pro is a very low-cost microcontroller that will implement the protocol. And it doesn't matter what protocol it is, whether it's USB PD or a proprietary protocol. So by definition, the ASP is higher, because it incorporates quite a bit more of functionality, such as the ability to adjust the voltage or current in very, very small steps, and also be able to read voltage and current. There's telemetry provided in the other direction, which is very, very useful in very sophisticated charger-type applications and also for industrial applications. As far as the revenue from this product, there's a lot of design going on at this time. We just announced it about a month ago, and it will start ---+ should start generating some revenue in the late part of this year, but it will be more substantial in the next year. Well, the Communications will always be a lower gross margin business, simply because of the concentration of customers. The volumes are very high, and by definition, they will demand lower prices because of competition. Even though we provide something that is very unique and highly integrated, there is always discrete solutions, so we have to be competitive. However, the big difference is ASP. We'll get a lot more per charger than we were getting even 2 years ago. I can't tell you how much it will grow, but I can tell you it will grow. We are gaining share from our competitors. And on top of that, our content continues to grow. It's really shocking to me that even coffeemakers and bread makers now have WiFi. Not quite sure why, but they have them. So we are seeing increasing power levels, more pressure on efficiency to make it so that they can stay within the power budget allocated by energy efficiency regulations. Probably the most important is that they still have to meet very stringent standby requirements. And that standby requirements is expected to get tighter over time. There is a proposal in Europe to reduce it from 500 milliwatts to 300 milliwatts. If that goes through, that puts a tremendous pressure, especially with the added IoT features. I think that will put us in a very strong position with our InnoSwitch products. <UNK>, yes, let me talk about ZTE first. Our exposure to ZTE is very small and we are actually looking at how the rules might apply to us. So we don't have an answer on that. But I can tell you, it's a pretty small impact, if we were to stop shipping. Huawei is a little bit different. We do have a significant business with Huawei. However, there is no ruling on Huawei. So until they have a ruling, I don't want to prejudge what it's going to be. Beyond that, we have not seen any impact with the tariffs that have been put so far. We haven't seen any issue so far. But only time will tell how that's going to go. I'm sure there are a lot of other companies also worried about this. We keep monitoring, both the Huawei situation and the tariff situation, to see whether it will impact us. Actually, we are seeing the opposite. There is quite a significant shortage of passive components and also high-voltage transistors. And so I think that the pricing pressure will be less. However, we do have a cost pressure because the starting wafers, silicon wafers, the prices have gone up. And it will start impacting us to some extent in Q3 and Q4. That will have a slight negative impact on our gross margin. We are still ---+ we still don't know the exact amount, maybe <UNK> can give you a little bit more guidance on that. But it's not just us. Everybody is seeing a tightness in supply of starting wafers. But more important, there is a tremendous tightness in passive components and the transistors. Which in some ways will help us, because we have invested in capacity. We don't have a capacity problem. We have plenty of capacity. And ---+ but we will have to pay more for our starting wafers to maintain our capacity. <UNK>. Yes, so to add to what <UNK> mentioned on the margin, as you've seen, we have guided second quarter at about 52% for the non-GAAP, because of the mix swing. The mix will continue to be unfavorable as we make and have success in USB PD in Q3 and Q4. And added to that, we will get pressure from the raw material cost going up. So we believe from the 52% non-GAAP in Q2, we will see a further impact downward of, say, about 50 basis points in Q3 and a further 50 basis points in Q4, roughly speaking. And so over the year, I think, give and take, we could average, give and take, somewhere around 51.5%. And <UNK>, just to emphasize, our customers are much more concerned about supply than price declines. I won't say there will be no price declines, it depends on the application, but I think it will be ---+ the price declines this year will be far more subdued than it has been in the past. We are not on allocation. If you notice, we added quite a bit of capacity last year. We invested a lot of capital, which was the best thing we did. Because if we had waited longer, we would have had a hard time getting that capacity. Thank you for the compliments. We had a really strong year on HVDC last year. Our overall growth of the high-power market was over 20%. We are not expecting another strong growth this year. I think it will grow, but probably in the single digits. And that's primarily because of what you said. It's a very, what you call, lumpy market, if you will. The growth comes in spurts. This year, they have delayed some of the installations. So it's delayed to the end of the year. So I don't think this year is going to be, as I said, more than single-digit growth. However, in the long term, we feel it's a really good market. It has a very large SAM. So we think it's going to provide us with growth, in addition to all the other areas in high-power, including wind power and also oil exploration. Oil exploration has come back this year, which has basically gone away for a few years, thanks to very low oil prices. Now that the oil prices have come up, people have started exploring for more oil, especially in the U.S. And we see that also as a driver. Yes, thank you for the question. We are seeing significant interest in our iDriver product, which we introduced recently. This product covers 10 to 100 kilowatts ---+ 100 to, say, 200 kilowatts, which is perfectly suited for cars. Cars typically range in the 80-kilowatt range. And they particularly like our FluxLink isolation technology, which is much more robust than optocouplers, which are currently being used. So we are working with a number of automotive companies. We just finished qualification of that product for automotive market. So we are now engaged, but as you know, it's a long design cycle. But we are very confident that we will get a very good share of that market, as the electric vehicles take off in the next, say, 3 to 4 years. It's hard to be specific ---+ it did a little bit, but not as you much as you can see, because the inventory levels didn't come back down. But if you remember what we had said, it will take a couple of quarters, and that's why we had said. But it did come down a bit, but it increased in some other segments. That's why you saw the overall increase in the channel by about a half week. What we are seeing is that because of the shortages of other components, we are finding that the inventory levels are higher, because quite a few of these distributors provide JIT locations. And they supply our product, but our product doesn't get pulled because they have shortages of other. And that's why on the call ---+ when we did last call, we had talked that it will take a couple of quarters for this inventory to come down. But the sell-through on the Consumer side was actually much stronger this quarter from the last quarter. Yes, having said all of that, we expect Consumer category to grow in Q2, not as much as the Communications category, because that's going to come back stronger after a weak Q1. But the Consumer products will grow because the air conditioning seasonally will be the strongest in Q2, so we expect that will help us with the growth. So first of all, we are not in telecom. Base stations have much higher power than we actually make power supply devices for. However, we used to have a very strong position in residential WiFi networking. And beginning of last year, we gradually moved away from that market because it got very commoditized. And that has been a headwind throughout last year. And it is one of the big components that makes our Communications segment, on a year-over-year basis, weaker in Q1, in addition to cell phones. If you look at the total reduction in Communications, it looks more than cell phone end market slowdown and that's because of the residential networking, which is basically going away. The good news is most of that has gone away. So we'll have far less headwind going forward. So 80% of our Communications revenue now is cell phones. And we have significant exposure to China, about 2/3 of that comes from China. And that's the reason you see the decline we saw in Q1, which is kind of amplified, to some extent, by the networking area also. Yes, somewhere at the end of the first quarter. At the end of the first quarter is when we decided not to take new projects. And then, it gradually started decreasing in Q2, Q3 and Q4, and further in Q1. That\

2018_POWI

2015

GPS

GPS #No problem. Thank you. I'll talk quickly about the e-commerce piece and then I'll hand it over to <UNK> on the other one. So to me the big issue and the big opportunity, and it is both an issue and an opportunity, is the continued growth of mobile traffic. Anybody who is telling you the truth will tell you that it's become probably a majority of their traffic growing very, very fast. And so we are really aggressively focused on making sure that as our traffic pivots from a desktop or a laptop or even a tablet onto a mobile device, that we are able to monetize that traffic. And so it's about a number of things that we've talked about before that we continue to push aggressively on, starting with responsive design that delivers a great mobile experience off of one website, but then making sure that the shopping experience is easy, greater use of inventory versus text, a great checkout experience, cap to applied promotion capabilities which we put in place. And so making sure that the experience is both emotional, immersive, and aspirational on a mobile device as a brand experience, but also transactionally efficient as a customer buying on the mobile device. That's probably the biggest opportunity that we've got right now and we're very aggressively focused on it. It is moving very quickly. We are excited about it. Our traffic is growing, but the mobile device experience is different than a desktop experience and we need to make sure that we can make money there in the same way that we can make money on the other real estate. <UNK>, do you want to ---+ . Yes. I would say it's fair to say, <UNK>, that we are not expecting big meaningful turns from the current trends we've seen both at Banana and Gap. Now we know Gap's performance actually has marginally improved on a two-year basis when you look at the comps, et cetera. But it's marginal, and so we are not expecting any big upswing there. And then Banana's has decelerated, so we are certainly not expecting any, you know, major change in trend there. I think more broadly speaking, we are just looking at the environment. And as <UNK> said, we need to be prepared to compete. Even though our inventories, we're pleased that we exceeded our goal in terms of coming in clean. We are just being realists about the promotional environment we may be facing and that is sort of where we landed in the area we landed. Sure. Yes. I'll back up a little bit, <UNK>, because we definitely try and buy to current demand; we never buy on hope. So a lot of the work we do on inventory is to make sure that the teams are grounded in current trends, current traffic trends especially. What happened with Old Navy was really all about September's trend dropping off from what we had seen. So September, again, was that all-important five-week month and we never saw Labor Day come ---+ or, I'm sorry, five-week month and we never really saw Labor Day come. And in a high-velocity business like Old Navy, where every day of a holiday and certainly every week is very meaningful, when you get backed up, it spells trouble for October. We fortunately, earlier in the year, made a decision across all of our brands, especially Banana and Gap, that we were going to go into the last quarter much tighter. So we had pulled back units across all of our brands and we feel comfortable that the combination of how we are entering with the much tighter receipting that will go on in the fourth quarter, we are going to be tight. We are going to be in good shape in terms of inventory. We've guided to that about flat at the end of the fourth quarter, but it's important to remember that that's lapping a minus 6. So we're going to ---+ a minus 6 on Q3's ending two-year minus 6, so we're feeling pretty good because we want to walk that line that we want to have enough inventory to give us a possibility of those positive comps. And yet we want to be tight. I'd like to thank everyone for joining us on the call today. As a reminder, the press release, which is available on gapinc.com, contains a full recap of our third-quarter results, as well as the forward-looking guidance included in our prepared remarks. As always, the Investor Relations team will be available after the call for further questions. Thank you.

2015_GPS

2016

GPN

GPN #Thanks, <UNK>. Yes, <UNK>, it's <UNK>. I'll lead off. There's really two things. First of all, in Q3 it was 15% on a constant currency growth basis, and that included inorganic growth from Realex, which we didn't have this quarter, as Realex annualized in the fourth quarter. So that's a big chunk of the difference as a starting point. I would say, the second element that impacted Europe in Q4 is I mentioned earlier in my comments, we've started to begin to annualize some of the early benefits from interchange reductions in the UK in particular. Last year, MasterCard in the fourth quarter of 2015 lowered credit interchange from on average roughly 100 bps to 80. And Visa changed debit interchange from the 8p a transaction to 20 basis points plus 1p. So those early benefits from the SEPA regulation that didn't actually become effective until December, we began to annualize in Q4 of this year, which created a little bit of headwind. Europe still grew high single-digits on a constant currency basis. That's in line with our overall expectation for Europe. So I would say it was a quarter, Europe-wise, that was very much consistent with our overall expectations. Yes, that's a good question, <UNK>. So we do expect Europe to grow next year in the high single-digits on an organic basis. And then, of course, the Erste joint venture is adding inorganic growth to top line revenue expectations for Europe in FY17. So those would be the component pieces next year. Hi, <UNK>, it's <UNK>. I think you'd also see Spain finally start to annualize, the annualization of the original benefits starting on September 1. So as I mentioned in our prepared remarks, that Spain [hit] yet another double-digit volume and transaction growth quarter, I think their fifth consecutive in the quarter in a market that's probably going half that. And you're finally going to see that accelerate into the beginning of our second fiscal quarter in 2017. And that's in the high single-digit growth expectation organically for Europe for the full year. We'll annualize (multiple speakers) the benefit of the UK interchange reductions as you know in December. Thanks, <UNK>. Appreciate it. No, I think you've got it right. Obviously, currency had a fairly significant impact on margins, particularly in Europe. The other item I mentioned in my prepared remarks again, relates to investments we're making in our e-com omni-channel solutions business in Europe. We're continuing to invest in that platform. We are preparing to launch a bundled solution in Spain, similar to what we launched in the UK earlier in the fall. That's coming in the next few months. So we did make investments to prepare for that market rollout, which we think will obviously be helpful to accelerating growth in Spain. So those investments were a little bit of a drag on margin in Q4. But in the grand scheme of things, we really try to target margin expansion for the total Company. Which once again, we achieved this quarter and we're very pleased with the level of margin expansion that we achieved in the fourth quarter of 2016. Europe being nearly 50% margin, our goal is to largely sustain, or close to sustain that level of margin, and really looking to drive total Company margin expansion through North America primarily. Hey, <UNK>, hi, it's <UNK>. I'll start on that. As I said in our commentary, we anticipated that this might happen, even though it wasn't our preferred option. As a result, immediately after the referendum, we took a number of steps by way of contingency, to prepare the business in the event that the macro environment in the UK deteriorated further. Those were along the lines of a bit of deferral on some investment we were going to make, <UNK>, by way of headcount, and product in the UK, and in Ireland. We also had plans, in the event that things change further, we also have plans to make additional decisions around our European businesses, if that's what's needed. I would say though, if you back up, that hasn't happened today. So as we said in our commentary, that post Heartland, our UK business is single-digits, as a matter of revenue of our businesses. I think we've shown, with what we've done in Asia over the last year, that to the extent that there are emerging headwinds, that we'll get ahead of those, as we did in the fall of 2015 in Asia. So I think sitting here today, we're as well-positioned as could be and obviously, we're here to manage proactively if things change. But that's not the case today. Sure, <UNK>. It's <UNK>. As always, we start with what's available for sale. We're really looking for things that are in our wheelhouse from a strategic point of view, and have the right partnership and culture to really drive the business forward, relative to our other alternatives for our capital. I would say sitting here today, a number of those opportunities are really in the Asia-Pacific region. <UNK>, I think talked about the eWAY transaction that we consummated in the fourth quarter of 2016, driving additional omni-channel and e-commerce activity in Australia and New Zealand. We're looking at a bunch of technology-related businesses in Asia primarily. Obviously, we think we're relatively full-up here, post Heartland, in North America. And as <UNK> mentioned, we just closed our Erste JV on June 1, and we think we have a fair amount of work ahead of us, to continue that integration over the next period of time. So I think we look at opportunities. Sitting here today, those are likely to be more weighted towards Asia. But of course, we're flexible, and it depends on what comes available for sale. Thank you. Thanks, <UNK>. Thanks, Georgios. <UNK>, it's <UNK>. I'll maybe start. You can see from our FY17 guide, that we're forecasting anywhere, maybe $0.10 to $0.15 of currency headwind in FY17, as a result of ---+ primarily weakness in the pound stemming from the Brexit referendum in the UK. So you can sort of extrapolate that further into calendar 2017. But sitting here today on July 28, it's very difficult. I think with any sort of accuracy to predict what currencies may do in calendar 2017. Frankly, at some point, I hope to annualize these fairly significant headwinds. I sort of view flat, as the new up, from a currency point of view. So I think when you get to flat, you can kind of get a sense from the guide we've given for calendar 2017, as the earnings power of the business, that we're able to generate, notwithstanding the FX headwinds over the past couple years. But if we can get a normal FX environment, obviously 20% cash earnings per share growth on a constant currency basis is fairly attractive and well ahead of our cycle guidance, and well ahead of what I think our peers and other industry participants are able to produce. Let me start with the ISO comment, that's the easier question. I'll give <UNK> the harder question around EMV. On the ISO side, we're expecting essentially flat growth, or roughly no growth out of the ISO channel. As we talked about historically, with the pivot we've made to direct distribution, particularly on the heels of the Heartland transaction, where we've essentially invested over $4 billion now in direct distribution in the US market, that is the focus of our business going forward. It's obviously the driver of the growth. We'll continue to serve our ISO partners well, but that is not a focus for our business, and we're certainly not expecting any tailwinds from the ISO channel. We expect it to be relatively flat. And then, <UNK>, on EMV plans, our focus to date has been on the transition for our customers, making it seamless, and really delivering to them security solutions bundles that really can drive maybe some nominal market share gains. So I think the way to look at what <UNK> and <UNK> have been describing, is there is no assumption of economic benefit from EMV whatsoever, but that is something we're exploring. As we get deeper into 2017, we're certainly going to have to think about where the risks are in the industry, where we've added value to our customers, where we may not be being compensated. But it's nowhere in the expectations. It's just something to think about as a marketing matter. No, it hasn't. And I guess, I appreciate you asking the question. I know that there have been folks out talking about certifications, about backlogs, some folks talking about [acquirers] delayed in certifications. I can tell you this, we have no backlog in our infrastructure anywhere, whether it's a direct channel or an integrated channel. So whomever is talking about those types of things to you guys, whether it's an opinion, or it's some other delays, it's not Global Payments. Thanks, <UNK>. Yes. <UNK>, this is <UNK>. Our expectation is indeed that we can accelerate Canada with really a couple of things. One is bringing in these new global initiatives like more e-com business, some of the fastest growing part of that market. And certainly with OpenEdge, where we're up to 30 partners. And we're just really beginning to build that sort of purpose-built ecosystem I've talked about before, partners, campaign management, and our sales teams to accelerate growth. So early stages. Hence, you've seen from <UNK> very traditional Canadian expectations for now for 2017, which I'm expecting our Canadian team to beat this year. And then beyond that, it's the Heartland synergies. So being able to take the products, whether it's education products, or the commerce point of sale cloud software across border to Canada. And just being able to take the US-based customers and prospects that our Heartland sales force will close in the coming months and quarters, and take those and extend those to Canada as well. So we think we've got lots of tools to accelerate Canada now, really for the first time in the last five years in Global Payments. Yes, it's certainly something we want to go after. It's obviously a growth pool in the United States, and it's one of the hidden benefits of the Heartland transaction, to be frank. First off, we finally have a real substantial direct sales force in the US, a strategic distribution asset that we did not have before. We also have OpenEdge, which is a fantastic business, and our vertical gaming and [greater giving] businesses, but we've not had a direct sales force like this. And another hidden benefit of Heartland, they have a true e-commerce solution for the United States as well. Great product folks, a great development team, and actual product in market, that's seeing success. In fact, we actually signed a record number of e-commerce customers in Heartland during the June quarter as well. So we're seeing increasing momentum that fuels our confidence, both about integration overall, and the type of accelerated growth the two companies can deliver that <UNK> described earlier. I think it's tough to size on direct metrics. Obviously, you have the two fastest organic growing acquirers in the industry combined. We think we can accelerate that growth, so we're pretty confident, it's pretty fast-growing. Good morning, <UNK>. Yes, <UNK>, it's <UNK>. I'll start with some of the integrated ISV talk. Obviously, our industry is highly competitive, but I don't think there's a sea change at all in the competitive nature of what's going on around ISVs and integrated payments. I think in particular if you think about the results we posted in 2016, our confidence in Heartland to date, and then the expectations for 2017, we're expecting another mid to high teens delivery from OpenEdge. They continue to drive across into new verticals. We don't see some of the larger competitors you're describing in our specific verticals in the OpenEdge business. We continue to drive that growth in the dentist, the pharmas, the things we talked about. Again, a highly competitive, every deal is competitive in this space, but we win more than our fair share with the integrated solution we drive. On the Heartland side, you've got the education verticals, the two, the one for K through 12, the one for university, that combination is double-digits as well. And the same thing, competitive deals, but we're driving and winning more than our share. I think the final piece of this is really the commerce businesses, where we've got new assets where we're just beginning to pursue restaurant and hospitality. There we're going to see more competition, but it's all going to be incremental to us. So we're very excited about our growth opportunity on that side. Okay, <UNK>, it's <UNK>. On Visa PayPal, we're A very good partner of both Visa and of PayPal I think, anything that drives toward more adoption of card-based usage, whether it's relative to ACH, relative to cash and check, et cetera, is really nothing but good news for our businesses. I would note, that in that partnership in particular, that's a US-only deal. Visa PayPal is the way it's been described externally. Most of our business with PayPal, as you probably know is outside of the United States, and in particular, mostly outside of North America, primarily in Europe and Asia. So I don't think by itself, it's going to have really a direct impact, just because of the geography that's been described. I think as a concept, to get to your other point, the idea that there's more volumes going through digital wallets, through two partners like Visa and a PayPal, is really nothing but good news for our business longer term. Thanks, <UNK>. Yes, <UNK>, it's <UNK>. I'll maybe start with that one. So if you think back to December when we originally announced the Heartland transaction, consensus for us for our FY17 was around $3.32. And we guided to mid single-digit accretion which kind of gets you to [$3.47] or so. If you think about where we are now, we just guided on a constant currency basis $3.50 to $3.60. So a mid point of $3.55. That kind of implies high single-digit accretion year one, which is pretty attractive from our point of view, and obviously, an acceleration from what we originally announced on the deal in the December time frame. Obviously, we've seen a $0.10 of ---+ $0.10-plus maybe of incremental FX headwinds. There's a little bit of noise around FX. But on an apples-to-apples basis, we're kind of looking at FY17 being high single-digit accretion from Heartland, and that's pretty exciting. Yes, <UNK>, <UNK> here. We do plan to keep growing the sales force. It's measured. It's surgical. As I said a little while ago, we've identified white spaces, where we want to accelerate growth and sales coverage as we speak. So we will keep growing that sales force, measuring it against demand and opportunity. But there's a lot of room for growth, in terms of just headcount adds, as well as in coverage that you'll see in the coming quarters. On the interest expense side, I think we've provided a little bit of color around interest rate expectations back in the Q3 call. We have about $2.8 billion of incremental debt associated with the Heartland transaction, actually we'll pay a little bit of that off the course of the year. Our weighted average cost of debt somewhere around [$3.75] to [$4.00], so in that ballpark. And then as a reminder, the legacy debt that we had, was repriced as well as part of the transaction. So there's probably an incremental 100 basis points on that. So it's going to be in the same, sort of probably $3.50 range for the historical debt. So all-in, that gets you to an interest rate expense assumption that's going to be in the north of $160 million range for FY17. Thanks, <UNK>. Yes. Hey, <UNK>, it's <UNK>. Great question. Revenue is essentially flat now. So we have caught up, in the sense that we've gotten revenue to it's flat to slightly up. As we get to September, and annualize the annualization of the interchange benefit ---+ I know it gets complicated ---+ we would expect revenue growth to trend back to the same level of transaction and volume growth that we're seeing in that market, which is double-digits to mid-teens. So we're very bullish on our execution in Spain. We, I think, are looking at our fifth consecutive quarter of growing transactions and volumes in the double-digits. We're growing well above the rate of market growth, and couldn't be more delighted with our partnership with [Caixa], and we see nothing but really tailwinds in that market. GDP has remained very solid in the market, and our execution has been terrific. So as we get into FY17, and get past the first quarter, we expect Spain revenue growth to return to that double-digit level. And it's obviously an important driver for overall expectations for European organic growth in FY17. Yes, <UNK>, it is a tough thing to model, and we've had joint ventures that we've unwound. We've added new joint ventures, and I recognize that's complicated. So with the addition of Erste, I would expect it to be up year-over-year relative to FY16 in aggregate by roughly 50%, relative to what we just reported for FY16. So that's kind of a rough guide. And we can obviously provide a little more color on that, if we have an offline conversation. Thanks, <UNK>. Yes, <UNK>, it's <UNK>. I tried to give a little bit of color on that in my prepared remarks, because we recognized a couple things. One is, the quarterly distribution of earnings in FY17, because of the FX headwinds in particular, are likely to be sort of the inverse of what we saw in FY16. So we expect 47% to 48% of the earnings to be distributed in the first two quarters combined, and the balance, 52% to 53% in the back two quarters, which to your point, will roll into the new calendar year. For the full FY17 guide, obviously, we're going to see the most FX headwinds in Q1 and in Q2 in particular, but primarily Q1. So still expect good growth in Q1 over FY16, and same for Q2. But it will ramp in the back half of the year, as we hope currency headwinds will begin to abate, number one. And number two, it's important to recognize that synergies ramp over the course of time as well. So as we're executing on synergies, and taking expenses out of the business, the benefits of those actions ramp over the course of the fiscal year, as we roll into FY18 as well. So those two things combined create an environment where, the back half will be a little bit stronger than the first half. But the overall expectations for the year, I think are very attractive. Yes, <UNK>, it's a really good question. So what I would start with is, when we look at our FY17 expectation, there's a lot of activities that are in progress today. We have dollar amounts tied to every one of those activities, but there's obviously execution that needs to be done to realize those synergies. So as we sit here today, we expect to achieve synergies in excess of the original $50 million-ish guide that we provided when we originally announced a deal in fiscal ---+ at the end of, I'm sorry, December for FY17. But more importantly, as I said in my comments earlier, we're well on track to meet the overall run rate synergy expectation, by the time we get into FY18 and beyond of $125 million a year. As you know, with synergies, you have realized synergies in a particular period. But then, you also measure the run rate of the actions you have taken, and how they're contributing to the overall run rate expectation that we have of $125 million. So I think it's a little early to I think try to put more specific numbers around where we think we're going to end up from a synergy point of view. But I would want to leave you with certainly our perspective which is we have a high degree of confidence on being able to accelerate synergies for FY17, relative to what we originally anticipated, and certainly feel very, very confident in our ability to deliver on the total run rate synergy, that we had premised in the original transaction economics. Thanks, <UNK>. Well, on behalf of Global Payments, thank you very much for joining our call this morning.

