Karen M. Hoguet - Chief Financial Officer

Paul E. Trussell - Deutsche Bank Securities, Inc. Lorraine Maikis Hutchinson - Bank of America - Merrill Lynch Research Lindsay Drucker Mann - Goldman Sachs & Co. Paul Lejuez - Citigroup Global Markets, Inc. (Broker) Matthew Robert Boss - JPMorgan Securities LLC Jeffrey Stein - Northcoast Research Partners LLC Brian Jay Tunick - RBC Capital Markets LLC Omar Saad - Evercore ISI Michael Binetti - UBS Securities LLC Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC Oliver Chen - Cowen and Company, LLC Richard Jaffe - Stifel, Nicolaus & Co., Inc. Dana L. Telsey - Telsey Advisory Group LLC David J. Glick - The Buckingham Research Group, Inc. Randal J. Konik - Jefferies LLC Brian Callen - Bank of America Merrill Lynch Priya Ohri-Gupta - Barclays Capital, Inc.

Good morning and welcome to Macy's, Incorporated second quarter 2016 earnings conference call. Today's conference is being recorded. I would now like to turn the call over to your host, Karen Hoguet. Please go ahead, ma'am. Karen M. Hoguet - Chief Financial Officer: Great, thank you. Good morning, everyone, and welcome to the Macy's, Inc. conference call scheduled to discuss second quarter earnings and our outlook for the back half of the year. I'm Karen Hoguet, CFO of the company. Any transcription or other reproduction of the statements made on this call without our consent is prohibited. A replay of the call will be available on our website, www.macysinc.com, beginning approximately two hours after the call concludes. Please refer to the Investor Relations section of our website for discussion and reconciliations of any non-GAAP financial measures discussed this morning. Keep in mind that all forward-looking statements are subject to risks and uncertainties that could cause the company's actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the company, including the risks specified in the company's most recently filed Form 10-K and other SEC filings. While second quarter sales and earnings were still below last year, we were pleased with the improvement in our sales trend during the quarter. Our comp sales performance on an owned-plus-licensed basis was much improved from the first quarter on both on a one-year and on a two-year basis and sets us up well for the remainder of the year. I will talk this morning first about the quarter and then our outlook for the second half of the year and will also discuss the strategic announcements made today regarding our store portfolio and real estate opportunities. Sales in the second quarter were $5.866 billion, down 4% from last year. On a comp owned-plus-licensed basis, sales were down 2%. This compares to the 5.6% drop we experienced in the first quarter. On a two-year basis, the first quarter was down 2.9% per year and the second quarter down 1.7%, representing a 1.2-point improvement in this trend. Both Macy's and Bloomingdale's experienced improvement in the second quarter. We would cite four key factors contributing to this trend change. One, weather has been hot this summer and has contributed to the strong apparel sales and perhaps more shopping in general as a way to avoid the heat. Two, international credit card sales were down 12% in the second quarter. This compares to a 20% drop in the first quarter. While this still negatively impacted our comp sales by approximately 60 basis points in the second quarter, it had less of an impact than it has had in recent quarters. As a result, our sales trend in the major tourist stores improved for both Macy's and Bloomingdale's in the quarter. Three, many of our sales-generating strategies are beginning to kick in. The investment in staffing in our best stores, our fine jewelry strategy, the Last Act clearance strategy, and home store improvements, this is very encouraging. And four, a few strong promotional events and sharper pricing helped in the quarter as well, and we were able to structure these events to both drive sales and preserve our gross margin rate. The families of business that were strongest in the quarter included all of apparel, men's, women's, and kids', as well as fine jewelry, shoes, fragrances, textiles, and housewares. Handbags and fashion jewelry and watches continued to be weak. We are encouraged by the start of the back-to-school season. We are seeing strength in all categories, but are most excited by the strong trend in denim. Our private brands also helped fuel the quarter's improvement, particularly in women's apparel, shoes, and home. This strength is great to see, given the importance of having great merchandise that can be found only at Macy's. Geographically, our Southwest region, which is primarily Southern California, had the strongest performance. Our digital business had a strong quarter again of double-digit growth both at Macy's and at Bloomingdale's. We are benefiting from new releases on our mobile apps and other technology improvements that are driving increases in conversion. Our investments are focused on removing points of friction, and our Net Promoter Score has improved on our digital business two points year over year. For example, we've been able to auto-provision our customers' wallets to make it easier to use coupons and other promotional offers. We've also improved navigation to make it easier and faster to shop. The number of transactions in the quarter was down 5% versus last year, with average unit retail up 2.8% and relatively flat units per transaction. This is slightly different from the first quarter when, as you remember, the number of transaction was down by more and the average unit retail not up by as much. The change in both of these metrics demonstrates the improved underlying trends in our business. Our Backstage stores are doing well in total, although performance by door is mixed, as you would expect from a new business. We are learning a lot about how to maximize this opportunity, with our focus being on the store-in-stores. We are encouraged by the early results. Bluemercury has had terrific new store openings, including in Tribeca, Columbus Circle, East Hampton, as well as their 100th store which opened in Savannah, Georgia. We now have 103 Bluemercury stores, including 12 in our Macy doors. We are optimistic that Bluemercury will contribute significantly to our beauty offering in our Macy's stores as well as in the freestanding locations. We are pleased with the early performance of our China joint venture, which is doing business through Tmall. We are learning both about the Chinese consumer and also how to do business there. It is too early to judge, but we are encouraged by what our small team has been able to accomplish in a very short time. Gross margin rate in the second quarter was 40.9%, flat with last year, which is better than we had expected. This resulted from our sales being stronger than expected and also from the success of our Last Act strategy for clearing end-of-season merchandise. We've now expanded Last Act beyond apparel areas, including for example to handbags, and we expect to convert shoes later this year. In total, our inventory at the end of the quarter was down 3.2% versus a year ago. And on a comp basis, inventory was down 1.5%. SG&A in the quarter was $2.026 billion, or 34.5% of sales. This is $32 million or 1.6% below last year in the quarter, due primarily to $21 million in asset sale gains in the quarter versus none during the second quarter last year. The portion of the Brooklyn gain that was booked in the quarter was $11 million, and gains on other asset sales were $10 million. We also benefited in the quarter from the restructuring that we completed at year end 2015, lower store expense due to last year's closings, and lower retirement expense. Offsetting these positive factors were an increase in expense to support our digital growth and a reduction in credit income. Credit income in the quarter was $181 million, $14 million below last year, due primarily to lower credit sales. The penetration of our proprietary credit cards was approximately 47% in the second quarter, down about 80 basis points from last year but up over 100 basis points from 2014. Depreciation and amortization in the quarter was $260 million, about flat with last year. We booked $249 million in asset impairments and other costs, primarily related to the expected closure of approximately 100 stores, which I will discuss with you in a few minutes. Settlement charges related to our retirement plans were $6 million in the quarter. Operating income after these charges was $117 million. Excluding asset impairment, settlement charges, and the other costs, operating income was $372 million, 6.4% of sales. On this basis, it was 15% below last year. Interest expense in the quarter was $97 million and tax expense $11 million. Including the asset impairment settlement charges and other costs, net income was $9 million. The net loss attributable to the non-controlling interest was $2 million relating to our China joint venture, so that net income attributable to Macy's shareholders was $11 million. Net income attributable to Macy's shareholders in the quarter excluding the asset impairment, settlement charges, and other costs was $168 million. Average share count on a diluted basis in the quarter was 311.3 million shares, down 9% from last year. We did not buy back any stock in the second quarter. We suspended the program in reaction to our disappointing first quarter. However, should current sales trends continue, we will consider resuming our stock buyback in the back half of the year. EPS on a diluted basis was $0.03. Excluding asset impairments and settlement charges, EPS in the quarter on a diluted basis was $0.54, which is down 16% on the same basis from last year. Cash flow before financing in the first half of the year was a positive $222 million this year as compared to a use of $217 million last year. And net cash provided from operating activities was $560 million as compared to $398 million last year, primarily due to the reduction in inventory. Net cash used by investing activities was $338 million, $277 million lower than last year, due primarily to last year's acquisition of Bluemercury as well as lower capital spending. We are still targeting capital spending of $900 million for the full year, which compares, as you know, to $1.1 billion last year. Cash used by financing activities was $331 million this year, $855 million less than last year, due primarily to the lower stock buyback as well as fewer option exercises. As we move to the back half of the year, we are encouraged by the recent business trends. Our annual sales guidance of minus 3% to minus 4% on a comp owned-plus-licensed basis feels achievable. The fall season would need to be minus 2.3% to minus 4.1% to hit that guidance. This