Ed Egl - Director-Investor Relations David P. Steiner - President, Chief Executive Officer & Director James C. Fish - Chief Financial Officer & Executive Vice President James E. Trevathan - Chief Operating Officer & Executive Vice President.

Andrew E. Buscaglia - Credit Suisse Securities (USA) LLC (Broker) Jeffrey Y. Volshteyn - JPMorgan Securities LLC Michael Hoffman - Stifel, Nicolaus & Co., Inc. Al Kaschalk - Wedbush Securities, Inc. Corey Greendale - First Analysis Securities Corp. Patrick Tyler Brown - Raymond James & Associates, Inc. Joe G. Box - KeyBanc Capital Markets, Inc. Michael J.

Feniger - Merrill Lynch, Pierce, Fenner & Smith, Inc. Scott Justin Levine - Imperial Capital LLC Barbara Noverini - Morningstar, Inc. (Research).

Good morning. My name is Rebecca and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 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. Thank you.

I would now like to turn the conference over to Mr. Ed Egl. You may begin..

Thank you, Rebecca. Good morning, everyone. And thank you for joining us for our first quarter 2016 earnings conference call. With me this morning are David Steiner, President and Chief Executive Officer; Jim Fish, Executive Vice President and Chief Financial Officer; and Jim Trevathan, Executive Vice President and Chief Operating Officer.

Before we get started, please note that we have 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. David 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, David and Jim will also discuss our earnings per diluted share, which they may refer to as EPS or earnings per share, and David and Jim will address operating EBITDA and operating EBITDA margin as defined in the footnotes for the earnings press release. Any comparisons, unless otherwise stated, will be with the first quarter of 2015.

The first quarter of 2015 net income, EPS, income from operations and operating EBITDA have been adjusted to enhance comparability by excluding certain items that management believes do not reflect our fundamental business performance or results of operation. 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 1:00 PM Eastern Time today until 5:00 PM Eastern Time on May 12. To hear a replay of the call over the Internet, access the Waste Management website at www.wm.com. To hear a telephone replay of the call, dial 855-859-2056 and enter reservation code 81195417.

Time-sensitive information provided during today's call, which is occurring on April 28, 2016, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Waste Management is prohibited.

Now, I'll turn the call over to Waste Management's President and CEO, David Steiner..

Thanks, Ed. And good morning from Houston. Our first quarter results continued the positive trends that we saw throughout 2015, and our volumes turned positive more quickly than we had originally planned. We also saw the continued strength on our pricing programs and our cost programs continue to gain traction.

This focus on disciplined growth, pricing and continuous cost improvement delivered $0.58 per share in the quarter, an increase of more than 18% from our 2015 first quarter results. Our revenue increased for the first time since 2014, and we achieved positive volumes for the first time since 2012.

Our employees are doing a great job of managing cost increases to drive earnings growth and margin expansion. In the first quarter, we saw improvement in virtually every financial metric that we track.

Our traditional solid waste business income from operations increased $60 million and margin increased 30 basis points, and our operating EBITDA improved $90 million and margin increased 50 basis points. We're very pleased with our first quarter results as they provide a strong start to 2016. Turning to our operations.

Our pricing programs continued to drive earnings growth and margin expansion. For the first quarter, our collection and disposal core price was 5.3% and yield was 2.6%. Core price improved 90 basis points from the first quarter of 2015 to the highest level that we've achieved.

And we also saw the highest core price ever in each of the commercial, industrial, and landfill lines of business. Core price in the industrial line was 10.7%; in the commercial line, it was 7.5%; in our landfill line, it was 3.3%; and in our residential line, it was 2.6%. As volumes have turned positive, we expect core price to remain strong.

With respect to volumes, we saw a positive volume growth in the first quarter but we did not chase low margin volumes by lowering price. We continue to drive disciplined growth by adding volumes in geographic areas and lines of business where growth is strongest.

Our volumes reflect both the strong solid waste economic backdrop and great work by our sales and operating teams. Our traditional solid waste volumes were positive 2.4% in the first quarter of 2016, a 360 basis point improvement compared to 2015.

We have one additional workday in 2016 and after adjusting for this, our traditional solid waste volumes improved 1.8%. We saw some very positive trends in our commercial and industrial lines of business.

Our commercial volumes declined only 0.2% in the first quarter, an improvement of 50 basis points from the fourth quarter and a 260 basis point improvement from the first quarter of 2015. In the industrial line of business, volumes were more than doubled to 2.7% on a workday-adjusted basis when compared to the fourth quarter of 2015.

We're very pleased with our traditional solid waste volume results in the first quarter, although we likely did see some benefit from the milder winter weather that may have led to some second quarter construction and landfill volumes being pulled into the first quarter.

We certainly expect volumes to remain positive throughout 2016, but we would like to see the extent of the seasonal uptick before we revisit our full year expectations for volumes.

Our landfill line of business continues to show strong operational results as we saw the benefit of increased core price and strong volumes as Jim will discuss in more detail. However, we see a significant increase in the cost of managing the liquids that naturally occur in our landfills.

Over the last three years, leachate costs have increased between 11% and 22%. And in the first quarter of 2016, the increase was greater than that with costs up about $14 million. This trend of increasing leachate costs has been ongoing for a number of years, and we believe it's a common issue throughout our industry.

With the increase in volumes, we've seen more liquids, and the cost to transport and treat those liquids has increased substantially. Of course, the added cost at our landfills affects our profitability and return on capital so we need to do something to offset those increasing costs.

Consequently, this quarter, we'll begin to implement a liquids management charge at our landfill. This charge will be between 4% and 7% of the cost of disposal and it will be applied only to our landfill customers and not to our collection customers.

Of course, many of our disposal contracts are long term, but just as we did with our fuel recovery and recycling charges, we'll implement the liquids management charge on contracts as they renew. Only by doing this can we maintain an adequate return on the huge capital investments that we make in our landfills. Turning to recycling.

We saw a drop of 12% in average commodity prices for the quarter and a 3.1% increase in volumes. The positive volumes are predominantly due to the unusually low broker volumes that we saw in the first quarter of 2015 associated with the slowdown in Western U.S. ports.

This should normalize and will likely be negative in the second quarter, so we don't expect to see recycling volumes contributing to our overall volume growth. But the volumes that we're losing are generally not profitable volumes, so the negative volumes won't negatively affect profitability.