2016_GPN

2018

NR

NR #Yes. I don't think that there's ---+ I don't recall any data on that. But certainly, you can look at the number of rigs that they're drilling with and give you a comparison to countries like Kuwait. It's significantly larger. Yes. Thanks for the question. The big packages have been opened. Hence, our indications. But ---+ so we do expect to win an award. There are multiple lots. The sizable lots, the first 3 lots, the winners of those can only win a single lot. So the process is still playing out. We expect to win, although, there are still, obviously, no guarantees as the process plays out. And I would just add to that. Again, going back to the commentary in the press release, the big change is that under the previous tender, we had 2 lots, lot 1 and lot 3. And the approach that they followed here for the procurement process has limited the major service providers to a single lot. Yes. <UNK>, it's <UNK>. Look, I think it kind of piggybacks off Parveen's earlier question on our penetration into the T&D markets. I think that's a particular region where there's substantial opportunity, and we're looking to continue to leverage new customer relationships and projects that are on in that area to grow share. And certainly as it relates to whether, when it's ---+ wet weather and rain that certainly helps the rental revenues. So we'd see that as some uplift. I don't think it's ---+ it could be limited. I think the projects are propping up growth throughout the network based on what we're seeing at this point, <UNK>. I'd actually like to continue the Sonatrach discussion, if we may. Would you help us understand what their logic was for only awarding 1 lot. Yes. It's really hard to say how ---+ why they'd go in the direction. I mean, it's not unusual for NOCs to change their bidding practices as they go forward in time. So I ---+ we just see this as a standard change that they're going through. And then secondarily, on the last call, it felt like you were being a bit cautious on the Gulf of Mexico opportunity simply due to the lower level of activity, and this quarter, it seems as though maybe you're feeling a bit more favorable. Is that due to market share gains and further anticipated gains. Or are we simply misinterpreting your view. Well, the award of this first well with this major IOC really is good news. And the duration and rigor of the testing over the last 18 months that they've put our fluids through has been significant. But it now serves us very well. Both the fluid and operations have ---+ as a result, their credibility has increased in the eyes of other operators. And so yes, you're sensing an increased sense of optimism. And this particular well that you're ---+ or this rig that you are on, what is the duration of the program that, that rig is anticipated to complete. We said in the script that we expect the well to be finished within the quarter. But it's a deepwater well and there's uncertainties around such operation. Yes. I mean, the rig is deployed to this IOC. I don't know what the length of the contract is. I don't think it's a short-term contract. But again, as I mentioned that ---+ we've got the 1 well. If done successfully, we believe that there will be a second well behind that. Put well. And the reason I was posing the question as I did is if understand correctly that ---+ there are some real switching costs if ---+ to take you off of the rig. So if you do a good job that as long as that rig is running, you are likely going to stay on the rig. Is that a correct interpretation. Yes. Yes, within reason. And so it's great that this IOC has switched to us and that we're taking off this well with them. Yes. I mean, it certainly doing a good job is what we do everywhere we operate. But again, with our new Kronos technology, we think there's some really unique value in terms of the low ECD. So we'll do an outstanding job servicing the account, and we're hoping that the customer really sees the value of the new technology and wants to continue to run with it and expand. Actually, <UNK>, for those of us who are neophytes, would you please share with us what those advantages are. The key there is the low, what I'd call, ECD, or equivalent circulating density, right. So those are the big things, especially with the new regulatory climate in the deepwater Gulf of Mexico. And so that's the key. Do you want to add some comments, Phil. Yes. So it limits pressure surges down hole when you're drilling in very tight, narrow pressure windows. Sure. Thank you once again for joining us on the call and for your interest in Newpark. And we look forward to talking to you again next quarter.

2018_NR

2015

PRLB

PRLB #I think the growth in our sales force is really focused on just making sure more and more product developers come into the fold, and they play a part in closing those developers and bring them in. So I wouldn't say there's more. There's a lot of engineers that don't like to talk to people, that just like to order. We have both. It's probably pretty consistent. I haven't seen data on it, but it's probably pretty consistent. Thank you. Great. Thank you for joining us today. We are very proud of the progress we have made this quarter, and we remain excited about the outlook for Proto Labs and its continued growth around the world. I, again, want to thank our employees for all of their dedication and hard work in achieving this performance, and we look forward to updating you next quarter. Thank you.

2015_PRLB

2016

SXT

SXT #The short answer is yes for both. We think right now certainly we've seen some improvements. In other words, the dollar has weakened to certain currencies for which it had strengthened considerably in the last couple of years, most notably the Canadian dollar. We see some reverse in a few other currencies. But we had estimated for the year approximately $0.15, but to the extent the situation would improve, yes, I would expect that we would be better positioned to reflect that in our EPS guidance for the year. But 8% to 11% is where we came in in the range for local currency, so I think we will certainly ---+ local currency normalizes all these discussions. But sure. With respect to as reported EPS results, we would certainly be consistent with where we framed up the currency for the year. Sure. So, let's start with the natural food colors piece first. I think that, to answer the first part about what inning, I'll answer it this way. About 30% of the products in North America would contain a natural color. So one could say it's about the second or third inning from that standpoint. Another interesting fact that I could give you is approximately 3/4 of all new launches contain natural colors. So I think you have that as kind of the quantitative background of what we are talking about here. Now, what do we hear from customers and what has been our specific experience I think is very consistent with that. It's broad-based. It's large CPG companies. It's regional companies. It's local companies. It's drinks. It's yogurts. It's candies. It's across the spectrum of food. It's very exciting, and I think, quite frankly, there is a good analogy that this is very much a tipping point that, sure, there have been activities and last five or six years, a little bit here, a little bit there, but I think, with the number of large influential CPG companies issuing press releases to the effect of we're going to continue convert to natural colors and we're going to do so by the end of 2016 or 2017 on these very specific products, that has created a tremendous momentum for those who perhaps were on the fence or those who were deliberating on it such that, from my standpoint, this is inevitable. And the inevitability is that I believe probably 75%, 80% of this market would be natural colors in the next several years. You're never going to have 100% conversion, and I don't think anybody would expect as much. But certainly we see broad-based conversion. We see a tremendous amount of interest. What we also find is that, in some of these conversions, if they are not done correctly, there can be some impact on the brand. In other words, if customers select the more diluted watered-down colors which you may see out there in the market not from us but perhaps from some others, those products don't do as well in the market. But when the consumers, the end customers, you and me buying products, see colors that are equally as vivid and equally as interesting as synthetic colors, we have seen a lot of evidence that suggests that those brands, because they can still show those vivid colors but declare that they are natural colors, those brands do very well. And I'm talking about brands that have been around there for a long time are getting a nice boost from this. So I think that kind of tends to build on this conversion, because it's generating success for those customers. So, I think with all the investments in product development and production that we have taken over the years, all those elevated capital expenditures that we've made for the last five or six years, many of which and much of which was made in colors, was very much in preparation for this moment in time. So I think we made some good decisions there and we are seeing those benefits. Taking it over to the cosmetics side of things, your question was can that be sustained. And I believe the answer to that is yes. Cosmetics and personal care, however you want to define the market, it's a very ---+ it's a significantly sized market and there is a significant pace of new product introductions. Look no further than commonly consumed makeup. There is a constant change in those portfolios, upgrading the portfolios. The end consumers are very interested in sustainable and natural products. They are very interested in removing products that they don't like in those ---+ whether it's a lipstick or an eyeshadow or you name it. And so that is probably one of our strongest product development and innovation driven businesses in the Company. And we have spent many, many years building that program up and turning that into what it is today. And the market is very, very accommodative to that because, again, they are always changing, much of it consumer driven, some of it governmentally driven. And so there is going to be a constant need to continue to improve performance on these products because the end-user always want something more. If it makes me look 40, I want it to make me look 30. And you can apply that to foundations or really any other personal care products. So it's a tremendous market, it's a great market for us, and I think here again, with our capital investments ---+ and going back to the acquisitions we made in cosmetics, I think these were all very well placed, and I think they fit in very nicely today and we are seeing those benefits in this market as well. Oh, and one other thing, just for everybody's benefit on this one, in the script, I think, when I was talking about the buyback, I said 250. It was 250,000 shares. So just to clarify that for everybody's benefit. But go ahead. I think that the reason we are successful, and the reason this company makes money, is because we are an applied science company. Now, that's a fairly broad statement, but what it's meant to tell you is the products are important and they are very critical to the success. The new products we develop are very critical. The types of customers we elect to target and market to and develop products for also very important. But fundamentally there are a lot of companies that make products, but what are they helping the customer to do with that product. And I think really this is where we drive a lot of the success in our business. So in every model where we can do that, whether it's food colors or cosmetics or flavors or inks, demonstrating how the products work for that customer either in the presence of these other ingredients, based on shelf life considerations or storage considerations, based on how they produce the product and the complications associated with that, those are three of the more important factors that ultimately say if you are an applied science company, in other words you can show your customer how your products work in their applications, that's a very, very powerful core skill, capability, value of our company. If you are just a company that's going to go out there and try to peddle a product, sure, you may sell that but there's a lot of companies that can do that. So I think really where we are today and why I give this guidance and why I feel confident is because, at its foundation, that is the organization we have built and that is the organization we continue to add onto and to enhance through innovation, through expansion of production, through acquisitions. So I think that, yes, we are very well positioned in a lot of these businesses, and the more interactions we can establish between our businesses, the better, so color and flavor together, cosmetic and fragrances together. These are very, very powerful connections to a consumer base that ---+ to a customer base who more and more is looking to its suppliers to do a lot of its development for them. I would say that restructuring is hard no matter where you are. And in whatever industry you are in there's always complications. We deal with customers who routinely are acquired by another company and they say, hey, we are in a restructuring phase, we'll talk to you next year and in a lot of ways business stops. I would say that our restructuring from that standpoint, yes, it's very complex. It's not just taking three widget plants and converting them into one widget plant. You're taking products that perhaps have not been made in one plant, and now you're going to move them over there. You've got a lot of new people. Moving a specialty and fine chemical from one plant to the next, you don't just buy the same equipment, turn the button and it works. It's science. And so science, there is oftentimes some art associated with it. So as you saw here in Q1, and as we commented on a little bit, you're going to have some complications, and we're not ---+ I am not going to hide that. We had some yield issues in some of our plants. We had overruns on some of the costs. I share those as restructuring startup complications but, again, I think many of those we got past, and again, we hold to our and I hold our guidance for the year. But restructuring alone is one thing. But restructuring in the context of really redefining a strategy for a business, adding a lot of new people, moving a headquarters, introducing a tremendous focus in a lot of areas that we have not historically had in flavors is a fairly significant undertaking. And I think we showed very good signs of progress last year in 2015. It's never as good as I want it to be, but I think certainly it was a shift in momentum. I would call Q1 2016 as a bump in the road. And I think Q2 and beyond is going to be quite good. I see a lot of progress. And based on the things that I see, that's why I feel very comfortable giving you that projection for the rest of the year. And you look at our history. We did a different kind of turnaround, but we made a substantial improvement to colors. We've made a substantial improvement to inks. We've made a lot of governance changes. We've made a lot of changes to corporate. And so I think I guess as I would talk to an investor, I would say they should feel confident that we are well-positioned to pull this off, because we've pulled off very similar things in different parts of our business. And so to that end, I think, yes, getting through restructuring will be a profoundly important part of this evolution of the flavors group because it is. It's very distracting. It's very challenging. It doesn't go perfectly. But we've got through the bulk of it. That's the positive. We have one more plant, and we have had a lot of time to work on that plant, a lot of preparation, so I think we're going to be very well positioned when we have that consolidated by the end of the year. And so, no, I feel very good about this. As you probably saw, I bought another chunk of stock myself in the last quarter, because I perhaps see things that not other people see. And I see the potential of the business and the fundamentally good foundation we have, and I see there's going to be a lot of continued improvement in flavors and continued sustained results in Asia-Pacific in colors. Yes, that's a great question. I think the investments really go back to our acquisition program of several natural color companies in the late 1990s. So I think we were somewhat ---+ as we looked into our ---+ the market at the time, we saw an inevitability to natural colors in many markets. So that's really where it started. Obviously, over the years, we've added a tremendous amount of capacity. We've also added a lot of very unique technologies that nobody else in this industry has, which are enabling us to have really a lot of superior products today, not the dull, watered-down stuff that you kind of see out there, but the more comparable to synthetic colors that consumers would expect to see. Much of this has been driven from these production type technologies, but we've also made a huge investment for at least the last six or seven years in new product development with a broad theme of how do you make a natural color look, act and cost about the same as a synthetic color. And that's been a big focus for our innovation, and I think really at the root of a lot of the success we are having today. All those things continue. We watched capacity, to your point, very, very carefully, not only capacity on production but capacity within the supply chain. And so we've got very strong ties to our customer base, and I think we've got a lot of projects, but certainly within each one of those is maintaining that level of infrastructure so that, when there are more and more large conversions, we are well-positioned to make those. But we've had some press releases over the years, expansions within Mexico, the US, Germany, Italy, really ---+ China. All over the world, we've made these investments in anticipation of this moment. That's certainly my expectation. As I mentioned in the first question from <UNK>, it's really pretty broad-based across a lot of different customers and product segments. And we've got a fairly significant sales and technical organization throughout the world, which is going to be very, very important to capture the lion's share of these wins. But natural colors, as you look at the overall food colors part of our business, natural colors is I want to say closing in on about 60% of that overall total of revenue. A couple years ago, I think it was about 40%, so it's a big change. Oh, yes, absolutely. In fact ---+ and it's interesting because it's not talked about as frequently in the market as, say, a natural color, at least in some of the markets we deal in. But clearly there is an interest from customers in a more natural profile for many of their ingredients, including color, including flavor. So you sometimes see this described in the flavor industry as an extract or a botanical, or even just as a natural flavor. So, yes, certainly that is a big part of our emphasis with our customers as well. And you see a very strong impact of that or very strong interest in that, particularly in the beverage part of the business. But certainly even within segments that are traditionally very process-oriented, like savory, there's a tremendous interest there to have more natural flavor, natural ingredient profile. I look at a lot of ---+ You know, acquisitions I think can always fill in very specific gaps that you have in any number of your portfolios. You saw the one we made last year in inks. That filled a very specific gap in our portfolio. So to that end, sure. There is no one company that has a monopoly on all technologies and all production processing techniques within the industry. So, we would be very open to an acquisition in flavors or any other of our segments, quite frankly. Yes. I think it's the acceleration of new wins. One of the comments I made on our last conference call for both colors and flavors was that most of the wins that we were anticipating for the year were very much back half in terms of when they would close. I would tell you that this garlic shortage that we've had for Q1 and Q2 we will not have for the second half of the year. And that was a significant impact in Q1. That was certainly in the seven digits in terms of its impact. So, I think you ---+ we are expecting to erase that for each of the third and fourth quarters. I think we've had a lot of ---+ I mentioned order timing, many of which we've seen those come through in Q2. And then, again, a lot of these restructuring benefits were being watered-down by some of the operational challenges that we had in these plants. And so as we've addressed those and we've moved past those, we would then see the full impact of those savings that we would expect to be getting as well. So those are four or five of the factors. But the thing I want to emphasize over and over and what I emphasize in the business is it's all about new wins. And that's what is ultimately going to move us in the right direction long-term ---+ new wins, new wins utilizing new and different technology platforms. Certainly, the costs are going to benefit us. A lot of these other factors that I mentioned are going to benefit us, but they are not going to benefit us for the next five or 10 years. And the model you hear me talk about and what we are generating out of Colors right now was really based on the programs we put in place over the last several years. And so this is why I see stronger and much better potential for new wins within flavors as we move forward because it does take some time; it does take some time to change customers impression of you. Six years ago, nobody even knew we sold natural colors. And today, some people would wonder if we even sell synthetic colors. So you can change an impression in the market, but it just takes some time, at times, and but once you do, and again you go back to the foundation of this business as an applied science company, when you can demonstrate that kind of success with the customers, now you've got a program for long-term success, and I think that's very much the trajectory we are on in flavors right now. So, first, just to comment on the overall change, we've had some changes in our organization and reporting has followed that. So, we are trying to get better cooperation between the color group, and we think there are opportunities in north Asia, China in particular, that we are not taking full advantage of. And so we are moving that into the Color Group, so that's the reason for the change. You know, the revenue of that piece in the first quarter is about $3 million. It's a little bit ---+ the margin is a little bit below the overall Color Group, but it's pretty comparable. So I'm not ---+ go ahead. Yes, I'll take the first part and then if <UNK> wants to add something, we will go that way. But I think right now as we've ---+ probably over the last four or five years, we've taken pieces out. So we took a cosmetic piece out, maybe four years ago a pharmaceutical piece out, maybe three years ago, and then we took the small piece of food colors out of north Asia. So where we have identified businesses that are obviously in each of the cosmetic and pharma cases were quite small, so it might not even have been noticed. Where we see opportunities to really further globalize these businesses and create a much stronger tie to the other regions within color or flavor, that's made a lot of sense for us. At the end of the day, what does Asia-Pacific look like in five years or so. I could still see it operating very much as it does today ex these pieces of food colors, cosmetics and pharma, and then probably also fragrances. So I think that we would still see it because it is a vast region. It's culturally entirely different from any other markets that we operate in. So it still lends itself to some structure that is somewhat independent of Color Group and Flavor Group, but I think, ultimately, for right now, we kind of have a little bit of a hybrid approach where we have taken off little pieces here and there consistent with what we think is going to help mostly with our global customers but also to the extent we can also hook up on innovation and have innovation centers in Asia-Pacific that are linked to our European, Latin American, and North American businesses. So I think, in short, it will remain an Asia-Pacific group, but the composition main change puts and takes here and there over the coming years. Well, in some cases, you want to replicate what you have in other regions on some of the more broad-based products. In other cases, where you have a big, significant capital investment in a certain product portfolio, you may not add that to Asia-Pacific as the current point. So I think really we focus on those products that are most sensitive to lead time with the customer. We think about those products that are most sensitive to logistical costs and shelf life considerations. In other words, when you're getting into the world of naturals and botanicals, they don't have the same shelf life as a synthetic product would. So to that end, it's much more practical and cost-effective to make those things locally and even source them locally. So there are some supply chain considerations as well to consider. So those are the many things we think about. I would not anticipate replicating the capabilities of the rest of the Color and the Flavor group in Asia-Pacific across every product, but certainly, again, the products that meets those criteria that I just described would be first in line. Sure. So for the benefit of all, <UNK>'s comment is related to the conversion of inks, industrial inks, what we call our specialty inks, from these traditional analog solvent-based products to a new version of that ink, which is digital, water-based. And so you really have to look at that according to product segments. So there's many different segments within the industrial inks world. There's packaging; there's textiles; there's food products, contact and noncontact; there's furniture. You can kind of go down the line. Anything with color in the world today may very well have been printed by an industrial ink. And so as you can imagine, each one of those segments are on a different conversion trajectory. Textiles has led the way. That's been the focus of our business up until to date, mostly polyester, but as you noted last year when we were losing out on cotton opportunities and we made our acquisition, cotton has also been an important part of that conversion in the world of textiles. Now, maybe 20% of that market is converted from solvent to water-based inks, which ---+ and again, I'm using it ---+ in my mind, every solvent-based ink is a traditional ---+ is an analog printing application, which is to say very rigid, very inflexible, not at all consistent with the supply chain needs of the industries today. So say that market has converted about 20% to 25% to digital. With my expectation it would be 100% digital. When. Some would say 15 years, some would say 10, some would say never. Someone say you're always going to have some portion of that that's traditional. But okay. Without splitting hairs, I think we see a nice growth trajectory within textiles for the next many, many years. As you move over from there, there are other segments that have almost no conversion. So you look at things like, say, furniture and home goods in general. There's maybe a 1% or 2% conversion to digital, and to some degree that's related to the fact that the inks are not suitable. They don't print with the same characteristics as their traditional solvent-based comparison. So, the technology will continue to evolve. Our innovation is focused on a number of these different segments for which we believe we can win and be very successful. And in a lot of these other segments, the conversions are just starting. This is why, as I've said a couple times in the past, in addition to the food conversions to natural ingredients, most notably color but also flavor, the strong changes within the personal care market towards more natural ingredients and products that are free of raw materials that many consumers believe to be harmful, there is a tremendous opportunity for Sensient in this conversion to inks. And the opportunities will differ across those segments, but I think we are very well-suited and well-positioned to be quite successful in any number of those segments, which, again, are just getting started in many cases. Sure. So, it's really tied to opportunities. What are the alternative opportunities to share repurchase, and then how attractive does share repurchase itself look. Keep in mind we have built up our leverage over the last two years. We were ---+ we had some capacity there, and so some of the share repurchase we've added debt to do that. We are very comfortable with where our leverage is right now, but we do want to maintain flexibility. So if there is an acquisition, we can pursue that. And so going forward, it may be a little bit more closely tied to cash flow barring a change in how we view the opportunities. So in the first quarter, the shares we bought back, we essentially were able to use our free cash flow to fund the dividend and the share repurchase, and there's very little change in debt as a result of that. So, I don't mean to be evasive, but that is the way we look at it, and I think it is a matter of weighing the different opportunities that are in front of us. Okay. That will conclude our call. Thank you to everyone who has listened in today. If there are any follow-up questions, by all means, you may contact the Company. Thank you.