compares to the minus 3.8% in the first half of the year. On a two-year basis, the back half of the year would need to be minus 3.2% to minus 4.1% per year as compared to minus 2.3% in the spring season. We still expect the comp sales performance relative to last year to be worse in the third quarter than in the fourth quarter, largely due to the last year comparisons. Our earnings per share guidance for the year remains at $3.15 to $3.40 for the full year. The only change in our key assumptions versus our prior earnings guidance is that we now expect the Brooklyn gain in fiscal 2016 to be approximately $36 million, which is $50 million less than what we had told you to expect when we gave guidance in February. The total gain associated with the Brooklyn transaction does not change. This is just timing due to delays in the project construction. We are comfortable at this point, though, covering this $0.10 a share of bad news within our prior guidance. As we have said, we are focusing on setting the company up for a comeback. And while we are very pleased with the improved sales trend, it does not change our feeling of urgency for making changes to better position Macy's and Bloomingdale's for the future. You will hear about these changes and our priorities as we move forward. Today's announcement is focused on our store portfolio and how we are strengthening it to position us best so that we can win over the longer term. As you know, we have a terrific portfolio of stores with strong locations in almost every top mall in our markets as well as great freestanding stores such as Herald Square, 59th Street, and Union Square. We are in 49 of the top 50 U.S. markets based on population and 91 of the top 100. All of our stores except a very few are cash flow positive, but not all of our stores fit today with our desired long-term retail footprint. While our weaker performing and less well located stores are cash flow positive, many of these don't produce acceptable returns on investment and often don't represent a customer shopping experience that reflects our aspirations for the Macy's brand. And as we all know, market demographics change over time, and this country is over-stored given evolving customer shopping habits. We decided to be proactive and to close a larger number of stores this year. This will bring the shopping experience to a consistently higher level and concentrates Macy's stores in locations with better potential. We believe we can benefit from right-sizing the company. This will force us to make necessary overhead reductions to preserve profitability and ongoing cash flow. And while it will shrink the company somewhat, these closings will positively impact our return on invested capital and help us to accelerate our growth. As you read in our press release this morning, we expect to close approximately 100 stores. We will not, however, lose representation in any of the top markets. Most of these stores will close around our fiscal year end, but we will continue to operate some of these until we either sell the store or until leases or operating covenants either expire or can be amended or waived. Most of these stores are underperformers or in weak locations. However, we will also close a few stores because their desirability as a redevelopment opportunity exceeds their value to us as retail store. While we can't be too precise until the actual store list and timing are finalized, our estimate is that if all of these closings happened at fiscal year-end 2016, they would negatively impact sales in 2017 by approximately $1 billion. But as I said earlier, we don't expect all to be closed at year end, and so the impact on 2017 should be less. This potential sales loss is lower than the projected volume of these 100 roughly stores due to our ability to retain some of the sales in other stores as well as on macys.com. With the stores we've closed in recent years, we have greatly improved our ability to retain sales both through new targeted marketing efforts and by trying to make sure that we add specific merchandise, categories, and vendors that is in stores that are being closed into stores that are nearby. The desire to retain as many customers as we can and begin impacting assortment decisions for spring 2017 is why we are making this announcement so far in advance. These stores currently produce incremental EBITDA, but we are hoping to be able to offset this loss with cost reductions beyond the costs that come from closing these stores directly. We are working hard on strategies to reduce costs consistent with both the downsizing of the company and also so that we can be more agile in making decisions going forward. At this point, we don't have details worked out and we will discuss this with you more down the road. But as you know, our track record is very good in delivering expense reductions to which we commit. The preliminary list of possible closures resulted in our having to impair many of these assets now. These asset impairments are primarily what is responsible for the $249 million in total charges taken in the second quarter. One of the reasons we feel it is right to shrink to grow is the success we're beginning to have in our top doors. Our work with our top 150 doors gives us confidence that we can accelerate our growth in these strategically critical locations. We want to focus our financial resources and our talent to make this happen, along with fueling our digital growth. This will come from a combination of improved assortments, more technology, more and better customer service, and more special events. The closing of approximately 100 stores is a big step and not one that we take lightly. We believe it is critical to reposition the company for the future, but that still doesn't make it easy. We will be respectful and open with our associates in these stores, and we'll try to minimize the impact on local communities by improving nearby stores and with our digital shopping venues. We also provided an update today on our pursuit of various opportunities to extract value from our real estate portfolio consistent with our long-term store location strategy as well as our balance sheet leverage objectives. For some time now, we have been examining opportunities for four large downtown stores in major cities, Herald Square, Union Square, State Street in Chicago, and downtown Minneapolis. Today, we announced that we are currently in discussions with potential purchasers for our San Francisco Men's store on Union Square. For those of you not familiar with San Francisco, we have a Men's building as well as a main store, and what we're talking about is selling just the Men's store. The main store would continue. This store would be redeveloped for alternative use, and our Men's business would be recombined into our main Union Square store. While today it is currently one of the country's most successful men's stores, the value of the real estate appears to offer significant opportunity, and we believe we can recombine it with the main store and both preserve the strength of our offering and hopefully improve the main Union Square store as well. We continue to analyze possibilities for our Herald Square New York flagship store, downtown Minneapolis, and the upper floors of our State Street store in downtown Chicago. In addition to these flagship stores, we have made progress in identifying underlying situations where the development or redevelopment of all or a part of our real estate holding exceeds the value of its existing use. We are developing and executing plans to move forward to capitalize on these opportunities. This will occur through sales of assets or portions thereof, some of which are included in the 100 closings, but it could also happen through joint ventures or strategic alliances. We are in early stages of discussions with various potential partners. We also continue to evaluate financial transactions such as sale/leasebacks or joint ventures for locations that we expect to operate for many years. However, this is a low priority for us at present, given a combination of leverage as well as breakage or leakage that would result from debt repurchase, from taxes, and from fees. While we know we have a lot of work ahead of us, we feel confident that we are on the right path. As I said earlier, closing stores is not something we take lightly, but we do believe it will enable us to focus more on our better stores and on our digital business. And by closing weaker stores and monetizing some of our real estate where the redevelopment opportunities are significant, we will grow faster and we will produce a higher return on invested capital. We have talked before about the ongoing need to reinvent our company and that our industry every five to seven years also needs to be reinvented in response to evolving customer shopping preferences and patterns. This is what you are seeing at work today at Macy's, Inc. Terry [Lundgren] and Jeff [Gennette] are working closely with our management team and our board on the strategic progress needed to extend our longstanding role as a leader in fashion, innovation, value, and convenience. As in previous times of reinvention, some big moves and tough decisions in the short term are necessary if we are to grow sales profitably for the longer term. We need to create value from our assets and manage our expenses prudently so that we can invest in the levers of growth. After a series of tough quarters, the distinct change in our sales trend in the second quarter has given our team encouragement. We have so many good ideas on the table. The biggest challenge will be prioritizing what we do, ensuring that we invest appropriately for success, and following the data to be sure that we are in sync with the customer. Everyone here is on board to implement our chosen strategies with passion and rigor. Retailing is changing, there's no doubt about it. Our company is committed to being tomorrow's leader in omni-channel retailing. We will strike the right balance between stores and digital. And the closing of 100 locations will get us to where we think we need to be, all while maintaining a significant physical presence in virtually every major market across America. Fortunately, our company has the critical mass to offer all of the options that our customers want in terms of stores, websites and mobile apps, in terms of expedited shipping, buy online pickup in store, and same-day delivery in many markets, in terms of offering a range of exclusive product choices supported by great experiences that are the hallmarks of both Macy's and Bloomingdale's. So what you are seeing today is meaningful change in the making, and you will be hearing more as time goes on. I'll stop at this point and take whatever questions you may have.