Our employees have done a good job at managing operating costs as we've seen our recycling operating costs improve 12% when compared to the first quarter of 2015.

However, the operational improvements have not been enough to offset the decline in commodity prices, so our recycling income from operations was slightly negative in the first quarter but we saw a year-over-year improvement of almost $0.02 per share.

Commodity prices have come off the lows that we saw in January, but they're still below 2015 levels and we do not expect any significant rebound in 2016. So we continue to work with our customers to develop a mutually-beneficial solution that allows for a sustainable recycling program in their community.

We're committed to recycling, and we'll continue to work to change the business model and drive out operating expenses. Finally, in the first quarter, our business generated strong growth in operating EBITDA, which in turn translated into significant cash generation.

Cash flow from operating activities exceeded $700 million, an increase of more than $200 million when compared to the first quarter of 2015. We did have about $156 million in cash flow benefits in the quarter, which Jim will discuss. But even if you adjust for those, cash from operating activities grew by 10.2%.

So 2016 is off to a strong start, and our results put us firmly on track to meet or exceed our full year guidance of adjusted earnings per diluted share between $2.74 and $2.79. We also expect to achieve or beat our full year free cash flow guidance of between $1.5 billion and $1.6 billion.

Based on first quarter volume results, we'd also expect to beat our volume goal for the year. I certainly believe that this will be the case, and we had favorable weather in the first quarter and we'd expect the volumes will pull it forward into the first quarter.

As noted previously, we also had higher recycling volumes, which will not continue through the year. We'll get a better feel for the effects of these factors when we see our second quarter seasonal uptick. After we see volumes normalize, we expect to give more precise volume and financial guidance for the year.

But we certainly expect to see continued year-over-year improvement across all of our operating metrics. It's a reflection of the strength of our corporate and field teams to see our strategy so well executed. I'll now turn the call over to Jim to discuss our first quarter results in more detail..

Thanks, David. In the first quarter, revenues were $3.2 billion, an increase of $136 million or 4.5% when compared to the first quarter of 2015. We saw a $126 million increase in our traditional solid waste business due to the combined impacts of price and volume, and an $81 million increase in revenues from acquisitions net of divestitures.

These increases were partially offset by declines of $32 million in lower fuel surcharge revenues, $18 million in foreign currency fluctuations and a $13 million decline from lower recycling revenues. Looking at internal revenue growth for the total company in the first quarter.

Our collection and disposal core price was 5.3% and yield was 2.6% with total volumes improving 1.9%. We had one additional workday in the first quarter. Adjusting for the additional workday, volumes improved 1.3%. Volumes turned positive in the quarter for the first time since 2012.

The combined positive price and positive volume led to total company income from operations growing $54 million, operating income margin expanding 110 basis points to 16%, operating EBITDA growing $74 million and operating EBITDA margin growing 130 basis points to 25.8%.

Our collection lines of business continue to see the benefits of our disciplined pricing programs. Overall, collection core price was 6.5% and yield was 3.4%. Our strong core price reflects a disciplined approach to pricing and a strong demand for our services.

In the first quarter, we continued to make progress on reducing the churn through our improved customer service. Our churn in the quarter was 9.2%, a 170 basis point improvement from the first quarter of 2015.

The improvement in our churn, strong roll off demand, and our focus on disciplined growth benefited our volume trends in the first quarter as total collection volumes turned positive, improving 70 basis points sequentially from the fourth quarter and 240 basis points from the first quarter of 2015.

Industrial demand was strong in the quarter with volumes up 4.2% or 2.7% on a workday adjusted basis. Our residential business continues to be a drag on volumes while commercial volumes are moving towards positive. For the quarter, residential volumes declined 3.4% and commercial volumes declined 0.2%, a year-over-year improvement of 260 basis points.

Strong core price and positive volume in the collection line of business led to income from operations growing $21 million and operating EBITDA growing $36 million. In the landfill line of business, we also saw the benefits of positive volume and positive yield in the first quarter just as we did last year.

Total landfill volumes increased 11.6% and 10.3% on a workday adjusted basis. On a workday adjusted basis, MSW volumes grew by 13.4%, C&D volume grew by 22.6%, and combined special waste and revenue generating cover volumes grew 2.9%. Our landfill volumes were stronger than we expected, in part due to milder weather and a couple of one-time events.

We do not expect that the one-time events will repeat. So as we continue throughout the year, landfill volumes may moderate, but should remain solidly positive as we face increasingly tougher comparisons. We achieved core price of 3.3% and saw same-store average MSW rates increase year-over-year by 2.1% from Q1 of 2015.

The positive volume and yield led to income from operations growing $29 million, margins growing 60 basis points, operating EBITDA increasing $40 million and operating EBITDA margins increasing 40 basis points. Moving now to operating expenses. As a percent of revenue, these expenses improved 120 basis points to 62.8%.

For the first quarter, operating expenses increased $47 million when compared to the first quarter of 2015. Landfill operating costs increased the most at $17 million, an increase of more than 27% year-over-year.

$14 million of the $17 million increase was leachate costs, which is one of the reasons that David mentioned the importance of imposing a charge to recover our increasing costs. The remainder of the operating cost increases primarily relate to our increased volumes and costs related to acquired operations.

For the first quarter, as a percent of revenue, SG&A costs were 11.4%, flat when compared to the first quarter of 2015. On a dollar basis, SG&A costs were $362 million, an increase of $14 million compared to 2015. Labor costs drove the majority of the increase primarily related to acquisitions.

We also had higher accruals for incentive compensation costs related to our strong performance. We still expect to improve SG&A costs as a percent of revenue for the full year when compared to 2015. Turning to cash flow for the first quarter, our operating EBITDA growth of almost 10% translated into strong cash flow growth.

Cash provided by operating activities was $706 million, a $207 million increase compared to the first quarter of 2015. Included in the 2016 results was a $67 million benefit from the termination of a cross-currency hedge.

We terminated the financial hedge because we borrowed money in Canadian dollars, thus providing a natural hedge against fluctuations in the Canadian dollar. The termination of the hedge had a negative $0.01 impact to EPS.

In addition, favorably affecting our year-over-year comparisons were nearly $90 million from timing and size of compensation payments. Excluding those benefits, we had strong growth as cash provided by operating activities grew 10.2%.