2016_SXT

2016

PDFS

PDFS #The R&D expense is not really for the tools. You'd see that more in our capital line. There's some parts that get expensed that don't have commercial capability and things like that. So it wouldn't be in inventory. It would either be in capital for the moment or in R&D expense. And both of those will be going up. Thank you.

2016_PDFS

2016

EXP

EXP #<UNK>, at some point, you get to a basic level, not too different than frankly, what we saw a few years ago in housing starts. You get down to a necessity level for that, but we're down pretty low. Look we ---+ kind of the first half of calendar 2015, I'd say demand as we had spoke was down 50%. We've seen another leg down, which gets you down to that down 80% in total. So that it's happened pretty swift. We'll see what happens in drilling activity from here. But we're at pretty low levels at this point. Most of that has been done, right, on the oil well cement. But that's happened. Again, you've got the weather comparison from the prior year, so we'll see how weather goes through the rest of the year. But the oil well shift has happened. What we do know is the rig counts are down. The oil service companies continue to struggle financially. The E&P's continue to reduce capital. There's little pressure on price. We think we're approaching the bottom. We also think the second half of our fiscal year will be a little bit better than the first half of our fiscal year. That was really through ---+ mostly through the end of the March quarter, the 1 million shares that we commented there. There's some shares that settle post the quarter, just the way the shares are settled through the financial institutions. Once you enter a blackout period or an earnings period, there's is some limitations on the stock repurchases. So the vast majority of that 1 million shares was in the March quarter and the first few days of April. As we speak, we are working with our customers to renegotiate supply agreements. We're looking a little bit different customer base than we originally sold. We're also working with customers to reduce costs delivered to their well, so we are actively working that at this point, yes. Our focus now is to breakeven in the short term and position ourself to make some good money in the long term. If we do those things right we will pick up a little bit of share. Yes, <UNK>, in the frac sand business, there's a number of railcars that are underutilized, as you would expect. We are going through the process currently of trying to improve those lease rates as best we can or utilize those cars in other parts of our business. So, that is well under way. That's part of the negotiation process that we're in right now, to make sure those lease times ---+ those cars as necessary are used and to the extent not necessary, renegotiate the timing of those leases and the underlying cost of those leases. I wouldn't put much ---+ attribute much to the weather at all. I think a lot of it is the market growth. We're very fortunate the markets that we play in grew faster than a lot of the other markets. We took full advantage of that. But I think very little had to do with weather to be honest with you. That's my read, yes. First of all, four of our five gypsum plants are on natural gypsum ---+ So we feel very good. We have decades of supply. In South Carolina, our plant does run on synthetic gypsum. We have the ability to run on actual gypsum and more importantly, we're teamed up with a terrific partner in Santee Cooper. We built our plant on their property. We have a 52-year lease on that property and a 52-year agreement for supply. We fully expect Santee Cooper to continue to live up to their agreement. But I will tell you that there are trends for fewer coal-fired power plants ahead. Those that have invested in scrubbers have a greater likelihood to keep running. It's really a situation that's plant and market specific. This also applies to fly ash as well as synthetic gypsum. <UNK>, obviously, we wouldn't talk about any specific opportunities. But needless to say, look, we continue to look for growth in the heavy side and adjacent businesses in slag and fly ash would certainly meet that right criteria. It will come down to valuation. I'm not going to overpay for the privilege and generating higher than industry average returns. That's something that we've always been focused on. We would like to thank all of you for joining us today. We look forward to sharing next quarter's results with you at the end of next quarter. Have a great day.

2016_EXP

2015

WRLD

WRLD #Not a great deal in depth, but I can give you some kind of general guidelines, because it certainly depends upon the state laws and so forth. But that mix has continued to change. The combination of ---+ well, basically, the larger loan portion of our portfolio, including the old sales finance portion that we are no longer ---+ that we're no longer offering that product, but it has risen from 39.2% as of the end of last fiscal year, to 40.5% as of the end of this fiscal year. So it's still not a dramatic change, but over time, it has ---+ that portion of the portfolio has grown more than the smaller loans. But as you would expect, the average loan of what we consider kind of ---+ they are all installment loans, but we kind of internally break them out between the differences. And it's generally geared towards what the state laws allow for loans less than a certain amount will have alternate rates and so forth. But the average loan in that portfolio, <UNK>ny, is ---+. In the large portfolio ---+. The small ---+ It's around $960. $960. And in the larger loan portfolio, it's more like ---+. $3,400 ---+ $3,300. $3,000. So obviously, you're ---+ with the larger loan portfolio, you're dealing with a more qualified customer, and you are dealing with a lot lower fees and charges, but you're also dealing with a lot lower loss ratio. So, the returns are very good for both of these portfolios. But you are definitely dealing with a different customer. And it would be hard to specifically give you averages and so forth because of the changes by state and so forth. But that's ---+ hopefully, that gives you a general picture. It is not title pawn lending. There's no balloon payment. It's a typical installment loan. It has the same laws, fees, charges and so forth as a product without an automobile pledged as collateral. However, an automobile, that certainly improves the position. But we rarely will reprocess an automobile. I mean, we would much prefer that the customer has the ability to repay us. And we prefer not to go down that route. But potentially, yes, we could still make those loans without automobile as a collateral, but it may limit to ---+ in some respects ---+ every positive thing, whether it's collateral, whether it's a person's free cash flow, whether it's net worth or whatever, improves a person's ability to pay. So, the more the positives, the larger the loan we can make. I don't know if that answers your question directly, <UNK>, but it's ---+ It's nominal. I mean, like ---+ the Company as a total probably has less than 300 or 400 repossessions in total across the entire branch network. So it's just not a very large number. If it's ---+ any loan in our portfolio that does not have an automobile pledged as collateral, will not fall under the proposed suggested possible rules. Because the other key ingredient is that you have to have access to the customer's checking account. And we do not do that on a single loan. I don't think insurance and other related fees grew faster than interest income. I think, if anything, it grew a little bit less, because our volume has been down throughout the entire fiscal year because of the changes that took place about a year ago. It currently has not shown up. It is not part of the net $16 million that was recognized during the current quarter. The $16 million was recognized as a gain on sale because of the nature of these previously charged-off accounts. Beginning in the month of April, and every month going forward for 18 months, we will have a similar sale that will generate approximately, plus or minus, $1 million a month. And that will be reflected as a reduction to our provision. We believe that any excess cash flow that the Company has, one of the best uses is the continued repurchase of our stock. And we intend to continually do that on an ongoing basis as long as we have the liquidity and the availability under our various ---+ with our various lenders to do so, and still have cushion for whatever possible needs might come around. So this is ---+ the goal is to continue with those repurchases in a very methodical manner, but it'd be subject to a lot of <UNK>ny's projections and assumptions and so forth going forward. So that's something we have we continue to evaluate on an ongoing basis. But I will add that, certainly, the fourth quarter, when we have such a large decrease in our outstanding balances because of our customers' excess cash flow that takes place around tax season, will always be a very good quarter for generating those excess cash flows. Well, there's two pieces. As we anticipated, when we actually stopped soliciting for those low-dollar renewals, we anticipated it would take us a year before we saw that level off. And it just so happens that in March of this year, we did experience a leveling off on that renewal volume. So that's a big plus going forward. So we don't expect to have the negative aspect of that. The second thing is, as I stated in our opening comments, that our biggest challenge does, in fact, remain our problem in attracting additional new customers. We've recognized that our primary marketing effort has been direct mail and it's not been as effective. And Janet, on the last three quarterly calls, has talked about some of the initiatives that she is doing from online applications to texting to ---+ we're doing some emails now. You know, so, we're doing some local marketing and calls to potential sources of applicants. So, we are doing all the things that we believe need to be done. A couple of quarters ago, it was suggested on the call that maybe we should do some kind of focus groups to determine those customers that are going elsewhere. We're going to take that individual's suggestion. And Janet has begun the process to do some of those focus groups, to find out are we missing business for reasons that we are not aware of. So it is our number one objective. It's our number one goal. And we recognize that the lifeblood of this Company is attracting new customers. So, all of our attention is focused in that direction, and we don't believe it's an insurmountable problem. Okay. Yes. There's not really anything else to add to what we've said in the last quarter. So we are continuing to evaluate our options. And we will likely have something in place the next couple of months. Okay. There doesn't appear to be any other questions. I appreciate your interest in World and your joining us today. Thank you very much. Have a great day.

2015_WRLD

2017

TXN

TXN #Thanks, <UNK>, and good afternoon everyone Gross profit in the quarter was $2.66 billion or 64.5% of revenue From a year ago, gross profit increased primarily due to higher revenue Gross profit margin increased 240 basis points Operating expenses in the quarter were $787 million, and on a trailing 12-month basis, were 22% of revenue, within our range of expectations Over the last 12 months, we have invested $1.5 billion in R&D, an important element of our capital allocation Acquisition charges were $80 million, all of which was the ongoing amortization of intangibles, which is a noncash expense Operating profit was $1.79 billion, or 43.4% of revenue Operating profit was up 27% from the year-ago quarter Operating margin for Analog was 47%, up from 41.2% a year-ago, and for Embedded Processing was 34.9%, up from 28.2% a year ago Our focused investment on the best sustainable growth opportunities with differentiated positions enable both businesses to continue to contribute nicely to free cash flow growth Net income in the third quarter was $1.29 billion or $1.26 per share This included a $38 million discrete tax benefit that was $18 million higher than our original guidance for the quarter, adding about $0.02 to earnings per share Let me now comment on our capital management results, starting with our cash generation Cash flow from operations was $1.72 billion in the quarter, up 18% from a year ago Capital expenditures were $186 million in the quarter On a trailing 12-month basis, cash flow from operations was $4.82 billion Trailing 12-month capital expenditures were $574 million or about 4% of revenue, consistent with our long-term expectation Free cash flow for the past 12 months was $4.25 billion or 29% of revenue Our cash flow reflects the strength of our business model As we have said, we believe free cash flow growth, especially on a per share basis, is most important to maximizing shareholder value in the long term, and will be valued only if it is productively invested in the business or returned to owners As <UNK> mentioned already, in September we announced we will increase our dividend by 24% and also increase our share repurchase authorizations by $6 billion Our quarterly dividend went from $0.50 per share to $0.62 per share, or $2.48 annualized This is our 14th consecutive year of dividend increases And over the past five years, we have increased the dividend by a compounded average rate of 24% Our total outstanding repurchase authorization was about $10 billion at the end of third quarter For the third quarter, we paid $495 million in dividend and repurchased $650 million of our stock, for a total return of $1.15 billion in the third quarter Over the last 12 months, we paid $1.99 billion in dividends, or about 47% of free cash flow, evidence of their sustainability Outstanding share count was reduced by 1.5% over the past 12 months and has been reduced by 43% since the end of 2004, when we initiated a program designed to reduce our share count Total cash returned to owners in the past 12 months was $4.32 billion These combined returns of dividends and repurchases and our recent announcement to increase the dividend and share repurchase authorizations demonstrate our confidence in our business model and our commitment to return excess cash to our owners Our balance sheet remains strong with $3.44 billion of cash and short-term investments at the end of the third quarter, 76% of which was owned by the company's U.S entities This is consistent with our long-term objective to have onshore cash readily available for multiple uses Inventory days were 119, up 1 day from a year ago and within our expected range Our total debt is unchanged at $3.6 billion with a weighted average coupon rate of 1.93% Turning to our outlook For the fourth quarter, we expect revenue in the range of $3.57 billion to $3.87 billion and earnings per share in the range of $1.01 to $1.15, which includes an estimated $20 million discrete tax benefit Our expected annual operating tax rate for 2017 continues to be about 31% For fourth quarter 2017, we expect our effective tax rate to be about 29%, which includes about $20 million of discrete tax items, up from our previous guidance of $10 million This is the rate you should use for your model for fourth quarter For 2018, we're providing you with our quarterly tax rate expectations for both the operating and effective tax rates You can find this detail on our Investor Relations website under the Financial Summary Data section Now to wrap up, we remain focused on growing free cash flow per share over the long term and investing to strengthen our competitive advantages We believe our third quarter results continue to demonstrate our progress With that, let me turn it back to <UNK> Yes, <UNK>, thanks for giving me opportunity to talk about that On free cash flow, it grew 4% on a trailing 12-month basis, and that is compared to a higher number for revenue on the same basis And the difference is higher working capital, particularly accounts receivables and tax payments If you look at the accounts receivable from 3Q 2015 to 3Q 2016, that actually drained whereas from 3Q 2016 to 3Q 2017, it built So that is a source of cash in one case and a use of cash in another case But, and in the case of the tax payments, we had a higher, disproportionately higher tax payment in the most recent comparison versus the previous trailing 12-month comparison Yes, I'll take that For OpEx, we think of that in terms of, from a model standpoint, we think of it as a percent of revenue on a trailing 12-month basis, and for the last couple years, we've actually been running at about 23% And in the current trailing 12-months, we're about 22% of revenue So we have said that in a stable environment, which we are, we can run in the bottom half of our expectations of 20% to 25% So we've been running at about 22%, so that's well within that Of course to us, OpEx are investments, and obviously that goes for R&D, but even inside of G&A we think of a large portion there as investment So in R&D of course we're focusing on industrial and automotive, because those are the best markets where semiconductor growth is happening But in the G&A front, we have many investments there on ti com and demand creation just to continue building on our reach of channels, reach of markets, competitive advantage that we have talked about Before we go to the next caller, I'd like to just make a comment on the previous question on working capital I want to stress that while our accounts receivables increased in that last comparison, the delta days sales outstanding actually decreased by 1 day So it's at 34. So that just goes to show you how healthy the account receivable balance is I wanted just to clarify that Yes What I would tell you is that generally what we suggest and what we recommend to analysts and investors to think about our fall through – in the 70% to 75% range But that is over the long haul, over a relatively long amount of time In any one quarter, that fall through can be a little different Now for example, in the comparison versus a year ago, which arguably, I would argue is more relevant as it has more time obviously in between, that was close to an 85% fall through, right The increase in gross margin was 240 basis points, just as an example of a comparison to the sequential basis Well, to your point, the profitability of that business has in fact improved significantly On a year on year basis, profit from operation is up 673 basis points But at the end of the day, the main objective here is to grow free cash flow We think that is – we believe that is what really drives value for the owners of the company, so and then return all that free cash flow to the owners So we're not particularly focused on any one of those percentages because there are many ways to drive that free cash flow and one of them is expanding the margins But then the other one is just growing the top line at the same margin, right So that's the key message that the core objective that we're trying to achieve Book-to-bill was, it was 1.0. Well, it came in about as expected So I wouldn't characterize it as a bit light And as I mentioned earlier on an earlier question, on a trailing 12-month basis, which is how we think is appropriate to look at, is, came in at 22% I think in the last couple years it's been at 23% So it's trended a little down over the last few years, but it is well within the bottom half of our expectations of 20% to 25%, which is our expectations when things are stable, which they are now On gross margins, what we have said before, and we'll continue to say, really hasn't changed our guidance on that is that our general expectation is revenue to pull through at about 70% to 75% And that's over the long haul, right, not in any one quarter So you should think about it that way And as we continue to grow the top line, driven by our investments in analog and embedded from a product standpoint, and industrial, automotive from an end market standpoint, we expect to continue gaining share and that additional revenue to fall through at about those rates

2017_TXN

2016

NCI

NCI #Good question. I do think we have the natural ebbs and flows relative to refreshing of our IT systems. So, we are going through this little patch in the fourth quarter that I mentioned, where we're making some ---+ what I would characterize as some larger investment on our IT and technology side. One of the trends, though, that we may be seeing a bit of is ---+ some of the technology that we're going to be purchasing for the business is in the form of non-capitalized IT. So we may end up, over time ---+ I would say that that's a little bit of a trend that I'm seeing ---+ may flow into more on the operating side, operating expense, as opposed to necessarily showing up on the CapEx side. So, hopefully that's helpful. It's a little hard to go ahead and say what the baseline is, given some of the ebbs and flows on some of the larger investment. I think so. Yes, I would say ---+ I don't want to go ahead and establish necessarily a long-term margin target for the segment. The segment is performing well. We still think that there is certain opportunities for us to work on. In particular as we've talked about, the TDMP part of that business tends to run at a little bit lower margin than the consulting side. So, as we continue to work on and focus that business, we would hope that there's some opportunities there. But we are pleased with how the business is running, what the team is doing with it; but we still see some things to continue to go after. <UNK>, we talked about earlier on, when we made the investment in our revenue cycle management solutions, that that would be at a different margin profile. So, I would anticipate, as that grows, that that will put some downward pressure on the margin. At the same time, we're really having robust performance on the consulting side. So, if you were to separate the two of them, I think that there is potential for healthcare consulting, certainly. But you're looking at a combination, and BPMS simply is a much higher organic growth business, but a different margin profile than consulting. Correct. I think you asked the question on the last call: did I say plural. And I did. And that remains the case. Now, what I would say is we want to be measured in our approach here. They're obviously just the nature of the business. We just went ahead and raised the whole EPS by $0.10. And I would just characterize it as being measured. I think there's obviously some drivers that can take that up or down, relative to what I would characterize as a continued very strong performance in some of our different segments. So, I don't think there's anything particular that I would point to, other than just the flows and the pace of the business. I think there's always some risk that if we were to lose an engagement unexpectedly, that that could be something that could bring the business down. We're feeling good. We're not anticipating anything disruptive in the business. But you always do have the risk that something that would end a little bit more abruptly. <UNK>, as we talked about throughout the year, strong performance, expecting to be on the upper ends of our guidance ranges. And we decided now that we had three-quarters of the year behind us, that would be good time to move on the range. We don't talk publicly about all the ---+ what we call the risks and opportunities that we build into our forecasting and planning. We have them. Every other company out there in the world has them. Those are the potential upsides and downside that could impact your business, and so that's kind of what you see built into that. And I don't know, <UNK>, is there anything else you'd add. But given that we're a project ---+ we're still a project-based ---+ as much as we built recurring revenues into our business portfolio, we're still a project-based organization. And so we probably have to have a bit more of a conservative approach than maybe a product-based organization simply because of that, because the client can suddenly decide to change things up on us. So, we feel really good about the year and what we have put out in our guidance, but we have to acknowledge that those risks and opportunities are out there. And I believe that's the last question. So thanks, everybody, for joining, and we look very much forward to releasing full-year results and sharing 2017 expectations at that time. Operator. Thank you.

2016_NCI

2016

CLH

CLH #Yes, some of the severance is in cost of revenue. We do break that out. So, if people were let go in the direct head count, if you will, those dollars would be in there. It's a mishmash of a bunch of different things, <UNK>, which includes incentive compensation changes and other types of adjustments. And the ---+ obviously, the selling organization, the investment we made there is all in SG&A. Yes. Absolutely. I wasn't sure the numbers you just quoting included the emergency response work we've done and the impact of that. There was a big number in Q3 that may have screwed up some of the first half second half numbers. Yes, absolutely. Clearly, as we look at Q1 and we ---+ as you know <UNK>, we meet weekly on this topic that we're getting them. Yes. We don't really give that number out specifically. Kind of year-over-year, interestingly enough, there was ---+ it's still a bit of a headwind, as you look at Q1, versus, Q1, $0.80 was the average rate in Q1 of 2015 and $0.72 was the average rate in 2016. And so it was a bit of a headwind as we look out. We think that fixes itself as the Canadian dollar last year, kind of went from $0.80 down into the low $0.70s, even $0.69. And so that picks this up as the year rolls on. But in Q1, it's still a bit of headwind. Yes. Absolutely. This is <UNK>. And just to comment on what <UNK> said just to add the point that if you look at the first quarter, it was about a $12 million headwind in revenues, probably a $1 million or so in EBITDA. But as you suggest, as we move later through this year certainly we will start seeing some benefit there, and we were not very aggressive in our guidance in looking at that. We use ---+ we kind of current use ---+ as we mentioned before, we use kind of current period FX rate as we give our guidance and so we update that as year rolls on. Right. Okay. So thanks for joining us today. The team is presenting at a number of upcoming conferences starting next week with Sterne Agee's Business Services Conference and Oppenheimer's Industrial Conference. We hope to catch up with many of you in-person soon and look forward to updating you as the year progresses. Have a great day.