And we will take our first question from Paul Trussell of Deutsche Bank. Mr. Trussell, please turn off your mute function. Paul E. Trussell - Deutsche Bank Securities, Inc.: Good morning, Karen. Karen M. Hoguet - Chief Financial Officer: Hi, Paul. Paul E. Trussell - Deutsche Bank Securities, Inc.: Thank you for all the color. Maybe we can just start with the top line. You spoke about an improvement that you saw throughout the quarter as well as a little bit less negative tourism. As we think about the second half, what are the key drivers that you think can further accelerate the momentum you have in the business and perhaps start turning the comps toward positive in 2017? Karen M. Hoguet - Chief Financial Officer: I think if I start by focusing on all those things that we are doing, it always starts with product and assortments as well as obviously offering the value that our customer wants, but we're supplementing that with improved service in our stores. As you know, we are investing in adding associates to help us with that. So we hope to have not only more sales associates but also continue to improve the training so that we have better associates. The mobile apps and what we're doing online should clearly help as well. So most of our focus is on what we can do internally to help make that happen. Obviously, if the tourist trends continue to be less bad, that would be positive. And obviously if we have a cold winter, that would be terrific as well. But all of our attention is focused on the parts we can control, and the key is having spectacular experiences both in-store and online and on our mobile apps. Paul E. Trussell - Deutsche Bank Securities, Inc.: Great. And then just to follow up, one, if you can, give us a little bit more detail on gross margin performance in the second quarter. Obviously, that came in better than plan. If you can, just walk us through how you were able to achieve that and any timing items or things that we should just keep in mind as we try to model out that line item going forward. Karen M. Hoguet - Chief Financial Officer: I think the key is that sales were better than we had expected, and we have a terrific merchant team that was able to plan out the promotions and needed clearance markdowns to get our inventory in the shape that we were in at the end of the quarter and did so in a way that we were able to preserve the margin. Also, as I said, our Last Act clearance strategy is working well, and that helped as well. Paul E. Trussell - Deutsche Bank Securities, Inc.: And just a quick clarification, Karen, you're saying – you said earlier that you would have – you actually would have raised your EPS guidance by $0.10... Karen M. Hoguet - Chief Financial Officer: No, it's the opposite. Paul E. Trussell - Deutsche Bank Securities, Inc.: ... if it wasn't for the real estate? Karen M. Hoguet - Chief Financial Officer: No, all we're saying is we're keeping the guidance the same. But since we had given a number for Brooklyn of $86 million at the start of the year and now it appears like it's going to be $50 million less, I just want to make sure you've all thought about that in your models, but we're not changing guidance. So that did hurt our earnings by $0.10 a share, but we're not changing guidance. Paul E. Trussell - Deutsche Bank Securities, Inc.: Understood. Thank you for the clarification, good luck. Karen M. Hoguet - Chief Financial Officer: Thank you very much.