During the first quarter, we spent $317 million in capital expenditures, an increase of $84 million when compared to the first quarter of 2015. The increase was related to an intentional change in the timing of our truck purchases.

However, as David mentioned, the cost of transporting our leachate has increased substantially so we are building some additional leachate treatment facilities. This will help with costs over the long run but will increase capital expenditures in 2016 and 2017.

This makes it very important to implement our liquids recovery charge, so we can offset some of these capital costs and generate acceptable returns. Nevertheless, we still believe that we will be within our guidance range of between $1.3 billion and $1.4 billion. In the first quarter, we also had $13 million in proceeds from divested assets.

Combined, we generated $402 million of free cash flow, an increase of $117 million when compared to the first quarter of 2015. This puts us well on our way to achieving or exceeding our free cash flow guidance of between $1.5 billion and $1.6 billion. In the first quarter, we returned $433 million to shareholders.

We paid $183 million in dividends and we repurchased $250 million of shares. Finally, looking at our other financial metrics. At the end of the first quarter, our debt-to-EBITDA ratio, measured based on our bank covenants was 2.77%, and our weighted average cost to debt was 4.26%.

The floating rate portion of our debt portfolio was 15% at the end of the quarter. The effective tax rate was approximately 35.4% in the first quarter. It was a bit higher than expected due to the timing of certain items, but we still believe that our full year tax rate will be 35%.

In summary, the first quarter trends continue the momentum that built throughout 2015. We're well positioned to achieve or exceed our full year goals as our employees performed well to start the year. In the coming quarters, the year-over-year comparisons become tougher.

But we have confidence that our employees can continue to meet or exceed our targets. And with that, Rebecca, let's open the line up for questions..

And your first question comes from the line of Andrew Buscaglia with Credit Suisse..

Hey, guys. Thanks for taking my question. If you could talk a little bit more about your volumes this quarter, obviously, there is some seasonal improvement.

So I'm just trying to get a sense of what it's going to be like going forward, and what's the sustainable volume number into Q2, and what would this quarter then adjusting for what you said was recycling benefit, too..

Yeah. If you look at the volumes for the quarter, we think that about 30 basis points of the improvement was attributable to the recycling volumes which, as we said, won't repeat in the following quarters, but that's okay because they're not profitable volumes.

And then about 20 to 30 basis points we estimate would be the amount that was pulled forward sort of from the second quarter.

It's always a question when you have – whether it's good weather or bad weather in the first quarter, do volumes disappear when you have bad weather or do they just get pushed into the second quarter? And the same is true with good weather.

Did volumes get pulled in from the second quarter to the first quarter, or is it just more economic activity so that there's going to be more volume? And so before we adjust our full year guidance, we wanted to be a little bit more precise on what the – we wanted to give a fairly tight range.

And so waiting until the second quarter seasonal uptick, I think, will allow us to sort say, okay, here's a more normalized look at what the volumes are going to be. We fully expect those to be positive in the second quarter. The question is how positive will they be..

Andrew, I guess if you put those in dollar terms, last year one of the ways we looked at this was that last year's negative impact from weather was about $12.1 million in revenue and about $8.1 million EBIT. So I think it's fair to assume that we didn't have that weather impact this year.

But as David said, it's hard to tell how much just moved from quarter to quarter and how much good weather actually expands volume or, on the other hand, bad weather contracts volume..

Okay. That's helpful. I guess, can you give us a sense of how April was trending then seasonally it probably still was strong like it's still trending....

Yeah. Basically, what we saw in April was that collection volumes sort of continue apace. The landfill volumes come down a little bit. We had some one-time – the MSW volumes come down, look, the MSW volumes were really strong in the first quarter but we had a couple of one-time type items.

So for example, some of the waste energy plants along the East Coast were down for maintenance and so some of those volumes came over to us into our landfills. And so we'd expect the landfill volumes to moderate a little bit. But they'll still – they'll continue to be strong.

So, I would say that, so far, the trends are pretty much what we expect in the second quarter. We continue to see positive volumes and we'd expect that to continue throughout May and June..

All right. Thanks, guys..

Thank you..

And your next question comes from the line of Jeff Volshteyn with JPMorgan..

Good morning. Thank you for taking my questions.

Looking at 2016, if you try to put it kind of all together, where do you see the main threats to your 2016 guidance? Where would it be coming from?.

Well, to be quite honest with you, I don't see any threats to the guidance. I see some opportunities on the upside. But if there was going to be a threat, clearly recycling is still a little bit volatile. We haven't seen the rebound in commodity prices that you'd expect to see. Look, our core price is pretty much locked and loaded for the year.

I mean, that is going to happen. Once we saw the – when you see these volumes turn positive and you see that our addition rate's exceeding our defection rate, it's hard to see volumes turning backwards. And so the things that are under our control, I think there's only upside, no downside.

I guess, really, the only potential downside would be in a general economic downturn, what would happen to volumes. But I think if there is a general economic downturn, it's not going to be led by housing like the last one was. And so we should see, at least, a six- to nine-month lag in any reduction in volumes.

And so it's hard to see how 2016 can do anything other than meet or exceed our guidance..

Dave, I might add the issue of the economy itself. We still see positive container weights in the quarter. We have the last couple of quarters and our service increases are exceeding decreases six or eight quarters in a row. So that's pretty good economics on what's happening in North America..

Yeah, Jeff. One of the common questions that we get is about the strength of the industrial sector and we best measure that by looking at our special waste pipeline.

When you look at special waste for the first quarter, it really didn't show a whole lot of impact from weather because in the month of January, we were actually down year-over-year about 4.5%. We were up about 1% in February, so pretty close to flat. And then March, we were up 6.1%.

And when you look at April, April looks like it's up probably double March. So when you ask about the risk to EBITDA, one of the areas that is somewhat – it does fluctuate some is that special waste pipeline and it looks pretty encouraging right now..

That's very helpful.

And if I can ask one more, just if you could give a little more color on the geographies and how does performance change in various regions where you operate?.

Yeah. It is interesting to see that after the last economic downturn, you saw the trends completely switch from being Sun Belt driven to being more Rust Belt driven.

