Charles Lynch - VP of Strategy & IR Roger Medel - Co-Founder, CEO and Director Vivian Lopez-Blanco - CFO and Treasurer.

Ryan Daniels - William Blair Brian - Jefferies Kevin Fischbeck - Bank of America Tejus Ujjani - Goldman Sachs Ralph Giacobbe - Citi Gary Taylor - JP Morgan.

Ladies and gentlemen, thank you for standing by. Welcome to the Mednax 2017 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded.

I'd now like to turn the conference over to Charles Lynch, Vice President of Strategy and Investor Relations. Please go ahead..

Thank you, operator. I'm going to read our forward-looking statements and then turn it over to Roger and Vivian. Certain statements and information during this conference call may be deemed to be forward-looking statements within the meaning of the Federal Private Securities Litigation Reform Act of 1995.

These forward-looking statements are based on assumptions and assessments made by Mednax's management in light of their experience and assessment of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Any forward-looking statements made during this call are made as of today, and Mednax undertakes no duty to update or revise any such statements, whether as a result of new information, future events or otherwise.

Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the company's most recent annual report on Form 10-K and its quarterly reports on Form 10-Q, including the sections entitled Risk Factors.

In today's remarks by management, we will be discussing non-GAAP financial metrics. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures can be found in this morning's earnings press release, our quarterly report on Form 10-Q or in the Investors section of our website located at mednax.com.

With that, I'd like to turn the call over to our CEO, Roger Medel..

Thank you, Charlie. Good morning and thanks for joining our call to discuss our results for the first quarter of 2017. I want to provide some thoughts on the environment we're operating in today as well as the strategic direction of our company. At a high-level, our same-unit revenues in both anesthesia and neonatology were challenged this quarter.

In anesthesia, this was primarily related to payer mix. During the quarter, we saw higher volumes of both Medicare and self-pay patients, while commercial volumes declined slightly. While there were some market-by-market differences, this shift occurred across all of the states where we provide services.

And from a revenue standpoint, it offsets the positive impact of overall volume growth and our underlying pricing increases from our managed care payers. We did see some faster inflation in compensation expense for nurse anesthetist, which impacted our labor costs, although this had a much lesser impact on our results than our revenue trends.

This appears to be largely a cyclical phenomenon. We saw a similar dynamic in the late 2000s, although at that point, anesthesia was a much smaller part of the business for us. In neonatology, the decline in our volumes was wholly a function of total births.

Geographically, there were wide variances similar to what we saw during the fourth quarter of 2016, but as a whole, our rate of admissions into the neonatal intensive care units and our average length of stay have both been very stable.

As always, it is difficult to pinpoint even in a 6-month period the factors that might lead to such a falloff, but from the data that we've reviewed, we believe it does not relate to market share shift at the hospitals where we manage the NICU.

And based on additional analysis that we've done, we believe demographic trends and fertility rates continue to point to a gradual re-acceleration in births, particularly in some of our more important states.

That said, based on our review of payer mix trends for the first quarter and birth trends over the past two quarters, we think it's prudent for the near term to anticipate some continuation of these trends. And that's what we've done in formulating our expectations for the second quarter.

I also want to discuss the progress we've made with some of our newer businesses so far this year. In radiology, results at vRad were in line with our expectations for the quarter and did not represent a headwind to EBITDA growth for us. As of today, vRad has more than 525 radiologists under contract, with more than 425 of those actively reading.

And I continue to anticipate that our total number of reading physicians will increase steadily as we approach the summer. Radiology Alliance, our first on the ground radiology practice, contributed nicely to our results for the quarter. And we are actively discussing ways that the group at vRad can work together.

The conversations we're having with additional radiology groups have been tremendously encouraging. And I am excited at the opportunities that we have to build a truly unique hybrid model of providing radiology services across the country. I anticipate that we will make additional progress this year towards that goal.

At MedData, the integration of sales efforts with Cardon Outreach have been very effective as well. Results for the combined organization were in line with our expectations for the quarter, and our pipeline of new contract opportunities continues to grow. Now, in terms of our broader strategic direction, I will say this.

We remain committed to the services we provide to our patients and the physicians and clinicians who provide those services as part of Mednax. Over the last 22 years as a public company, we have gone through plenty of difficult periods.