And we'll move to Lorraine Hutchinson of Bank of America. Lorraine Maikis Hutchinson - Bank of America - Merrill Lynch Research: Thank you, good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Lorraine Maikis Hutchinson - Bank of America - Merrill Lynch Research: Karen, you said that you would be able to cut costs to offset the EBITDA loss from the closed stores. Will that limit your overall longer-term cost reduction plan, or will these cost cuts be incremental? Karen M. Hoguet - Chief Financial Officer: No, the key is, as you know, we're focused on getting our profitability back to the 14%, so we have been continuing to focus on are there ways of doing the business more efficiently to make that happen. So all of that activity is continuing and will help us offset the loss in EBITDA dollars from the store closings. Obviously, if we can preserve the EBITDA and have whatever the number turns out to be, roughly $1 billion less in sales, that will help our EBITDA rate and also, by the way, help us in terms of return on invested capital, so all good. Lorraine Maikis Hutchinson - Bank of America - Merrill Lynch Research: Yes, and then the AUR was up for the quarter. Was that a mix shift, or were there other factors involved there? Karen M. Hoguet - Chief Financial Officer: No, AUR is a very tough number when you look at it in total. I'm sure there was some mix shift in there. But it also had to do with the fact that we were able to clear the inventory both through Last Act and earlier in the markdown cycle in a better way. Lorraine Maikis Hutchinson - Bank of America - Merrill Lynch Research: Great, thank you very much.

And we will take a question from Lindsay Drucker Mann with Goldman Sachs. Lindsay Drucker Mann - Goldman Sachs & Co.: Thanks, good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Lindsay Drucker Mann - Goldman Sachs & Co.: I wanted to ask about the $1 billion of lost sales you estimated. I know it's still early from the 100 store closures. You talked about that being net of some sales recapture in other stores and potentially online. Are you able to disaggregate what's the gross versus net number and the potential of that to benefit comps in your existing store base? Karen M. Hoguet - Chief Financial Officer: Yes, we'll talk about it as we get the specific stores and where we are going forward. We have had a lot of success in retaining more of the sales than we used to be able to retain, both through marketing and also through our assortment decisions. And so as we model these out, we have estimates store by store, which depend on distance to the other store, how similar the stores are, et cetera, et cetera. But once we make the final decisions, Lindsay, we'll try to help you with that. Lindsay Drucker Mann - Goldman Sachs & Co.: Okay, great. And to follow up, we've heard from a number of your vendors a change in their thoughts on friends and family and couponing and promotional strategy. Are you guys also contemplating a shift in that strategy for next year? Karen M. Hoguet - Chief Financial Officer: No, I wouldn't say we're contemplating a shift, but obviously we're working with our key vendors to make sure that we can keep their sales growing as much as they should and sorting through how to do that by giving customers the value that they want. Lindsay Drucker Mann - Goldman Sachs & Co.: Okay, great. Thanks.

And we will move next to Paul Lejuez of Citi. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): Hey, Karen. Karen M. Hoguet - Chief Financial Officer: Hi, Paul. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): I'm just curious how you plan to work through inventory at some of these stores that are to be closed. Should we expect you to merchandise those stores similarly as if they weren't being closed, or will they have a more toned down assortment as we think about the back half? And then maybe... Karen M. Hoguet - Chief Financial Officer: No, there will be no change for the remainder of the year in those stores in terms of the inventory. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): So should we expect pretty significant promotions in those stores at the end of the year before they close? Karen M. Hoguet - Chief Financial Officer: No, it will be business as usual, like we always do when we close stores. And then once we close them, they will go into going out of business mode, but it doesn't change how we operate them between now and then. As you know, we haven't identified which ones they are, so don't expect any change in terms of how stores are operated this fall. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): Got you. And you talked about having I think a better experience just in terms of retaining sales on recent closures. Can you talk about the 41 stores that closed last year, what percentage you were able to retain at nearby stores or e-comm? Karen M. Hoguet - Chief Financial Officer: Yeah. We're still watching the percentage, but it's not as much as people would think it would be, but we are having a lot more success than we used to. I think we need a little more time, Paul. So let's just wait until the end of the year, and then we'll talk about it. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): Great. And then just one model question. On the depreciation line, the impairment charge in 2Q, does that help you a bit in second half on the depreciation line? And if so, can you quantify that for us? Karen M. Hoguet - Chief Financial Officer: Yeah. I think as we look at the depreciation, it's not going to change much from the guidance we had given you before for the year. So it changes some, but not enough to make a difference. Paul Lejuez - Citigroup Global Markets, Inc. (Broker): Okay, thanks and good luck. Karen M. Hoguet - Chief Financial Officer: Thank you.

And we'll move to Matthew Boss of JPMorgan. Matthew Robert Boss - JPMorgan Securities LLC: Hey, Karen. Karen M. Hoguet - Chief Financial Officer: Hi, Matt. Matthew Robert Boss - JPMorgan Securities LLC: Can you talk about early indications from some of the initiatives, so what you're seeing from the jewelry rollout, Last Act, Backstage? And then just we traveled out and saw some of the tests in Easton Town Center, and it was pretty impressive. Any learnings you've found there and potential to roll out across the fleet? Karen M. Hoguet - Chief Financial Officer: Yeah. The good news is if I look at, for example, fine jewelry, we started it in 40 stores in California last year. And based on that success, as you know, we're rolling it out. The good news is as we year-round the rollout of that in California, the stores continue to grow significantly, so we feel great about the sustainability of the accelerated growth. And now it's in over 350 stores, with the remaining locations being rolled out next year. And Phase 2 of the rollout is doing as well as the first phase did last year, so we feel great about that. Last Act continues to be very strong, helping both sales and margin. And Backstage, as I said, we're learning an awful lot about how to give value to the customer and perhaps how to both increase the share of wallet of our existing customers and also attract new customers to our doors. So all is good. Matthew Robert Boss - JPMorgan Securities LLC: And then just anything on Easton Town Center? Karen M. Hoguet - Chief Financial Officer: Oh, sorry, I forgot about Easton. Easton, there's a lot of things that are working very well, and I think you will see us roll it out a lot with active and the wellness, beauty. But I think it's too early to really be specific about what it will be, but we feel great about what we're seeing there. Matthew Robert Boss - JPMorgan Securities LLC: Great. And then just to follow up, larger picture, there are a lot of changes underway from your vendors. I'm sure you hear it on every single one of these calls and more on the distribution front. Can you speak to how you see this playing out for Macy's over time? Do you believe this could actually accelerate your differentiation effort versus some of your peers? I'm just curious how you think Macy's is impacted and the best way for us to think about it. Karen M. Hoguet - Chief Financial Officer: Look, we have great relationships with the major vendors. We're important to them; they're important to us. And hopefully, with us being proactive and hopefully accelerating our growth and making the company stronger, that will be good for them as well, and we'll work together so that we all can be stronger in the future. Matthew Robert Boss - JPMorgan Securities LLC: Great, best of luck. Karen M. Hoguet - Chief Financial Officer: Thanks.