And what we've seen over the last six to nine months, as you've seen it sort of revert back to what I would call a pre-recession economy where housing starts in Florida and throughout the Gulf Coast and then all the way into California are driving very strong results throughout the sunbelt.

And you've seen the Sun Belt actually performing better than the Rust Belts. It's why we like having a diversified business. It works in any kind of economy. Obviously, right now, you're seeing the South do better than the North. But the North continues to drive improved profitability, it just happens to be a little bit stronger in the South.

So from a geography point of view, I think you can sort of follow the housing trends and say that our business is following that, which is very strong from Florida through the Gulf Coast then into California. And then continued strength, but not as strong throughout the Midwest and East Coast..

I would echo what the Waste Connections guys said this morning which is pretty strong growth universally across the country and in Canada as well, except where you have kind of big E&P operations, and those are weak. And so those areas of the country have been a little bit depressed, but the rest of the U.S. and Canada looks pretty strong..

This is very helpful color. And one last maintenance question from me is just on CapEx. So your total number for CapEx remains the same, you have a little bit of an increase for leachate investments where – and then you've have more truck investment.

What is being reduced as far as capital investment?.

We're not really reducing anything. We're actually increasing the number of trucks. It just moves us within the range, right? The range is $1.3 billion to $1.4 billion and what we're spending on leachate treatment facilities is well less than the amount of the range.

So we are not cutting back on capital for Yellow Iron, on capital for containers and capital for trucks we're actually increasing that from last year. So it really just moves us a little bit up in the range..

Yeah. We're probably going to be – you remember last year, we're $1.23 billion in CapEx. We gave the $1.3 billion to $1.4 billion range. This year, we're probably going to be in the middle of that, maybe towards the higher end of it.

Exactly what David said which is about 125 extra trucks, about $25 million additional capital invested in our Yellow Iron fleet which is, in some cases, has got some older equipment. And then putting in some wastewater treatment facilities, which we'll have the pay back to them but they have a big upfront capital cost..

Thank you very much. This is very helpful..

Absolutely..

And your next question comes from the line of Michael Hoffman from Stifel..

Jim, Jim, how are you today?.

(30:04)..

I'm doing fine, too, Michael..

Good. I asked. On the MSW, when you talk about that type of a volume number in the landfill, one could go that's eye-popping. Well, (30:19) 2% GDP.

So Jim Trevathan, you made a comment earlier that container weights – on a same-store basis, what's your container weight trend been in your commercial business?.

It's been positive the last couple of quarters, Michael..

In the 2%, 3% type zone?.

A little below that. 1.5%, in that kind of range..

Okay.

So, that's more reflective of underlying consumerism GDP, and that's how we should think about this is good but shouldn't get irrationally exuberant about 13% MSW in one quarter?.

Agree. Absolutely agree. Michael, we also had – Dave mentioned the waste energy plants. We also had a couple of competitor landfills close during the quarter or during the – really, the second half of last year. And we've picked up a good portion, if not all of that volume at one of them. And that's helping that 12%, 13% MSW volume growth.

That'll continue but some of the one-timers that David and Jim mentioned will not continue..

Well, Michael, at the peak, we did roughly 130 million tons into the landfill. Now we're probably looking closer to 110 million tons into the landfill. And so the strong MSW volumes, to me, are indicative that finally we're getting back to where – as in an industry, we're getting back to where we were pre-recession.

Most other businesses are already above the volume levels that they were pre-recession. And so I don't see that moderating. I think that's just a reversion back to the norm..

Okay.

And when do you think that leveling-off point occurs as you look at sort of the economic drivers that drive your business?.

Yeah. Gosh, it's hard to see – again, we're still 20 million tons below where we were at peak. You're seeing a lot of municipalities take some types of materials out of their recycling streams. And so when I look at the future, I think there's more upside potential on the volume than there is downside potential..

And a couple of years before you get that incremental 20 million?.

Yeah. Well maybe if you look at the pace of change between today and the great recession, yeah. I would think – I think it's you'd still see a couple years. And that's a couple of years of good solid, sort of 4% to 7% type volume growth at the MSW line..

Okay. That's what I was trying to get at.

And then this liquid management charge, if you took the 3.3% landfill pricing in 1Q and you had had that surcharge in the whole quarter, what would this 3.3% look like?.

Yeah. Well, look, it's going to be slow to see any big results out of that. Look, the point here is that we've got to recover our landfill operating costs. The part of the problem is that a lot of those contracts are long term. And we're going to go out and start doing it in some test markets in the first quarter.

we're not going to just go out and do it blanket across the country just to find out what does the reception look like. If we go out and do a 7% charge across the entire country, you're putting a lot of volumes at risk. And so we're going to go into a couple key markets and we're going to test it and see what the reaction is in the market.

I think the whole industry is having the same problem. And so, I would expect the charge to be well received in the market. But we're going to test it this quarter and then we'll roll it out during the course of the year.

But even at its peak, we don't think it's any more than $10 million to $15 million over the next couple of years, and that's on an annual basis just because we have so many contracts that are long term. But if we can get an additional $10 million to $15 million that at least goes a little bit of the way to cover in the increased leachate costs..

And is some of this leachate – you've had a very wet year, first quarter in the middle of the country where you have a lot of landfills..

And so, basically what you got going on here, Michael, is two different things. Look, we had 11% additional volume going in there. So you've got naturally-occurring water from the volumes. And we've had positive volumes now for quite a few years so you get more liquid out of that. And then as you say, we've had more rain events.

And so there's been a lot more fluid. But the bigger part of it, frankly, is that the cost to transport and dispose of the liquids has gone up fairly dramatically. And so we sort of had a double whammy, more liquids and higher cost to dispose..

Yeah. I mean, that's the bigger concern is the last part of David's statement. When you look at some areas of the country, the unit cost of disposal of leachate has gone up 400% to 500%. So that's why we're talking about this charge. It's not related necessarily to the rain because – look, we could have a dry year at some point, too..

Okay. Fair enough. And then, Jim Fish, on the cash flow from ops, it was 22% of revenues which is well above your long average.

How do I think about what cash flow for ops should be for the full year as a percent of sales given the adjustments you talked about?.

Boy, on a percent of sales. And I don't normally look at it that way, but I think it'll moderate a bit because the primary driver of that is EBITDA.