2016_CLH

2017

ECPG

ECPG #Thank you, operator. Good afternoon, and welcome to Encore Capital Group's Third Quarter 2017 Earnings Call. With me on the call today are <UNK> <UNK>, our President and Chief Executive Officer; and <UNK> <UNK>, Executive Vice President and Chief Financial Officer. <UNK> and Jon with make prepared remarks today, and then we'll be happy to take your questions. <UNK> <UNK>, President of Encore's International Business, is also here and will be available for the question-and-answer session as well. Before we begin, we have a few items to note. Unless otherwise specified, all comparisons made on this conference call will be between the third quarter of 2017 and the third quarter of 2016. Today's discussion will include forward-looking statements subject to risks and uncertainties. Actual results could differ materially from these forward-looking statements. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included on our earnings presentation which was filed on Form 8-K earlier today. As a reminder, this conference call will also be made available for replay on the Investors section of our website, where we will also post our prepared remarks following the conclusion of this call. With that, let me turn the call to <UNK> <UNK>, our President and Chief Executive Officer. Good afternoon, and welcome to our third quarter earnings call. I'm pleased to report that Encore has delivered solid financial and operational performance this quarter. Overall, U.S. investment returns continued to improve as a result of the favorable domestic purchasing environment coupled with our long-term progress on liquidation improvement initiatives. In Europe, deployments were very strong in the third quarter and our international business continues to deliver solid results due to sustained improved collections. Cabot continues to execute on its liquidation improvement plans, resulting in strong collections performance. Let's now turn to a review of Encore's domestic business. In the third quarter, we continued to see favorable purchasing dynamics in the U.S. market. Banks are building on their loan loss provisions and net charge-off rates continue to increase with some large credit card issuers reporting an acceleration in charge-off rates when compared to prior periods. As a result, we expect a meaningful growth in supply through next year and beyond. Overall pricing remained favorable in the U.S., as a commitment to our disciplined pricing strategy remained firm. Although our domestic deployments with charged off credit card portfolios in Q3 were lower than a year ago, we continue to book new business at better returns than those of last year, enabling us to generate more ERC for each dollar we deploy. The money multiple for our consumer credit card portfolio purchases year-to-date through the end of Q3 was 2.0, which compares favorably to the 1.8 multiple from a year ago. Through our prudent capital management, our focus on improving liquidations and our solid relationships with issuers, we are positioning ourselves through capacity expansion for a period of strong deployments with attractive returns. As a result of successful portfolio purchases and forward flow arrangements, by the end of third quarter commitments for 2018 already totaled more than $280 million. Unfortunately, a number of Encore's consumers and employees were impacted by hurricanes hitting the U.S. and Puerto Rico. These weather systems have had a profound impact on the communities in their paths. In the wake of these storms, our first order of business was to establish contact with each of our employees who work in the affected areas. The hardest hit was our Puerto Rico office. After a number of anxious days, we were grateful to confirm that all of our people there were safe. Although our offices in each of the affected areas are back up and running, as you would expect, we temporarily suspended collections activity in impacted locations while recovery is underway, consistent with Encore's hardship policies. Our pool groups typically consist of accounts from a broad geographical footprint, which generally dilutes the effects of any regional impacts such as these hurricanes on any particular pool group. However, we have 2 pool groups included in the 2012 and 2014 vintages which are heavily concentrated in Puerto Rico. For these 2 pool groups, we recorded an allowance charge of approximately $10 million in the third quarter, as it will take time to reestablish normal operations and commerce on the island, while the community there works hard to recover its footing. After the allowance, the Puerto Rico-based accounts in these 2 pool groups have a remaining book value of approximately $12 million. We do not anticipate incurring any allowance charges resulting from this quarter's hurricanes on our other pool groups. Let's now turn our focus to our international business. Cabot deployed over $165 million in Q3. Cabot's operational, technological and analytical initiatives continue to drive better performance over a large number of pool groups. Combined with the benefits from a number of cost efficiency programs, the improvements from these initiatives enabled us to deploy capital in Europe's competitive market at strong risk-adjusted returns. We expect Cabot's strong collections performance such as that delivered in Q3 to continue in the future. As a result, we reversed an additional $28 million of the allowance charge from a year ago. We have previously mentioned that JC Flowers and Encore began a process that is expected to result in an initial public offering of Cabot shares. Cabot recently announced its intention to launch a public offering and apply for admission to the London Stock Exchange. As we have stated in the past, our ability to provide updates about any IPO or similar activity at Cabot is limited by securities laws. Our consolidated debt-to-equity ratio at September 30 was 5.1. Considering this ratio without Cabot, our debt-to-equity ratio was 2.3, which reflects a substantial difference when compared to the consolidated ratio. It is important to remember that we fully consolidate Cabot's debt on our balance sheet, because of our significant economic interest in Cabot and our control of their Board. However, Cabot's debt has no recourse to Encore. It is clear from this illustration that Encore is far less levered than our financials would indicate. As stated last quarter, upon consummation of a Cabot IPO, we intend to deconsolidate Cabot, significantly changing our financial statements. Deconsolidation would result in the removal of assets and liabilities attributable to Cabot from our balance sheet, and our investment in Cabot would be accounted for under equity method accounting. We believe this will make it much easier for investors to understand Encore's true financial condition. Before I pass it over to Jon, I would like to take this opportunity to publicly thank our outgoing Chairman, Will Mesdag, for his many years of service. Will's vision has been an inspiration to Encore's strategy over the years, and we all benefited in countless ways from his counsel. I'm pleased that the Board has chosen Mike Monaco to become our new Chairman. Mike has been the Chair of our Audit Committee for the past few years, and we look forward to his guidance and leadership. I'd now like to turn the call over to Jon for a more detailed look at our Q3 financial results. Thank you, <UNK>. Before I go into our financial results in detail, I'd like to remind you as required by U.S. GAAP, we are showing 100% of the results for Cabot, Refinancia and Baycorp in our financial statements. Where indicated, we will adjust the numbers to account for non-controlling interest. Turning to Encore's results in the third quarter, Encore earned GAAP net income from continuing operations of $28 million or $1.05 per share. Adjusted income was $31 million or $1.17 per share. Cash collections in the quarter were $443 million, and our ERC at September 30 was $6.6 billion, a new all-time high for our business. Comparisons to prior period financial performance take on a different tone at the beginning of this quarter, as we are now a year removed from the U.K.'s vote in favor of Brexit, which occurred at the end of June last year. This activity caused the British pound to substantially decline in value versus the U.S. dollar, which made year-over-year comparisons for our European business more difficult over the past several quarters. Deployments totaled $292 million in the third quarter, up 42% compared to the $206 million of purchases we made in the same quarter a year ago. In the United States, the majority of our deployment of $111 million represented fresh charged-off credit card portfolios. This compares to our core domestic deployment of $132 million a year ago, which represented a particularly strong quarter. European deployments totaled $177 million. This compares favorably to a year ago when we deployed $43 million in Europe. Our liquidation improvement programs allowed us to more than offset the competitive market dynamics in certain European markets to earn better returns than a year ago. During the third quarter, we also deployed $4 million in other geographies, including Australia and Latin America, compared to $22 million of purchases a year ago. Worldwide collections grew 9% to $443 million in the third quarter, compared to $407 million a year ago. Encore's Q3 collections in our U.S. call centers also grew 9% when compared to last year, as we continued to benefit from increased purchasing volume and the acquisition in recent periods of portfolios with higher returns. Also keep in mind, given the continued growth in the U.S. market, we are investing to increase the capacity of our call centers and legal collections network. Worldwide revenue in the third quarter was $307 million compared to $179 million a year ago, a period in which our revenues were impacted by a European allowance charge. Domestic revenues were down 7% compared with the same quarter last year, primarily as a result of the $10 million allowance charge associated with our Puerto Rican pool groups. Q3 revenue in Europe was $128 million and benefited from the $28 million allowance reversal resulting from the increases in collections driven by our liquidation improvement initiatives. In the third quarter we increased domestic yields primarily in pool groups in the 2012 through 2015 vintages, as a result of sustained overperformance. In Europe, we increased yields on certain pool groups in the 2014 through 2016 vintages, also as a result of sustained overperformance. Encore generated $34 million of zero-basis revenue in Q3 compared to $38 million in the same period a year ago. Our ERC at September 30 was $6.6 billion, up $836 million, representing an increase of 15% compared to the end of the third quarter of 2016. In the third quarter, our higher purchase price multiple results in more ERC per dollar deployed than a year ago. In the third quarter we recorded GAAP earnings from continuing operations of $1.05 per share. In reconciling our GAAP earnings to our adjusted earnings, adjustments totaled $0.16 per share. After applying the income tax effect of the adjustments and accounting for non-controlling interest, we end up with $1.15 per fully diluted share. And after deducting approximately 500,000 shares in Q3 related to our convertible debt, our non-GAAP economic EPS was $1.17. There are a number of items which impacted our earnings in Q3 which bear mentioning. I'd like to talk about these in the context of our economic EPS. First, as <UNK> indicated, we recorded an allowance charge of $10.2 million in Q3 or $0.24 due to the impact of Hurricane Maria on Puerto Rico. With regard to Cabot, the previously mentioned $28 million allowance reversal for $0.38 was driven by sustained collections overperformance. In September Cabot redeemed Marlin's original senior secured notes and generated a gain of $5.7 million in the third quarter, which represented approximately $0.08 of earnings contribution. With that, I'd like to turn it back over to <UNK>. Thanks, Jon. As I reflect on our performance in the third quarter, I'm excited about the path ahead. Purchasing trends continue to favor debt buyers in the U.S., our largest market. We remain well-positioned to benefit from these market conditions and are working diligently to maximize our returns. To summarize, we delivered a solid quarter of financial and operational performance. First, market supply in the U.S. continues to grow and is showing signs of long-term supply expansion. Second, our improving liquidation rates, together with continued favorable market conditions, are enabling us to purchase charged-off credit card receivables with money multiples at 2.0. Third, Cabot had a very strong purchasing quarter in Europe and its liquidation improvement initiatives are producing sustained improved collections. And finally on October 20, Cabot announced their intention to float shares on the London Stock Exchange. Now we'd be happy to answer any questions that you may have. Operator, please open up the lines for questions. What we have seen, <UNK>, is we're listening to the earnings announcements from the large credit card issuers. And supply depends on 2 factors, right. One is the total overall lending. And the second factor is the loss rates measured through charge-offs or delinquency rates or whatever metric one may choose. And in terms of what we are seeing the issuers report are their lending is growing. In each of the issuers' cases, the outstandings grew from a year ago in terms of the major issuers who have recently reported. And the net charge-off rates are also growing, and some of them are forecasting them to grow over the next year or so. So if you combine the 2 as well as the overall lending in the revolving debt industry market has crossed a trillion dollars in summer, as I've mentioned before. And you combine the 2 factors, the trends as well as the most recent credit card issuer announcements and publicly released information, we are seeing signs of continued improvement in supply as well as indications that it will continue for a foreseeable future. I'm not seeing any change in behavior. Again, quarter-to-quarter issuers may take different actions. In general, most issuers also work some paper internally or through their outsource suppliers, and they also sell. And they kind of change those mix over time. We maintain long-term relationships with the major issuers and believe over time we agree on certain pricing that works for them, on flow agreements, for example. And that also generates good returns for us, but makes sense for the banks. So we're not seeing any material change from the issuers and they continue to sell in the market that we have seen in the past, from the same major sellers. We have not seen any change in that. Our call centers are located in many sites in the U.S., one in Costa Rica, and one in India. And they all are stable in terms of the trends we see. We are growing capacity. That we have said before. We have grown capacity over the year, and we continue to grow capacity every month. And in terms of attrition rates, the productivity and how well they perform, it takes a while for them ---+ for the new hires to perform. But there's no change that we have seen and our operations teams are very focused on it and the recruiting teams are focused on it, and we see very good progress. And I feel very optimistic and positive about how we are growing capacity, how it's performing as the supply will increase in the future. <UNK>, what drop are you referring to specifically. I'm not sure ---+ I'm not sure. We're all looking at each other and we're trying to figure out. We apologize. We're not really following (inaudible) question. I think what <UNK> was trying to say is that the market is a very strong market and is providing opportunities to make investments at attractive returns, and we see that market growing in the future. I won't speculate in terms of our leverage and where we're comfortable or not. But I will share what I've shared with people in the past that there will be times that we will move our leverage up, and there will be times that we'll move our leverage down, and that will be driven by how attractive the market is. I think you'll see post-deconsolidation, my expectation is that you'll see some very attractive leverage ratios. And we don't have any near-term plans to move those. Cost to collect, <UNK>, is a reflection of several actions and kind of quarter-to-quarter things can change, for example, how we place accounts in different channels. As you can imagine, call center cost to collect is very different from legal. There are ---+ a year ago there were still some delays from the CFPBs consent order driven kind of litigation delays. And some of them ---+ clearly all of them went away. But then certain weather-related delays can happen in courts and whatnot. So I would say the cost to collect in aggregate can fluctuate quite a bit, at least for the U.S. number. And then there is a weighted average number that you're looking at for the company. So there's no one big driver that I can see change or predict what may happen. Yes, I think that we are, if your question is, is there ---+ as our volumes increase, if there can be scale to this and drive down our cost to collect. Certainly longer term we expect we will be able to do that. The only thing I would add to that is as we deploy more and as the supply grows, which we think it will and we're able to deploy at attractive returns, which we are very disciplined about, then we'll be buying those accounts, particularly if any of them are more [low-balance] accounts. They all require for initial investment, particularly in the (inaudible) channel; but even in the call center capacity that takes a little bit of time to ramp up and train. So if we deploy a lot more, we will probably have more front-loading of expenses, but we'd be doing it at very good long-term investment returns. The long answer is no. <UNK>, I don't have that number in front of me. But I remember last year we also had a very strong commitment pipeline for 2017 at that time. I'm pretty confident it was less than this number. But we did have a strong pipeline as well. In terms of our economic EPS, $0.71. Now, I think I need to explain a bit more there, <UNK>, just so we're all on the same page. That $0.71, if you go back to the prepared remarks, there was the $28 million allowance reversal and a $5.7 million gain on Marlin bonds. So if you net that out, your Cabot economic EPS would be $0.25. And then if you take the inverse, which I'm sure you would do, and say if Cabot made $0.71 and we made $1.17, then by definition everything else made $0.46. But you have to then also add back in the $0.24 from the Puerto Rico allowance charge. And that brings you to $0.70 for the non-Cabot part of the world. Does that make sense to you. This is <UNK>. The U.S. is very strong right now. And because of the supply that we're seeing, the increase in supply and because of the relatively lack of competition, the European ---+ U.K. and European markets are competitive. We are able to deploy capital at very strong risk-adjusted returns because of all of the operating initiatives we have around liquidation and efficiency. So while the U.S. returns are a bit stronger than they are in Europe, the returns we're getting for our deployment in Europe are very strong. No, we haven't, <UNK>. What they had indicated in August or so in summer, that by September they would have the notice for proposed rulemaking. And September has come and gone. So those rules haven't come out yet. So we and others in the industry are still waiting for that to happen. So we expect at some point soon. But they had a very clear September timeline that they did not meet. It's too early to say anything on that at this time, <UNK>. I'm sorry. So what we've said last time and this time is we intend to deconsolidate at IPO. Beyond that, as I just said, I'm not able to share what we may or may not do. This concludes our call for today. Thanks for taking the time to join us. We look forward to providing our fourth quarter 2017 results in February. Thank you.

2017_ECPG

2017

SMP

SMP #Okay. Thank you, Larry. As a preliminary note, I would like to point out that some of the material we will be discussing today may include forward-looking statements regarding our business and expected financial results. When we use words like anticipate, believe, estimate or expect, these are generally forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available to us and certain assumptions made by us, and we cannot assure you that they will prove correct. You should also read our filings with the Securities and Exchange Commission for a discussion of the risks and uncertainties that could cause our actual results to differ from our forward-looking statements. Looking at the P&L. Consolidated net sales in Q1 '17 were $282.4 million, up $43.5 million or 18.2%. This significant increase is primarily related to 2 factors: first, $23.4 million wire sales from our general cable acquisition, completed at the end of May 2016. Excluding the GC volume, our consolidated net sales increased 8.4%. The second significant increase was from stronger preseason Temp Control orders, following the warm 2016 season. By segment, Engine Management net sales in Q1 '17 were $211.3 million, up $30.6 million or 17%. Excluding the GC wire acquisition incremental sales, Engine Management sales were up $7.2 million or 4%. This increase reflects higher pipeline orders from certain customers as they are increasing their inventory coverage. Temp Control net sales in Q1 '17 were $70.3 million, up $13.5 million or 23.8%. This significant percentage increase reflects the higher preseason orders in anticipation of another warm season as experienced in 2016. Consolidated gross margin dollars in Q1 were up $11.1 million at 29.8%, down 0.8 points. Looking at the margins by segment, Engine Management gross margin was 30.3%, down 1.4 points versus Q1 '16. Margins were off slightly related to lower margins in our GC wire acquisition sales not present last year. We expect the GC margins to improve significantly once we have combined the acquired operations in Nogales, Mexico, into our existing Reynosa, Mexico, operation. In addition, we are incurring additional costs during our multiple transition moves. Temp Control gross margin was 25.2%, up 0.4 points versus Q1 '16. Margins benefited from higher production levels and our continued efforts and focus on reducing costs. Total SG&A expenses were $57.4 million in Q1 at 20.3% of net sales versus 22.2% last year. The GC wire acquisition was beneficial, gaining leverage on our SG&A spend as we have integrated our wire sales, marketing and distribution functions during 2016. The SG&A percentage also benefited from the higher Temp Control preseason orders shipped. Consolidated operating income before restructuring and integration expenses and other income net in Q1 '17 was $26.8 million, 9.5% of net sales versus $20 million, 8.4% of net sales last year, reflecting a 1.1 point improvement. Operating income dollars were up in both segments, and our restructuring initiatives underway should improve this performance further. The net effect of our operational results as reported on our non-GAAP reconciliation was Q1 '17 diluted earnings per share of $0.74 versus $0.55 last year, which is almost a 35% increase. Looking at the balance sheet. Our working capital needs increased as we entered the spring and summer seasons. AR increased $45.5 million since December '16, primarily with the strong Temp Control preseason orders. Inventories increased $19.3 million since December as we build inventories for the summer season and also bridge inventory builds, with our multiple facility moves underway. Accounts payable increased $18.1 million, partially offsetting the rise in receivables and inventories. Total debt increased $27.2 million to fund our working capital needs. These working capital increases are expected as we enter Q1 and Q2. And then we begin to monetize these investments through Q3 and Q4. Our cash flow statement reflects a $27 million use of cash in Q1 '17 versus only $1 million use last year. This increase reflects the higher working capital needs, slightly offset by higher net earnings. Capital expenditures were $3.2 million, slightly below the $4 million level in Q1 '16. We anticipate this spend level to increase over the balance of the year to the $25 million-plus range for the full year compared to $21 million in 2016. This reflects our continued focus to reinvest in our businesses. In February 2017, we announced a $20 million Board of Directors authorized repurchase program for our common stock. In Q1 '17, we repurchased 32,367 shares at a cost of $1.6 million or $48.18 a share. In Q2 '17, through the end of April, we repurchased another 30,543 shares at a cost of roughly $1.5 million or $48.09 a share, leaving us a remaining $17 million authorization for future repurchases. In summary, we are pleased with the results in the quarter and future initiatives to strengthen our business for the long-term. Thank you for your attention, and I will turn the call over to <UNK>. Thanks, Jim, and good morning, everybody. Jim has covered the numbers, and as you've heard, we're quite pleased. Sales were obviously quite strong. However, it is important to note that in both of our divisions, a portion of the sales was geared towards customer pipelines rather than strong demand through the channel. As you've seen from first quarter earnings calls from our large publicly traded customers, Q1 was a bit of a challenge overall, and we did see that to varying degrees with how they did with our product lines as well. I'll talk about the 2 divisions separately. In Engine Management, our customers' POS was slightly down. Meanwhile, their purchases from us were up fairly substantially. If you exclude the acquired General Cable business, our Engine Management sales out were about 4% up. Few of our customers determined the need to expand their assortment and deployed broader inventories throughout their system. They, therefore, placed heavier-than-normal line update orders as they reset their planograms. As you know, a key to growth in the DIFM business is to have broad coverage and rapid delivery. So working with our category management team, they identified coverage gaps and sought to fill those gaps. In Temp Control, our customers did post slight increases in POS, but the dollars are small as Q1 is always a light quarter. As a weather-related business, our first quarter is almost entirely about preseason orders as our customers get ready for the summer. We see this every year, but this year, the preseason orders have come in heavier, which reflects the impact of last year's hot summer, where they ended the season a bit lighter on inventory than usual. So we, therefore, believe that the customer actions within both divisions do bode well for the future as we believe that these strategic purchasing decisions will help them secure sales going forward. But as we always reiterate, one should look at our performance year-over-year, as quarterly activities can cause some temporary peaks and valleys. So I won't spend any more time on the numbers. I thought I'd spend a few minutes talking about recent initiatives, and then we'll open it up for Q&A. First, an update on General Cable. We're nearing the anniversary of this acquisition, and other than planned integration and efficiencies, it's performing quite well. Sales have been solid, and we've retained all the accounts. We've greatly improved our shipping performance, our fill rates across the board to all of these accounts, and the acquired plant in Nogales is doing really quite well. The integration is proceeding on plan as announced, the distribution all moved last year, and we have now moved the manufacturing for several accounts without any hiccups. We're on target with the build-out of an additional 75,000 square feet in our Reynosa wire plant to accommodate the balance of the production lines, which will all be moved by the end of the first quarter of next year. So overall, within wire and cable, 2017 will remain a transition year, with lots of moving pieces. And while we fully expect to achieve all of the planned synergies, we won't be all the way there with our profit improvement until next year. We've also been quite active with other plant moves. We're making strides in winding down our Grapevine, Texas, plant, a project we've been working on since early of last year. To remind you, there were 2 elements in Grapevine, where we did all of our diesel products as well as a bunch of our Temperature Control. All of the diesel lines have now moved to our injector plant in Greenville, South Carolina, and are performing really quite well. Greenville is our center of excellence for fuel delivery products, and we're excited to see what they're going to be able to do with this line. The Temp Control products are all slated to move to Reynosa. We've expanded into an additional building there, which is now fully up and running. We've moved several of the lines already and have a handful of lines left to go. We're on target to be out of Grapevine by the end of the year, and we're actively marketing the building and the [product]. We are very pleased to note that many of the Grapevine employees have elected to take other jobs with us, mostly at our Louisville location close by, but also in South Carolina, and we're very excited that they've chosen to stay with us. As discussed on our last earnings call, we are now also in the process of closing our electronics plant in Orlando and relocating it to Independence, Kansas. To remind you of the rationale, Orlando is an excellent high-tech plant, but quite small, less than 50 people and only about 50,000 square feet. And meanwhile, Independence is quite large and diverse and manufactures many other similar electronic products, and they can easily absorb all the Orlando production and allow us to be a much more effective manufacturer seeking synergies between the 2 operations. This will be a multi-phased move, which will take us into the middle of next year to complete. The first phase will soon be underway, and everything is on schedule. So for all of our employees in both Grapevine and Orlando, we really would like to thank you publicly. You've been terrific throughout this entire process. It's been a difficult time, but you've continued to operate your plans with pride, performed at a high level and are helping to make this successful. So you do truly have our sincere gratitude. So in closing, we are very pleased with the quarter. We have a great team here at Standard, and with their talents, I and the rest of the senior management team here at Standard, we're very excited about our future. So with that, I will turn it back over to the moderator, and we will open it up for questions. Can you maybe just talk about sell-in. <UNK>, you talked about how your customers are talking about how things were a little sluggish in the quarter. Maybe just talk a little bit more about what they're saying, what they're hearing, whether it's weather related or just timing or tough comparisons with a year ago. And maybe just talk about ---+ maybe just reaffirm your expectations for the segment if you could. The quarter ---+ different customers had slightly different experiences in the quarter with the 2 different product lines. And ---+ but I don't think it's anything that has any longer-term impacts. Overall, we see our Engine Management business is going to increase barring any major gains or losses of business. It's going to roll with the trends of the overall market, up a couple of percentage points year-over-year. Temp Control is entirely based on the summer. And so here we are in early May. We'll see what the next few months bring. But we don't get too hung up in what happened in a particular quarter. And we'll just see what happens as the year progresses. Got it. And on the margin side, a couple of items. You talked about General Cable mixing in and some of the redundancies with the facility moves. Can you maybe just ---+ it sounds as if the lion's share of the contraction came from the latter. Can you maybe just confirm that, maybe just talk about that a little bit. Yes, <UNK>. This is Jim <UNK>. So again, part of the ---+ on the General Cable, the volume there ---+ when we took it over, the margins were lower and fully anticipated to bring them up once we consolidated the businesses. They have a higher mix of OE/OES business that's in there, which margins will be different than our aftermarket, but then we have lower SG&A. We are incurring incremental costs as you start up in a new area and wind down in the other. And really, there's a lot of moving parts. The key is we expect these margins to improve to the Engine Management levels, and you'll see further improvements once we complete all the moves by the end of Q1 '18. Got it. And maybe on the SG&A line. You definitely had some nice advances in leverage. Some of the things you talked about with General Cable and some of the consolidations there. But maybe just give us a framework of where you see in absolute dollar terms the line item going, I guess, for the balance of the year on a quarterly basis. Yes. We came in at $57 million for the quarter. And Q2 and Q3, because of our sales volumes will pick up, that's in there. So again, that's probably the low end of the number that we would be in. And again, I've talked consistently that we're more in absolute dollars than as a percent when you're looking at our spend. So from the $57 million, we would size up, obviously, in Q2 and Q3. And then Q4, it really depends how much volume, but we're probably in that same range again there. So I would say the low point per quarter is $57 million. We size up a little bit in Q2 and 3. Got it. And one just last question maybe on new products. I know that you guys have a lot of things in the pipeline and you've talked about numerous times. Maybe just talk about whether it's diesel injectors or some of the new technologies in cars today that are leading to increased uses of your parts. Maybe just give us an idea of how that's going. Sure, absolutely, <UNK>. Well, yes, we do always have several new product lines that we are adding and growing with. It's important to note that a lot of times, any sales growth that we see on newer categories is really replacing older technology as it's falling off the backside of its life cycle. But we do have several going on right now. One that we've been talking about a bunch recently is diesel where, if you go back a couple of years, 2015, we really used that to get our house in order; 2016, we started to see the fruits of that; and here, first quarter of 2017, we're continuing to see sales in our overall diesel offering up in north of 20% growth year-over-year. So diesel is a really exciting category for us, and we see a lot of upside there, continuing to see growth in our TechSmart offering. One new thing that maybe I'll highlight just briefly is, we developed several years ago a compressed natural gas injector for heavy-duty markets, and really, it was ---+ we had the product, and we're waiting for the market to develop. Here in early 2017, we are starting to see a nice uptick as the China market starts to adopt the technology a little bit better. Yes, it's a small piece of what we do, but just another example of where we're always looking for complementary product categories. Within ---+ I don't have the month-over-month numbers. But within the quarter, like I said, Engine Management was slightly soft, Temperature Control was okay. It's really a little too early to tell what's happening in this quarter, especially Engine Management, not particularly a weather-related product line. And Temperature Control, as we've said numerous times, we really have to wait and see what happens going forward. I believe that they started out this year a bit lighter than they started out last year, which is reflecting the fact that not only was last summer hot, but it stayed hot long. So what typically happens is, towards the end of a season, they will stop reordering from us and sell [them] from their own shelves. And that is what we saw happen in 2016. So I believe that what we saw this year is, they started out lighter than they started '16, and now they are probably equally positioned for the season as they were last year. Yes. Again, Jim <UNK>. It'll be more gradual that's in there. We'll see some improvements coming over the second half of the year that we would see there and then the balance. It won't be a full step item that's in there, <UNK>. All right. Goodbye. Thank you.