And we will take a question from Jeff Stein of Northcoast Research. Jeffrey Stein - Northcoast Research Partners LLC: A couple real quickies, Karen. Any estimate of the cash impact of the store closings, and is that part of the $249 million? Karen M. Hoguet - Chief Financial Officer: Most of the $249 million is non-cash, and it's related to the asset impairments. Almost all of it is non-cash. Jeffrey Stein - Northcoast Research Partners LLC: Okay, but there will be severance charges? Karen M. Hoguet - Chief Financial Officer: There will, there will. But typically when we close stores, the bigger number is the impairment charge. You can go back and look at last spring and see that. Jeffrey Stein - Northcoast Research Partners LLC: Okay, but you're including that in the $249 million, the severance? Karen M. Hoguet - Chief Financial Officer: No. Jeffrey Stein - Northcoast Research Partners LLC: No? Karen M. Hoguet - Chief Financial Officer: No, because we don't know the stores yet. Jeffrey Stein - Northcoast Research Partners LLC: Got it. Karen M. Hoguet - Chief Financial Officer: And our hope is to be able to place as many of the associates as we can and minimize that number. Jeffrey Stein - Northcoast Research Partners LLC: Okay. And Last Act, can you quantify the impact that you believe it has had on your overall gross margin? Karen M. Hoguet - Chief Financial Officer: No, I really can't. Jeffrey Stein - Northcoast Research Partners LLC: Okay, final question real quick. How large is the men's store at Union Square? Karen M. Hoguet - Chief Financial Officer: It's about a little less than 250,000 square feet, and the main store is about 925,000 square feet. Jeffrey Stein - Northcoast Research Partners LLC: Got it, okay. Thank you very much.

And we will take a question from Brian Tunick of RBC Capital. Brian Jay Tunick - RBC Capital Markets LLC: Thanks very much. I'm new, but I was curious, Karen. On Backstage, maybe you can give us little more color there. What is the team internally evaluating when they're considering rolling it out into more of the Macy's stores, and how does that change given the store closing announcements? And then just on the buyback potential acceleration into the second half, can you give us a view of what a minimum cash position would be when we try to think of how much stock you would buy back? Karen M. Hoguet - Chief Financial Officer: Unfortunately, I can't give you much help on your second question. Typically, we look at the cash that we're going to generate through the year, but I can't give you a – and use it to buy back stock what we're not using for CapEx and internal purposes, but I can't give you a specific number. On Backstage in-store, what we're trying to evaluate, and this is really being done category by category, what impact does it have on the Macy's store and what impact does it have in terms of bringing new customers to the store, sort of both. As you would expect, when we take space away from the rest of Macy's, the non-Backstage part of the store will do less business. But currently we are seeing a lift in the total store including Backstage, which is very encouraging. But as you might imagine, different stores are behaving differently, different categories. And so we're really just trying to learn and figure out what's the best way of expanding this concept. Brian Jay Tunick - RBC Capital Markets LLC: And where are you in building out a buying organization or developing a packaway strategy? Obviously, I know Bloomingdale's Outlet is developed. But is there a lot of overhead you need to add to build out the capabilities like other off-pricers? Karen M. Hoguet - Chief Financial Officer: We have an organization already. It is being bought completely and planned for completely by a separate organization, so we already have that. Obviously, it will grow depending on the growth of the business. But we do it completely separate from the core Macy's organization. Brian Jay Tunick - RBC Capital Markets LLC: Terrific, thanks very much and good luck. Karen M. Hoguet - Chief Financial Officer: Thank you.

And we'll hear from Omar Saad of Evercore ISI. Omar Saad - Evercore ISI: Thanks. Hi, Karen. Karen M. Hoguet - Chief Financial Officer: Good morning. Omar Saad - Evercore ISI: I wanted to – as you guys are really thinking outside the box and creatively about different strategies, operational and real estate related, you've had some nice success with the licensed concept with Finish Line and others. Have you guys thought about pursuing more of that kind of concession model maybe directly with some of your big suppliers? Have you thought about – that would allow you to take away some of the inventory risk and maybe some of the expense around running those businesses. I'd just be curious since you're in that mindset of thinking differently about things. Karen M. Hoguet - Chief Financial Officer: We definitely will expand the licensed businesses that we have, but it always starts with opportunities to grow sales and give our customers experiences in categories that we haven't been able to do as well ourselves. So it doesn't start with a desire to reduce inventory. It's really, can we give the customer a superior offering? So our focus has been primarily on categories or in some cases vendors that we might not otherwise be able to offer. But it really does start with the lens of the customer in terms of what we choose to license versus not. Omar Saad - Evercore ISI: That's helpful. And then maybe you could just give us a little update on the Black Friday in July event, how that went, and it was a unique thing that you guys did. Karen M. Hoguet - Chief Financial Officer: It went very well, and we were quite pleased with it. Omar Saad - Evercore ISI: Thanks, good luck. Karen M. Hoguet - Chief Financial Officer: Thank you.