And while we thought EBITDA was fantastic, as David said in his opening comments, we need to see what EBITDA does or all of our financial metrics do when we transition from this pretty mild winter quarter into spring and summer. With that said – and even – honestly, Michael, when we look at this on an EPS basis, we were up $0.09 versus prior year.

Historically, we've been up kind of $0.02 to $0.03 over the last five years, $0.02 to $0.03 per quarter. So $0.09 felt like a great quarter but also felt like we don't want to straight line that.

So when I think of cash from operations I think we're going to wait, reserve comment until we see how that transition from the mild winter first quarter into the spring quarter, how it looks..

Okay. Churn is at 9.2%.

Is that about the floor?.

Yeah. I mean, that's right about the lowest we've ever had..

Okay. So, the good news is is your replacement costs have come down meaningfully because you've reduced the churn, so that's helped in the overall pricing as well and that anniversaries. So I got 2Q and 3Q, and then it anniversaries in the fourth quarter because you're around 9% in the fourth quarter..

Right. That's right....

Okay. And then, Jim – sorry. Go ahead, David..

Yeah.

We were at what, 9.2% in the fourth quarter?.

We were almost identical..

Yeah..

Yeah. Okay..

Well, I'll tell you, Michael, we've touched 12% over the last couple of years and most of those numbers have been double digit. Those two quarters are the lowest in over a decade. So this is substantial for us in the process of retention, and we're making real headway in that regard..

Well, yeah. Yeah. I get it. Because it significantly lowers the pressure on your pricing reported – yield because to replace that customer's much lower price than what you lost. So....

And the important thing, Michael, is that the addition rate was 9.6%. And so you can see the rollover effect of that positive addition rate. We always follow the rule of 72 here and you can sort of see it as it creates that sort of annuity policy for us. That addition rate just continues to roll and roll and roll throughout the quarters.

And so that's why we say it's hard to see our volumes going negative again because we've got that addition rate above the defection rate..

Michael, as you know, that addition rate and defection rate are based on number of customers. We're net positive in dollars as well and have been now for the third consecutive quarter. So that roll-forward effect will continue. Again, numbers matter. Number of new customers, but dollars are the ultimate measure..

And Michael, one last point on your question about cash from operations. When you say 22% of revenue, that includes the $67 million benefits to cash from operations from the termination of the SWAB. It includes the one last cash pay period that we had.

We had a pay period that fell on January 1 this year, so we actually had – we paid it out on December 31, 2015. So we actually had one more cash pay period in 2015 and one less in 2016. So that 22%, even if we take out any effect of kind of a mild winter quarter, you still have a few things in that 22% that don't repeat..

Yeah. That was my question. I'm assuming the 22% benefited by the nonrecurrings, but your long-term average has been 17%. It appears you're trending better than your average even for the adjustment. So that's what I was trying to get at..

Well, yeah, I didn't do a good job of answering that, but that's – I think you're right. We feel good about the trend. We're not looking at a 22% trend because of the one-timers..

Right. And which leads to – I get you're not raising guidance, but if you take the midpoint of your capital spending and your trend works up by a percentage point on cash flow from ops, we're beating free cash flow guidance, too..

Yeah. No, look, I mean I think what we'd say is that we want to wait for the second quarter to understand the seasonal upticks. But if there's going to be an adjustment, it's certainly going to be an adjustment upward..

Right.

And then last one from me, Jim Fish, you had led this year with the objective to have a flat dollars of SG&A, is that still the intention given some of the strength in the business?.

Well, look, our goal is to stay as close to flat as possible. But keep in mind, we added $90 million, $92 million in acquisitions, which came with some SG&A, primarily S right? A lot of the G&A has come out of those, but the S stays and that's a good thing for us.

And similarly, the other half of our increase in dollars in SG&A was incentive compensation related to strong performance, so I look at that as being a good thing as well.

One thing I would say is, in addition to saying that we will try to get as close to flat as we can is that on a percent of revenue basis, one kind of aspirational number we've had out there for probably a decade has been 10% on an annual basis. We were at 10.4% last year. I think we have a decent chance of getting to or below 10% for the year.

So we'll shoot for flat, may not get there but I think we're getting pretty close to 10% for the year on a percent of revenue basis..

Okay. That's very helpful. Thanks for answering my questions..

Absolutely..

And your next question comes from the line of Al Kaschalk of Wedbush Securities..

Morning, everybody..

Morning, Al..

Good morning..

Just wanted a couple of housekeeping items.

For 2016, how much acquisition revenue is included in your expectations?.

Yeah. When we looked at the beginning of the year, we thought we'd do $100 million, $200 million of tuck-ins. I would say that we're probably on pace for the lower end of that right now. And then obviously, we sort of used a mid-year convention for that. And then, of course, we got the SWS revenue.

So we had, what, I'm sorry, $90-some-odd million become....

$92 million and then (42:49).

Yeah. Exactly. $92 million and then you'd take the divestures out. But I would guess that that $90 million run rate is probably good for the year..

It might be a little high just because we anniversary Deffenbaugh. So, what you're going to get is a full year of SWS, a full year of EnviroServ which is a little smaller out west..

But then you replaced that with the small tuck-ins, right?.

We replaced that, yeah..

So it could be. It kind of depends on how those tuck-ins go throughout the year..

Okay. It's a good point. Deffenbaugh's anniversaried already, or is there a couple....

Al, well, yes. It's anniversaried at the very end of Q1..

Okay..

With a full first quarter of kind of gain, if you will, in Deffenbaugh, but then nothing in the second quarter. It's all kind of integrated in an anniversary..

Okay. In constructive light, if you don't mind, may I ask this question? Understanding that the volume was strong and there were couple of the extra work pay, one other things that just escaped my mind. But the messaging, David, around volumes seems to be a little misplaced and I said – and taking this in the light of what I'm intending it.

You've been pushing for getting to flat. It now seems you're going to be substantially above that flat level, yet we all know that the underlying business doesn't really change all that much.

So for lack of a better word, what did we miss on looking at the business or directionally? Where were you a little too conservative on the trend there for volumes?.

Yeah. Look, I would say the underlying business actually has changed fairly dramatically. I mean, you see it not only in our numbers but you see it in everybody's numbers. The roll off volumes right now have been nothing short of spectacular. And our roll off volumes doubled quarter to quarter, and that's with the energy services being down.