And it is this commitment that has not only sustained us, but has also led us to new opportunities to grow and succeed. I don't see today's environment any differently from those times, and we have, indeed, identified new growth opportunities that we're acting on. This is particularly the case in radiology and management services.

And I remain committed and optimistic about our future. So while we’ve attempted to account for the factors impacting our growth in the near term, we are nonetheless focused on the opportunities in front of us to innovate, to lead in our clinical field and to grow and succeed in the years to come.

With that, I want to turn the call over to our Chief Financial Officer, Vivian Lopez-Blanco..

Thanks, Roger. Good morning, and thanks for joining our call. As we disclosed a couple of weeks ago, our first quarter results compared to our guidance were impacted by several factors. I want to focus on those key factors and how they've impacted our results as well as discussing other details of the quarter.

For the first quarter, net revenue increased by 11% to $836 million, driven by contributions from acquisitions, slightly offset by a decrease in same unit revenue. Looking at our same unit metrics, same unit revenues decreased by 90 basis points.

This, compared to our guidance range of 1% to 3% growth, impacted our adjusted EPS results by $0.11 versus our guidance. On the volume side, same unit volumes declined by roughly 30 basis points.

We saw modest growth in our anesthesia services, but that was more than offset by declines in our neonatology service volumes, which impacted same-unit volume negatively by roughly 60 basis points. For the quarter, same-unit NICU days declined by 2.1% or 1% when adjusted for one fewer day in 2017.

This decline was driven by lower births at the hospitals where we manage the NICU, which, on a same unit basis, declined by 2.9% or 1.8% when adjusted for one fewer day in 2017. The other drivers of our NICU volumes, which were the rate of admissions into the NICU and the length of stay, were stable compared to the first quarter of 2016.

On the pricing side, same-unit revenue declined by 60 basis points. The payer mix shift we saw in the quarter impacted our same unit pricing negatively by 150 basis points, somewhat offset by the positive impact of increases in managed care pricing. This payer mix shift occurred primarily in anesthesia.

Payer mix for our NICU services was relatively unchanged year-over-year. In terms of the factors driving our payer mix shift, I can share a few observations that we made as we reviewed our anesthesia results. First, what we saw was both an increase in Medicare and self-pay activity and a decline in commercial activity.

Overall payer mix for anesthesia shifted by 190 basis points to government and self-pay payers compared to Q1 of 2016. Second, in terms of the magnitude of impact, roughly half of the financial impact we saw relates to our services in North Carolina and Texas.

However, our mix shift was directionally the same across all states where we provide anesthesia services so it was not isolated to one state or region. EBITDA was $131.7 million for the quarter as compared to $143.9 million for the first quarter of 2016.

EBITDA as a percent of revenue was 15.8% for the first quarter as compared to 19.1% in the prior year period. EBITDA margins were impacted not only by the same unit revenue results I discussed, but also by some cost items.

For the 2017 first quarter, practice salary and benefits expense was $572.4 million or 68.5% of net revenue as compared to $491.8 million or 65.4% of revenue in Q1 of 2016. The increase in expense as a percentage of revenue was primarily related to increases in same-unit compensation expense for non-physician clinicians, primarily nurse anesthetists.

We generally see some tightness in the labor market for nurse anesthetists, but this quarter, the compensation expense increase was greater than what we had anticipated in our previous first quarter outlook and impacted our adjusted EPS unfavorably by $0.02 versus that outlook.

Also, as a result of same-unit revenue declines and compensation expense increases, the results of certain practices were below the internal bonus eligibility threshold established for each practice. Because of this, the impact of lower practice results was not shared by the practice and was instead fully absorbed in our results.

Now, I'll briefly touch on some balance sheet and cash flow items. At the end of the first quarter, accounts receivable were $488 million, a decrease of approximately $8 million as compared to December 31. Days sales outstanding were 53 at the end of the quarter, down two days as compared to December.

For the first quarter, we used $22 million to fund operations compared to a use of $33 million in last year's first quarter. Our total net outstanding debt was $1.9 billion at March 31, up from $1.7 billion at the end of 2016.

This increase was primarily related to acquisitions completed during the quarter and the repurchase of $68 million worth of shares completed under our ongoing authorization. At the end of March, our available borrowings under our credit facility were approximately $715 million.