And we will hear from Michael Binetti of UBS. Michael Binetti - UBS Securities LLC: Hey, Karen. Good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Michael Binetti - UBS Securities LLC: And congrats on a very tough quarter for the industry. Karen M. Hoguet - Chief Financial Officer: Thank you. Michael Binetti - UBS Securities LLC: Let me ask you. I think as we look ahead a little bit, obviously you're talking about a lot of things today that are longer term in your model. If I look at just 2017, maybe a little bit of help on how to think about some of the puts and takes as far as – can you help us dimensionalize the comp trend in your, say, top 100 doors versus your bottom 100? Or you pick the number, just so we can understand how this could impact comps. And then maybe just how you – I think there was an earlier question about friends and family about a couple brands pulling away from it, how you think about the merchandising to replace any hole in comps that that may cause as we look out to the next year. Karen M. Hoguet - Chief Financial Officer: I think it's premature to give guidance or thoughts on 2017. So I apologize, but I'm not going to be able to help you there. And obviously, that's what we work on, which is when we see some sort of a risk, either from less good product or a change in a promotion strategy for a vendor, what can we do to fill those holes with other products or other categories, and that's what our team does all day long. Michael Binetti - UBS Securities LLC: Is it meaningful? I guess is it fair for me to assume that there's a meaningful delta in the spread of comp growth or comp distribution of the company between your top doors and then any of the bottom 100 that we may have talked about? Karen M. Hoguet - Chief Financial Officer: I don't know how to answer that because everybody defines meaningful differently. Michael Binetti - UBS Securities LLC: Okay. So you guys have done a great job on staying nimble on watching the costs during the smaller number of closures over the past few years, but this one is obviously bigger. If you can do it respectfully to your team, can you talk to us about how the approach to cost with a bigger announcement like this may be different than in a year when you close a lower door count? Obviously, people will look at where is Macy's going to come up enough to offset the fixed cost deleverage potential? Karen M. Hoguet - Chief Financial Officer: I don't think there would be a big difference in terms of our approach. For example, one of the areas we'll focus on is the whole world of indirect spend, where we think there may be opportunities to take costs out. But I don't think this year will feel any different than other years in terms of what we're trying to do. Michael Binetti - UBS Securities LLC: Okay, thanks.

And we will hear from Kimberly Greenberger of Morgan Stanley. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great, thank you. Good morning, Karen. Karen M. Hoguet - Chief Financial Officer: Good morning, Kimberly. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: I wanted to ask about transactions. The 5% decline, does that include e-commerce? Secondarily, apparel I think you mentioned was strong across the board. Was that category actually positive in the quarter or just better than the rest of the categories? And then lastly on the 100 stores that are closing, I understand that the $1 billion in revenue is the expectation of the net loss net of retained sales, and I know that the retained sales assumption varies on a store-by-store basis. But could you give us some idea of what the gross revenue assumption is? That would be helpful. Thanks, Karen. Karen M. Hoguet - Chief Financial Officer: So the 5% drop in number of transactions does include dot-com. That's the number we quote every quarter. And in ready-to-wear, there were parts of the ready-to-wear that were quite positive. In total, it was pretty close but not positive. But there were categories, things like junior dresses or millennial dresses that was positive, and active and things like that. And I think as I had said earlier, until we know specifically which stores are closing, I don't want to talk about gross versus net. And remember, that $1 billion is likely to be a bigger number than what actually ends up closing at year end 2017 because some of the 100 stores will be closing a little bit later. So once we have the specific stores, we'll try to be more helpful with gross and net. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great. Thank you, Karen, and just one last follow-up. I think you mentioned on a slightly lower credit income, it was largely a result of a slight decline in penetration. Are you seeing any increase in late payments, delinquencies, or defaults in that portfolio at this point? Karen M. Hoguet - Chief Financial Officer: No, remember, we had expected credit income to be below last year when we started the year, so this is not a surprising trend. We are seeing some increase in delinquencies, as we had said. But remember, part of that is because we're also trying to grow the portfolio. So there's nothing concerning happening in the portfolio today, and it is happening as we had anticipated. Kimberly Conroy Greenberger - Morgan Stanley & Co. LLC: Great, and thank you so much for all the detail today. It's really helpful. Karen M. Hoguet - Chief Financial Officer: You bet. Thanks, Kimberly.

And we will move to Oliver Chen of Cowen and Company. Oliver Chen - Cowen and Company, LLC: Hi, Karen. Karen M. Hoguet - Chief Financial Officer: Good morning. Oliver Chen - Cowen and Company, LLC: Regarding the reinvention of stores and the changes you're making, what are your thoughts on how we should focus on millennials and Generation Z and how you're going to balance being appealing to younger and older in your core as the store evolves? It's a longer-term question in terms of how will these stores look different in five years. What is your consumer research saying, and are there major category shifts we should see? The service component is also interesting in your prepared remarks. Which departments do you think will benefit from more service, and why did you identify this as a need? Karen M. Hoguet - Chief Financial Officer: That was a mouthful. I'm not quite sure where to start with that. Clearly, our view of the stores going forward will evolve. So I can't sit here today and paint what it's going to look like in five years. But as we do stores like Easton and Columbus, that gives you some insight into some of the things we're looking at, for example: an expanded active area that includes health and wellness more broadly; the way we've approached the bridal business at Easton, including having some wedding dresses available that you could buy in the store day-of or not having to be pre-ordered. Also, what we've done with beauty in Easton is really very exciting. So there are a lot of concepts, fine jewelry, which we've talked about. We're experimenting with shoes. So I would say almost throughout the store, we are looking for ways of improving both the assortment that we carry, making it more special, more exclusive to Macy's, which will attract not only millennials but also older customers as well. So I think you're going to see a lot of experimentation continue on that front. In terms of increase in service, one of the areas we've actually focused on this year has been ready-to-wear. And the reason for that is it's the category that also has to handle the most Internet returns. And so we wanted to make sure we had more staff there so that they were able to service customers that came in wanting to buy in addition to dealing with the returns that are going to obviously come from a growing digital business. So that's one of the examples of where we've put increased staffing. Oliver Chen - Cowen and Company, LLC: Okay. And, Karen, you've been on top of understanding the real customer focus on value and evolving Last Act. But what's the future of the evolution of how you execute promotions in a brand-appropriate way in the manner that you want to execute them and is appealing in terms of how you may segment different ideas? I just want to get your take on the modernization of promotions. Karen M. Hoguet - Chief Financial Officer: I think it's premature, but we've got lots of thoughts and lots of tests that we're going to start to begin thinking about that. So we agree that that's an issue that should be on our plates and for sure it is, but premature to really be talking about it. Oliver Chen - Cowen and Company, LLC: Okay, and just our last question, Karen. You've been a really good partner to a lot of vendors. As the opportunities – as the landscape evolves and Amazon becomes a partner to a lot of your vendors as well, what are your thoughts on how you'll maintain a competitive advantage? And there's many ways to approach that, but what's top of mind? And has anything been surprising in terms of what we should know about the evolution of that relationship and how this is evolving? Karen M. Hoguet - Chief Financial Officer: No, I would say first, vendor relationships have always been one of the core values of Macy's. And that's going to always be important, and we're going to work very closely with our vendors to help our business and their business simultaneously. So I see that continuing. I think also as part of today's announcement we're focused on growth and more profitable growth. And yes, while we're shrinking to achieve that growth, I think that will help our vendors as well. And let's not forget the critical importance of stores for most of our vendors. We have the ability of showing merchandise and providing instantaneous not only purchasing, but also the ability to put outfits together in a store, which again for many customers to be able to see the color, feel the fabric, see how it fits, it's still where the lion's share of where this merchandise is being sold. So I think all of that will help us to continue to be very important partners to our vendors. Oliver Chen - Cowen and Company, LLC: Thank you, great job on moving so quickly in your communications strategy. Thanks, best regards. Karen M. Hoguet - Chief Financial Officer: I appreciate it, thanks.