And so roll-offs bench really strong. C&D has been very strong. MSW has been very strong. Special waste has continued to be nicely positive. And then on the commercial side, I think you're seeing sort of a cumulative effect of the new business in new commercial construction that we've seen over the last few years.

So I really think the underlying trends in our business are as positive as they have been since 2007..

Okay. That's helpful. Finally, if I just may pick a little bit on the SG&A, Jim Fish. I saw some recent head count reduction announced. I think there was more for outsourcing.

What other benefits are there in terms of trying with the goal of keeping the dollar level flattish that was just asked previously?.

Yeah. First, let me correct one thing, what you saw was probably in Phoenix, and we moved – by the way, the difference between outsourcing and offshoring there/ They're still employees, we just have now employees at our own host office, back office indoor in India.

So they're still considered employees, and are still carried under our payroll as opposed to true outsourcing there. But really, the big drivers of SG&A dollar increase, as I said to Michael, were acquisition related which we think is a good thing.

We will make sure that we try and take as much of the kind of duplicate SG&A out of these acquisitions, as we always do. But the sales component is very important. I mean, if you think about Deffenbaugh, it was an area that we had no operations. If you think about EnviroServ, it's an area where we had operations but they had a niche business.

So, the sales component of SG&A will stay on and is very important to us in terms of growing top line dollars. And of course, the other piece is just a true-up of incentive compensation plans..

Hey Al, if the concern is just the creep into our SG&A, we – Jim and I both and Dave are still on track. We look at all of increases or even replacements and make sure that the absolute right thing to do and there are very few of those on the sales side even, although, Jim is right, we retain the Deffenbaugh additions.

We have added some sales heads in early 2015 but fewer in 2016. And we look at those on a return basis. Are they generating the value or we don't do them..

I would tell you, nobody is more cognizant of the danger of SG&A creep. When things look good on all other financial metrics, the one that can get away from SG&A.

So as Jim said, we are scrutinizing every single not only head count addition but even replacements to make sure that we're only adding where we need to add and where it adds top line or bottom line..

Excellent. Great. Appreciate it. Thanks. Good luck..

Thank you..

Thank you..

Your next question comes from the line of Corey Greendale with First Analysis..

Just a couple from me. First of all, so the pricing – the core price in industrial has been strong, got even stronger.

Is that reflective of what you're seeing in temporary roll off or is that being driven more by permanent work?.

That's temporary roll off. We had a roll off season that started very early. We had unseasonably warm construction season. And virtually, across the board we heard from our folks out in the field that they're not able to – they don't have the trucks and the containers to meet the demand.

So what do you do when you don't have capacity to meet demand? You add more trucks and drivers and you raise your price, and that's basically what we saw.

And not only do you raise your price, but all of a sudden, those cans that are only being pulled once a month, you take them back and you put them out into another customer where they're pulled more often. And so we saw an unusually strong roll off season. And again, that's continued through April..

So, on – sorry..

I was going to say, if I can add to that, that doesn't diminish the increases that we're getting on the permanent business as well. It just says most of that came from the answer that Dave gave you..

Yeah. So the data suggests that the market is absorbing it well with the low churn. If you had told me two years ago that you're going to get 10% core price in industrial, I would have said you're going to shock the market by doing that. So it sounds like that's not happening.

Is there any time that that could be starting? Or is it that there's so much demand and you've got the capacity by virtue of being Waste Management, and some of the smaller local providers just don't have capacity so you're able to do that now, but maybe more capacity comes in over time?.

That's exactly right. I mean, I think you hit the nail right in the head. There is limited roll off capacity and it got stretched in the construction season. Not everywhere, it's regional. And so we haven't seen that slow down. And again, it's not just raising prices.

It's making sure that you're getting the most efficient use out of that container and that driver and I think we've done a pretty good job of that out in the field of making sure that we're getting the maximum number of polls out of our can..

And it all sounds, Corey, like, when you talk about a 10% increase as if there's concern that we lose permanent roll off business and that's why David pointed out. But this is largely a microeconomic application of pricing to the temp roll off business as a function of strong, strong demand in certain geographies..

I understand. And then I understand that the leachate related charge you're talking about, not a big dollar amount.

But can you remind me, have you done other kind of specific cost offsetting fees at landfills or have you only done that on the collection side before?.

We've applied the environment charge at the landfill. Certainly not as much across the board as we have on the collection line of business. And that's why this one's going to be landfill focused. I mean, it really is a landfill particular problem.

The environmental charge, when you look at our cost for environmental compliance that stretches across all aspects of our business. This is peculiar to the landfill. Again, I think if you look at everybody in the industry, you'd see both industry players and private players. You'd see that their leachate costs are going up.

I mean, it's just a function of higher volumes and higher transportation cost. And so I think the industry has two choices, right? You either watch that return on capital shrink at the landfills, which it has been doing over the last few years or you do something to reverse it. We've decided to do this liquids management charge.

I can't speak for anyone else, but that's the way we're going to drive that return on capital. Because look, we invest more capital on the landfill than any other single asset that we have. Now we've got to get the return on it..

Yeah, I understand. And I realized kind of market conditions change so maybe not a good analog. Where I was going with that, I was wondering if you could make a drawn analogy what the reaction was when you implemented the environmental charge at the landfills.

Have you found competitors kind of following along or if they use that as an opportunity to try to take volume from you?.

No. I mean, I would say for the most part – again, the environmental charge is not widespread on our landfill customers. But for the most part, we've seen the market react quite favorably..

And then just one last quick one, you already addressed the line question a bunch of different ways, but when you reported last quarter, you said that you thought volume gets stronger in the back half of the year.

Do you still think that is likely to be the case?.

Yeah. Well the couple of headwinds that we have going into back half of the year are the recycling volumes, right? And that was about a 30 basis point benefit in the first quarter.

But if those volumes go negative like we expect them to go in the back half of the year, it's probably a little bit more of an effect because it will go from positive 3.1% to negative 2% in the back half of the year. So it could be a little bit more than 30 to 40 basis points.

But the underlying macroeconomic trends that we see in the industrial and the commercial line are strong. And so I would expect – look, we've always said we don't look at volumes for volumes' sake. We look at volumes to try to add profitable volumes.

And what I would say is that the trend line on the profitable volumes that we're going to add is going to be very positive throughout the rest of the year.