Turning on to our outlook for the second quarter, we believe it's most appropriate to anticipate that the factors impacting our results for the first quarter will continue in the second quarter.

As a result, we have incorporated a similar expectation of same-unit revenue results as well as a continuation of the practice salary and benefits cost inflation we experienced thus far this year.

As we announced in this morning's press release, we expect that our earnings per share for the three months ending June 30, 2017 will be in a range of $0.68 to $0.72 and that our adjusted EPS will be in a range of $0.85 to $0.89.

The range for our second quarter outlook assumes anticipated same-unit revenue growth will be negative 2% to flat year-over-year. For the second quarter of 2017, we expect that our EBITDA will decline by 8% to 12% compared to the second quarter of 2016. With that, I'll turn the call back over to Roger..

Thank you, Vivian. Operator, let's go ahead and open up the call for questions, please..

[Operator Instructions] And we will begin with the line of Ryan Daniels with William Blair..

Roger, one for you upfront. I'm just curious of your thoughts on capital deployment.

Given some of the challenges you've seen in acquisitions outside of the core and then given some of the noise in trying to predict volumes and mix and some of the longer-term uncertainty in health care in general, have you considered perhaps deploying more capital toward share repurchases until we get better visibility versus trying to figure out how to underwrite acquisition assumptions on a go-forward basis?.

Hi Ryan. Good morning, yes. I happen to think that capital, the capital structure of decisions that are made are perhaps the most important decisions that the CEO gets to make. And so it is something that we spend a lot of time thinking about. We have a board meeting coming up here shortly, our annual shareholders' meeting next week, et cetera.

And those are all discussions that we're planning on having with our board. In general terms, I would say that the difficulty, I guess, with share repurchases is always that you're borrowing money. And with acquisitions, you're, it's a onetime thing with acquisitions. You're not only generating net income, but also cash flow.

So, I mean, those are some of the things. I haven't ruled anything out. We do think that our radiology opportunity is very attractive. We're very, I am very bullish on it.

I think we have a significant competitive advantage with radiology that no else has and I do expect that we will make more acquisitions this year of on-the-ground radiology practices before the year is over. All of that seems to be trending in the right direction.

Some of the multiples that are being tossed around as potential for, particularly anesthesia practices, seem to be a little out of whack with what the realities are of that specialty. So, I mean, I'm just -- I can't give you sort of a quick view of what my board meeting is going to be like a few days from now.

So yes, we're going to talk about all of those things, including any other potential use of our cash and how we move forward..

Okay. No. That's very helpful. And then, as my follow up, just trying to get the message you're trying to send on guidance.

Given some of the difficulty in predicting out quarter volumes and mix, which is really out of your control, should we be reading into your commentary as you saw worse trends, you're going to expect those to continue? Or things have stabilized a bit, but you're still going to have a little bit more conservative guidance than you have had in the past, given some of the missteps the last few quarters and given the volatility we've seen in those metrics? So is there kind of an added element of conservatism to your outlook than maybe what we saw three or six months ago?.

Yes. Frankly, the message is I'm tired of having these conversations. I don't really -- I can't predict -- I would have never predicted what we saw during the first quarter. And I just don't want to have this conversation with you guys anymore. We could be having a very difficult -- a very different conversation three months from now.

I don't know what -- why the payer mix did what it did and I certainly was not expecting volumes in the neonatal ICUs to drop. So all I'm saying is I don't have a clue really. I mean, the best I can do is just say this is what happened during the first quarter.

So the best I can do is say -- I think the most prudent thing to do -- but I don't think -- I have no clues that tell me that things are getting worse, that the volume is getting worse, that the payer mix is getting worse.

I don't even know what the payer mix for the second quarter is as of right now and I won't be able to get that information for another week or two. So it's just -- I'm just trying to be conservative..

Okay. And next, we'll go to the line of Brian Tanquilut with Jefferies. Please go ahead..

Roger, just to follow up on a few of Ryan's questions there, so as we think about the M&A pipeline, we've obviously seen a slowdown in deal flow, but you seem very excited about radiology.

So do you mind just giving us a look into what you're seeing and how you guys view capital deployment in terms of sizes here? Because I think, in the past, we've talked about $1 billion, obviously, as a target or as an internal goal to -- for deployment.

So how should we be thinking about how much money you think you're going to be able to deploy by yearend?.