And we will take the next question from Richard Jaffe of Stifel. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Thanks very much. Just a quick clarification. We had planned for 30 stores to 40 stores this year. Is the 100 stores you've mentioned an incremental or an additional 100 stores? Or is that... Karen M. Hoguet - Chief Financial Officer: No, the 30 stores to 40 stores – the 41 stores were closed year-end last year. So if you're talking about last year's announcement, that's already happened. So this is 100 stores on top of that, approximately 100 stores. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Got it, that's helpful. And given what appears to be the success of some of the shop-in-shops you've built, I know you can't be specific, but is that going to be an initiative we should look for in 2016? Karen M. Hoguet - Chief Financial Officer: Are you talking about like Bluemercury store-in-store, or are you talking about the licensed businesses... Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Bluemercury or... Karen M. Hoguet - Chief Financial Officer: Yes, absolutely. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: And then in time for Christmas, do you think? Karen M. Hoguet - Chief Financial Officer: Hopefully. Richard Jaffe - Stifel, Nicolaus & Co., Inc.: Okay. Look forward to it. Thank you. Karen M. Hoguet - Chief Financial Officer: Thank you.

And we will move to Dana Telsey of Telsey Advisory Group. Dana L. Telsey - Telsey Advisory Group LLC: Good morning, Karen, and nice to see the progress. Karen M. Hoguet - Chief Financial Officer: Thank you very much. Dana L. Telsey - Telsey Advisory Group LLC: As you think about the apparel pickup, what's your take on what's driving it? Is it style? Is it price? Is it Last Act? And then on the promotional cadence where you saw the margin uptick, did that come from a lesser rate of promotion or better full price? How do you triangulate it? Thank you. Karen M. Hoguet - Chief Financial Officer: Yeah. Honestly, I think the pickup in apparel is all of those things. It's improved assortments, improved offering. I think it is the value offering and the price, and I do think Last Act. So I'd say yes, yes, and yes. And I also think, as I said earlier, the warm weather did help. Dana L. Telsey - Telsey Advisory Group LLC: And then as we go in the back half of the year, any new collaborations or anything new on the merchandising side that we should look to? Karen M. Hoguet - Chief Financial Officer: I think I would say stay tuned. There are some things in the works that we're still hoping to get done. But we continue to strengthen the relationships that we have in these collaborations, so stay tuned. Dana L. Telsey - Telsey Advisory Group LLC: Got it, thank you. Karen M. Hoguet - Chief Financial Officer: You bet.

And we will move to David Glick of Buckingham Research Group. David J. Glick - The Buckingham Research Group, Inc.: Thank you. Good morning, Karen. Karen M. Hoguet - Chief Financial Officer: Good morning. David J. Glick - The Buckingham Research Group, Inc.: A question on Backstage and then I'll follow up on the store closings. At what point do you think you'd be in a position to more aggressively roll out the store within a store Backstage concept? And did you consider or is it still possible to consider some of these locations that are closing to repurpose as Backstage stores? Karen M. Hoguet - Chief Financial Officer: I think it is unlikely that we will repurpose any of these stores for Backstage in-store, although that's always a possibility. And I think we will continue to grow Backstage in-store. I'm not sure. Again, the word aggressive has a wide range of definitions. David J. Glick - The Buckingham Research Group, Inc.: Right. Karen M. Hoguet - Chief Financial Officer: But I think we feel good about it and we'll expand it. David J. Glick - The Buckingham Research Group, Inc.: Okay. And then a follow-up on the store closings. Can you help us think through the cash flow impact? Obviously, it's EBITDA neutral given the cost cuts that you're implementing. But if you can, give us some color on the working capital and CapEx impact, and then also as you seek to get back to your historical EBITDA margin goals, the impact this could have on gross margin given the probability that some of these smaller doors are higher markdown, lower margin doors. Karen M. Hoguet - Chief Financial Officer: Until we have the specific stores, David, it's hard to do it. Obviously, it will free up working capital and it will allow us to spend less on CapEx, although I confess we're not spending an enormous amount in these stores, which is part of the reason why we're closing them. But we will reinvest that capital. So I don't expect a reduction in the capital budget because of these closures. Also, they will bring in proceeds. So again, as we get closer to knowing which stores, there will be a cash flow positive that will come from selling many of these stores. Some are leased, so it's not all of them. So more to come as we know more, but the working capital and the proceeds should be positive in terms of cash flow for the company. David J. Glick - The Buckingham Research Group, Inc.: And the gross margin impact? Karen M. Hoguet - Chief Financial Officer: I don't know that it will be significant, but again, we'll wait and see as we close the stores. David J. Glick - The Buckingham Research Group, Inc.: Great, nice progress. Thank you very much, good luck. Karen M. Hoguet - Chief Financial Officer: You bet, thank you.

And we will take a question from Andreas Olia of GBM (1:01:15).

Hello, congrats on the results. Can you give us a little more color regarding how many of the stores that you are closing are owned versus leased? Karen M. Hoguet - Chief Financial Officer: Well, we don't know exactly which stores it will be, but I don't see any reason for it to be dramatically different than the split of our stores today.