Some of those negative volumes like landfills, maybe some residential contracts, some of those things might moderate the volume growth a little bit but I expect that we'll continue to see good strong growth in the landfill line and the industrial line and the commercial line..

Got it. Thank you and congratulations on the good start to the year..

Thank you..

Thank you..

And your next question comes from Tyler Brown with Raymond James..

Good morning, guys..

Hey, Tyler..

Good morning..

Hey, quick housekeeping item.

So Jim Fish, I may have missed it but can you go over the day adjusted collection volumes by line?.

Yeah. Let me see here. Flip back into the script for a second..

Yeah. Sorry about that..

Okay. So, roll off volume was 4.2%, on a day adjusted basis it was 2.7%..

Okay..

I didn't give a day adjusted commercial....

It's the same negative point 2%..

Right..

Okay. Okay. So roughly maybe the same impact on each, okay. I do want to dig in a little... sorry..

There was no impact on the commercial line..

Oh, no impact? Okay. Okay. Perfect. All right. And then I do want to dig in a little bit more on the landfill volume. So if you look at your actual tons consumed, the $23.6 million versus $20.9 million that actually went in to the landfill. That was a great number, probably the best physical number we've seen in some time.

You noted a number of the one-time drivers.

But can you isolate maybe how much the burner availability was in issue? And was coal ash a driver in that?.

Well, yes, to both. The coal ash was a driver. By the way, one last point on your first question. Landfill volume on a day adjusted basis was 10.3%, the unadjusted was 11.6%..

Okay..

So to answer your second question, coal ash was certainly a piece of it because we saw some scheduled maintenance done at Covanta and at Wheelabrator that did impact us. We also saw that the coal business, that Duke Energy contract we've talked a lot about, started to really kind of ramp up.

We have three plants and all three of those are kind of fully up and running, and that was growing incrementally throughout 2015. But, I would tell you that those – I don't know, Jim, if you know the number for the coal ash piece..

No. I don't.. But it was improved year-over-year..

Certainly improved..

Okay..

It was part of that....

Okay..

But that's a long-term issue, Tyler. We have that business in 2016 and we'll continue those projects. So that's not part of the one-time..

Okay. Okay. That's helpful. And then, David, this is a bigger picture question. You kind of touched on it. But the MSW landfill volumes are very robust. We saw it with you, we saw it with Connections, et cetera. The industry seems to be shuttering, recycling capacity across the board.

And do you think that the woes on the recycling side with some of that material, is it making its way back into the landfill? And do you think that's part of the whole MSW volume story?.

Yeah. I don't think there's any doubt. I mean, when you see recycling rates going backwards over the last couple years, that material has to have an outlet. And I do think that some of that material is going clearly to the landfill..

Okay. Yeah, very helpful.

And then just last one, Jim Trevathan, what did hazardous waste landfill volumes do in the quarter?.

They were improved year-over-year. We had a pretty good year-over-year improvement at the two Southern sites that had a event business given good weather that was larger than the prior years, event business. Especially at the Alabama site..

And then in our California hazardous site, we actually did an acquisition, our EnviroServ acquisition out there. And so we saw pretty good volume growth there too..

And we'll continue to see that as we move some of that volume that's still going third-party as we get state approvals to bring them into Kettleman. That volume from that acquisition, will improve here, during the course of this year..

Right.

Didn't Kettleman just restart up? Is that right?.

Yes. In the second half of the last year. They were running but they had a very low rate in the first year (59:05)..

Yeah. Okay. All right, thank you, guys..

Thank you..

Your next question comes from the line of Joe Box from KeyBanc Capital Markets..

Hey. Good morning, guys..

Morning..

So with cash flow expected to be above the range and leverage up some but still below the 3 times kind of mark that you're looking for, can you maybe just gives an update on the buyback and maybe should we think about another ASR at some point, either this year or on the horizon?.

Yeah. We said at the beginning of the year that we'd spend $600 million on the share buyback and I would expect that we would at least hit that number. We've talked about – we did $250 million in the first quarter, we've talked about doing another $250 million ASR this quarter. And so we'll certainly spend the $600 million.

I think there's probably a little bit of upside to that number as we see the cash generation through the year..

Got it. Thanks for that. And....

There's a couple things there on the leverage ratio and then capital allocation. The leverage ratio finished at 2.77, up a bit from the end of Q4 largely related to the acquisition of SWS. But we think for the year, we'll probably be in that 2.6 to 2.7 range.

Long term we probably expand that range a bit and kind of call it 2.5 to 3.0 just to give us some opportunity there if we see a big acquisition that looks like it's strategic and reasonably priced, we may go after that. Unfortunately, at this point we don't see any of those out there.

So we'll just go – when we think about capital allocation, we'll go with kind of the $100 million to $200 million in acquisitions. And then we'll maintain that leverage ratio, long term in that 2.5 to 3 range..

Got it. Thanks for that, Jim. And then one last quick one. So I want to flesh out the volume growth a little bit. You're still seeing resi volumes decline. Can you maybe just talk to the undercurrents that you're seeing within volume and maybe the impact on margin? Because obviously a solid incremental EBITDA margin this quarter.

Is there may be a double benefit with the volume? You're getting a positive mix and then you're also getting more volume at the landfill. Just any color there would be helpful..

Yeah. I think it's exactly right.

When you look at the lines of business from a margin perspective going from top to bottom, you go landfill, commercial, industrial, residential, right? And when you see the predominant volumes coming into those – to the landfill and into the industrial side, and you saw 360 basis points of improvement on the commercial side.

It's like I said, we don't go after volumes for volumes' sake. We try to go after the volumes that actually make money.

So if we lose a little bit of volumes on recycling, lose a little bit of volumes on residential, I'm not going to tell you that we like that because they do generate some EBITDA, but when you look at it from a mix point of view and from a profitability point of view, I'd much rather be adding volumes on the commercial, industrial, landfill line than on residential and recycling..

Yeah. Maybe one more point, Dave, is that on the resi side, when you renew a contract or you gain a contract, it's generally a capital outlay. So we look at return on that invested capital stronger there. Because the other lines of business are inherently strong on an ROI basis..

Got it. Thanks for the color, guys. I appreciate it..

Thank you..

And your question comes from the line Hamzah Mazari with Sterne Agee..

Hi. This is (01:02:51). I'm filling in for Hamzah. Had a question about the Canadian portion of your business. With the Waste Connections and Progressive Waste merger closing soon, can you give us a sense of your position in the Canadian marketplace? And maybe do an M&A there on the U.S.

side, how that all relates?.

Yeah. When we look at the Progressive deal, obviously, we couldn't do that because we have too much business in Canada. Certainly, I think Waste Connections, taking over that business is a very positive thing for the industry. Progressive, I would say, was a little bit more of an aggressive volume player than Waste Connections is.

So I think it's only going to be positive for all the business in Canada. From our perspective, we did a large transaction in Montreal couple years ago. I think, I'd say about Canada exactly what Jim said about the United States. If we could find a good sized acquisition that's strategic for us and that's priced fairly, we'd go out and do it.

But I think the same thing applies to Canada as does the United States. Right now, we just don't see those. A lot of the sort of what I'd call mid-sized acquisitions, call it in the sort of $500 million to $2 billion type, dollar range. A lot of those type of sellers right now expect too high a price for their business.

And so, we have to pass on them for now. But I see that business certainly not being hurt by the fact that Waste Connections will be our new Canadian neighbor instead of Progressive..

All right. Great. Appreciate it. Thanks a lot..

Thank you..

And your next question comes from the line of Michael Feniger with Bank of America..

Thanks, guys, for taking my call. I think last quarter you mentioned a 30 to 40 bps benefit margin on lower fuel.

Did you guys break that out this quarter? Where did you see the tailwind on the margin line from the lower fuel price?.

Yeah. The fuel impact was, to be exact here, 13 basis points tailwind for us. When you think about fuel, we had about $32 million lower in fuel surcharge revenues, $33 million in fuel expense, so kind of a push there.

And then when you factor in the lower fuel surcharges that we pay to third-party transportation providers, that's where you get the 13 bps of tailwind..

Great. And the incremental margin was I think around 50% this quarter, a little over that.

I mean, is that – when we think about this going into this environment where it's kind of looking like the best environment we've seen since 2007, is that 50% incremental margin, is that a sustainable run rate we should be thinking in a market where you're getting really good pricing and starting to see positive volumes?.

Yeah. Look, I think in a positive volume environment and particularly when the volumes are positive in the landfill and in the commercial industrial line, I don't think that 40% to 50% flow through is an unreasonable number..

Great. Thanks, guys..

Thank you..

And your next question comes from Scott Levine with Imperial Capital..

Hey, guys..

Good morning, Scott..

Good morning..

Just one question, really. Your core price of 5.3%, just looking at your last transcript. You guys were guiding for 4% this year. Obviously, this is a huge upside to that number. Just wondering whether informally your expectations for this year would be considerably higher or maybe a little bit more color on the upside in price in the quarter.

And then I have a follow-up about CPI which has always been strengthening a bit of late and wondering if you could remind us of your exposure to index-based pricing and/or whether we might see some lift associated with that if inflation continues to pick up..

Yeah. When you look at CPI on a core basis, you certainly see an improvement. But when you look on it on a universal basis, you've actually seen it flat to down because of lower energy prices.

So we still think that in the back half of the year, CPI, which is about 40% of our business, CPI could be a headwind not a tailwind in the back half of the year. With respect to core price, we pushed up a lot of our price increases this year, and we're going to be anniversarying some mid-year type price increases we did last year.

And so I don't expect the dollars to moderate during the course of the year, but I would expect that the actual number at core price and the number on yield would probably moderate a little bit. But we still wholly expect to be above that 4% core price, and at or above that 2% yield..

Great. Thanks, David..

Thank you..

And your next question comes from the line of Barbara Noverini with Morningstar..

Good morning, everyone..

Good morning..

Hey, Barbara..

Just a quick clarification question. So once your leachate treatment facilities are built, we're basically looking to see operational cost savings from replacing higher or third-party cost with your own labor.

So is this a longer term goal and that you want most of you major landfills that's common in wetter areas to be self-reliant when it comes to leachate treatment versus basically just targeting specific facilities where this has been a particular challenge?.

Yeah, so....

I think it's the latter..

When you look at it, it's really geographies. I mean, the biggest expense we'll have this year is a geography where you have a water treatment facility at POTW that in the past has always taken leachate, not only from us but from a lot of other third party landfills around the area and they decided not to take leachate anymore.

And so that's when Jim talks about cost going up by 500%, that's basically what happened and this geography. Our outlet for disposal basically disappeared, so now we have to find another outlet and it happens to be a lot further away.

So in that type of case – and this is a fairly rural area in the Southeast, and so in most cases, if one POTW shuts you down, doesn't take leachate anymore, you can find another POTW. This happens to be in a more remote type area so you have to build your own treatment facility, but that's pretty unique to this geography..

Got it. Got it.

And then out of curiosity, could you then open your own treatment facility to accept third-party leachate volumes?.

We could if we wanted. I think it'll be fully utilized with our own capacity but we could if we wanted to. And then I think I'd just add a little bit to what David said. We don't expect to build these things across the country, across U.S. and Canada.

We don't want in Eastern Pennsylvania, the one that he mentioned is in kind of the mid-Atlantic area, and we don't have any other plans to build them beyond those unless we see similar cost increases. But that is the concern and that's why we're proposing the charge here..

Yeah. Makes sense. Okay. Thanks a lot..

I might – one clarification. We can but we would have to get a permit from the state that would allow us to accept third-party materials rather than just our own. The current permit does not allow that. So it's possible, it's just not part of the current plan..

I think it's moot because we're going to have (01:10:52).

Yeah. We'll fill it up..

You've got enough to keep your attention, I understand. Thanks a lot..

And thank you..

At this time, there are no further questions..

All right. Thank you, all. Obviously, we're off to a very strong start. We look forward to seeing the seasonal uptick in the second quarter and getting back to you with a more precise view of the full year at the end of the second quarter.

But I would be remiss to say that when we get to report these good quarters, we as a senior team get to report the numbers. We still realize who produces the numbers, and that's our folks here at the corporate staff and our folks out in the field that are doing a spectacular job applying our strategies throughout the country.

We will see you on the road, and we'll see you in the next quarter. Thanks..

Thank you for participating. This does conclude today's conference call. You may now disconnect..