Yes. So I think what you'll see if we're able to do and execute the things that we have planned to execute on, I think you'll see one or two anesthesia acquisitions. The bulk of what you'll see are going to be radiology practice acquisitions. We believe that we could do -- again, I'm speculating here.

We believe that we could do as many as three or four radiology practice acquisitions. We don't think it would be unreasonable to think that we could put $1 billion to work during the remainder of the year, but again, things have to fall in place and we've got to get that done.

The advantage that we see with radiology right now is an excitement with our radiology groups about the benefit that vRad brings to the radiology groups that are hospital based.

And so while historically, vRad has been seen by some of the groups as somewhat of a competitor to them and not really helpful, now what we're showing them is a new model where vRad is a tool that is offered to them to utilize to the benefit of the practice.

And so the ability for the practices to expand, the ability for the practices to provide some nighttime reads, the ability for the hospital to have specialty coverage on a 24 hour a day basis, all of this is new.

And the technology that vRad brings, which is all homegrown, 20 some patents, the ability to utilize if a group is reading for two or three different hospitals or different systems, they might be utilizing two or three different systems to read on, and what vRad gives them is the opportunity to run one platform and read off of just -- independently of which hospital or which system they're reading for.

Anyway, it's adding a technical component to the professional component that these practices have that it brings them -- we've taken a number of practices to vRad and shown them what the advantages are. And it's a very exciting time for us. So we think that we're going to make some good progress here this year..

I appreciate that. And then, the second question is for Viv.

As I think about the back half of the year, obviously you're not giving guidance, but qualitatively, how should we be thinking about your opportunity to drive margins in the back half, especially since I think it was a year ago when you guys laid out the plans for vRad to ramp up once these 425 doctors are reading and at full capacity? How should we be thinking about margin ramp and your expectations for volume as we come up against easier comps?.

Yes. And so, Brian, again, like Roger said, I have to reiterate his comments. Unfortunately, we haven't had a crystal ball on some of these things that really have hit us with a larger magnitude than we expected, certainly on the anesthesia payer mix. So as those things start turning around, we certainly will have a lot of positive leverage.

We always have a lot of positive leverage, as you guys know, with NICU when the volumes turn around as well. And honestly, on the vRad side, we're happy to report that they have been stable. They have been meeting our expectations over the last couple of quarters. They have 525 radiologists, of which 425 are reading.

And so they're really slowly progressing to a norm here, and we're happy to report that.

And so I think that there will be a lot more opportunities because, as Roger said, when we get some of these radiology practices and we start benefiting from the synergy we believe we have as it relates to complementing the service with vRad, I think that there's going to be some positive momentum there.

Hard to predict exactly what quarter that will be, but like he said, we just really, at this point, are tired of really reporting less than stellar results, given some of these things that are out of our control. And we think there's a lot of positive things to be had here with our business model if we could get them ramped up quickly.

And then, we'll have to wait to see what happens with NICU volumes and p mix on anesthesia..

Okay. Next, we'll go to the line of Kevin Fischbeck with Bank of America. Please go ahead..

I guess, I just wanted to dig more into kind of the volatility in the quarter because Mednax had basically no same-store revenue growth for the last several years and we really haven't seen volatility in the P&L the way that we've seen it this quarter and, I guess, to some degree, last quarter.

The way I was looking at it, if you grew revenue by 11%, it implies that same-store EBITDA is down something like high-teens.

Is that the right way to think about it? And, I guess, why would the margins be so volatile the last couple of quarters when you've been able to keep margins relatively stable with similar revenue top line growth on a same-store basis in the past?.

Yes. And so, Kevin, this is Vivian.

So I wouldn't say it's similar because, yes, we have seen some softness in the NICU volumes certainly over the last couple of quarters, but really what changed this quarter to aggravate that was related to a couple of things, which was the payer mix shift for anesthesia, so that's another top-line impact, which last year we really didn't see a big shift in payer mix, as well then as some of the cost pressures on the CRNA compensation.

And so, of course, that was one of the items that we talked about when we preannounced. And so that just throws some of these practices out of bonus as it relates to the expectations that we have set for their internal practice metrics. And so you see really a lot less flow-through on the negative impacts of the top-line.

And so all of those factors, as I tried to explain to you guys, is really what occurred in the first quarter..