2017_SMP

2017

HCSG

HCSG #Thank you, Nicole, and good morning, everyone. Matt <UNK> and I appreciate all of you joining us for today's conference call. We released our first quarter results yesterday after the close and plan on filing our 10-Q the week of April 24. Revenues for the first quarter were up over 5% to $404 million. Housekeeping and laundry increased 2%. Dining and nutrition grew at 10% for the quarter. Earnings from operations increased 10% in Q1 to $32 million. Both revenues and earnings from ops were company records. We have strong new business momentum heading into the balance of the year, and in conjunction with yesterday's earnings release, announced the addition of over $160 million of new service agreements set to begin during the second quarter. The provider community's renewed emphasis on core competencies, especially in this era of value-based purchasing, has increased the demand for outsourcing services of all kinds, including ours, that allow operators to focus on patient care and patient mix, which is really the lifeblood of their business rather than support services that tend to drain their already limited resources. This increased demand will present significant opportunities for us in the years ahead, which is why people development from the newest employee to the most experienced of leader remains our highest priority. With that abbreviated overview, I'll turn the call over to Matt for a more detailed discussion on the quarter. Thanks, Ted. Good morning, everyone. Net income for the quarter increased to $22 million or $0.30 per share. And both net income and earnings per share for the quarter were company records. Direct cost of services for the quarter came in at 85.4%, which is below our target of 86%. And going forward, our goal is to continue to manage direct costs under 86% on a consistent basis and continue to work our way closer to 85% direct cost of services. SG&A expense was reported at 7% for the quarter. But after adjusting for the $1.2 million change in deferred compensation investment accounts, which are held for and by our management people, our actual SG&A was 6.7%. And we would expect SG&A to continue to be at or below the 7% range going forward with some ongoing opportunities to garner modest efficiencies. Investment income for the quarter was reported at $1.6 million. But again, after adjusting for that $1.2 million change in deferred comp, actual investment income was around $400,000. Our effective tax rate for Q1 was 32%, which includes about a 2% impact related to FASB's required change in share-based payment accounting. And we expect our effective tax rate for the remainder of 2017 to be in the 34% to 35% range, excluding any share-based payment accounting impact, as we continue to maximize tax credit programs, including WOTC, the Worker Opportunity Tax Credit. We continue to manage the balance sheet conservatively, and at the end of the first quarter, had over $116 million of cash and marketable securities and a current ratio nearly 4:1. And receivables remained in good shape, DSO in line with the year-end, right around 63 days. As announced yesterday, the Board of Directors approved an increase in the dividend to $0.1875 per share payable on June 23. The cash flow and cash balances for the quarter support it. And with the dividend tax rate in place for the foreseeable future, the cash dividend program continues to be the most tax-efficient way to get the value and free cash flow back to the shareholders. This will be the 56th consecutive cash dividend payment since the program was initiated in 2003 after the change in tax law. And it's now the 55th consecutive quarter that we've increased the dividend payment over the previous quarter. That's now a 14-year period that includes 4 3-for-2 stock splits. So with those opening remarks, we'd be happy to open up the line for questions. Yes, I think during the second quarter ramp-up as the new business is phased in. Because we're operating at our most efficient stage, we're inheriting the staffing patterns, the purchasing programs of the new customers, so you would see some ramp-up to get to the normalized margins during the second quarter, which we would expect to see at some point during the third quarter, typical to what you would ---+ we've experienced historically. Yes, I mean, look, over the past few years, we talked about this on the past few calls and it continues to be something we have conversations about. But certainly, over the past few years, with the shift towards value-based purchasing and more specifically the bundling initiatives, RAC audits, more recently the requirements of participation, the industry continues to feel a heightened sense of regulatory as well as reimbursement uncertainty. And last quarter, we talked a little bit more in detail about the change in administration. But that certainly adds some additional uncertainty around the potential repeal and replacement of ACA, whether that's reinvigorated or not remains to be seen, Congress's ongoing interest in modernizing Medicare as well as Medicaid block grants and the potential for them. So again for us, that uncertainty has the effect of increasing the demand for our services. A significant part of our value proposition is the operational, financial as well as administrative certainty that we're able to provide on what amounts to 20% of a facility's cost structure. But that doesn't mean we can grow any faster. Again, the constraint on our growth continues to be our ability to develop management people. But certainly, the ongoing uncertainty within the long-term and post-acute care industry has forced operators to really focus and refocus on core competencies, which I've referenced in my opening remarks. Yes, <UNK> ---+ I'm sorry, <UNK>, we've talked about this previously. And certainly, as some of the regional chains and multistate chains have expanded, we've seen the lumpiness apply to the housekeeping and laundry segment to some degree as their operational structures have really grown to somewhat mirror ours. So as you gain momentum in a certain geography facility-by-facility, there's often that rolled-up benefit that applies with a Regional Vice President of Operations or a Regional Director of Operations within those state-based or multistate operator chains. So there is that impact with housekeeping and laundry. But certainly, the more pronounced lumpiness applies to the dining and nutrition segment. And the reason is that it's really more of a significant transition from the in-house operation to the outsourced model. When we go in, as we've talked about previously, we're typically bringing in a new menu, a new clinician, the registered dietitian who will serve as the clinical liaison from the dining operation to the medical director at the facility. And most typically, we are changing the service offerings at the facility as well. So when you roll all of those together, there tends to be more transition issues as it relates to a dining move from in-house operation to outsourcing through Healthcare Services Group. When you look at some of those state-based and regional and even multistate operators with whom we are growing in the dining segment, their preference is that they would make all of those transitions among the facilities under their management at one date certain rather than, which would have been historically our preference as we develop managers through the management training program, we would layer them into the new facilities as the demand requires. But the operators are increasingly looking to make all of the facility starts to line up so that they go through all the transition pains or bumps and bruises in one fell swoop rather than sort of death by 1,000 paper cuts. So I think that's the dynamic that most drives the lumpiness that you'll see in dining. Not to say that it's related in any way to demand for either segment being significantly up or down or suggesting that there's any cyclicality or seasonality to the demand for either of those services, but I think it really is driven by that factor of clients wanting to start all of the dining facilities at the same time as opposed to dragging them out over a longer period of time. And <UNK>, the only thing I would maybe amplify relative to Matt's response, and it's specifically related to housekeeping or at least more directly related to housekeeping, is the driver of ---+ is what drives some of the lumpiness is geography. When you think about the most significant ---+ when we look out over the next 3 years, right, for housekeeping specifically, we look at that as a mid-single-digit, maybe high double-digit growth rate, quarterly or annual ebbs and flows notwithstanding. But again, the top line variability in housekeeping is primarily driven by geography, where are we adding the business. Nearly all of the cost in housekeeping, 85% to 90%, are labor and labor-related. So a 200-bed facility in Manhattan that's subject to a CBA, high wage rates, rich benefit program, pension contributions, that may be a multimillion-dollar contract. That same size facility in rural Louisiana, lower wage scale, limited medical benefits, that may be a $250,000 contract. From our perspective, it's similar efforts, similar resources, but again in any given quarter or any given year, that can affect, more specifically related to housekeeping, that segment's top line performance. Yes. As you highlighted, <UNK>, about half of the facilities that we've highlighted in this new bolus of business that we're adding in the second quarter are concentrated in our Northeast and Mid-Atlantic divisions. And the balance are spread fairly evenly across the rest of our operating divisions. We had a nice mix comprised of multiple customer groups, some state-based, some multistate operators. So there is a concentration in the Northeast and the Mid-Atlantic. So as is typical, when there is significant growth in any geography, there will be sort of added efforts and additional management applied to those starts to make sure that we're transitioning effectively, that we're managing the new customer relationships and that we're ultimately getting those facilities with our systems implemented and ultimately at the budget levels that we've anticipated. So that is a process, and certainly, when we bring in new business in any geography, if there's a particular concentration in a given geography that's going to take more management effort and it's going to typically pressure margins in those areas. Now we've talked about correspondingly in the ideal scenario, the management development function, the recruiting of management candidates, shepherding those folks through the management training program, that doesn't stop when we have these new business adds. But the reality is that it's typically an all-hands-on-deck exercise in a geography that's especially experiencing growth. So inevitably, there is sort of a tamp down in the recruiting efforts and the training efforts. So what we'll most likely see, especially here in the Northeast and Mid-Atlantic is, as they get these facilities on track, implement our systems, make sure the clients are satisfied and ultimately get them on budget, that's when there would be sort of that ebb and flow in which the end of that time period is when we'd see more of the ramp-up in the recruiting and the management development, which then ultimately contributes to the completion of that virtuous cycle of ultimately as those managers are developed, they would look toward the next wave of growth in that area. Now if you look outside of those specific divisions, those that are not as impacted by this amount of growth in the second quarter here, it's really business as usual. As they're layering in those new facilities, there's not a tremendous concentration of facilities in any other geography outside of the Northeast and Mid-Atlantic. So for those areas, it should be that continuous cycle of recruiting, training and developing the next wave of management folks so that as they come through the training program, almost in a production line-type fashion, <UNK>, we'll be ready to place them in a new facility. So I think there will be a slowdown in the Northeast and the Mid-Atlantic. But as far as the rest of the country, there's no significant areas that are overburdened, so we would expect business as usual with respect to the management development function, which, of course, then ties into our ability to grow the business. Yes, Matt touched on it. But again, the majority of it, let's call it 80% plus, is dining-related. And again, that's what we're calling out as we head into the quarter. Given the flexibility and the capacity that we have in at least half the country that has less of the concentration, we would expect ongoing normal type of business-type growth really in both segments. About half the facilities, as Matt alluded to, are concentrated in the Northeast and Mid-Atlantic. And it's comprised of multiple customer groups. We've got state-based chains, a multistate operator, and one particular national operator which makes up a substantial portion of that growth. And I think, <UNK>, just to try to put the $160 million-plus in some additional context, at least in the way that we think about it, the way management thinks about it, coming into the year, we felt like we were in a good position in terms of existing management capacity as well as the quality and quantity of the management trainee pipeline. And that, more than anything else, has and will continue to be the governor on our growth. Now here we are, 4 decades in, and we still have not found a management development shortcut in that promotion from within model. And if you look back historically, thinking about what the next 3 years will look like, the sweet spot for us as it relates to delivering our commitments that we have related to customer experience, which is critical for us, as well as career opportunity for our employees has been that high single, low double-digit-type growth range. And that's been the case, that remains the case as I said, when we look out over the next few years. Of course, we're going to have quarters or years, perhaps 2017 is going to be one of them, where because of the timing of the new business adds, this bolus that we're culling out, we grow at a faster rate. And that's still manageable. But it does require that we are much more conscientious in managing that customer experience at the facility level and really at the client and customer level even outside the facility. Not just for the purposes of maintaining the client retention levels, which are critical for all the obvious reasons, but more importantly making sure we have a satisfied client base because it's our current facility level client partners that ultimately serve as the reference base or in many cases the catalyst for those future growth opportunities. I think the greater than $160 million, without taking those retention rates, those client satisfaction levels for granted, I think it would be fair to tease out the $160 million with the full run rate being reflected in the third quarter. And then again, as Matt touched on, for the ---+- about half the country, right, we had normal type of business-type growth rate. So you could certainly see a double-digit, maybe gets into the mid-teens type of year. But there's a hell of a lot of execution that goes into that. But that's what we're set up for. Again, it doesn't mean going into next year or teasing it out over 3 years, it's the new norm. That high single-digit, low double-digit range for us over the mid-term, over the long-term is really that sweet spot. And that's why I wanted to underscore that point. We've seen an increase, <UNK>, in client retention. But it really, I think, relates to 2 things. Number one, we've certainly put much more of a focus on delivering client outcomes, really driving client satisfaction and ultimately linking client satisfaction to client retention, which has not always been the case. We've retained some business with clients who may not be as satisfied as we would like for them to be. And we've lost other business, where the client was in all other ways completely satisfied with our services. So we have made efforts to really focus on implementing our systems, consistently implementing our systems and our quality assurance programs to really drive that increase in client satisfaction, which we believe has translated into an increase in client retention. The other driver that we've been open in discussing previously is that when you're cross-selling dining services into a client, it really elevates the relationship from both an operational perspective but also from a financial perspective. And if you think about when we've talked about where we're ---+- the scenario in which we're most at risk for cancellation, it's typically when there's a change in ownership or control at the facility level. When that new operator comes into a facility, if we're there in a housekeeping and laundry capacity, for them to unwind that relationship, it's not all that cumbersome. It's pretty simple, right. But if you've got housekeeping and laundry and we're also managing the dining and nutrition operations at the facility, that's a pretty significant relationship both financially and operationally and certainly from a quality perspective to unwind. So when we do have that expanded relationship, there's less of an incentive for that new operator to come in and want to unwind those services. It's certainly a much more complicated proposition. And certainly, when given a chance at bat, which we do better at assuring ourselves in those new scenarios these days with a new operator, we've certainly demonstrated the value and ideally earn a place at the table on a go-forward basis. So certainly, all of those factors have contributed to the gradual increase that we've seen in the retention rates. I would say yes to the first parts of your question, Nick, as to whether that translates into ---+ or correlates to our ability to increase new business adds, I don't think we'll see that. As we've talked about, we continue to have the governor of growth being our ability to develop our managers through the training program. Now certainly some of the technology initiatives that you're referring to have certainly contributed to the management development training program. We're able to push out electronic-based and cloud-based training programs from the corporate office so that there's an element of self-study in addition to that hands-on apprenticeship-type training that happens in the management training program. But it doesn't really accelerate either the throughput from a timing perspective and that folks can get through that training program in a faster fashion nor does it significantly improve the overall turnover that we're seeing through that management training program. It is still a very hands-on program. And because of that, we do have 2/3 of the candidates that aren't making it through. The real impact from an efficiency perspective, Nick, that we've seen in some of the technology initiatives that we've launched is really at the management level at the facility, the facility level manager. We've initiated an electronic onboarding program that really took what was anywhere from a 50- to 75-page application for our line staff employees. We're talking about housekeeping applicants, pot washers and dishwashers applying for a position and having to fill out a 50- to 75-page hard copy application. The manager at the facility often had to sit over their shoulder and explain portions of that as it related to social security verification, background check and screening, abuse registry checks, et cetera. And then the manager had to aggregate that information, send it to the corporate office, who would then disperse the various parts of the application to the relevant parties for review and approvals, reaggregate and send back to the facility with either an okay to hire or a flag to not hire that potential applicant. What we've done is we've created this electronic onboarding platform that's really translated at a fourth grade reading level so that the applicant can now sit down in front of a Chromebook and go through that whole application themselves. And that frees up the manager to otherwise manage the facility, right. It certainly helps us from a compliance perspective in that now all parts of the employee application and employee file are housed electronically in a cloud-based fashion and we can free up that management time so that that manager now instead of having to sit over their shoulder and translate the application for them, is free to go and do systems implementation, manage the client relationship and initiate our quality assurance programs that will ultimately drive client satisfaction and hopefully retention. So certainly, we would expect to see improvements, more on the qualitative side, Nick, as we look at some of those initiatives as it relates to IT investments. Does that translate into increased growth. No, we don't believe it does because the governor on that growth is still related to our capacity to develop managers for the training program. And as we've talked about previously, we've not found any significant shortcuts in developing those folks through the training program. Yes, I'd say excluding the share-based payment accounting, Andy, our tax rate would have been 34% and change. And going forward, as we look out over the remainder of the year, again barring increased profitability, right, which would have the effect of a higher portion of our profits being taxed at a higher rate, given the scale of the tax rate system, we would expect it to be in that 34% to 35% range. But the 2% benefit that we received was just the result of that share-based payment accounting, which as you know essentially takes the excess tax benefit from option exercises and now runs it through tax expense as opposed to equity. Yes, it could be. And again, it doesn't change the cash taxes we pay. It's just removing one additional book-to-tax difference that exists out there. But that could be one driver. But it also depends on option exercises, the volume of option exercises and when the timing of them hits, whether it's Q1, Q2, Q3 and Q4. Traditionally, Q4 and Q1 have been more active option exercise quarters. But I don't think it's going to be something that's overly significant this quarter. It added about $0.01 or so to our earnings per share. But again, it's not something we're really baking into our internal cake on how we manage the business because it's already in there. It doesn't change the cash aspects of how we manage the business. So whatever falls out quarter-to-quarter, we'll talk about it, we'll call it out and we'll explore it from there. I think everything is on the table. It's something the board evaluates on an ongoing basis, Andy. And I know we've talked about this before. But we're committed to continuing to gain operating experience in managing growth opportunities, taking on this bolus of new business during the course of the year, right. That's from a timing perspective, that's a cash outlay that needs to be considered. But also the capitalization requirements of the captive and how all of that works within the working capital needs of the parent company, and then determining the capital allocation strategy moving forward. I would say longer term, obviously the potential for tax reform and the ongoing acceleration of earnings and cash flow continues to lend credence to kind of your question about, is it a matter of when. Or is it a matter of if. And I would tend to lean more towards the when. But it's evaluated quarter-to-quarter, year-over-year, and we're always looking forward to determining what the highest and best use of our free cash flow is, vis-\u0102\xa0-vis capital allocation. Well, I can tell you, without knowing exactly what article or more specifically what iteration of articles you're referring to, I can tell you we believe our best efforts are spent actually running the company and delivering outcomes for our customers, our employees and all of our shareholders, not the latest and greatest investor sentiment or third-party articles and blogs. And I would say regardless of bias, Andy, whether they're positive or negative, God knows there is plenty of both out there. And when you look at over the past 10 or so years that you mention, our track record really speaks for itself. We've tripled the size of the company, customers, employees, revenues, profits. We've paid out more than $400 million in dividends during that time frame. And most importantly, we've positioned the company today to surpass that performance and deliver for all of our stakeholders over the next decade. So again, I think our track record of performance over the past 10 years really stands on its own. We haven't, <UNK>. No, I mean, we've ---+- regardless of the overall labor market, we've been remarkably consistent in our ability to garner enough resumes and hire enough employees. It's just in getting them through the training program that's been the restricter on our ability to grow the business. So if you look at kind of expanding out the view on the labor market, we've seen some inflationary-related pressures, particularly in states that have adopted minimum wage initiatives, like California, New York, Washington State. But that's really no different than how we would handle any pass-through increase because we match the wage rates, mirror the benefits and recognize the seniority at each facility. So really, any change in the conditions of employment, like minimum wage or for that matter, health and welfare as it might relate to ACA or a union stipulated increase, commodity costs in food, DOL exemptions, exempt minimum salary threshold, all those trigger the pass-through clauses in our contracts and we would increase the billing accordingly, so really haven't seen any labor market pressures that have impacted our ability to either recruit and develop managers effectively nor recruit and retain the appropriate line staff employees in the facilities. I think as far as the sales cycle, <UNK>, the main difference would be sort of the size of the opportunity. Clearly, we look at each and every sale, if you will, as a facility-by-facility exercise. But clearly, as we've discussed as it relates to sort of the lumpiness, particularly in the dining business, our clients are increasingly wanting to look at all of their facilities in one fell swoop. So as it relates to the size of the opportunity, there is typically a correlation in the length of the sales process related to that opportunity. So with some of these bigger deals and certainly the specific deal that we've alluded to as the primary driver of the second quarter growth here, that was a discussion that was complex and it was held over a long period of time. And there are ongoing discussions just like that, that may not come to fruition for a year or so. It might not be until first or second quarter of 2018 that some of the discussions that are substantive but ongoing currently come to fruition. The flip side of that would be in any given geography, where you have the local administrator who leaves one facility and goes to the next, that's our greatest source of growth opportunity. So as that administrator calls us to bring us in to examine that new facility as an opportunity for expansion, that's a scenario that could turn around within a matter of weeks. So there is, as always, a high degree of variability in the sales cycle. But we haven't seen any external factors, <UNK>, that are significantly accelerating nor impeding this sales cycle. It's really driven by kind of the size of the opportunity for the most part. Thank you, Nicole. And as the company enters its fifth decade, our vision for the future is clear, to be the choice for our customers and all of the communities we touch each and every day, including our employees, residents and shareholder partners. Our primary operational goal is to provide an extraordinary service and experience to our customers by executing on our systems implementation and adherence and people development strategies. These are the key ingredients that will ensure sustainable, profitable growth over the long term. As we look to continue our positive momentum in the year ahead, the demographic trends have been and continue to be in our favor. We're in an unprecedented cost containment environment that's increased the demand for outsourcing services of all kinds, including ours. We have the most talented management team that we've had in the history of the organization. And we have the financial wherewithal to grow the business as fast as our ability to manage it. Ours is an execution business. And our ability to execute is what will drive our success in the months and years to come. So on behalf of Matt and really all of us at Healthcare Services Group, I wanted to thank Nicole for hosting the call today, and thank you to everyone for participating.

2017_HCSG

2017

BYD

BYD #Sure, <UNK>. The purchase was for $43 million. The Orleans is ---+ sits on land that it had previously leased and we had the opportunity under the lease to ---+ under our purchase option to acquire the land at a price that we felt was an attractive price. There's no incremental development opportunity that existed before or after the purchase. It just converted a piece of land that was being rented to one that we now own. Yes, but you have to understand, this lease is not like the lease associated with a propco/opco structure. It's a much lower lease rental stream that we paid. Thanks. Thank you, everyone, for joining today. We wish you and your family a happy Valentine's Day. If you have any follow-up questions, please feel free to reach out to the Company. Thank you.

2017_BYD

2015

GPRE

GPRE #The corn basis has definitely firmed up here in the last several weeks. As the farmer goes into the field, plants his corn, he is going to wait to see what he has coming at him. So if to get old crop corn right now, the farmer is absolutely in charge. And we are going to have to wait for him to come out of the field and spoonfeed us some corn. So the corn basis has definitely started to have an impact on the overall crush spread. But we had most of what we needed locked in for the second quarter, and we have a good start on the third quarter for procuring corn. What's interesting though, <UNK>, is what we are seeing in the fourth quarter. We are starting to see commercial hedgers sell us corn at more historical levels earlier in the season. And we think that's probably to make room for some soybeans, as well, as we will probably have a bunch of soybeans this year. So we have started to see in places in Iowa at the 25 to 35 under numbers, which we typically wouldn't see this early, where commercial hedgers are starting to let go of some corn. So that's a good thing. The interesting thing is the East and the West are basically at parity now, once again, where the East typically with trade at a premium to the West; but we are starting to see where the West has accelerated corn basis, which is why we see such good margins on our Eastern plants versus our Western plants. So that is impacting the market a bit as well. Overall our view is the farmer is going to get into the field, and he's going to plant the corn. We think that he hasn't ---+ well, from what we are hearing, he is not buying the most expensive hybrid. But we still think that he's still ---+ you know, the numbers are solid, what we've seen in the market on corn acres. And we expect that under normal growing conditions, we are going to have another good crop year with not a big draw into carryout. So overall, hopefully, that's a favorable fundamental for ---+ looking forward in the fourth quarter for the crush. Yes. So we think that gasoline demand will be up 2%-ish to 3% this year. Ethanol blending is up 3% to 4% year over year already for the first part of the year. So we've seen more blended ethanol into the gasoline as driving has gone up. As the charts have indicated, we are continuing to push up ahead of the five-year demand run rate for gasoline. And so with all that said, you can have a 138 billion gallon, 139 billion gallon gas demand, which then leads to a 13.8 billion gallon, 13.9 billion gallon at base ethanol demand. If you had a add 800 million to 1 billion above that, we are starting to see some of the evidence that stocks will draw a bit. Now, the industry has shown that they can produce 15 billion gallons for one week or two on a run rate. I'm not sure we can annualize that. So we are probably capable as an industry somewhere between 14.2 billion and 14.5 billion on an annualized basis, which then leaves us somewhere close to parity, if not starting to draw. Again, I can only ---+ and we'll get charts out to everybody ---+ is to take you back to the fact that when you look at the overall tightness of days, overall with the increased gas demand, some of those numbers we used to look at in the past aren't correlating very well with margins right now, where these stock numbers would typically correlate with a lower margin structure. But the fact is that we haven't seen this gas demand really for about four years to know what the stopping number needs to be. In addition, in discussions with others ---+ I'll give others credit. They also pointed out that all of the new tanks that have been built to store ethanol across the United States gives you another baseload of supply that you can't always access when you look at tank bottoms that are there all the time, that are not accessible as well, which could be another 0.5 billion barrels that we can't really ever get to. So overall I think that when you look at gas demand and the increase we have to take into consideration, between exports and gas demand, we need higher stocks anyways. And it doesn't feel like it's very loose right now. So we ran the numbers, and obviously the currency is helping us over the last week or so. And while there was a slight window for a day or two when the currency was at its weakest, that window has closed. And while somebody might have shoved a boat in trying to fulfill an agenda, it may not have been the most economic thing to do. So right now it appears that the US is cheaper as an origin overall. It appears that there is not a window today to import Brazilian ethanol. And if you go out really much past July, it is advantage US fully into the world market. And really could not ---+ there's really not a window at all for imports to come in here from Brazil. <UNK>, do you want to comment on that. No, that's exactly right, which brings some less competitive delivery to the Southeast Asian markets, also. Sure. So we had indicated on the last call, <UNK>, that this next 100 million gallons that we are going after is obviously more expensive than the first debottlenecking effort we had over the last five years. And that's going to be costing in the range of $0.65 to $0.70 a gallon, which is still the cheapest ethanol gallon we can go after. We are able to do that and be more aggressive on the volume because we have registered RIN capacity at several of our facilities. For example, Lakota, Iowa, that already had extra RIN capacity without any pathway needed to go after that capacity. So that project alone, <UNK>, is 20 million gallons. So that project alone is 20 million gallons, and we don't have to ask for any pathway from the government to go after that ---+ go after those gallons. So, overall, we expect by the end of 2015 to be able to produce 100 million gallons more in our platform than the start of 2015 at a cost between $0.65 and $0.70 a gallon. Well, we built Birmingham at around $17 million. And we are still on track for a three-year payback ---+ again, EBITDA. It is being used by a multitude of customers, including ourselves, who put volume through the terminal. And those are longer-term take-or-pay contracts that we have in place. So overall, that strategy worked well. And it has done exactly what we said it was going to do. Well, overall, when we look at Q3, what we mentioned is we were 10% hedged and looking to add to that position, as margins have continued to expand right through our hedges and are showing right now high teens on the board. And we are making a decision now on how much we want to extend coverage. Now, we are doing that basis ---+ the fact that we have some corn basis bought in the third quarter. And then we are estimating on what it would take to buy the rest of the corn basis that we would need for a hedge program. If we feel like we can't achieve those values, we don't want to take the risk of being short the corn basis in the third quarter ---+ but feel like the farmer will let go of some of that corn if they are staring at a big (technical difficulty) corn crop. And it looks like conditions are off to a great start. Without a doubt, the farmer is in charge of the US corn basis today. But they are going to carry in a lot of stocks. When you looked at the carry-out could be pushing 2 billion bushels, the farmer is going to have to let go of some corn. Like I said, we are starting to see some commercials let go of corn in the fourth quarter, which is earlier than we expected. But we need the farmers to let go of some of the corn in the third quarter. So we feel like as the corn basis rallies ---+ you know, the farmer really looks at it from a flat price perspective. But when we say filling hedges for ourselves, we would do what we normally do, which is lock in margin. So it's a matter of making sure we can buy the corn basis. Well, we continue to see Canada being one of our strongest customers. We have Brazil in the first quarter and late last year became a strong customer. We have the Philippines; we have India. We have other countries like that. <UNK>, do you want to comment any more on ---+. I think the only one you missed that came back in ---+ we missed them in January ---+ was UAE. They are back on the list breaking forth right now. Back in a strong way. Yes. We are seeing other interest from newer countries, as well. We think there's expanded countries coming as well. And that's ---+ when we look at it, when you look at ---+ there is 30-plus renewable mandates around the world today, ranging from 2% to 10% and growing. So when you look at that ---+ as you look at the price of ethanol, people are discovering the price of US ethanol globally is a very competitive fuel. These mandates are going to start getting filled. And when you start filling these mandates, we believe by mid-2017, global demand will be greater than global supply, when you take into consideration utilization rates around the world of the ethanol. Now, there's more ethanol production available globally than global demand; but when you run utilization rates in the mid-80s globally, you really have to see a very big margin structure to bring back that extra 1% or 2% or 3% of ethanol production, which we don't think necessarily just comes on that easy. A lot of it is stuck in Brazil with the current sugar issues. But that's something that we believe is very fundamentally in our favor on going forward, where utilization rates just can't come up, but assumption rates continue to increase. And that doesn't even take into consideration the E15 initiative that is in place in the United States today, where when you look at three years out, and five years out, and 10 years out, when you start to get 30% and 40% and 50% of the fleet E15 ---+ with an E15 cap on the fuel tank, all of a sudden it becomes the standard, not the exception. And you'll see more wide-range use of and selling of E15 as well. And that is another factor ---+ doesn't even include the 2017 numbers I have given you. In the US I think that you will see capacity come online. I think you will see some expansions take place, as we are already seeing with a couple of plants across the US, and our expansion, and some more debottlenecking. So there's more debottlenecking to happen before I think you have to sit and build a plant. But I still think you will see a plant here and there get built, if they can see the demand down the road. Obviously, if demand doesn't materialize and we overbuild again, then obviously we are going to have to deal with that. But that just still takes your lowest-end, most inefficient plants will be the first ones to close. So overall I don't know that we are going to see some rapid build. I think we have to see evidence that demand will be greater than supply. But I still think in the meantime you will see some capacity expansion come online. I can't hear you. Can you repeat that. I think you'll see an increase in the need for more fleet, potentially. Yes. But I also think when you look at it ---+ so it depends; if they run slower, will they add more locomotives and more power. That's the first thing. The second thing is: we have now seen cars offered to us at $600 to $700 a month for one-year terms, and that's off of $3,000-plus off the highs. So the market is coming back in our favor from a railcar-leasing perspective. We've seen rate increases because of some of the slower speeds start to take shape, but we'll have to see how that transpires. Yes, I mean it's very early. Obviously, in the West this is great, clear weather to plant corn. So let's not complain too much about no rain. Let's get the crop planted in a big way and then start to watch the forecasts after that. We are starting to see some of the forecasts get wetter, but I think the farmers' at full planting mode in the West. In the East I think they are off to a solid start. We need to make up a little bit in the Southwest in terms of ---+ we are behind there. But I think overall it looks like we have a clear window. And we have good soil moisture east of the Mississippi. And it looks like a good forecast in our favor, if we can achieve that forecast once the farmer is done planting. So overall, not too concerned just yet with weather, but watching some of these dry spots closely, as you are. Yes ---+ look, I mean, it's not like last year, where we saw a curve just explode. But I think when we look at long-term structural margins for the industry have been between $0.18 and $0.25 a gallon is kind of what we had said. We have seen some years like last year, where we saw $0.30, $0.40-plus margins. We do see some of those in the East today. Hard to say what the year will be, but the first quarter will definitely not be the defining quarter for our year. So our trailing 12 is still strong. It should remain strong for the after the next couple of quarters. And we will continue to focus on paying down our debt and managing our Companies overall. It may not be like last year, which was a great year for us. But we feel like getting rid of the first quarter and moving on to the second will give us some opportunities then for the forward curve. Well, we don't give year EPS guidance. But I would say the difference now is the fact that we have 1 billion gallons of production versus what we had ---+ 300 million gallons back then. And we have $100 million or so of non-ethanol operating income, inclusive of our corn oil revenues, so ---+ and growing that as well. And then, obviously, some other things that are happening around the space in terms of ---+ we can now run harder because of the investment that we've made in SMT; and maintain yield, which ---+ it's a little bit different story than in the past, as well. So we don't give full-year guidance on EPS, but when we say that, it is obviously a very different platform than it was in 2012, and even more so than it was at 2009. So you can kick out the highs and lows, but I would say we probably missed the highs last year as a company anyway. So our average crush for a lot of the quarters was around $0.30 to $0.35 a gallon. But the daily averages were higher than that, as you can see at other companies that report at times. But overall, like I say, we believe that this isn't a one-year deal for us. And we've built the Company to withstand these cyclicals, and we saw a cyclical in the first quarter with oil doing what it's doing. And the small loss had very minimal impact on our strategy. Look, we are. We are 90% exposed to spot today. So I don't think we will come into any quarter fully in the spot. But with the strength of our balance sheet, obviously ---+ you can see we came into the first quarter exposed to spot. It was a wrong decision, actually. And so like I said, we are often criticized and often applauded for our strategy, and this is one we got whipped a little bit on, thinking that spot margins were always going to be the best place to be. I still think there's lots of other reasons from a strength of Company, generation of cash, that you lock a certain percent away, with the size and scope and scale that we are. But you can see, I think we went through the worst of it. And I'm not sure we will aggressively lock Q3 away, but we still believe that a majority of our shareholder base and our owners expect some percentage of our forward book to be locked away when the opportunity is there. So we make the best decisions that we can, but obviously the balance sheet is a little bit different than in the past, where we could stay unhedged longer, as long as we feel like that's the right thing to do. So I wouldn't say we are aggressively going to go to 80% in Q3 today. But when you are staring at $0.19, $0.20 a gallon and then $0.30 in the East on some of your plant, it's not such a bad place to start. Well, we were running at 92% of capacity for the team, but we are now running at 96% and pushing towards 100%. So it was more from a standpoint of this was the decision we made. I think you can disseminate from the information in the market that others had cut back as well, but others had kept running right through low margin, waiting to see what their returns were going to be. So it's a combination of a little bit of both. Overall, though, I think we are pushing back towards the higher level. But the market seems to be leveling off here in this 920 to 930 range. And probably we will see some continued weakness in production as turnarounds continue to happen. We'll see when we come out. You've got to remember: in the fourth quarter it was cold again ---+ and obviously, it's winter; so it always gets cold ---+ but in the fourth quarter and then the first quarter, we ---+ the industry ran full out. Everybody had done their work on the plants. The temperatures were perfect. You could run these plants full out without the cooling capacity needed. As we get into summer and spring here, then you have to start bringing cooling capacity on, which gives you limitating factors on how hard you can run. So that will be some of the things that temper overall production rate back down from that 950, 960, 970 on a weekly basis. But overall we are running back towards capacity. Yes. Basically, when you look at the corn basis in the East and corn basis in the West, you have parity. So it could take you 15 over to buy corn in the middle of Iowa or Nebraska, and it could take you 15 over to 20 over to buy corn in the middle of Indiana. So when you look at that, the price spread is approximately $0.11, $0.12 a gallon. So when you get to there, you are looking at a $0.11 to $0.12 a gallon better margin structure just off of that. And distillers have more value in the East and the Southeast, more so than the West. So it's a combination of ---+ all those factors have brought a weaker margin structure in the West and a greater margin structure in the East. Now, that has been consistent now for at least six months. And what we were used to is where the West always led the way with the margin structure. So Eastern plants have ---+ you know, the portfolio that we have ---+ and I'm talking about the Corn Belt. I'm not talking about the coast. So Eastern Corn Belt, Western Corn Belt. The geographic portfolio that we have ---+ we get the benefit now of the East, while the West is a bit of a drag where the past comes up. No. I don't have a plant out there, and I really can't comment on that. I know that they've had ---+ for a while Los Angeles was a very hot market in Q1 relative to everything else, the LA market or the West Coast market. But overall I don't have a view on margin structures out there. Not at all, actually. The site in Shenandoah ---+ we basically increased our ownership there. We have a new management team running the business now. We are focused on streamlining and getting some kind of straight-line production in terms of some of the variability that we have seen in the past. The site in Shenandoah performed consistently throughout the winter, but that is the most difficult time, typically, for an autotrophic algae growth initiative. But we've discovered new ways through our ethanol plant and synergies to use the ---+ beyond waste heat and CO2 ---+ to grow algae in winter in our facility. Now we can take what we learned this winter, which ---+ we operated, literally, straight through the winter, which we've never done before without much downtime. We found the robust cultures that we needed within that time period. And now we are actually incorporating that for use in some trout fish feed trials that we are going to start here shortly. And we are collaborating for piglet trials, as well, for our feed product. We are still seeing strong interest in protein and superfoods, with the aspect of algae for direct human consumption. It's one of the fastest-growing categories in health food and supplement market. What we are making sure is that we can get our strains registered from an Omega-3, DHA, and EPA standpoint, which is very lacking in vegetarian diet. So when we look at it, we have discovered a lot of new opportunities within the platform. We still are making changes to the technology to make figure out what we can grow for the cheapest CapEx and the highest yields. We think there's more to come on that. But our silence is not a viewpoint that what we are doing is anywhere near ---+ in comparison to our silence. We just don't want to overpromise and underdeliver. We'd rather underpromise and overdeliver down the road. And we feel like what we're doing right now in that platform is now running it, and trying to run it and make it look more like a business than a science project. So I think we're making a lot of progress there, but more to come in the next couple of quarters, most likely. It depends. We just want to be able to sell something and make money doing it. I don't know how significant the CapEx is going to take to do that. There are smaller, niche markets that we can go after. What we really want to do is ---+ yes, our goal is to get to a point where we make a decision to say: we are going to grow a ---+ we're going to build a commercial farm to grow our algae. So we are getting closer to retrofitting our technology so that we can get to a cheaper CapEx at a yield point that makes sense, of a revenue break, or ---+ much like a farmer or much like any other production plant does. So if we weren't feeling like we can at least get to a point to make a decision, we would stop the project now. But we are not stopping the project, either from product development and/or technology development or CapEx decisions. No, I don't think so. I think that is a structural change that we felt across the US, where they are producing 84 base stocks. If you look at the Magellan system, their base fuel that they ship is 84 octane. Correct, <UNK>. Correct. So when you look at that, obviously, you can't leave their fuel terminal systems without blending ethanol, or you blend high-octane normal gasoline ---+ premium gasoline. So the RINs have a world of their own. It's a small-market supply and demand. And when you import gasoline, oftentimes you have to buy a RIN. And so that's often the market defining it. But if you are a blender, and typically everybody right now, because of the economics, are blending to their required level. So we have to wait for the RFS to figure out what those required levels are. But we know 2014 will be a push down the road. So when you look at that, I'm not sure ---+ I think the one thing you are missing, though, when you say we have record gas demand or a very good gas demand is the fact that we are producing this year at a 920 to 960 run rate. And last year overall we didn't produce at that run rate. So our daily available ethanol is higher with a higher gas demand. So there is some equilibrium here. And when you look at everything we produce against an 800 million gallon export program and the stocks number, we will see a draw in stock; but we don't believe we will see a draw in stocks to the point that we saw last year. So we think stocks could still make a run towards below 18, but we don't think that stocks will make a run to below around the 15 range, like they did last year, when margins hit the highs. So it's a combination of all of those things that defines the strategy. It's not just a combination of ---+ to say that you have the best gas demand that we've seen in years. Because you also have the most ethanol production we've ever seen, and you also have an equilibrium point where ethanol ---+ seems to have enough ethanol for the demand. So it's combination of all those things. Well, when you look at where we are heading right now ---+ I mean, when we looked at the 2015 initial RFS program, we would have expected that the whole program was based on 150 billion gallons of gasoline demand and driving miles going up. Also, I don't think they planned for the electrification of the fleet and/or alternatives that were in place that are happening today, as well as these CAFE and the ---+ in terms of miles driven, but getting more miles out of your gas tank is a big factor, right. So all of that weighs down on overall gas demand. Obviously we are seeing the impact of low gas prices and people willing to drive more, because when you have $10 and you fill up at $2.00 a gallon, it's a lot different than when you filled up at $4.00 a gallon. You can go a lot further and feel better about it, feel better about that. So I can't comment on the 3 trillion miles. Those are awfully big numbers for us. But I can comment on the fact that there are other factors that have made the determination of where gasoline demand is going and probably where it's going to max out here. And a lot of that has to do with CAFE, and electrification, and other alternative things that are happening in the market. But overall we like it when we are pushing 138 and 139, because the industry with exports is definitely ---+ equilibrium turns in our favor. We can see over the next five years an expanded use of E15 broadly and nationally, that's really what you make the spread up and can tighten things up much more than, say, gas running up another 142 or something like that, or gasoline demand running at 142. That will only add 200 million gallons to the demand base. We really need 1 billion gallon driver. And the only 1 billion gallon driver that we can see coming is the potential E15 national expansion, which we are working on very hard. Every 100 million gallons moves the needle. That's how sensitive we are, right. Because when you look at the supply of 21 million barrels or 880 million gallons of stocks ---+ if you take that down 100 million gallons or 200 million gallons, and your stocks number now goes to 600 million gallons, or 15 million barrels, or 16 million barrels ---+ then you've got some real opportunity, right. Every 200 million gallons will make a significant difference at this point. We are going to have to keep up with some of the expansions, but I think overall we can do that. Thank you very much. And thanks, everybody, for coming on the call today. We appreciate it. Obviously we are more optimistic about the rest of the year than our results in Q1. But I think we've shown that the resiliency of our platform and the abilities to withstand a cyclical downturn once again has been proven out. And we emerge as a company just as strong as when we started the quarter. So we appreciate your call and appreciate your support. And we'll talk to you next quarter. Thanks.