Thank you very much.

And we will take a question from Sheila Jaywalker (1:01:48) of Jefferies. Randal J. Konik - Jefferies LLC: It's actually Randy Konik at Jefferies. Hi, Karen, thanks for taking my question. Karen M. Hoguet - Chief Financial Officer: Sure. Randal J. Konik - Jefferies LLC: I just want to go back to the real estate approach. Since the call is talking about 100 stores but we don't know which stores they are, can you give us some thought process on the approach? Is it an exercise in looking at the density per market? I'm just trying to get a sense of since you identified 100 stores but we don't know what the 100 stores are, I want to get some more color on the approach to what the process was. Thanks. Karen M. Hoguet - Chief Financial Officer: Yeah. The process, we did two very detailed analyses, one, which we've always done, which is how is the store performing and how do we expect it to perform in the future. And we project out cash flows and discount them back and compare that to the proceeds that we would get, so what you would expect to be a typical financial analysis. What we did this year, though, to supplement that is we went through and looked at all of our locations and evaluated them based on their strategic importance, which had to do with quality of the market, quality of the malls, the competition in the malls and the market, what was happening in terms of growth of income and population in all the markets and coverage that we would need to go forward, and ranked our stores in terms of long-term strategic importance. And so what we've done to come up with this 100 stores is married those two. And in most cases, as you would imagine, a poorly located store is also an underperformer. And so for the most part, they were both of those, but it did lead us to accelerate some of the closings that in prior years we might not have done without that long-term evaluation of the strategic importance of the location. So that is most of the 100 stores. There are a few additional locations, though, that have been included that are not strategically critical to the company based on that analysis, but where from a redevelopment opportunity we think there's a big opportunity. So in those cases, they're not underperformers but that long term they're not critical to the Macy's footprint. And so we will be taking advantage of the real estate demand for those locations as well. But I would say most of them are both underperforming and not in good locations for the long term. Randal J. Konik - Jefferies LLC: And if I may, is there any type of color or guidepost that we could get around geographic dispersion of those closures? Karen M. Hoguet - Chief Financial Officer: They're all over the country. They're over the country. Randal J. Konik - Jefferies LLC: Is there any concentration where we might see? Because if there are 100 top USA market MSAs and there are 100 door closures, it's most likely not one per MSA, I'm assuming. So I'm just curious if there is any type of – did the analysis spit out in the Southeast market where this is where we disproportionately have some underperformance where we could reduce exposure to become more profitable? I'm just curious from a geographic... Karen M. Hoguet - Chief Financial Officer: Again, we don't have the specific locations. But geographically, they're spread across the country. Because even in high-growth markets, there are malls that aren't strong or areas where we've got duplication. Remember, Macy's is the combination of many companies that we've put together over the years. So it shouldn't be surprising that in some markets, we don't need as many stores as we have. Randal J. Konik - Jefferies LLC: Got it. I guess my last question is when you think about – you've obviously done a great job over the years of giving a cost number and hitting that cost number. When you think about the visibility of lack thereof of the top line estimate, is there anything you can point us to, to give us some perspective on what the retention assumption is on the gross versus the net? Karen M. Hoguet - Chief Financial Officer: No, not at this point. We need to work through what stores it's specifically going to be. Randal J. Konik - Jefferies LLC: Got it, okay. Thank you. Karen M. Hoguet - Chief Financial Officer: You bet.

And we will move to Brian Callen of Bank of America. Brian Callen - Bank of America Merrill Lynch: Hi, good morning. Karen M. Hoguet - Chief Financial Officer: Good morning. Brian Callen - Bank of America Merrill Lynch: Just one on the real estate optimization and maybe specifically on the asset sales and JV transactions bigger picture that you're looking at. Are those conversations with buyers or partners taking longer than you would have anticipated a year ago? Are there any hang-ups or were there any surprises in the conversations? Karen M. Hoguet - Chief Financial Officer: No, as you'd imagine, we'd always like to get things done quicker. But these are big complicated assets, so I would say no. It's pretty much as expected. Brian Callen - Bank of America Merrill Lynch: Okay, great. And then just quickly on the repurchase halt, was that at all driven – obviously, you said based on your performance in 1Q. But is that at all driven based on the negative outlooks from the rating agencies, or is intent the same in terms of your investment-grade rating and you were just prudently halting the repurchase? Karen M. Hoguet - Chief Financial Officer: The intent is completely the same. And again, that's always been the benefit of stock buybacks. You can flex them up and down depending, and we took advantage of that opportunity after the first quarter. But we continue focused on maintaining the investment-grade ratings. Brian Callen - Bank of America Merrill Lynch: Great, thank you very much.

And we will take a final question from Priya Ohri-Gupta of Barclays. Priya Ohri-Gupta - Barclays Capital, Inc.: Thank you for the questions, Priya Ohri-Gupta, just a quick one around the expected use of proceeds from some of these asset sales. Do you anticipate, given some of the outlooks from the agencies that Brian recently mentioned the need to pay down some of your upcoming maturities using the proceeds or perhaps proactively looking to reduce some of the maturities that aren't coming due near term? Thanks. Karen M. Hoguet - Chief Financial Officer: We're working hard to get back into our target debt-to-EBITDA range, the 2.5 to 2.8 times, which we're obviously above right now. But we think that that will happen naturally through EBITDA increases and don't at this point anticipate proactive debt repayment. But that doesn't mean we couldn't do it in the future should EBITDA not materialize. But at this point, the use of proceeds will be as you might expect but not proactive debt paydowns, although again, it could happen, and our goal remains to get back into these targeted ranges. Priya Ohri-Gupta - Barclays Capital, Inc.: And is it your expectation, given the outlook for EBITDA declining this year, getting back to that 2.5 to 2.8 times leverage range as more of a 2017 objective at this point? Karen M. Hoguet - Chief Financial Officer: I can't comment at this point. Priya Ohri-Gupta - Barclays Capital, Inc.: Okay, that's helpful. Thank you very much. Karen M. Hoguet - Chief Financial Officer: You bet.

And there are no further questions in the queue. Karen M. Hoguet - Chief Financial Officer: Wonderful. Thanks, everybody. And if you have further questions, just let us know. Take care.

And, ladies and gentlemen, this does conclude today's conference. Thank you, everyone, for your participation. You may now disconnect.