Is that, am I right in kind of saying that same-store EBITDA is probably down somewhere in the high teens this quarter?.

Yes. I mean, I don't want to get into the specifics of EBITDA by our, any one of our operating segments, but you guys could do some of that math, but I do think obviously it's an impact that was greater this quarter because of all of these things happening at the same time..

Okay. And then, I guess, when we think about the payer mix, I guess, really just trying to understand how much of what's been going on in this quarter, the last couple of quarters can be recovered versus what you might think is maybe a resetting of kind of the baseline earnings for the company.

I guess, you mentioned obviously that there is leverage in the model when NICU volumes come back, but, and, I guess, obviously there will be similar, or some leverage if payer mix starts to normalize.

But I mean, obviously the guidance is just trying to be conservative, but I'm just trying to understand kind of is this a base in your mind? Or is this the type of thing where you'd say, over the next three years or some longer-term view, payer mix will be back where it was before and the margin profile should look more similar to where it's been the last few years than what we're seeing over the last few quarters?.

So payer mix, we've talked about this for years. I mean, it's something that is totally out of our control. I do think that obviously when volumes come back on NICU and when payer mix comes back, we will definitely have some positive impacts on that.

Obviously, we look at longer-term staffing models, if, in fact, there, this volatility continues to stay. And obviously, our operations folks would be looking at that. But as I've said before, that has to be sustained and obviously, in any given practice, for us to be looking at any staffing model, specifically on the NICU side..

Okay. And just maybe the last question. I mean, what, how do you think about leverage given, I guess, the uncertainty that you're seeing right now in kind of predicting quarterly numbers? I mean, on my model, if you had asked me three weeks ago, I would had you levered at low twos by the end of this year.

And now, I have you levered in the high twos based upon my new expectations for this year's EBITDA. So, I mean, a pretty wide to swing.

And, I guess, how are you thinking about that? And how are you thinking about your financial flexibility or capacity? Are you willing to deploy that with this uncertainty going on right now?.

So I think your numbers -- I would agree with your numbers. It's certainly in the high twos, but honestly that's a pretty respectable leverage ratio and one that our shareholders have been asking us to lever up for years.

And so I think, as Roger said, we're always looking at where to deploy capital, but we still believe that the acquisition is something, given the pipeline that we have a lot of opportunity, certainly in radiology. So I don't think that leverage is going to stop us because, honestly, it's a very respectable one..

All right. And next, we'll go to the line of Tejus Ujjani with Goldman Sachs. Please go ahead..

A follow up on the comments on the CRNA wage pressure there.

Can you share any color on the typical staffing contract mix between anesthesiologists and CRNAs? Said another way, can you give us a rough sense of number of employed CRNAs versus anesthesiologists? Just trying to understand staffing trends there?.

Yes. The ratios really vary. There are hospitals or groups that are just straight anesthesiologists and no nurse anesthetists and they believe that, that is the best care for the patients.

Most groups do use nurse anesthetists and depending upon their hospital and what they're used to doing, they could have one per physician or two -- as many as four, and so the -- per physician. And so it just depends on the group and depends on the what -- how they have practiced historically.

Clearly, if you're using nurse anesthetists, you tend to be more profitable because you're using the physician expanders. So -- but I would say, I don't know off the top of my head, but we might employ 1,000 nurse anesthetists, maybe even more than that. I'm getting a thumbs up across the table, so maybe even more than 1,000 nurse anesthetists..

Okay. That's helpful. And then, within anesthesia side, can you give us a sense of your revenue exposure to hospital versus kind of outpatient surgery center clients? Just rough -- kind of rough percentages..

Well, I mean, so pretty much -- I got to make sure I understand your question. Pretty much, the outpatient that we're in are related to the hospitals that we provide the service for. And so yes. We don't really have a lot of business that's just unrelated to the hospitals that we have a contract with..

Okay. I guess, I meant like freestanding surgery centers or nonhospital affiliated surgery centers.

Do you have business with those?.

Yes. So it's -- the percentage is in, I would say, in the double digits, like low double digits, on the revenue side. Like, within 10% to 15%, something like that..

Next, we'll go to the line of Ralph Giacobbe with Citi..

I know you guys don't guide annually and clearly you're saying you have little visibility in the business. I guess, when you look at things historically, first half EBITDA tends to be lower in the kind of 46% to 47% of sort of annual EBITDA.

