美國廢棄物管理公司 (WM) 2016 Q4 法說會逐字稿

Good morning. My name is Jennifer and I will be your conference operator today. At this time, I would like to welcome everyone to the fourth-quarter and full-year 2016 earnings release conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions). Thank you.

I would like to turn the conference over to Mr. Ed Egl, Director of Investor Relations. Sir, you may begin.

Thank you Jennifer. Good morning, everyone, and thank you for joining us for our fourth-quarter 2016 earnings conference call. With me this morning are Jim Fish, President and Chief Executive Officer, Jim Trevathan, Executive Vice President and Chief Operating Officer, and Devina Rankin, Acting Chief Financial Officer and Treasurer. You will hear prepared comments from each of them today. Jim Fish will cover high-level financials and guidance for 2017 and provide a strategic overview. Jim Trevathan will cover price and volume details and provide an operating overview, and Devina will cover the details of the financials.

Before we get started, please note that we filed a Form 8-K this morning that includes the earnings press release and is available on our website at www.WM.com. The Form 8-K, the press release and the schedule for the press release include important information.

During the call, you will hear forward-looking statements which are based on current expectations, projections or opinions about future periods. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are discussed in today's press release and our filings with the SEC, including our most recent Form 10-K.

Jim and Jim will discuss our results in the areas of yield and volume, which, unless otherwise stated, are more specifically references to internal revenue growth, or IRG, from yield or volume. During the call, Jim and Jim and Devina will discuss our earnings per diluted share, which they may refer to as EPS or earnings per share, and they will also address operating EBITDA and operating EBITDA margin as defined in our press release. Any comparisons unless otherwise stated will be with the fourth quarter of 2015.

The fourth quarter of 2015 and full-year 2016 and 2015 results have been adjusted to enhance comparability by excluding certain items that management believes do not reflect our fundamental business performance or results of operations. These adjusted measures, in addition to free cash flow, are non-GAAP measures. Please refer to the earnings press release footnote and schedules, which can be found on the Company's website, at www.WM.com, for reconciliations to the most comparable GAAP measures and additional information about our use of non-GAAP measures.

This call is being recorded and will be available 24 hours a day beginning approximately 1 p.m. Eastern time today until 5 p.m. Eastern on March 2. To hear a replay of the call over the Internet, access the Waste Management website at www.WM.com. To hear a telephonic replay of the call, dial 855-859-2056 and enter reservation code 55317607. Time sensitive information provided during today's call, which is occurring on February 16, 2017, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Waste Management is prohibited.

Now I'll turn the call over to Waste Management's CEO, Jim Fish.

Thanks Ed, and thank you all for joining us this morning.

I'm opening on a somber note this quarter as we bid farewell to our Chairman, Bob Reum, who passed away last week after a brief but valiant battle with cancer. Bob brought a strategic sense and a naturally inquisitive approach to leading the Waste Management Board and his intellect and guidance will be missed by me and by all who worked with him. We extend our heartfelt condolences to his wife, Sherry, and his three children, Carson, Courtney and Halle. They've lost a wonderful husband and father, and we have lost a good friend. Thank you for joining me in a brief moment of silence for Bob. Thank you.

On a much lighter note, my friend David Steiner completed a very successful and transformational career at Waste Management last year. Among many things that David brought to Waste Management, including driving tremendous value through disciplined pricing, our recently completed 2017 Waste Management Phoenix open was his brainchild. In fact, he played in the first Waste Management pro-am with a guy who would later become a good friend of his, Phil Mickelson. While he played with Phil before, Phil plays in lots of pro-ams and didn't remember David until David uncorked his infamous swing on the first tee, to which Phil said, now I remember you. Thank you, David, for your great contribution and your many years of service to Waste Management, and we wish you well with that swing and all of your future endeavors.

Now, moving on to results, 2016 was a very successful year as we exceeded expectations across the board. Each of our operating income, operating EBITDA, and net cash provided by operating activities were at all-time highs, and each showed the greatest year-over-year percentage and absolute improvements in the last decade. In addition, earnings per diluted share, operating income margin, and operating EBITDA margin were the best we've seen since the merger in 1998.

Our commitment to improving core price, adding profitable volume in a disciplined manner, and controlling costs produced $2.91 of EPS, just as we forecasted when we raised our full-year guidance at the end of the third quarter. That was an increase of 11.5% compared to 2015. We've built a strong foundation and have the momentum to continue to generate growth into 2017.

During 2016, our strong free cash flow allowed us to return almost $1.5 billion to shareholders in dividends and share repurchases. We've seen solid growth in the cash generation capability of our business over the last few years and, as a result of their confidence and continued strong cash flow, our Board has stated its intention to increase the dividends declared in 2017 by 3.7% and has authorized up to $750 million of share repurchases. Over and above our dividends, our preference is to use our free cash flow to acquire accretive businesses at a reasonable purchase price, so the amount and timing of share repurchases is dependent upon the acquisition landscape.

For the full year, revenues increased almost $650 million, or 5%. This is the best revenue growth we've had since 2011.

One of the drivers of our success in 2016 was the continued improvement in our pricing programs. For the full year, our collection and disposal core price was 5% with yield of 2.4%. Both exceeded our original expectations for the year with each individual line of business improving over 2015. For the fourth quarter, core price was 5.1% and yield was 2.1%.

Looking at volumes, our traditional solid waste volumes were positive 1.6% in 2016, a 210 basis point improvement from 2015. And our overall volume was a positive 1.4%, an increase of 300 basis points year-over-year.

2016 demonstrated that we can maintain pricing discipline and grow high-margin volumes while delivering exceptional customer service. Our employees are focused on continuing the progress we've made here.

With regard to recycling, we talked to you last year about the transformation we were initiating to ensure that this line of business is both environmentally and economically sustainable for the long-term. In 2016, we made significant progress on that front by improving operating cost and renegotiating contractual terms with our customers as the recycling line of business contributed $0.09 of EPS year-over-year. Our recycling employees have worked hard to change the business model to ensure we generate the returns our shareholders expect, whether commodity prices are high or low.

Our contract terms are now designed to recover processing costs and fully charge for contamination. We are fully committed to providing the recycling services our customers desire at the returns our shareholders expect.

I will now turn the call over to Jim and Devina to discuss our fourth-quarter results in more detail, and then I will conclude with a discussion of our strategy and our 2017 guidance.

Thanks, Jim, and good morning.

The fourth quarter of 2016 saw a continuation of the strong operating and financial results we saw throughout the year. Revenues in the quarter were $3.46 billion, an increase of $214 million, or 6.6%, when compared to the fourth quarter of 2015. Once again, our revenue growth was driven by the successful execution of our price, customer service, and disciplined growth strategies in our collection and disposal business.

Fourth-quarter revenue growth in our collection and disposal business from the combined impact of price and volume was $118 million. Fourth-quarter revenues also benefited from higher recycling commodity prices, which drove a $51 million increase in recycling revenues. Acquisitions, net of divestitures, also increased revenues for the quarter by $45 million. Fuel surcharges and foreign currency fluctuations did not significantly impact our revenue for the quarter.

Looking at internal revenue growth in the fourth quarter, our collection and disposal core price was 5.1% and yield was 2.1% with total volumes improving 2% and traditional solid waste volumes improving 1.7%. We saw revenue growth from volume contribute equally to price growth for the first time in over five years, but without compromising our pricing strategy or results. We focused on improving service to our customers and our full-year churn improved 100 basis points to 9.1%. This is the lowest churn rate since 2002, when we were at 8.6%.

We also saw service increases exceeding service decreases for the 12th consecutive quarter, supporting continued commercial volume growth. The combined positive price and positive volume led to total Company income from operations growing $42 million, operating income margin expanding 10 basis points to 17.8%, and operating EBITDA growing $54 million.

Our collection lines of business continued to see the benefits from improving price and now volumes. In the fourth quarter, commercial core price was 7.6% with volumes up 2%, which was a 270 basis point improvement from the fourth quarter of 2015 and an 80 basis point sequential improvement from the third quarter of 2016.

Industrial core price was 9.7% with volume up 1% in the fourth quarter. While industrial collection volumes continued to improve, the rate of growth moderated when comparing the fourth quarter of 2016 with the prior-year period, which is largely due to the tougher comparisons in C&D volumes.

In the residential line of business, core price was 2.7%. Residential volumes were down 2.6% in the fourth quarter, which is the same rate of decline as the fourth quarter of 2015, and a 30 basis point sequential improvement from the third quarter of 2016.

Our focus is on disciplined pricing of the business to ensure an acceptable return on invested capital. The combined price and volume in our collection line of business led to income from operations growing almost $19 million and operating EBITDA growing $30 million.

In the landfill line of business, we again saw the benefits of positive volume and positive yield in the fourth quarter. Total landfill volumes increased 6.2% with MSW volumes growing 1.6%, C&D volume grew 17.7%, and combined special waste and revenue-generating cover volumes grew 7.1%. We achieved core price of 2.5%, about the same as the fourth quarter of 2015.

As Jim mentioned, we made significant progress improving the recycling line of business, which contributed $0.09 of EPS year-over-year. The majority of the increase in EPS, or $0.065, was driven by improvements in operating costs and renegotiating contract terms. The remaining $0.025 was due to improved commodity prices.

For the full year, gross operating expenses per ton improved by 2.4%, and average commodity recycling prices at our recycling facilities improved 8.6% and volumes grew 0.8%.

And moving now to operating expenses, in the fourth quarter, total operating cost increased $120 million when compared with the fourth quarter of 2015. The cost increases were largely related to our increased volumes and costs related to acquired operations, which were reflected in higher labor and subcontractor costs. We also saw increases in leaching cost and a 130 basis point impact from higher commodity based costs related to recycling rebates and fuel expense.

Our operating expenses as a percentage of revenue improved 30 basis points from 62.4% in the fourth quarter of 2015 to 62.1% in the fourth quarter of 2016. The improvement in operating expense margin from revenue growth, efficiency gains, and cost control efforts was 160 basis points, but this margin improvement was largely offset by the commodity based costs in the quarter.

I'll now turn the call over to Devina to discuss our financial results.

Thanks Jim, and good morning everyone.

For the fourth quarter of 2016, as a percent of revenue, SG&A costs were 10.9%, which is an increase of 30 basis points from the fourth quarter of 2015. On a dollar basis, SG&A costs were $378 million in the fourth quarter, or $35 million higher than in the prior-year period. The increased SG&A costs on both a margin and dollar basis are almost entirely related to higher costs for our incentive compensation plans because we outperformed the goals set for the year. SG&A costs during the quarter also included a charge for executive severance costs, which negatively impacted EPS by $0.01 per share. So when we look at fourth-quarter income from operations and operating EBITDA margin, the year-over-year comparisons would have been 100 basis points better without the increase in these incentive compensation and severance costs.

For the full year, we held our SG&A costs flat on a percent of revenue basis at 10.4% as we offset increased incentive compensation costs and higher SG&A costs from large acquisitions by reducing backoffice spend and finding greater efficiencies in our processes. We will continue to focus on our continuous improvement objective in managing SG&A costs in the year to come, and expect to hold SG&A costs flat in 2017, and for SG&A costs as a percentage of revenue to improve by about 40 basis points.

Turning to cash flow, in the fourth quarter, cash provided by operating activities was $753 million compared to $526 million in the fourth quarter of 2015. This growth in operating cash flow was driven in part by an increase in operating EBITDA of $54 million, and this reflects the strength of our core operating performance in the year.

For the full year, cash provided by operating activities increased $462 million to almost $3 billion. Again, operating EBITDA was the primary driver of the increase year-over-year, contributing $277 million of increased cash flow.

During the fourth quarter, we spent $377 million on expenditures and, for the full year, we spent $1.34 billion, which is an increase of $106 million from 2015. When we gave our guidance for capital spending at the end of the third quarter, we expected to spend about $1.4 billion in 2016. Due to permanent construction delays that were beyond our control with three of our capital projects, we pushed $50 million of this spend from 2016 into 2017. This $50 million deferral is included in our 2017 projected capital expenditures which Jim will discuss. So, combined, in the fourth quarter, we generated $387 million of free cash flow, and this is a $199 million increase compared to the fourth quarter of 2015.

For the full year, our free cash flow increased by $254 million, or 18%, to $1.66 billion. This is the highest amount of free cash flow that the Company has ever generated if you exclude the proceeds from the divestiture of Wheelabrator in 2014.

As I mentioned, in 2016, our free cash flow growth was driven by the 8.1% increase in operating EBITDA. While this bodes well for continued cash flow growth from core operations in the year to come, in 2017, we had some headwinds to overcome, but they are incorporated in our guidance that Jim is going to discuss.

In 2016, we have a $67 million benefit from the termination of a cross-currency hedge that will not repeat. We also expect cash taxes to increase, capital expenditures to be higher, and our cash payout for incentive compensation to be up in 2017. That said, our focus in 2017 will not change. We will grow revenue and manage our costs, maintain capital spending discipline, and drive efficiency in working capital to generate high and sustainable levels of free cash flow.

In 2016, we continued our commitment to returning value to our shareholders through dividends and share repurchases, returning a total of $1.45 billion during the year. In the fourth quarter, we paid $180 million in dividends to our shareholders and we repurchased $225 million of our shares. For the full year, we paid $726 million in dividends and repurchased $725 million of our shares.

During 2016, we allocated cash to capital investments for the organic growth of our business, acquired core solid waste businesses to enhance growth and return value to shareholders, all while maintaining a strong balance sheet.

At the end of the fourth quarter, our debt to EBITDA ratio measured based on our bank covenants was 2.53. Our weighted average cost of debt for the quarter was 4.17%, and the floating-rate portion of our total debt portfolio was 14% at the end of the quarter. For 2017, we currently expect that interest expense and cash interest paid will be relatively flat with the full year of 2016.

The effective tax rate was approximately 34.4% in the quarter and, on an as-adjusted basis, the full-year tax rate was also 34.4%, which is in line with our expectations. We have built our 2017 projections using current tax law, and we currently expect our 2017 tax rate to be about 36.5%. The increase in our projected tax rate for 2017 is due to expectations for higher operating and pretax income, which reduces the benefits from our tax credits.

I will now turn the call back over to Jim to discuss our strategic outlook and 2017 guidance.

Thanks Devina. When we reflect on 2016, we are very pleased with our results. We successfully executed on our strategy of improving price, disciplined volume growth and controlling costs.

Looking forward to 2017, we expect core price to be 4% or greater and yield should be approximately 2%. We expect to achieve the same dollar amount of pricing in 2017 as we did in 2016, however, with the growth in our revenue core price and yield as a percent of revenue will moderate. We expect total Company volumes to grow in the range of between 1.2% and 1.6% for the full year in 2017. We anticipate that we will lose some unprofitable recycling contracts in 2017 and that our 2016 landfill volume growth of more than 7.5% will moderate on tougher comparisons this year.

In our recycling business, 2017 has seen a strong start to the year with current prices of our average commodity price per ton up $40 from the lows we experienced in January of 2016. January of 2017's uptick over January of 2016 was driven primarily by strong cardboard pricing impacting our brokerage business. However, we are not forecasting that these elevated levels will be sustainable throughout 2017, and the comparisons in the back half of the year will become more difficult, but we still anticipate additional operating cost improvements. Add to that the strong commodity prices in Q1, and we expect a positive $0.03 impact on our EPS year-over-year when compared to 2016 with most of the contribution occurring in the first quarter of 2017.

The real theme for our 2017 financial guidance is the continued strong operating EBITDA growth, which will be the foundation of our free cash flow. We expect that the solid execution of our strategic priorities will produce 2017 operating EBITDA growth of between 6.5% and 8%. This will lead to between $3.95 billion and $4 billion of operating EBITDA, and that will in turn drive free cash flow of between $1.5 billion and $1.6 billion.

Capital expenditures are anticipated to be between $1.4 billion and $1.5 billion. The expected increase in capital spending is to fund truck and container purchases for volume growth, the Los Angeles and New York City contract wins, and the $50 million carryover impact that Devina mentioned. Bottom line, we expect 2017 adjusted EPS of between $3.14 and $3.18 per share.

Looking at the strategic drivers of 2017 and beyond, we will stay keenly focused on those tried-and-true earnings drivers, including core price execution, disciplined volume growth, and controlling costs. In addition, we will stay focused on safely providing superior customer service, attracting and retaining the best team in the industry, and differentiation through technology.

From improving the ease of self-service for our customers to enhanced mobile applications, to improving our pricing and routing tools, to working with our OEMs on advanced vehicle and container technologies, we will use technology to supplement our strategy and both drive growth in our business and further reduce costs. With strong execution on these strategic drivers combined with a continued focus on acquiring accretive businesses, we are confident that 2017 will be another great year for Waste Management.

In summary, we had great success in 2016 driving earnings and cash flow growth to record levels that exceeded our own expectations. As we have demonstrated over the last few years, strong pricing, the execution of our service delivery optimization programs, and growing the right kind of volume drive margin expansion. We expect that to continue into 2017. We did this as a team, working together to execute upon our top strategic priorities. I am honored to be able to take this opportunity to thank each member of the Waste Management team for their success. So, thank you. In 2016, you delivered exceptional service to our customers, and you looked for opportunities to drive improvement in everything you do.

And with that, Jennifer, let's open the line for questions.

(Operator Instructions). Michael Feniger, Bank of America Merrill Lynch.

Good morning guys. Thanks for taking my questions. I'll keep it at two. Just first, on the pricing, so you're guiding 4% for the full year. Q4 was very strong. So just how much of this is just the tougher comps? Is price increases just getting more challenging now than they were in 2016? And how should we be thinking about pricing kind of playing off through the year?

I think it's the fact that we have, for I think several years, said that we will be at a 2% yield on a 4% core price, and we are kind of sticking to that. We think that's a pretty safe range for this.

When you look at whether we saw any kind of sequential weakness, we didn't. The four lines of business that ultimately show price increases for us are commercial, industrial, resi and MSW. And when I look at those sequentially, commercial was up quarter-over-quarter 10 basis points, 50 basis points in industrial, we were down 40 basis points in resi, and we were up 20 basis points in MSW. So collection and disposal sequentially was flat at 2.1%. So, I think what you're seeing in 2017 is just kind of a standard 2% and 4%, which is where we have guided I think over the last four years.

Okay, that helps. I guess if we could just talk about inflation in CPI, can you quantify the headwind that we saw in 2016, and what we should be expecting in 2017 if we see inflation start to pick up over the next few months? Is this more of a 2018 story? I was hoping you guys could kind of parse that out for us.

Jim Trevathan here. CPI, or index-driven pricing, affects about 40% of our total business. So to quantify that, about a 50 basis point increase in CPI would impact our topline by $28 million.

But I also want to stress, as Jim just did, that we don't plan for CPI increases in our business plan. So, you're right, an increase has some upside to it, but we don't plan for a decrease either. Our core pricing strategy allows each area, and we ask them to overcome any CPI increase or decrease with more core price. And we do that on obviously those open market customers. So, we've overcome the low CPI rates in past years and you've not seen any impact to that core price. So, an increase, although it will occur, and I think you're right, it does have a roll-forward impact, it would be later in the year as you see it, because our price increases don't come every month. They come, especially on those CPI or index driven price customers, they come periodically, July 1 or October 1, based on the contract term. So that will be more of a late 2017, 2018, if we see that CPI increase. But I stress again, we generally have not let that affect us positively or negatively. We're going to go get core price. (multiple speakers)

There is a bit of a lag there too, Jim (multiple speakers) with CPI, these contracts are tied to it, as Jim mentioned. But they have a look-back period; it tends to be 12 months. Then of course as, Jim mentioned too, we've got these periodic increases that are kind of July 1 or January 1. So that lag is probably at least 12 months and sometimes as long as 18 months.

That's really helpful. Just if I could squeeze in my last one, Jim, what do you think is an appropriate incremental margin we should be thinking about at this point in the cycle for Waste Management?

I think, when you think about the fact that our landfill volume has been strong, our commercial volume has been the strongest we've had in at least four years, if you think about 50% flow through to the EBITDA line, I think that's probably appropriate.

Thanks guys.

Andrew Buscaglia, Credit Suisse.

Hey guys. Thanks for taking my question. I just want to dig into the recycling. You guys said it would help you guys about $0.03 in 2017. It looks like some of that is coming more so in Q1. Can you talk about -- I would think that would be a little bit more of a benefit given where commodity prices are going. So, what are your assumptions around pricing for commodities and just generally for recycling?

So, when we think about commodity prices and particularly when we think about recycling, the recycling line of business, 2017 is the first year in four years that we are actually budgeting some improvements. We are budgeting $0.03 per share for the year. $0.02 of that comes from price. $0.01 of it comes from continued cost improvement that we baked into the plan. Now, most of that is in Q1, a little bit in Q2, but most of that is in Q1. And we do expect prices to come back down in the back half of the year. So, I think what this really amplifies is the point that we made last year, which is that commodity prices are difficult to predict and obviously out of our control, so we need to derisk the model, and we've done that over the last four to six quarters so that, if prices do retreat, we've really protected the downside.

We only have a couple of contracts that remain into 2017 that are significant contracts that will fall off. And we'll get some value there from them, but we have altered all of our agreements, the significant large ones, to make sure that our customers are providing a return for processing their material, and then that commodity price impact is minimized. We are not taking that same risk. There are only a couple of those left. Our operating guys have done really good work at putting in continuous improvement programs that let us see historically and also look at volumes coming in and just right-size their operations so we make sure we get that operating improvement that Jim mentioned.

That's helpful. For volumes, I thought 2% was pretty good, much better than I expected. Just looking at the breakdown, was there any -- was there anything that surprised you within the breakout, you know, MSW C&D and special, any one-time projects that are going away, or are those really tough comps that you're basing your guidance for 2017 on?

I think you are right. When we look at landfill volume for the year at MSW at 7.5%, that's pretty strong in a 2% comp if you believe the economy drives that. When you look at our C&D volume, C&D volume was, for the year, was 18%, 18.7% I think. So hard to repeat that. We are not seeing any weakness there, but hard to repeat.

Now, I would say, on the positive side there, if you believe that those are going to be different comparisons on the positive side, I would say our special waste, which is driven by kind of the industrial economy, was really only at about 3.9%, 4%. So, you may argue that we've got some upside there, still not weak by any stretch of the imagination, but I do think that special waste could provide some upside, particularly if something comes out of Washington that benefits the industrial economy.

From a comparison perspective, the one thing I would add is that, in the first quarter of 2016, we did see some MSW volume benefits from some of the waste to energy facilities meeting their maximum capacity. And that will prove to be a bit of a tough comparison, but that's not something that would impact the full year. It just really impacted the first quarter.

Okay. And your commercial is very strong. What are your thoughts on that into 2017, because obviously that's more a piece of the puzzle?

For the year, it was 0.8% volume on commercial, but sequentially it was getting stronger. So I think I mentioned in my script that it was really strong towards the end of the year at 2%. And as I look back, that's the strongest number I see on the page here, all the way back to 2012. So we like the direction of commercial, and I think Jim talked about the fact that our churn has been a success story for us too, and that of course affects commercial volume as well.

Yes. And similar to that special lease piece, you would think that the infrastructure or potential something out of Washington could help that commercial side too, as maybe some confidence --

More on the industrial line of business, honestly, but it certainly wouldn't hurt commercial, but I think the industrial economy for us, with respect to collection, tends to show up more in the industrial line of business.

If you look back at our -- at commercial volume and you go back six or eight, nine, 10 quarters in fact, every quarter, we've had good improvement leading to that 2%. And that's obviously with -- the economy hasn't driven much of that. Most of it's come from the actions that we've taken around service to our customers, process to handle customers that have issues and how we work through those. Our people in the field have done just a superb job in that regard. They get that defection rate down pretty close to the lowest ever.

And then our customer acquisition methods are getting -- we are just getting better at looking for the right kind of volume that Jim stressed to make sure that we still get the contribution from that and don't disrupt the marketplace. And that would be the last thing we'd want to do. But we are focused really hard on that, at picking the right locations that have a little more economy support and make sure our resources, sales resources, and operating resources align with that so we can take advantage of that growth. We're using some of our technology tools Jim mentioned to help us in that regard, and I think you'll see that continue. It's been fairly dramatic on one of our more profitable lines of business, and we expect that to continue.

Okay. That's it for me. Thanks guys.

Corey Greendale, First Analysis.

This is Ken Wang on for Corey. Thanks for taking my questions. I'm just wondering if you can talk a little bit about your M&A outlook, specifically any comments on what your plans are, what you're seeing in terms of seller expectations, and any commentary you can offer on pipelines.

Sure. Look, we'd like to do more of the RCIs, the Deffenbaughs, the SWSs that we've done over the last couple of years at reasonable prices. And that's I think the key. Obviously, return on invested capital is very important to us, so you're not going to see us pay 12 or 13 times EBITDA on a pre-synergy basis for companies. We continue to kind of comb the landscape and see if we can find those midsized acquisitions at what we think is a fair purchase price. If we don't find those, then 2017 is really going to be a year of tuck-in acquisitions in the $100 million to $200 million range.

Thanks. That's helpful. And any update on your EBITDA acquisition outlook for 2017?

We really only have tuck-ins built into EBITDA, so it's largely organic growth on the EBITDA line of business, on the EBITDA line, in 2017, a little bit of carryover from acquisitions in 2016 as well.

Great. That's all I had. Thank you.

Brian Maguire, Goldman Sachs.

Good morning. It's Derrick Laton on for Brian. Thanks for taking my questions. I just wanted to see if we could get a quick update on how we should think about residential volumes. You mentioned those are down about 2.6% year-over-year, but it looks like sequentially a small improvement. Was this mainly attributed to the progress you're making on moving to an inflation index that more kind of closely mirrors the waste industry? Maybe we can get an update on your progress there.

There's no doubt that has been a positive impact to us as we've changed some of those contracts over to that waste water and sewer increase instead of just CPI. That's a slow process with cities and counties and government entities, because cost is so important to them.

I think the other thing I'd mention is that line of business is an extremely competitive line of business, especially with those midsized and smaller communities. They are always looking for savings. What we've tried to do is look more at just return on invested capital. That line of business has such a strong impact on capital requirements as you retain a contract and that entity wants new trucks or with new business. So return on invested capital is our primary focus there because it has such an effect on our return, and that you all care about, and we do as well. So we don't look at it as a growth opportunity like we might other lines of business. We look contract by contract. Yes, we choose to and we will improve that business. We are doing things using technology and trying to differentiate ourselves, especially on those larger franchise and larger contracts, providing some self-service opportunities for customers, some things that local communities look for that we can add to websites, both with regard to trash services but other information that might, again, set us apart from some of our other competitors.

We're looking at increased automation. How can we help with those helpers on the back of the truck and get more focused on the drivers? Some of the shortages that we see with automation, we tend to retain drivers longer when they have that kind of truck. And we get better return for our shareholders as well. So all of those things I think will help that line of business, but I don't believe you will see the dramatic change like you may have at whether it's MSW or Special Waste or commercial/industrial lines of business. We'll plot along and make good excellent returns for shareholders, but we'll do it spending money wisely.

Got it. That's really helpful. And then maybe just one more. You mentioned that, in 3Q, leachate and wastewater developments were kind of a headwind for the quarter. Are these issues squarely behind you now? Thanks. I'll turn it over.

So, you're right, leachate was a headwind. And we talked about it a bit last year. We've lost some low-cost disposal options for ourselves with some of these year TWs, specifically the one we mentioned last year was in the state of Virginia. So but it's not limited to Virginia. So, we've built a couple of our own plants. We built one outside of Philadelphia a couple of years ago. We are in the process of bringing one up and online in Virginia. That will come online at the end of Q2 or maybe the beginning of Q3. So, that Virginia plant coming online in the back half of the year will have a run rate expense reduction of about $0.03 per share, $0.02 to $0.03 per share. For the year, we've built in about $0.015 of expense reduction in leachate costs. And then, of course, we also have the charge that we put into place last year that's helping us compensate for some of that increase in cost.

Great. That's helpful color. Thank you.

Joe Box, KeyBanc Capital Markets.

Good morning everyone. So, I can appreciate you guys are taking a conservative approach to commodity prices. Now that you've restructured a lot of these contracts, can you maybe just give us an update and quantify what a $10 change or a 10% change in the commodity basket might mean?

So, $10 change, it's about $0.04 on an annual basis.

$0.04, okay.

$0.04 annual.

As we changed those contracts, exactly as you said, we are not taking as much of that risk on the downside there, but we don't get as much on the upside. There's value to us when we do that, but it's not as dramatic as it was when we took all that upon ourselves. We're trying to make sure that the capital that we've spent building these facilities provides a return for shareholders that's a reasonable return, given the build, the spend, and then we will share in that commodity value instead of take all that risk. And that's what you see happening.

I understand.

I was just going to say, look, Devina mentioned it's tough for us to predict what's going to happen with commodity prices. Every time we've tried, we've failed. We tried to predict first quarter, and we think that looks like it's going to play out the way we expected based on where we finished the year. But predicting out past that, you could look at the transition historically from Q3 to Q4, and, historically, there has been a big dip in commodity prices from Q3 to Q4. We didn't see that dip this year, and we actually thought it would happen, and it just didn't. So are we going to say that that's a new normal for us? I don't know. I think the problem is, as soon as we say that's the new normal, then we will get back to normal and we will see the big dip in Q4 next year.

So, we expected that you might ask why we are being conservative with recycle pricing. That's why I did mention earlier on that it's the first year in four that we've put anything into our budget in terms of improvement in the recycling line of business from commodity prices. And we did put $0.02 in there. We put $0.03 in total, $0.02 of it is price-related. But it's just, in our minds, it's hard to predict what happens with commodity prices. 30% of our volume goes to China. Really hard to tell what's going to happen overseas. So while you may say it's conservative, and we might even agree with that, I think we've got to make sure that we don't get ourselves in a bind the way we have in years past.

Right. And I get that you just don't have visibility on it. I think it's a prudent way to do it. I just wanted to check on the $10 change, given you guys have restructured contracts.

Maybe switching gears, I think you guys snuck in a quick comment on an investment for New York City contract. Can you just give us a little bit of color around what that is and how much that investment might be?

Sure Joe. I should probably take the opportunity first to just recognize our team. That was an excellent long-term contract for us. It gives us a real basis for supplying service to the New York City area for a long time. It's for 20 years in fact. So a really good contract for us with a lot of work by that local team. We will start accepting MTS, MSW in July of 2017. That waste will go to our western New York High Acres landfill in early 2018. At the peak of volume, that's about 750,000 tons a year. We'll split that volume between our western New York landfill and then one of our Virginia landfills. We'll spend money; we've already started a little bit. It's why you saw some of the capital spend that Devina mentioned going up in 2017. And it's in the $50 million range. It includes quite a bit of containers as a primary amount of spend. Those MTSs, by the way, when they are fully operational, the New York City, they are implementing -- they are executing and building out those transfer stations. We'll end up handling 1.8 million tons for the City at the end of this in total, given two MTS contracts, the long-term Bronx contract we have, the Brooklyn contract that we have, and the Queens contract we have. So, it's sizable. A over 20-year period, it's a little over $3 billion in revenue.

Congrats on the win. So, can you maybe talk about the return profile and the risk profile of the contract? Does it end up being accretive to overall Waste Management? And then hopefully I can circle up off-line and get some more details on it. Thanks.

It absolutely is accretive to both 2016, our plans in 2017. It's a very good contract for us. It's transportation and disposal at our site. It does not include collection. It's just the receipt of the material, the railing of the material, handling, and then disposal at the other end. So, that line of business is good for us and this contract is very good for us as well.

Because of the line of business, Joe, it ends up, that contract ends up being an accretive to margin contract, as disposal is such a high margin for us.

And from a risk standpoint, we, just like all the other New York City contracts we have, we've got all the right components in there to make sure that we are covered if the City decides to go a different direction. And we don't expect that, but if they do, we are covered from a capital standpoint and from a cost standpoint. So, we don't see the risk that you might expect with that long-term a contract. It has all of the right escalators in that cover cost change. So we are very pleased with the work our local team has done to win that project.

Great. Thank you guys.

Hamzah Mazari, Macquarie Capital.

Good morning. Just a question on longer-term capital allocation. It looks like you guys are not very levered. The dividend increase is lower than free cash flow growth and profile. When you think about M&A, you mentioned accretive acquisitions. Are there antitrust issues for you to grow in solid waste? And how do you think about prioritizing sort of industrial waste, energy waste, medical waste? Any sense of long-term capital allocation around M&A would be very helpful.

That was kind of four questions in one there. Let me tackle the capital allocation first. So, first of all, yes, with respect to how we think about capital allocation for 2017, primarily for 2017, we look at that dividend coming out first, and we increased the dividend by 3.7%. You're right. It did not increase at the same level as free cash flow. You recall last year, in January, we took kind of a 6.5% increase because we felt like our free cash flow had reached a new baseline. So we said it had gone from kind of the $1.2 billion, $1.3 billion, up to $1.4 billion last January, so we increased it by a higher than normal amount. And you could argue that we are now at somewhat of a higher base too at $1.5 billion. I think we'd like to have more than just a year's worth of data before we determine that we truly are at a higher base. So, 2017 will provide that data for us, we think, and then we will readdress the dividends as we go into the latter part of this year or next year. So, once you take the dividend out, once you say, okay, then potentially your next use of capital would be acquisitions. And I talked about the fact that we would love to get a midsized acquisition similar to an RCI or a Deffenbaugh, but we've got to get it at the right price. We are looking for those. And to the extent that we can find them, then we would do that. And I think Devina has done a very good job getting the balance sheet in shape to be able to accept one of those, should one come along. If it doesn't come along, then we will do our standard $100 million to $200 million in tuck-ins. Plus, we will do -- about $500 million is what we've built in, in terms of share repurchase, to our budget for 2017.

And then you did ask also about the types of acquisitions that we would look at. So, we consider that industrial space to be a good space for us. It's a core space for us. We would look at acquisitions within that space, whether they be energy services or hazardous waste. All of that, in our minds, is core for us, particularly as you think about what might come out of this new administration with respect to the industrial economy. It could be a good space for us, and so we would look at those along the same lines as we would look at solid waste.

And then I guess your last question had to do with antitrust. It's always something we have to look at. As the biggest company in the industry, we always have to look at the antitrust side of this. It is a consideration when we buy businesses, but we don't foresee, with anything we are looking at, any real difficulties.

Okay. Great. Thank you. Since I asked four, I'll leave it there. Thank you.

Barbara Noverini, Morningstar.

So, I am interested in some of your high-level thoughts about some of the policy talk coming out of Washington. Obviously, you mentioned that an uptick in the industrial economy would benefit you, as would of course a lower corporate tax rate. But what do you make of some of the talk concerning regulation, particularly the EPA and the environmental regulation? Obviously, the new administration has been talking about the potential for simplifying or relaxing certain regulations.

That's a great question, Barbara. We've talked a lot about that internally. Environmental regulation, in a funny way, is a differentiator for us, because we consider ourselves to be preeminent in terms of our protection of the environment within the waste disposal space. So, it is a question that we've had. Do we benefit or not? There's a second side to that coin. It's a bit hard to tell because we just don't know what's going to come out. We don't know what environmental regulation or re-regulation or de-regulation would come out of Washington, so we really can't give you a very good answer to that. I would tell you that, off the top, that it would be -- there's a potential opportunity, we think, out there to improve the Superfund program, so that would be, I think, good for us. But over and above that, it's a bit hard to say because we just don't know where it would be coming from.

Sure. Interesting. Thanks. Then just one more. With prices for recyclable commodities improving, are you starting to see local competition pick up again? And also, have you seen some other competitors follow your lead and change their contracts too to include processing costs, contamination reimbursement, what have you?

We have not seen dramatic change in competition. It's a very competitive line of business, but we've not seen anything different recently. It's been such a short time since they've moved forward, and I don't think that will happen in the short-term. And it takes a lot of higher corporate prices to make that happen and sustain. I think people have been burned enough that they are not going to spend capital with new facilities until we see the right direction.

And yes, I think, in general, we don't change things because of what others do, but, at the same time, from just hearsay, we think it's so prudent to do what we all have been doing around derisking that business, and we don't see any signs of that changing.

Makes sense. Thanks a lot.

Noah Kaye, Oppenheimer.

Good morning. Thanks so much for taking my questions. We talked earlier in this call about a couple of maybe some special items on the capital spending side, on the CapEx side. You called out the $50 million swing from 2016 to 2017, the New York City spend. You mentioned the leachate spend. I guess can we talk a little bit about how to think about a more normalized CapEx level and the potential for CapEx spending moderation looking beyond 2017? Because it does seem like there are a number of higher items impacting the year.

Absolutely. What we've said for quite some time, since I was in the CFO job, we've said that we thought CapEx would be in a range of percent of revenue of about 9% to 10%. So, when you look at 2017, and the CapEx guidance that we gave of $1.4 billion to $1.5 billion, that's in that range for us.

We do have, as we talked about, some CapEx that moved unexpectedly from 2016 into 2017, and then the rest of the increase is driven by the growth of the business and its new contracts that Jim Trevathan mentioned. Even with the $50 million that moved from 2016 to 2017, we still think we are within that CapEx range. And I don't think you'll see us really move much outside of that 9% to 10%.

Okay. That's very helpful. And then maybe one quick follow-up. Specifically on the tax reform discussions going on, just wondering how that's impacting M&A discussions because, certainly, there's potential for more cash to you. It may also impact economics of transactions for buyers and sellers. To what extent is that having an impact on discussion, maybe on timing at all of transactions? How are you thinking about that as kind of impacting the M&A activity over the course of the year? Thank you so much.

Probably Devina will have a better answer to this than I will. But with respect to how it's impacting our view of acquisitions, we haven't -- I would tell you haven't looked at that as an impediment at all. It's hard to say because, again, it's kind of like the environmental question. We don't really know what comes out of the administration. There's been a lot of conversation about interest deductibility going away, so how would that impact the way we think about funding these acquisitions. There's also been some conversation about the grandfathering of debt that you have on your balance sheets prior to kind of April 1 or April 30. So we hear a lot of this. It's probably just chatter amongst people who don't know. So, in that respect, I would tell you that it hasn't really influenced our decision. Our decision is going to be based much more on the purchase price than it is on the funding mechanism.

And then, to the extent that it's impacting the way that sellers think about the landscape for moving forward with transactions at this point, we definitely think, as we've talked internally, we do think that our sellers are going to be influenced by the evolution of tax policy, and it certainly is going to be a factor in the way that they think about the optimal time to move away from their businesses. So, it's too early for us to say whether or not it can impact our ability to execute on that targeted $100 million to $200 million of tuck-in acquisitions, or any other potential acquisitions that we may look at in the future. But we do think that, with tax reform, you're going to see some sellers more motivated to move forward potentially, given that they will likely have lower taxes to pay as a result of a transaction.

I told you, Noah, she would give you a better answer.

I appreciate the additional color. Thank you very much and congrats on the quarter.

Tyler Brown, Raymond James.

Good morning. Jim, I know you don't give quarterly guidance, but if I recall, last Q1 was really strong on an extra day, and I think mild weather. How should we be thinking about volumes here in Q1 versus the full-year guide of 1.2% to 1.6%?

You're absolutely right about that. Last year was a very mild winter, so we were a bit worried when we talked about Q1 last April that we would have pulled -- the big question was how much volume did we pull into Q1, particularly in the month of March, because March was very strong? January and February we were fine, but March was particularly strong last year. I would tell you that, aside from the bad rains that we've seen on the West Coast, primarily in Northern California, that the weather has been kind of normal this year, not as mild as last year, but the weather has not had a dramatic impact on us so far. Now, we are only halfway through Q1, but I think, so far, we are pleased with what we are seeing. It hasn't been a 2014 or whatever it was when we had the polar vortex, or 2015 where New England had 50 feet of snow. It's been more of a normal winter and hence our volumes have been kind of what we expected.

Okay, that's good color. And then you guys noted New York and I think L.A. as well as contract wins. I'm just curious. How much of the volume growth this year is attributable to those?

You're right, I didn't mention the L.A. contract. But it's a new agreement that we've been awarded. We've been awarded two of those zones that the City of L.A. has extended. We've got the exclusive commercial and multifamily franchise with the West Valley and Southeast Valley zones. The real good thing there is they are contiguous with our current infrastructure and it really fits our business, and we are very pleased with that. It's also a large contract. Life of value of that contract, it's a 10-year deal with $1.3 billion at accretive margins to the Company.

But in our plan, the L.A. is scheduled to start July 1, to the point of your question, July 1. We have until the end of the year, so until January of 2018, to make the transition. And the real issue there as opposed to New York City is that we currently have 8,500 customers in that open market of L.A. that's going to these franchises. We'll end up with 16,000 customers by roughly January of 2018. So, they will piece their way into our structure during the course of the second half of 2017. (multiple speakers)

(multiple speakers) go to other. It's not just an incremental 8,000. There's some swapping going on here. So a lot of operating (multiple speakers) there's a lot of logistics involved.

A lot of operating cost changes that will occur in the second half of the year. So, I don't think you'll see dramatic value, and we haven't put that in our plan, dramatically, to be a July 1 run rate. We've parsed that in throughout the months in the second half of this year. The same for New York City. Although it starts July 1, there is some work to be done at the MTSs, and to get the rail capability right for High Acres and Atlantic. So that will piece its way in. It will help our volumes, but I think our volume forecast and guidance is about what we expect.

Okay, that's helpful. Then Devina, I know the cable will print soon, but what were cash taxes paid in 2016? Is the expectation that cash taxes paid in 2017 will be roughly the same in terms of dollars? And is this kind of the right -- I don't know if this is the right technical term, but kind of a cash tax as a percentage of pretax, if that makes sense?

Right. So, cash taxes paid in 2016 were $470 million. We expect those to increase by about $125 million in 2017. And of course, that will vary depending upon our pretax income and how the year actually comes in. So, I wouldn't say that 2016 is a normal year because we had a $100 million realization from the debt restructuring that we carried forward into 2016. So, look for 2017 -- again, it's too early to say what tax reform will do, but look for 2017 to be a more normal year at that $600 million level.

Okay, very helpful. Thanks guys.

Michael Hoffman, Stifel.

Hi Jim, Jim, Devina. Thanks for taking my questions. Believe it or not, there are still some left. I have a question with regards to volumes. Given your urban model, your higher concentration of urban, there was a slow recovery in some of that commercial container volume, but it's clearly -- it showed up in 2016, and that's better quality business than C&D and special wastes. So as that shift is occurring, how do we think about the operating leverage of the business model of that, and where do you think you are in innings, if you will, if we frame it that way?

Jim and I can take a shot at that, but I think you are right about that, and I think, as you talk about the urban model, it really, ultimately starts to show up in the commercial line of business, I think. And that's why I think you've seen -- that's a part of why I believe you've seen our commercial volume on a nice, increasing trend over the past probably 12 quarters. But there are more pieces to that. There's the fact that we are doing a better job with customer service, and so we are hanging on to a bigger percentage of our business. The churn has gone, as Jim mentioned, from a high of 11.5% or close to 12%, down to approaching 9%, and we think we've got the opportunity to get to 9% on a full-year basis, or even below.

But you are right, Michael, I think this urbanization of the United States and Canada as well is resulting in these commercial volumes for an urban company like Waste Management. We are largely in kind of urban areas -- is resulting in some of that volume growth.

So, following through the operating leverage, you should see this ongoing operating leverage as a result of this improving pattern that hasn't peaked yet.

That's right because, as you know, the commercial line of business has higher operating leverage than do the other lines of business, particularly residential. So, yes, I think, while we take some credit for this, when we look at OpEx as a percent of revenue, some of it is the efforts of our SDO and our MSDO. So, a lot of it is what we are actually proactively doing. Some of it is just what you say, which is, as volume moves into the commercialized business, our operating -- our flow-through really improves.

Three points to that total agreement with Jim and your theory, for example, our addition rate, and that's largely driven by the commercial line of business, although it includes the industrial line as well, the permanent business on the industrial rolloff line. But we have flipped that addition rate and defection rate so that we are net positive in number of new customers starting roughly midyear, early third quarter last year. And that, we see that continuing. The add rate has gone up fairly dramatically just as the defection rate has gone down, so those lines have crossed. And that's a really good sign for us, both in the selling process but in the overall economy, as you mentioned.

The other thing I mentioned earlier is that service increases have outpaced decreases 12 consecutive quarters. And that's a real positive for us and it bodes well given some of the economy improvements that we are seeing.

And then lastly, the container weight issue has not changed dramatically for us up or down. It stayed about where it is. That's we think a good sign the economy is moving forward, and we think we will gain both revenue but, more importantly, margin out of that growth.

That last point, is it flattish with a positive bias, or flattish, just flattish?

It's just flattish. It depends on -- quarter by quarter it's changed some, but not so much with service increases. That's been very consistently positive.

Okay. And then if we could shift gears to sales outlook for 2017, if I take your comments about price volume recycling, guess at what the deal rollover is, and I am assuming you're somewhere around $50 million or $60 million of deal rollover, that puts you kind of in a $1.4 billion -- I mean a $14.2 billion to $14.3 billion. But then, if I hear your comment about capital spending as a percent of revenues, I take the midpoint of it, $14.5 billion, so I'm trying to understand. What's the right sales number for 2017?

We are thinking about revenues being just north of $14 billion in 2017.

So kind of $14.1 billion to $14.2 billion.

I would say on the low end of that, Michael.

Okay. That seems very conservative. If you just take the price and volume assumptions you've given on the $13.6 billion, that puts you at $14.07 billion.

So, I would say the way that we are looking at it is to build up volume of [1.2 to 1.6] price -- or yield of right around 2%. And then we are not building in anything specific on the recycling line of business from commodity price. We are not building in anything from foreign currency either. And so -- and we also leave fuel flat. So, ultimately, that's what builds from this year's $13.6 billion to $14.05 billion to $100 million basically I would say.

And I think the lack of acquisition at the same level as what we've done with those (technical difficulty) regionals that Jim mentioned, we have in there I think a little over $100 million, $150 million in tuck-in acquisitions. But we don't have acquisitions at the same level as the last three years in the plant. We would love for them to happen, but we are not forecasting that today.

That's a great point, Jim.

You mentioned, Michael, I think you mentioned $50 million carryover on the top line I think you were saying. And really because we did the acquisitions at the very beginning of 2016, we think there will be some carryover on the bottom line from some of the cost synergies, but the topline really won't see, other than what Jim mentioned, won't see much in the form of inorganic growth.

Okay, that's fair enough. That helps. That actually pulls that closer.

And the other piece of that that might be helpful is we've got to think about yield as being off of an $11 billion base of revenue rather than the $13 billion.

Got it. That's a big part of it then. Okay. That's fair enough. And then I just wanted to touch one quick question on the regulation. This industry's got very mature regulation. There's very little changing around the margin, even if Scott Pruitt comes in and guts the heck out of EPA, the regulations you have lived with are really very mature. So there's a probably bigger probability that whatever happens regulatory-wise is going to impact your customer more than it's going to impact you directly. Is that fair?

I completely agree with you. Whether it's MSW regulations that affect our landfills, or whether it's regulatory impacts to our landfill structure or recycling or hazardous waste business, those -- states are allowed to exceed the federal guidelines, and some do. And I don't see that impacted. I just don't see states getting in and changing those kinds of regulations that would impact our business. Could something come out of the blue? I guess it could, but I have seen nothing, no discussion or no intonation that it's even close to affecting our business the way the question was worded.

I think the one exception to that would be the Superfund program, which is really regulated.

Which is the other side of that, which is, if Pruitt rolls back the levering enforcement budget the way it was and using enforcement, so less enforcement, do lots of industrial players look at the project world and say this is the most favorable environment I'm ever going to have to clean things up, so let's get them done in the next four years.

But they still have to clean them up.

Might as well do it with a friendly regulator than one that's been something hitting you over the head with the club.

That's the upside, right, that could come out of this. But as we've said to the earlier question, it's a little hard to tell because we just don't have real good visibility yet.

We're four weeks in. Last question. Are you getting a blended average tip fee positive impact from being awarded the two Brooklyn marine transfer stations when you think about where that volume is going?

One more time Michael? I'm sorry.

When you think about the implied tip fee that's in the total price that they are paying per ton, because there's -- a certain amount of it is for logistics but the rest of it is for -- you can walk back that logistics part out and get to what does the tip fee look like. Are you getting a tip fee improvement as a result of the New York City contract at High Acres, or I am assuming this is going down to -- was it King George.

Yes, down to the Atlantic landfill. First of all, Michael, we don't publicize that number, the individual disposal component. It is an all-in price for transportation and disposal, and includes a lot of handling of the material and moving the material. But it is not going to be a detrimental impact to the Company on a margin basis if it's accretive in margin, both the EBIT, EBITDA. So we are -- those two are very good contracts for us.

Okay. Very good. Thank you.

So, just to close here, 2016 really was a great year for us, and closing with such a strong year really gives us confidence that the business is hitting on all cylinders. I think we have the team, the strategy, assets, the culture to make this year and years to follow successful really by any measure. So, we are pleased with where we stand right now. And thank you for joining us. We will see you next quarter.

As a reminder, the encore replay for this call will be available in approximately two hours beginning at 12 p.m. Central Standard Time, and will last until March 2, 2017 at midnight. If you would like to access this replay, you may do so by dialing 1-800-585-8367, 855-859-2056, or locally at 404-537-3406, and will use conference ID number 55317607 to access the replay. Thank you for your participation. This does conclude today's conference call and you may now disconnect.