2015_GPRE

2016

RHI

RHI #Good afternoon, everyone, and thank you for joining us. As is our custom, I would like to remind you there are comments on the call today that contain predictions, estimates and other forward-looking statements. These statements represent our current judgment of what the future holds and include words such as forecast, estimate, project, expect, believe, guidance and similar such expressions. We believe these remarks to be reasonable. However, they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Some of these risks and uncertainties are described in today's press release and in our SEC filings, including our 10-Ks 10-Qs and today's 8-K. We assume no obligation to update the statements made on today's call. For your convenience, our prepared remarks also are available on our website at www.roberthalf.com. From the About Us tab go to our Investor Center, where you will find the Quarterly Conference Calls link. Now, let's review first-quarter 2016 results. Quarterly revenues were $1.303 billion, up 8% from the first quarter one year ago. Income per share was $0.64, up 10% from this time last year. Cash flow from operations was $79 million in the first quarter. Capital expenditures were $19 million. In February we increased the quarterly cash dividend from $0.20 to $0.22 per share. This is the 11th consecutive year we've increase the dividend amount. The dividend was paid to shareholders on March 15 for a total cash outlay of $29 million. We also repurchased 700,000 Robert Half shares during the first quarter at a cost of $29 million. We have 9.7 million shares still available for repurchase under our Board authorized stock repurchase plan. The US job market remains solid in the first quarter, as did demand for our professional staffing and consulting services, resulting in year-over-year revenue growth on all lines of business. Our accounting and finance staffing divisions had a particularly strong first quarter. This was the Company's 24th straight quarter of double-digit earnings per share percentage growth on a year-over-year basis. Our unleveraged return on equity was 33%. I'll turn the call over to <UNK> now for a closer look at our first-quarter results. Thank you, <UNK>. Global revenues were $1.3 billion in the first quarter, up 8% from the first quarter a year ago on a reported basis and on a same-day constant currency basis. First quarter staffing revenues were up 7% on a same-day constant currency basis. US staffing revenues were $900 million in the first quarter, up 9%. Non-US staffing revenues were $215 million, up 4% when adjusted for billing days and currency exchange rates. We have 330 staffing locations worldwide, including 90 locations in 17 countries outside the United States. The first quarter had 62.7 billing days compared to 62 days in the first quarter one year ago. The difference in billing days had the effect of increasing by 1% the reported year-over-year revenue growth rate for the quarter. The current second quarter has 63.9 billing days compared to 63.2 days in the second quarter of last year. Currency exchange rates had the effect of decreasing reported year-over-year staffing revenues by $11 million in the first quarter. Exchange rates decreased year-over-year reported staffing growth rates by 1%. Global revenues for Protiviti were $187 million in the first quarter, with $158 million in revenues in the United States and $29 million in revenues outside of the United States. Protiviti revenues were up 14% year-over-year on a same-day constant currency basis. US revenues were up 15% and non-US revenues were up 8% from the prior year. Exchange rates had the effect of decreasing year-over-year Protiviti revenues by $1 million in the first quarter and decreasing the year-over-year reported growth rate by 1%. Protiviti, and its independently owned member firms, served clients through a network of 75 locations in 25 countries. Accompanying our earnings release is a supplemental schedule showing year-over-year revenue growth rates on both a reported and a same-day constant currency basis. This data is further broken out by US and non-US operations. This is a non-GAAP financial measure that offers insight into certain revenue trends in our operations. Now let's talk about gross margin. Gross margin in our temporary and consulting staffing operations in the first quarter was 37.1% of applicable revenues. This is a 10 basis point improvement from the same period one year ago, as higher pay/bill spreads offset lower temp-to-higher conversion revenues. First quarter revenues for our permanent placement operations were 9.5% of consolidated staffing revenues, which is up slightly from last year's 9.4%. Together with temporary and consulting gross margin, overall staffing gross margin improved by 20 basis points versus a year ago to 43.1%. First-quarter gross margin for Protiviti was $51 million, or 27.4% of Protiviti revenues. Gross margin one year ago for Protiviti was $47 million, or 28.8% of Protiviti revenues. Staffing SG&A costs were 32.4% of staffing revenues in the first quarter versus 32.2% in last year's first quarter. SG&A costs for Protiviti were 19.6% of Protiviti revenues in the first quarter compared to 18.8% of Protiviti revenues in the year-ago period. Operating income from our staffing divisions was $119 million in the first quarter, up 7% from the prior year. Operating margin was 10.7%, the same as the prior year. Our temporary and consulting staffing divisions reported $98 million in operating income, an increase of 5% over the prior year. This resulted in an operating margin of 9.7%. Operating income for our permanent placement division was $21 million in the first quarter, up 13% from the prior-year and producing an operating margin of 20.2%. First-quarter operating profit for Protiviti was $15 million, a decrease of 11% from the prior year. This produced an operating margin of 7.8%. At the end of the first quarter, accounts receivable were $734 million. Implied days sales outstanding, DSO, was 51.3 days. Now turning to guidance. Before we turn to guidance, let's review the monthly revenue trends we saw the first quarter, and so far in April, all adjusted for currency. Globally, year-over-year revenue growth rates for our temporary and consulting staffing divisions decelerated slightly during the quarter and we exited the quarter with March revenues growing 6.3% compared to 6.7% for the full quarter. Revenue growth for our staffing and consulting services in the first two weeks of April was up 5.5%, compared to the prior year. Global permanent placement revenue growth rates accelerated during the first part of the quarter, then moderated thereafter, with March revenues growing 1.5% compared to 8.6% for the full quarter. For the first three weeks in April permanent placement revenues were flat compared to the same period last year. This information is designed to offer a glimpse into trends we saw during the quarter and in April. But as you know, we hesitate to read too much into these numbers as they represent very brief periods of time. With that said, we offer the following second quarter guidance: Revenues $1.325 billion to $1.385 billion. Income per share $0.70 to $0.76. The midpoint of our guidance implies year-over-year revenue growth of 6% on a reported basis and adjusted for currency, including Protiviti, and EPS growth of 8%. We limit our guidance to one quarter. All estimates we provide on this call are subject to the risks mentioned in today's press release and in our SEC filings. Now I'll turn the call back over to <UNK>. Thank you, <UNK>. We were pleased with the Company's performance during the first quarter. Our results were boosted by still low US unemployment in numerous professional occupations and stronger labor markets in key international locations. The number of US job openings has exceeded the number of hires since February 2015, according to the most recent Job Openings and Labor Turnover survey from the Bureau of Labor Statistics. The competition for skilled talent is intense. Multiple offers and counter offers are common for high-demand candidates, particularly in technology and accounting. Internationally we see higher demand for professional level talent in a number of markets, notwithstanding economic headwinds that persist outside the United States. We feel we will continue to benefit from a widening skills gap in a number of our professional specialty areas. Employers that are struggling to find needed talent are recognizing that flexible staffing can help them manage total labor costs and also increase the pool of potential full-time talent through temporary-to-hire arrangements. Turning to Protiviti we were pleased with Protiviti's performance during the quarter, including once again reporting double-digit revenue growth on a year-over-year basis. Protiviti has an excellent growth outlook based on multiple factors favorably influencing service and demand. These include a robust regulatory environment and increased need for stronger internal controls and data security measures among others. At this time <UNK> and I would be happy to answer questions. We ask that you please limit yourself to one question and a single follow-up as needed. If time permits we will certainly try to return you if you have additional questions. Thank you. Okay. So several sub-questions there about trends, comparing cycles. Clearly, we see clients remaining cautious due to the uncertain macro environment. That lengthens the sale cycle. Further, as we've talked about before, candidates have many options with their current employer, with other employers. That makes them harder to close. That also lengthens the sales cycle. So generally speaking, across our divisions ---+ less so with the accounting and finance ones, but the sales cycle has elongated, which has impacted our growth rates and is expected to impact our growth rates into the second quarter. Compared to prior cycles, it usually gets white-hot for candidates such that clients will very quickly take any candidate that's close. And the current environment is nowhere near that environment. So to the extent in prior cycles, the late stage has been indicated by this white-hot hyper demand where permanent placement goes at very high double-digit rates. That hasn't happened, and notwithstanding the fact that we're in year seven or whatever of this cycle, we still don't see that type of hyper demand that we would typically see late cycle. But instead, we continue to slug it out in this relatively sluggish macro environment. We saw that again in the first quarter. Our guidance anticipates more of same in the second quarter. With respect to RH Tech and perm, I would say those trends were particularly evident in both of those divisions. While it's true that Tech's year-over-year growth rate slowed, from 10% to 6%, if you look at their a-year-ago comps, they got harder from 12% to 19%. So given the tougher comps, the deceleration in the growth wasn't totally unexpected. Perm did fine in the beginning of the quarter as we said. It decelerated late. That deceleration continued into the first part of this quarter. That said, we all know from experience that those are short periods of time. They were disproportionately impacted in the post-quarter start by our non-US operations. But on balance, the guidance we're giving is that the economy will continue to chug along at a slow rate. The sales cycle has elongated. It's taking longer to close deals. That includes perm. That includes tech. And therefore, our growth rates have slowed modestly. Well, as you know, we typically don't go beyond a quarter, but we've been slugging it out in 1% or 2% GDP environment for several years. The comps do get easier. That's certainly better than them getting harder and gives us a better shot at decent growth rates on the backside of the year. There are certainly plenty of economist types out there that say GDP growth will accelerate in the back half of the year. We don't know if that's true or not. But easier comps are better than harder comps. First of all, Protiviti, once again, on very tough comps, reported very robust revenue growth. They were up 14% on comps that had grown 26% in the year-ago period. That said, on the cost side, there have been many investment hires on the managing director side to expand their practice, both in the US and abroad. January 1 is the date for the annual raises for their entire practice. The raises, due to the competitiveness of the market, were higher this year than they were in years past. So the combination of those two ---+ their direct costs were up 17% off of the revenues that were up 14%. Clearly, some of those costs are front-loaded for the full year. We expect to leverage those as we progress through the year. We would also observe that in the financial services regulatory consulting practice, we had some projects again that were delayed and deferred. On a few new projects, the rates were lower than they had been in the past, as some clients get a little more cost conscious. The regulatory practice for many quarters in a row has had absolute hyper growth. In this quarter it went from hyper growth to fantastic growth. It's shades of really good, but it was slightly slower this quarter than we expected, frankly. And to the extent it was a little light relative to our plan, all of that lightness dropped all the way to the bottom line. So notwithstanding, very robust revenue growth. Our margins declined year-over-year, as you noted. As we move into the year, for the second quarter, we expect Protiviti to still have growth in the low to mid-teens. Again, that's on very tough comps a year ago, which were up 23%. We think the margins will grow nicely, sequentially, but the margins will still be slightly below last year's levels. That said, we do expect to get back into double-digit percentage operating margins, which is certainly going in the right direction. Demand for Protiviti services remained strong. The pipeline remains strong. It had a very good quarter. It certainly has been aggressive adding to capacity. It will now leverage that capacity over the rest of the year and the margins will improve. It's our fastest growing division. It's been our fastest growing division for several quarters running. We are very pleased with Protiviti. Conversions were 3.2% of revenue for the quarter. As we said earlier, overall, our temp margins expanded by 10 basis points. That's notwithstanding a 10 basis point contraction in conversions, which means our pay/bill spreads more than made up for that. So they were down a tick. Clearly, we would have liked to have seen those a bit higher. We're still optimistic, over the medium term, that we have some upside in conversions. But for this quarter, they backed up just a little bit. Sure. Once again, Germany, by leaps and bounds, was our strongest non-US operation. It performed just wonderfully on very tough comps a year ago. It's where we've invested the most headcount. It's where we focused the most effort, and we're getting a very nice return on our German investment. The UK and Belgium were also very solid. On the flipside, we had challenges in Canada and in Australia, which are minerals/mining related. France continues to struggle a little bit, as well. But Germany, easily number one. UK/Belgium solid. The other three trailing a bit. I'd say first of all across all our accounting related divisions, whether it's Accountemps, whether it's Management Resources or whether it's Protiviti, you've got a backdrop of more focus on internal controls. You've got a backdrop of more regulation that has to be figured out, processed, dealt with, complied with. So that overall umbrella is helpful for all our accounting divisions. But further than that, we would also observe that there is a shift to higher-level skills. In Accountemps it's a shift from accounts payable/accounts receivable payroll to staff and senior accountants and to business analysts. In Management Resources it's a shift to more accounting managers, more controllers, more senior analysts. So the net of that is, the assignments are little longer, there is a little less candidate turnover, and so you see higher growth rates in Accountemps, Management Resources. And as we talked about earlier, that in Protiviti ---+ they are all somewhat related. With more complexity comes the need for higher skills. And we are seeing that positive skills drift, if you will, that you can see we are benefiting from in those divisions. The tax rate was lower. Our foreign tax rate was lower than we had projected. We made some elections that reduced those rates positively. Some of that actually carries through for the rest of the year. We've talked about 39% being the midpoint of a range of 38% to 40%. So maybe rather than 39%, maybe it's now 38.75%. I mean it's still in that range. But as you know, and as you've seen for many quarters, our tax rate's a bit volatile. And the source of the volatility is typically non-US tax rates. Okay. By segment, I would say ---+ without getting totally granular, generally speaking, we would expect Accountemps and Management Resources to have higher growth rates than the other staffing divisions. We've already talked about Protiviti. At the gross margin line, our guidance contemplates a contraction of 10 to 20 basis points for temp gross margin. However, that's because we have not considered any additional workers' compensation credit that we got a year ago, that a year ago was 20 basis points. So with no consideration of a workers' compensation credit this quarter, we're talking about temp GM being down 10 to 20 basis points. If you figure we get our workers' compensation credit, which we have a third-party review and we just don't know. Although for many quarters we have gotten one, then we wouldn't have that contraction. On the staffing SG&A side, we believe we will start to leverage the headcount investments we made in the second half of last year because we are holding those pretty much constant. And the quarter just ended as well as the second quarter ahead, as we've talked about in the past, so that we should get 10 to 20 basis points of year-over-year SG&A leverage. Again, in the absence of any workers' comp credit, our staffing operating income percentage would be down 30 to 40 basis points year-over-year. Half of that would be workers' comp. A piece of the balance of that would be expected less perm mix than we had a year ago. The second quarter is always a strong perm quarter and you give a nice lift sequentially. We got a really nice lift a year ago. We're expecting a lift this quarter, but not as much lift as we had a year ago. We talk about Protiviti, year-on-year, will be down 1 point or 2, operating margin-wise, but that will be up sequentially versus what we just reported. Tax rate, we just talked about. Share count would be down 0.5 million shares or so as they flow through what we bought in the first quarter. So at a high level, we see a couple of points of top-line deceleration. As we go into the second quarter, we hope we are being conservative. But when people start talking about Q1 GDP growth is being sub 1%, we thought it prudent to be conservative. Frankly, our start in April is a little stronger than the full-quarter guidance that we have given, but it's not a lot stronger. We constantly look at our headcounts, and with the turnover early in our business, there's a lot of attrition. So you get a lot of opportunities to decide, do you replace the attrition or do you not replace the attrition. So we will focus carefully on our headcounts. We still are growing, projected to be 5% or 6% topline, so it's not like we are not growing. But we always look at our headcounts. And to the extent we feel like adjustments are needed, it's just part of the ordinary course of our business with attrition that we get a lot of opportunities to adjust in a very quiet, behind the scenes kind of way. We would agree. As we talked about earlier, typically when you get late cycle, you get hyper-perm growth, and we haven't seen that. Demand has not overheated anywhere near to the extent that it has in prior cycles. That in and of itself would be indicative of we're not late cycle. That said, we are in a condition where our internal sales cycle has lengthened. Clients take longer to pull the trigger. Candidates with all their options take longer to close. And even with robust demand and even with candidate supply, when it takes longer to close a deal, that shows up in our growth rates. But relative to cycles past, the demand environment has not overheated no where near to the extent which it has in prior cycles. And our perm growth rates are pretty reflective of that. Well as we talked earlier, it's a very mixed bag. Most headcount investments we've made have been in Germany temp and perm ---+ but including perm. No question, Germany came through with flying colors, and we are very happy with the investment and we're really happy with the return. That improvement was offset by some declines in the other countries that I talked about. So when you put the two back together, you don't see the net improvement that we would like to see, but it's not because the places that we invested didn't perform. It's more because the places where we'd didn't invest were more challenged than what we expected. Well clearly, tougher comps was a big part of the story given how much tougher the comps got. But this whole phenomena of the sales cycle elongating certainly applies to Tech. We had had clients take longer to pull the trigger if you want to call that softening. That would be fair. Candidates are still in tight supply, particularly the mid- to higher-level candidates. It does take longer to close them. That impacts growth rates as well. So we would characterize the market for tech as firm, as strong, but it's taking us longer to get deals closed, and therefore our growth rates are slowing, exacerbated by the toughness of the comps. Particularly on staffing, we're very diversified from an industry end-market point of view, so I wouldn't necessarily single out any industry per se. On the Protiviti side, it is more financial services focused. You do have some of the larger financial services firms a little more focused on cost control than they have been in the past. Having said that, the regulatory compliance environment, even at those largest of the large financial services firms, is still robust. It's just not quite as robust as it has been. It's degrees of strong. It's not the difference between strong and weak. Bill rates were up 4.7% year over year. That's down slightly from the 5% they were down last quarter. Right. That's a smaller rate of growth than the 5% rate of growth from last quarter. To be real clear. And is candidate supply holding growth. It's certainly impacting growth, yes. There's no question that if we could close candidates more quickly, we would be growing more quickly. That's not to say that the candidates aren't there. It's their confidence level that if they don't take this job there is going to be another job available to them, makes it harder to convince them to take this job. And to the extent it's harder and takes longer, that impacts our growth rates. So are we saying that candidates aren't there. We are not. Are we saying because they have more confidence in their alternatives, it takes longer to get them to say yes. We are saying that. It's true on the accounting side. I'd say it's not as severe as it is in tech development. But on the accounting side, in the mid-to-higher levels, which is where our practice near term is gravitating toward, clearly there are shortages. Regulatory compliance would certainly be the case. Senior financial analyst certainly would be the case. So there are pockets in accounting finance. But as a percent of accounting financing overall, they're not as significant as is the case in tech. Okay. For the quarter, there virtually were not any headcount additions, which is what we expected the case to be. We front-loaded 2016's hires in the second half of 2015, and we announced then that we didn't expect much in the way of headcount addition in the first half of 2016. And that has in fact been the case. Now there are always pluses and minuses, one line of business to the other and one country to another. But outside the US, we've been the most aggressive in adding to headcount in Germany. And as I said earlier, that's both temp and perm, and it's paid off nicely. It continues to pay off. And we'll continue to invest heads in Germany. But we won't net up as many heads as for adding to Germany alone, because we're doing some adjusting in other countries. Our expectation would be bill/rate growth would be a little higher than our overall bill rate growth because candidates are in shorter supply. That said, just as a sector, there seems to be more pressure on bill rates in Technology than our other lines of business. Whereas our other lines of business clients focus on our markup or our margin, in Technology they tend to focus more on the absolute bill rate. And that's something that's existed for decades, which is a little head-scratching, frankly, given the supply and demand dynamics. But short story is, the bill rates in Tech are a little higher than overall, but arguably aren't as much higher as you would expect them to be given relative supply and demand of candidates. As to how broad-based it was, it wasn't isolated and it was certainly something we saw in more than just one or two lines of business. First of all, let's keep in mind we are talking about 10 basis points. So we can't come up with broad theories over 10 basis points. But we did see situations that weren't isolated, where we had an order that was a temp-to-hire order and because the market is hot, our candidate left for a full-time job with some other client rather than hang around and be converted to full time on the assignment they started with us. Which is yet another indication of candidate tightness. Having said that, in the past, we would typically see clients converting them more quickly to avoid that situation and that isn't happening at the moment for the macro conditions and the macro backdrop we've described. We do not believe we are at or near peak in temp gross margins. We do not believe 3.2% of revenue is peak conversions. When the traditional range is 3% to 5%, midpoint being 4%, we just do not except that 3.2% is as good as it gets. And whatever more we get above that is pure margin. Further, we still got 30 to 40 basis points in unemployment fringe cost, higher than what they were at the last point. That's upside. That upside will be offset a little bit by more and more states adding mandatory sick pay for our temporaries, and so that sick pay is going to offset some of those 30 to 40 basis points that you're going to get on an employment. But net, we still think there's upside between the two. On the pay/bill spreads ---+ as late as this quarter, just ended, we did expand our pay/bill spreads. There's not as much upside as there is in the other two areas, but we've done a nice job with our pay/bill spreads. That continued into this quarter. While we think we have got a little room to go with our pay/bill spreads, we think more of the future expansion will come from conversions and lower fringe charges. Well, to some degree all those things are true, <UNK>, but to the extent clients get more bullish if, in fact, the second half macro improves, they're not going to wait as long to pull the trigger. To the extent they don't wait as long to pull the trigger, then the sales cycle shortens and we expand our margins. And further, while we're growing mid-single digits in this environment, we still get some operating leverage from doing that. Notwithstanding that we are making infrastructure improvements internally to our ERP system, to our staff payroll system, to Protiviti's front-office system as well, we still get some operating leverage over time from growing revenues period. So we believe we certainly have not peaked from an operating margin standpoint. Protiviti's costs got a little ahead of their revenues this quarter. But for heaven's sake, they grew their revenues almost 15% on mid-20% growth a year ago. They've got the rest of the year to leverage themselves out of that, and you'll see margin improvement from it. It's a lot of different explanations, except I think it got an open enrollment lift the last couple of years as companies reviewed their medical insurance policies, whether they should go to private exchanges, whether it was ACA motivated or related or not. There's been a lot of motion and activity with clients in the insurance enrollment area, medical insurance enrollment area, and that hasn't been quite as robust the last couple of quarters as it was in quarters past. I guess our experience over many years is that you never know whether it's under valued or over valued over short periods of time. Generally speaking, we spend our cash flow. If it's down, we get more shares. If it's up, we get fewer shares. And so during the quarter, we spent a little more than our cash flow, not much. But it's pretty much dollar-cost average. Because over short periods of time you don't know. We bought more shares than we would of but because of the price, and that's been our policy and philosophy for many years, it seems to have done well for us. When the price dips and goes back up, we can always be criticized for not getting more. We've also seen the other happen, but at the end of the day it's pretty much we spend our cash flow. Well, anything's possible. I guess as the labor markets tighten, we would observe it takes a more human intervention, not less because somebody has to convince either or both sides that they need to move forward with this job or with this candidate. So whereas clearly there are more technology options be it job boards, be it job aggregators, be it social media including LinkedIn, finding the identity or an existence of a candidate or a job isn't hard nor has it been hard for a long period of time. But just as our efforts are more labor-intensive to get things close to, we would argue self-service, either by a candidate or by a client is less effective as well. And in fact, those same technology driven options you describe are also places, are also tools we use in our own recruiting of candidates and in our own pursuit of leads for which clients are looking for people. We have more visibility to open job orders or unfilled openings today than we've ever had. We have more visibility to candidates in our functional roles today than we've ever had. But notwithstanding that greater visibility into both sides of our business, we find it's more labor-intensive today, not less labor-intensive, to get things done. Oh it's a subjective evaluation on our part. I'd say we certainly haven't seen a cycle that's lasted this long, that's had sluggish 2% and less growth rates, economically, for this long. And so you've got this odd situation where clients are still cautious because they're worried about the macro, but because the elapsed time has been so long on the candidate side they have a lot of choices. So you've got both sides of the equation dragging their feet, to our detriment to some degree. We've been here now 30 years, and because it's easier to remember the near term than the long ago, it's easy to say yes if the longest we can never remember, but that's a subjective answer. I'd just add to what <UNK> said. The current environment is really peculiar because you have a lot of small and mid-sized clients we deal with who on the one hand know they need help. On the other hand, they're nervous about the economy and there's a lot of delay in procrastination involved. They're about as uncertain as which way the economy is going as the stock market appears to be. The slow GDP growth rates make them nervous, they're part of it. And yet, they see demand in their own businesses that is encouraging. So I think everyone's in a little state of limbo here waiting to see what the macro economy is going to do. From our standpoint, it certainly doesn't feel late cycle, let's put it that way. We've had elongated sales cycles in the past, and my guess, this one will change also and go to a more traditional format depending on which way the economy breaks in the months ahead. Thank you. That was our last question. We appreciate everyone joining us on today's call.

2016_RHI

2016

SSD

SSD #Thank you <UNK>. In an effort to ensure we are the most cost effective manufacturer in North America, we have started to transition our high volume connector production out of the Riverside branch to our other major manufacturing locations in North America. The complete transition will take a couple of years. This will allow us to use our equipment more efficiently and to strive for our goal of 75% utilization on two full shifts. Riverside will remain one of our major sales and distribution locations, with shearwall manufacturing and a specials facility to continue to meet our commitment of service and availability to our customers in the Southwest region. Once the transition is completed we expect to see over $3 million of annualized savings. For the past 18 months, we have done extensive review of commercial ERP systems. Our current home grown system, although perfect for what it was designed to do, can no longer keep up with our geographic growth, and our product diversity. The Board has approved our implementation plan for SAP, which will become our global enterprise platform. This is a three to four year plan of approximately $30 million. Some of the spend will be capitalized. Although a short term increase in operating expense, once fully implemented, we anticipate annual savings around 1% of sales through new business analytics, improved inventory management, improved purchasing, and reducing operating costs as we grow. Our truss specialists have been actively presenting our truss design and manufacturing ---+ or, excuse me, management software and are working on converting customers. We have converted a number of small component manufacturers since the release and are making good progress. Truss sales, although small, were up just over 14% from Q2 of 2015, and year-to-date those sales are up 22%. As a reminder, our current software design features allow us to approach about one-third of the US truss market. We continue to be engaged with M&A firms in North America and Europe, working to find out acquisitions to help us meet our long term growth strategy. We spent a little money in Q2 evaluating a couple of the companies, but as of now we do not have anything to announce. And I would now like to turn the call over to <UNK>, who will give some additional financial information. Thanks <UNK>. As <UNK> mentioned, exchange rates had minimal effect on Q2 comparable sales. But there was about $1 million of foreign exchange cost in operating expenses to account for unrealized losses on payables denominated in foreign currency, primarily for the UK operations as the pound moved against other currencies at the end of the quarter. The margin differential of wood to concrete products is about 13 percentage points this quarter compared to 15% Q2 last year due to concrete product gross margin increasing at a higher rate than wood product gross margins, both on increased sales. Those factors led to a Q2 2016 gross profit margin of 48.5%, up from Q2 last year of 45.4%. As noted in the press release we believe the estimated gross margin will be 46% to 47.5% range for 2016, depending on how the rest of the year goes. Total operating expenses, which are R&D and engineering, selling and admin, as a percent of sales was up about 170 basis points in the quarter compared to last year, as the company incurred expenses related to those unrealized foreign exchange losses previously noted, increased cash profit sharing on higher operating income, and legal and professional fees as the company works to deliver on its long term strategic initiatives. Regarding taxes, the tax rate of 35.8% for this year Q2 is down from 38.5% last Q2, primarily related to lower foreign losses and the R&D tax credit which was made permanent at the end of 2015. We believe the annual effective tax rate for 2016 will be between 37% and 38%. Q2 2016 CapEx was about $13 million, primarily for improvements in our new chemical facility that we announced last year as we are continuing to build out for the move of our two existing chemical facilities anticipated for late 2016. We also invested in manufacturing equipment and software development. We estimate total 2016 CapEx to be in the $50 million to $55 million range, assuming we complete all projects this year, and that includes the expansion of our facility in Texas for greater warehouse and office training center capacity that we announced last quarter. For 2016 depreciation and amortization expense is expected to be in the $29 million to $31 million range, of which depreciation is $23 million to $25 million. Before we turn it over to questions I would like to remind you that if you would like further information, please contact <UNK> at the phone number listed at the press release. Also look for our quarterly report on our Form 10-Q to be filed next week. We would like to now open it up to your questions. Hey <UNK>. Hey <UNK>, it's <UNK>. Thanks for the question. I would say that the uncertainty in that wide range is due to the steel pricing that's in the marketplace. As you probably noted, steel has taken up a pretty big run up over the last six months. So that's what's creating that uncertainty there. Yes, we have had ---+ I wouldn't say any significant buys, I mean, we have inventory throughout the ---+ over the last months to take us through a little bit further, but depending on the specific material there weren't any major buys, I don't think, in the last quarter. So as we look at what we have on hand and what we are bringing in, obviously we are bringing in material at higher amounts, at higher costs. Again, that's I think where that uncertainty is coming from in my mind. Hey, <UNK>, this is <UNK>. Obviously a lot of information out in the industry about what's going on with the steel prices, and of course it's mainly due to the new tariffs that have been put in place for steel that's coming in outside of the US market. Certainly many companies in the building materials that have steel as their predominant material ---+ we have seen price increases that have been announced for them, and we certainly are analyzing that and will have to make some decisions as to what we might need to do in that front. Yes, <UNK>, it's <UNK>. I would say maybe a little bit of spend toward the end of 2016. We have actually, as part of our readiness and evaluation we have been spending a little bit of money to evaluate the various systems and the like. But as the project is now moving forward, we may capitalize a little bit towards the end of this year regarding licenses that we may need to acquire or equipment that may need to support that. But I would say that the spend would largely begin next year. And of that total that <UNK> noted, if I had to ballpark an approximate capitalized piece, maybe about a third, maybe a little more. And of course if it's capitalized, it's going to run through the P&L at some point. And it's got a pretty short depreciable life, so that will take it out couple of years but not too significantly. So, I would say that as we go through the phases of implementation that 2017, 2018 are probably the heavier years as we look at that, and then as we bring more locations on, the work hopefully just continues to roll and we are not having to spend as much on those subsequent phases if you will. Yes, <UNK>, I think we have had a team of over 50 people here at Simpson from both our North America branches as well as our international branches. We have looked at it ---+ brought in people from operations, finances, inside sales and the warehouse, everybody really that would be directly impacted by a new ERP system. And as I mentioned, we have spent about 18 months analyzing first of all what system is the best for us, and certainly the team came up with the SAP system. And this year, as <UNK> mentioned, we have spent a significant amount of time in what they call readiness, which is really looking at the exact operations that we do at the Simpson locations and how will they work on the SAP platform. You mentioned customization, the idea is not to customize but to use the off the shelf program. If we start customizing we really do lose some efficiencies, and certainly that has been our message as we have been really communicating significantly with the entire company on why we are bringing this product in and what it will do to help us be more efficient in all aspects of our company. So we are not looking at customizing; typically that creates a few headwinds when we do customizing. So I think we have done a good job, again, over the last 18 months getting key people engaged. We have a very key team that will be working on this project full time. We have spent quite a bit of time with an implementer and they specialize in manufacturing companies. So I think we have done a good job on our due diligence with this project. No ERP implementation is easy but I really applaud our group. I think they have done a lot of great ground work, and we will be rolling this out in about 4 different waves. And that's really that timing. Obviously, the first wave will take the longest and then we anticipate each one after that should be a little bit shorter. So, can't say we won't have any headwinds, but I think we have done a really great job and the team has done an excellent job of thinking of all the things that may come into place, and I think more importantly the communication with the employees on why we are changing and what the benefits will be and getting their engagement and involvement in the project. <UNK>, it's <UNK>. Not all of it. I would say it was ---+ a fraction of that was. It was broken up; we were looking at acquisition opportunities, but as we just talked about, the SAP readiness is part of that. We have done some shareholder engagement so we have had a little spend around there, and then just an increase in legal expense related to nothing major but a few different things that add up. So of that total that you noted, maybe a quarter of that was for the acquisition type activity. Let me talk about the Riverside and SAP. We are still ---+ we have not tabled our look for acquisitions that can help our long term growth strategy. So we are still actively looking at those. And certainly lot of acquisitions take a long time to come to fruition and evaluate, so we are still very active on looking for acquisitions. We have a great team that is helping us from the manufacturing side with the Riverside transition, and again that's well under way. And as I mentioned, I already mentioned the SAP team. So, we have really got good teams working on both those projects but they are not hindering or slowing down what we are trying to do from an acquisition standpoint. And <UNK>, it's <UNK>. On the shareholder engagement ---+ last year or at the last annual meeting we had a low say on pay vote result, so we wanted to get out and talk. We have been getting out and talking to the governance teams of shareholders specifically around our compensation programs and governance programs and getting feedback, listening, and taking that information back to our board and various other folks that would help us work through what those programs are. So that's really where the shareholder engagement efforts were. Thanks, <UNK>. I think, obviously, <UNK>, our core ---+ we have built this company over the last 60 years on that connector business and what we can provide to the industry from wood construction. We have obviously added to that, if you look at our revenue, at 1.2 million housing starts versus where it was at 2.1 million housing starts, you certainly see that our revenue is approaching the same level. And I believe that is because we have had our additional product lines of fasteners and the truss business as well as what we are doing in the concrete space. So, as housing starts increase, it's obviously a great thing, but it's also ---+ creates a little bit more difficulty in that diversification. But I do believe that what we are doing in the concrete side, we are much better positioned for looking at construction products in commercial market as well as concrete repair market. So nice to see housing starts going up and certainly that's our huge focus, but I also think we are in a much better position from a balance as we look at being able to spread geographically as well as in different product lines. Yes, I think our sales team and our support groups do work very hard every single day to keep our margins and our market share. We still see MiTek has a very good software program, and so from a truss standpoint it's a tough push for us to compete against them. But I think we have got a good product on the market now that's helping us penetrate that space a little bit. We still see them using software sort of as a key selling aspect and trying to basically bundle truss plates and software along with the USP connectors. And I think that's their strategy on how they are going to market. We have been able to, I think, hold most of our market share, and that's really just a function of what we built our company on and that's that customer service. And so as I have mentioned, and I talked about it a lot, pricing is an interesting thing but you need product availability. You need to be able to support the customer. You need 24 hour turnaround on specials, and those are all the things that we have really put in place to continue to service those customers, and I think they reward us for that by staying loyal to our product line. Thank you <UNK>. Yes, <UNK>, let me address the home center piece first. I think it's definitely a timing issue. The home center business was up pretty significantly in the first quarter. I think it probably pulled some of the second quarter business into the first quarter business, but certainly on a year-to-year basis we are still up in the home center space. And actually that's sort of a similar timing with the rest of the connector product line. We had a very significant increase in our revenue in the first quarter, and as we mentioned, we believe that pulled a little bit of second quarter into first quarter, and so that's I think what you are seeing as again you look from the first quarter into second quarter. Thank you. Good morning <UNK>. Sure, our system, again I mentioned our ---+ we call it ---+ ERP system is called Blue Screen, and it was developed about 30 years ago really with the connector business in mind, and although it's been a great system and it's certainly served us very, very well, as we grow and have different currency issues, as we look at different product lines, it just is not really designed for where Simpson is today. So we are certainly looking at the opportunities for efficiencies. We can look across the entire company looking at inventory. We can't really do that today. We will be able to look across the entire company and see from a standpoint of metrics associated with sales in different regions, specific products. If you think we use Blue Screen for our operating systems; from a finance standpoint, we use AX right now. So it will certainly have a better tie-in with both operations and finance to help us from closing the books sooner, a little more consistency across all our branches from an auditing standpoint, consistency from the standpoint of joint purchasing. So there's many, many pieces that we believe will see cost savings. And one of the key things is that we have ---+ we believe as we grow, the system will help us not need to add additional people, because it is more efficient in how we are all connected. So we will be able to grow with not a huge increase in employees because of the efficiency of the system ---+ which right now we have a lot of hand operations that are having to go through our systems today. Volume definitely helps as we noted in the release. As a percent of sales, material and labor helped. Those were some of the key drivers there; and then, as I noted in the prepared remarks, the mix of ---+ within concrete and wood and concrete margin improving a little bit better than wood, although wood improved as well, helped in that mix ---+ helped drive that gross margin in the quarter. I would say mostly absorption, it being more efficient in the manufacturing and delivery of those products. I think it's pretty early; again, as we mentioned, the ---+ we are sort of in our first year looking at both the truss software that's out, and certainly I mentioned, I think last quarter, we have got our code report on that carbon fiber now, so we will have a little bit better feel as to where that might be as we finish out 2016. Thanks <UNK>. Great, thank you. Thanks, everybody.

2016_SSD

2017

STRA

STRA #Thank you, Rob. Good morning, everybody. I'd like to begin this morning with an update on a couple of regulatory matters. First and foremost, we were very pleased that our regional accreditor, the Middle States Commission on Higher Education, reaffirmed our accreditation for an 8-year period, which is the maximum duration that they allow. This reaffirmation follows a review of our self-study. It included multiple site visits by a peer review team and was a multiyear effort on the part of the university's leadership team. I'd like to specifically acknowledge Dr. Sondra Stallard, Strayer University's President Emeritus; and Brian Jones, Strayer University's current President, as well as his senior leadership team for the incredible work they did not just on this self-study but on all of the improvements made since the university's last self-study in 2007. The second regulatory update is also during the quarter. We received our specialized programmatic accreditation for our RN to BSN program from the Collegiate Commission on Nursing Education or CCNE for a period of 5 years, which is their normal duration. Next, just a couple of comments on our second quarter financial results. Our revenue per student declined 1.8% from last year. That's better than the decrease of 2.6% we had in the first quarter. However, in a prior earnings call, I indicated we thought revenue per student would be down in 2017 on a full year basis by roughly 1 percentage point. But based on our current trends, which is more undergraduate students as well as a slightly higher drop rate, we expect revenue per student to decline between 1.5% and 2% now for the full year 2017. Our operating expenses were up 3.4% in the second quarter when you include the reversal of the NYCDA contingent liability, otherwise they would have been up 6% excluding that adjustment. About 1/3 of that increase was associated with higher advertising costs as we work to support our various branding efforts. Much of the remaining increase is essentially timing. We have about a dozen active large projects designed to improve both student learning outcomes and the overall student experience, and we invested in those a little more heavily in the second quarter. For the full year, we think our operating expenses will increase roughly 3% on a year-over-year basis, and that figure assumes that our current enrollment trends continue. And then lastly, on enrollment. Our positive enrollment trends continued in the second quarter with new students up 6% and total enrollment up 8%. Our continuation rate in the quarter increased 100 basis points. Quickly on the Jack Welch Management Institute. They posted another very strong quarter with 34% new student growth, 31% total student growth. And they almost doubled the number of graduating students from 52 last year to 94 this year, and they've crossed over the 1,500 student threshold. And we couldn't be happier with their performance. In the quarter, yes. Lastly, our enrollment outlook for the third quarter is for both new and total enrollment to grow approximately 7% versus the prior year. And with that, operator, we'd be happy to take questions. Sure, Henry. First, we continue to see a pretty positive demand environment, meaning that interest in the university continues to grow at a double-digit pace. We saw that in the second quarter. And I think it's a combination of just general brand awareness; the health of, as I just commented on, the Jack Welch Management Institute; the health of our corporate alliances. All of that is contributing to the new student growth that we've had. We also had pretty healthy retention gains in the quarter, 100 basis points. So it's a combination of just the ongoing efforts to build the brand awareness of the university combined with some of the more proprietary things that we have in the way of JWMI and the 300-plus corporate partnerships that we have around the country. Well, you heard <UNK> comment in his remarks that we expect double-digit earnings growth in the back half of this year, and with that, we would expect our margins to expand. Sure, <UNK>. Unfortunately, I don't have the by-program list in front of me. I know, similar to prior quarters, the bulk of the growth is at the undergraduate level. In prior quarters, the growth has been pretty spread evenly across most of our programs, but the bulk of what we teach is business. So for example, the BBA is our largest program, so that would be a program that had a lot of growth in it. And in terms of the second part of your question, the health of our corporate channels is very strong. We're benefited by the fact that we have a lot of them, well over 300, and we're also benefited from the fact that we've got this campus network which enables us to activate a lot of these relationships at a local level. So we may sign a relationship at the corporate level and let's say it's with a nationwide retailer and then our local staff in the 80 campuses that we have around the country can go visit those retailers and get to know them and build relationships at a local level. And that has always worked well for us. And in this quarter, it was a big contributor to our growth, and we expect it will be in the future as well. Well, what we refer to is that along with community college enrollments, and taken together, it's about 1/3 of our total population. We had a 1% undergraduate tuition increase at the start of this year, and we felt that implementing that tuition increase did not in any way move us up the affordability comparative universe that we look at. We still feel like we're among the most affordable institutions and basically in line with your average in-state 4-year institution on a public basis. The Jack Welch Management Institute will be implementing a 6% tuition increase for the fall term for new students, and that's, I think, about the fifth tuition increase that we've had there, reflecting the strong outcomes in the institute and the strong demand that we see there. And we haven't made a decision on 2018 yet, so we can comment on that on Investor Day. Yes.

2017_STRA

2016

TEX

TEX #I would say on the steel side we are not yet seeing some of these pricing increases. Where we do it unequivocally is in the high tensile strength steel, that's the first place it shows up. But we are going to be working hard to make sure that we can push back on some of these increases. There's still an oversupply of steel in the global market place. Thank you. In terms of the trends, we do believe we'll see ---+ we had a tough first quarter in our utilities segment that's reported under our cranes segment. We expect that that will come back more as the year progresses. Some of the action that Ken is taking, near-term actions, I think are going to help later in the year on the margin side. And then they also, some of the new products that we're introducing, have some better gross margin opportunities as we bring those into the marketplace. So without question cranes' operating margin and progression is one of the challenges that we have, given our guidance. But for now we are going to stick to that until we see how the year unfolds a little bit more. You know the Board and management, we understand the ---+ we want to resolve the uncertainty as quickly as possible, and as I indicated in my prepared remarks, both sides are working diligently to do that. And again we are focused on the financing, their shareholder approvals, the governmental approvals and security and amount of a reverse breakup fee. So those discussions are ongoing and we will announce as soon as we can which direction this will go. Thanks, <UNK>. In terms of ---+ you are absolutely right. At this point in time we are intense competitors in the marketplace and we also have a merger agreement. So there's very strict firewalls that we established as part of the merger planning integration activities. So there are very strict firewalls in place. In terms of the market development, I do not believe that customers are delaying their purchase decisions based on the potential outcome of the merger transactions at this time. I really do think that if you look at the underlying fundamentals in the business, on the material handling side I think it's tracking pretty closely to factory utilization. It's in the low 80%s in Europe and we are seeing some growth there. In the United States, factory utilization is in that 75% range, so that's not great, it's not bad, but it's not great. So I think that's driving the purchase decisions on the material handling side. And on the port solutions side the slowdown in growth rate in container traffic is really causing ports around the globe to delay some of their purchase decisions and saying we can get by with the existing equipment that we have, that we don't need new equipment. And so across the product line on the port side we are seeing customers delay their purchase acquisitions. I am not aware of any situation where a customer has said, I'm delaying this decision because I am uncertain about the acquisition and the merger. In terms of conversations, most of the conversations that I had at were around Bauma and they inquire just because obviously it's a major issue. Not an issue, it's a major uncertainty right now in terms of the ownership structure. But the message that we've conveyed to the customers and frankly to the employees is that in either scenario they are going to be dealing with the same great people they deal with every day. The same products and service organizations that they've been dealing with. And so the impact of who owns the equity of the Company is frankly not that significant on a customer's transaction. And most customers when you talk to them about that, they get that and then they move on to the business. Yes. In terms of the $60 million in restructuring, as <UNK> indicated in his remarks, we are anticipating about 40% of that in the year with most of it coming later in the third and fourth quarter. So I think that's, from a flow standpoint, how we are looking at the benefits from the restructuring. I would say it was clearly impacted on the rough terrain boom truck market segment. The large crawler crane market is competitive but we've got a very strong position especially with our 3800 in that market space. So we can demand a good price because we provide a significant value to the customers. Also one other thing on pricing that I think is important is, we've said we are going to compete aggressively but we are going to compete intelligently. Price can't always stimulate incremental demand, and we understand that we are in a capital goods business, so it's the upfront initial price plus the operating cost through the life cycle plus the residual value and resale value. So as we look at a transaction, we are having our sales team really focus on the value add and being overly aggressive to try to stimulate a market that's not there with an upfront price doesn't help anybody in the value chain. And so we are going to compete aggressively but we will compete intelligently on the pricing side. I would say pretty consistent all the way through. That's a ---+ relative to our other businesses, that's a relatively rapid velocity business in terms of order and ship rates, and so I would say it was pretty consistent through the quarter. Thank you. Net working capital is a focus, such a focus that we redesigned our management compensation scheme to put a big part at risk with our net working capital improvements. We are being rigorous, we have our biweekly cash calls/net working capital calls with all the segments where we focus on all elements of net working capital. Where we are starting to see some progress, and again I will caution it does take time to implement these changes throughout the organization, but we are seeing improvements in things like APs. Where we look at the AP terms and making sure we've got contracts that are in the bucket of what we believe are acceptable and the teams are making progress there. AR on the receivables side, looking at receivables, receivable collections, reducing the days late across the business segments. We are continuing to make progress there. On the raw, WIP, and finished goods, that is about improving our S&OP process, and the team's working hard around that on their sales and sales forecasting, and then driving down through the operations with changes in the ERP system so they actually see a reduction in raw, WIP, and finished goods. And it's going to take some time. But we are focused on it. In terms of the percent of sales and absolute dollars we are basically flat on net working capital. Slightly higher in Q1 to prior year, but again I think that was due to some strategic decisions specifically in AWP that Matt made about positioning some inventory. I think as we look AWP, I'm sorry, as we look at net working capital to sales on a full year basis, probably in that 24% to 25% of sales range is what we are looking for to drive to by the end of the year. <UNK>, in terms of the, as I indicated, the Treasury notice did have a significant impact on the savings. We are going through what the implications of that are to the overall transaction. In terms of ---+ at that this time I don't want to comment about negotiations or renegotiations with Konecranes, but we are collectively, Konecranes and Terex, working through the implications of the Treasury and tax notices to understand what it means to this transaction. Correct. As I said in my prepared remarks, the Board has not changed its recommendation for the Konecranes merger. We continue with our discussions with Zoomlion across the elements that I've discussed to ensure that we can have a firm and binding commitment proposal going forward. And so that's what we are working on. Again, I want to thank you all for your interest in Terex. If you have any additional questions, please follow-up with <UNK>. He would be more than happy to address your questions. And again, thank you and have a good morning.

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