Any reason to believe that would be significantly different this year? Otherwise, it looks like sort of an EBITDA run rate of about 6 10-ish or so.

Is that all fair? Or would you object to any of that?.

Well, I don't want to get into trying to give a hint on your annual number there that you just spelled out, but I would agree with your commentary on the trend probably not changing, but that's just assuming that we continue the same trend in the second quarter that we said was related to the results of the first. So that's not a done deal yet.

So hopefully, it will be north of that. Yes..

Okay. All right. Fair enough. And then, the 190 basis point shift, I was hoping you could actually break that out more granular on the payer mix between the buckets. So you mentioned Medicare and self-pay.

I was hoping you could actually dissect that in terms of that 190, how much into Medicare versus Medicaid versus self-pay?.

Yes. So when we looked at that, if I remember correctly, it was really about half of the mix was related to movement to Medicare and the other half was to self-pay..

Okay. That's fine. That's helpful.

And then, can you give us a sense at all of contract terminations in the quarter, particularly on the anesthesia side?.

I can't, I don't really remember much of that. I mean, obviously, I don't think we had, yes..

0 is the number..

Next, we'll go to the line of Gary Taylor with JP Morgan. Please go ahead..

I just wanted to clarify something. I was multitasking. I apologize.

Did you say 10% to 15% of total anesthesia revenue is derived from nonhospital side? Is that what that figure was?.

It was about cases. Yes, that's in cases..

Cases, and probably as revenue lower then..

Yes..

Okay. And if you covered this, because I was just distracted just for a minute when I think you were talking about it, just tell me to read the transcript and I will..

I'm usually nicer to you than that, Gary..

It's my fault. I got distracted just a moment. But on the CRNA labor cost issue, I know you talked about it early and I didn't quite understand it, I know there was a comment later, but I'm not sure like exactly what's driving that or the difference versus expectations. And again, if you covered it, I'll move to my next question..

Yes. Let me take a crack at that. What we're seeing is our nurse anesthetists are being offered more dollars to go work with other practices in the area. And we have seen, in some areas in particular, significant jumps in the salary that the nurse anesthetists are being offered.

There are areas up in the Northeast where nurse anesthetists are making -- now are being offered $200,000 a year salaries, which is a significant upgrade increase from where their salary was.

So what's driving is, in my analysis, I believe that it's being driven by groups that have figured out that they need to hire nurse anesthetists in order to be more productive or efficient. And so they're now going and recruiting these nurse anesthetists.

I think mostly groups that either have not used nurse anesthetists in the past or have used fewer nurse anesthetists in the past. So I think that's probably what's driving most of what we're seeing on that front..

Got it. On the accounting rule for stock comp, 2016-9, which most companies have adopted this quarter, I didn't see any mention. Was there, and certainly, it didn't look like any tax rate benefit. So did you adopt that this quarter? And if so, it's....

Yes. So Gary, you'll see it in the Q because obviously we'll say that we adopted it, but it wasn't material and so that's why it wasn't highlighted for this. But it will be a note in the 10-Q when we file it..

Okay. Two more quick ones. Can you tell, can you ballpark us how much the anesthesia volumes were up? You obviously quantified total volume on adjusted basis, NICU days. Are you willing to help us understand how much anesthesia was up? I believe you mentioned volumes were up same-store..

Yes. Anesthesia was close to 100 bps or something like that. It was north of 80 bps..

Got it. Last question.

I heard your explanation, didn’t entirely understand, but Vivian, when you were talking about some of the lower results being fully absorbed by Mednax corporate and not in some of the practice incentive thresholds, does that mean that the 1Q guidance already anticipated that there would be no incentive accruals, and that's why it all fell to you? Am I understanding that correctly?.

Well, we had obviously further deterioration when we had the difference in the revenue, right? And so the $0.11 and the $0.02 would have added to that, right? So we did have some expectations, but not all of it..

Are you talking about the bonus accrual, Gary?.

Correct..

Yes, the bonus accrual. Yes..

Okay. I missed the $0.11 versus $0.02 split..

Yes. Yes. Yes..

[Operator Instructions].

Okay. If there are no further questions, then thank you, operator, and I thank everyone for your attendance this morning. I look forward to speaking with you again three months from now..

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect..