M&A announcement

Aug 17, 2017

forward-looking statement. The company's business and operations are subject to a variety of risks and uncertainties, many of which are beyond its control, and consequently, actual results may differ materially from those projected. A summary of these uncertainties is included in the safe harbor statement contained in the company's press release. For a more complete description of these and other possible risks, please refer to the company's annual report on Form 10-K for the year ended December 31, 2016, as well as to subsequent filings with the SEC. You can access these filings on the company's website at www.ur.com. Please note that United Rentals has no obligation to make, no commitment to update, or publicly release any revisions to forward-looking statements in order to reflect new information or subsequent events, circumstances, or changes in expectation. You should also note that the company's press release, investor presentation, and today's call include reference to free cash flow, adjusted EPS, EBITDA, and adjusted EBITDA, each of which is a non-GAAP term. Please refer back of the company's recent investor presentations to see the reconciliation from each non-GAAP financial measure to the most comparable GAAP financial measure. Speaking today for United Rentals is Michael Kneeland, Chief Executive Officer; William Plummer, Chief Financial Officer; and Matt Flannery, Chief Operating Officer. I will now turn the call over to Mr. Kneeland. Mr. Kneeland, you may begin. Well, good morning, everyone, and thanks for joining us on such short notice. Here we are with more exciting news to share. This week, we signed a $1.3 billion agreement to buy Neff Corporation, and we expect to close it in the fourth quarter. We're going to move pretty quickly through our prepared remarks this morning to leave time for your questions, and we'll focus on adding detail to some of the information you just read in the release. I'll start with a strategic overview, and then Matt will share his thoughts on operations. After that, Bill will run through the numbers. As you know, we're always open to M&A, and if we see a way to augment our value creation, we found a really good one in Neff. We've looked at Neff before, going back a number of years, but it was never exactly the right time or price. Today, we absolutely feel that it's right. I should mention that we feel just as strongly about our acquisition of NES back in the first quarter, and so far, it's been a home run. The press release did a good job yesterday of laying out the many compelling rationales for this transaction. Now, I'll dig into two of them that merit special attention. Number one is our growth strategy. It's what we call Grow the Core. We're committed to growing our core business through numerous avenues, and Neff is right in our wheelhouse. They have a complementary fleet and branch network serving over 15,000 customers that's very attractive to us. But Grow the Core is also about synergies and about building value more quickly than we could achieve organically. Looking deeper, I want to point out why Neff is especially good fit for our company. For one thing, their footprint is concentrated in the southern states, where we've consistently seen strong demand for equipment rental services. The addition of their network bring us greater efficiencies of scale in key markets. Neff is well established in the infrastructure and municipal sectors. This dovetails with our Project XL initiative. Infrastructure, in particular, is one of our target verticals. In addition, we can benefit by increasing the number of larger earthmoving assets as a percentage of our fleet. We already offer one of the largest earthmoving fleets and established a good customer connections in an under-penetrated renter market. Neff is on a different level. They're very good at managing large earthmoving categories for superior returns, and we'll be bringing that expertise on board. We're also excited about the cross-selling opportunity that will be on our doorstep once we close the transaction. Matt will talk more about cross-selling, but the big picture is that a fair amount of the opportunity stems from the last two levers I just mentioned, the infrastructure sector and earthmoving. Both put us face-to-face with new customers who can use our broader equipment range, including our specialty fleet. A minute ago, I mentioned that there were two compelling aspects for this transaction. In addition to the financials, one is our strategy and the other is the team at Neff. Culture is a really big deal for us. We have to share on the same priorities, and Neff is committed to continuously improving their safety performance, and we are, too. They have a lot of seasoned operators with deep expertise who will be an asset to our combined customer base. Then we're bringing on board at a pivotal time in our growth to play an important role in our future. I look forward to welcoming the Neff team personally to United Rentals. Finally, a word about timing. Neff's bid has been well documented in the trade press. In the end, our involvement during the go-shop period happened quickly, but also very thoughtfully. We're extremely comfortable with the agreement and excited to move forward. The NES integration that we started in April is going smoothly, and we're on track with the expected synergies, and the heaviest lifting is behind us. We'll be customizing a similar integration plan for Neff. Once the transaction closes, we'll issue new guidance that reflects the impact of the combination for the remainder of the year. I think I'll stop here and hand it off to Matt, and then we'll go to Bill, and after, we'll go to Q&A. Matt, you're on. Thanks, Mike, and good morning, everyone. As Mike mentioned, the NES integration's gone exceptionally well. That's relevant for this call because we'll be using a similar integration process with Neff. We'll tailor it for their operations. We've got a world-class playbook that we've honed over 20 years of successful M&A, so we're confident it's going to go well. One of the early cornerstones of the integration is to get all of the acquired branches on our rental management platform. The great news here is that Neff already uses the RentalMan system, so that's going to help facilitate the entire process. This will allow our combined field organization to serve customers seamlessly during the transition. It effectively gives each branch visibility into one big pool of fleet. It also triggers cross-selling, which we see as a big opportunity here. It paves the way for harmonizing data and customer groups with the goal of serving the customers the most effective way we can. Beyond all of that, a lot of the tech on the back end matches up really well and should streamline the integration process for the front lines. There's not a lot of other information to share about the integration right now, other than to say that the number one thing we've learned over the past 20 years is you've got to take care of the people. We know that there are a lot of great people who will be joining United Rentals family from Neff, and their expertise and the ability to serve customers is what gets me excited about this deal. Now I want to talk about why Neff is so attractive from an operational standpoint. Now Mike mentioned the footprint, fleet mix, and access to new customers. Those are all definitely strong considerations. We also like their end market mix. As you can see on slide 5 of the investor deck, Neff derives about 30% of their revenue from infrastructure and another 10% from municipal. This is especially interesting to us, given the opportunity to cross-sell our specialty ranges such as power, pump, and trench. As many of you know, we started prioritizing infrastructure about 9 months ago as part of our Project XL initiative. It's a sector that's grown steadily over the last 20 years, and historically, it's been less volatile over cycles. Given the poor condition of many of the U.S. roads and bridges, we see this as a big opportunity, regardless of how the proposed $1 trillion infrastructure package fares in Washington. So the addition of Neff clicks right into place with our strategy. The rest of Neff's business comes from non-residential, residential, and other end markets, which may give us some new avenues to explore. Now, let's turn to fleet. Pro forma for the combination, we expect to be about $11.2 billion of OEC. You can see the breakout on page 7 of the investor deck. To give you context on the earthmoving part, we're currently at 11%, and we'll move up to 14% after the deal closes. That dirt fleet is very diverse, consisting mostly of backhoes, dozers, loaders, and excavators, as well as some of the smaller mini excavators and skid steers. Now Bill will get into the synergies, but I want to mention one thing about the cross-selling opportunity. We're targeting a revenue synergy of approximately $15 million annually, just from cross-selling our expanded fleet to customers in both directions. In other words, we have customers that can use the earthmoving and material handling equipment that we'll be adding to the fleet from Neff. On the other side, Neff has customers who can use our specialty solutions and broader gen rent fleet. So the combination is a win-win for customers and for our company. The last thing I want to mention is our commitment to sharing best practices. We never go into any acquisition thinking that we have all the answers. We do a lot of things right, but we're also open to change. We know that the Neff team is really good at making a profit, and that they have a strong background with earthmoving equipment, and we want to learn that from them. We also have a lot of operational know-how we can share, as well as field-tested initiatives for safety, sustainability, customer service, and operational excellence. We feel strongly that combining our strengths will be very powerful. I know I speak for our entire management team when I say that we've been impressed with what the Neff team has been able to accomplish, and we're very excited to have them as part of our organization. I think it's going to be a very good match. Now I'll turn the mic over to Bill for an overview of the proposed transaction, and then on to Q&A. Bill? Thanks, Matt, and good morning to everyone. I'll add my thoughts about the excitement we feel about this transaction. Neff is a well-run company joining what is a well-run company at United Rentals, and so that combination should be very powerful for us. An aspect of well-run as nature of Neff is how they performed over the last few years. If you look at their revenue profile, they've been growing their revenue pretty consistently at about 6% a year since 2013. That grows it to a total revenue expectation of about $419 million this year. So nice growth as a standalone company that we think we can enhance. The profitability of the company is good as well. Forecast is for $207 million of adjusted EBITDA in 2017. That's a margin that's creeping up on 50% across the full year. So really nicely profitable company as it stands today. Again, we think we can enhance that. So a good property to be joining a good property is a great acquisition in our perspective. We believe we paid a good price for this company. The $1.3 billion is about 6.4 times the 2017 adjusted EBITDA that I just gave. If you add in the synergies that we expect, the $35 million of operating synergies, that nets down to about 5.4 times. There's also another big attractive aspect to this deal, which is the tax benefits that are associated. We calculate the benefit of step-up in basis on the assets, some of the tax-deductible intangibles, and NOLs in aggregate to be a net present value of $220 million. So that's a very nice add to what we're buying as an operating business. That tax benefit nets down our net purchase price to 4.5 times. A very attractive deal, no matter how you look at it. Just to give you a little bit more concrete sense of the benefit of that tax impact, we expect if we close this deal in the early part of Q4, that it will reduce our cash taxes in calendar 2017 by $40 million. The tax story is pretty exciting. Overall, this deal will be accretive to our cash EPS in 2018 by a non-trivial amount. Again, I think that speaks to the attractiveness of the deal from a financial perspective. Even if you look at it on an ROIC perspective, within 2 years, we expect the ROIC of this investment to be above our cost of capital. However you want to slice it, the financial characteristics are good. Just a quick comment on the synergies I mentioned. $35 million is comprised primarily of overhead actions that we can control with pretty high certainty, very high certainty, I would say. There are some operational improvements that we believe we can bring to how the company runs overall. That combination makes up the $35 million of operating synergies. Then on top of that, we will have procurement synergies that come from the scale and expertise that we bring in our procurement activities. Call those $5 million-$10 million of cash impact of our procurement each year. Financing for the deal is going to be pretty straightforward. We will use a combination of a draw on our ABL and new debt. We are currently in the process of thinking about the type and tenor of the debt that we would issue to get the deal done. This is something that is right within our financing wheelhouse, and we obviously expect that to go very smoothly. Speaking of debt, if you look at the leverage impact of the deal, it is minimal. If we close this deal in the early part of the fourth quarter, by year-end, we expect the leverage to be below 3 times. Actually, right on close, it will be right at 3. Assuming we close sometime in the early part of Q4, it dips below 3 at the end of the year and continues nicely down by the end of 2018. Our current model has that 2018 year-end leverage dropping to somewhere around the bottom of our 2.5-3.5 times leverage range. The leverage impact of the deal is minimal, and it lines up with all the other attractive financial aspects of this deal. It is one that we are excited about, and we look forward to talking about it as we go to the future. With that, I will end my comments and ask the operator to open up the call for Q&A. Operator? Thank you, sir. Ladies and gentlemen, at this time, if you would like to ask a question over the phone, please press star and then one on your telephone keypad. If your question's happened to answer or you do wish to move yourself in the queue, simply press the pound key. Once again, ladies and gentlemen, to ask a question, that is star and then one. Our first question will come from the line of David Raso with Evercore ISI. Please proceed. Hi. Thank you. A couple of quick ones. First, any provisions around the deal to help protect it, be it breakup fees, no-shop provisions, things of that nature you can help us with? Sure, David. I'll start. There is a no-shop provision in the agreement that we signed. We think that adds some protection. There's a reverse break fee if something happens from their side that's north of $20 million, that would come to us if the deal fails. I think the biggest thing that assures the deal is just the excitement that both sides feel that this is the right deal, and that will give the best benefit to both the buyer and the seller. Regarding the inclusion of Neff into your core metrics, like the way NES initially dragged on your rates, can you help us with how the NES inclusion will impact your core metrics? Yeah. We're not getting into that level of detail right here and now, David. We'll follow the same approach at close. We'll give you a little bit more insight into how we expect it to impact our performance overall. At a high level, though, adding 49.5% margin for 2017 will be a net impact on the positive side for us as a company, and that's pretty exciting for us. More to come as we get to close and we update our view of the total company's 2017 outlook and some of the key metrics. On your excitement about the infrastructure exposure being ramped up and so forth, it's interesting, though. You still have a lower cross-sell synergy, $15 million here, than the NES deal. You're looking for $35 million. Can you help us understand why would you think the cross-sell here would be half of what you'd get out of NES, even though it's a similar size acquisition? Sure, Dave. This is Matt. We could have a debate of if it's too conservative or not. I think at this point, we're much more familiar with the customers we are cross-selling into with the NES acquisition being primarily aerial, and that's a core strength of ours historically. We used our model, and that's the number that kicked out. As we get under the hood, I certainly hope there's more opportunity, and we'll update appropriately. But we wanted to be conservative in modeling this deal to make sure the funds that we were going to spend, that we appropriately get the return, and $15 million of cross-sell helped get us here. If we get more, we'll certainly go after it, and we'll update appropriately. Even on the saving side, it's a little less as a percent of revenues than NES. Okay, I appreciate that. Last one, this gives you a little more, as you said, some heavier iron. Impact on your CapEx, your mix. How should I think about just straight out CapEx planning and scope broadly, but also on mix now with maybe a larger footprint in infrastructure? Yeah. We already had some plans to invest in these categories, which is why this deal makes so much sense right now at this time. We haven't done the analysis to figure out what that will be going forward. We will update once we get under the hood, and very similar to the NES integration. Once we get to really dive into the data and have teams look at it and talk to the sales teams and find out what the pipeline is, we will have a much better understanding of what we will do on a go-forward basis for CapEx. All right. I appreciate it. Thank you. Thanks, David. Thank you. Our next question will come from the line of Joe O'Dea with Vertical Research Partners. Please proceed. Hi, good morning. Morning. First, maybe just why historically you weren't spending a little bit more on the earthmoving side of things, and particularly some of the heavier earthmoving that you will get with Neff. As a second part of that, do you think the experience you'll gain through adding Neff to the portfolio means that you'll be better positioned to invest in this equipment outside of the branches that you'll get from them? Yeah, Joe. I'd say that we historically hadn't done a great job in bringing returns, and we had had the opportunity to spend on more accretive items. More specifically, we really put a lot of our incremental investment into our specialty business. As we've learned and dived more into the business and going after different verticals, and I think as Neff has shown, you can make money in this space. We just weren't. It wasn't a focus of ours. So it could be a fair criticism that maybe we were using our experience as a proxy for what could be done. We feel very comfortable now that we can make money in this space. As far as how big we get into it, I think it's important to point out that the higher end of Neff's dirt categories, for example, in excavators, only about $60 million of their excavators would be over the 200 size class that we would already normally invest in. So we don't have the exact numbers for you right now, but let's say it's 70%, 80%, very similar to what we would carry, and yeah, there's an incremental improvement in some of the larger categories. I think that's where we'll learn the most. But we do quite well financially on the smaller half of this dirt fleet that we have. So it's not a one-size-fits-all here. I just wanted to share that. Got it. On just the rate dynamic and how to think about that, are you able to say what your premium is relative to Neff? I mean, clearly good margins there. But I think in general, you think about you relative to other top 10 providers, and in general, 400-500 bps of premium and rate. Yeah. I wouldn't get so specific as to say what our premium is relative to Neff. As we've said numerous times, they've managed this business pretty well. So what I would say broadly is that the premium here in these categories and classes won't be the same as the premium we would realize typically elsewhere relative to the market. So that's the broad statement that I'll make and stop there. That's helpful. Off topic, but given just what we saw out of a really sharp uptick in the sequentials in the second quarter, are you willing to say what those sequentials did in July? I'll say it just as soon as we hang up. How's that? No, we're going to stay away from updating the current quarter. Thanks, Joe. Thanks a lot. Sure. Thank you. Our next question will come from the line of Steven Fisher with UBS. Please proceed. Thanks. Good morning. Morning. Just in terms of timing, Mike, you mentioned that you looked at this in the past. Part of why you did this now is because you had to outbid a competitor. Other than that, why is now the right time for this specific deal? Was it just opportunistic because the numbers made sense? To what extent do you need infrastructure spending to pick up for this really to deliver all that you expect? Or could the current kind of infrastructure landscape and marketplace support your plans for the deal? Sure. I just will tell you that timing, if you recall, several years ago, we had the acquisition of RSC. We were fine-tuning our cross-sell opportunities. As we move forward and when we had our Investor Day last December, we had talked about Project XL and infrastructure being an area of opportunity for us as a vertical that we were growing, and we have continued to mention those on each quarter. It is more about product offering with our current customer base. Timing was right, as I mentioned in the opening comments. As far as the infrastructure, we do not really need infrastructure spending or the bill that is being talked about to make these numbers work. To me, that would be frosting on the cake. This is an opportunity, as Matt mentioned, right here within our core customer base of expanding and learning and taking what Neff does very well and being able to push that out to the remainder part of our location. So very exciting about it. We do not need a lot of opportunity for growth on a bill and to make this business work. Okay. Then you stated that you expect the ROIC to exceed the cost of capital within 18 months, with an attractive IRR and NPV. How does that compare to the timeline for what you had with NES? What does it assume for the amount of synergies you would achieve within the 18 months? Regards to the second question, I think we said the timeline for the synergies here is within two years, and I think we said the same thing for NES on the synergy question. The point I made about the synergies primarily being in areas that we have high confidence of being able to control is an important point. We are really excited about how quickly we can deliver those synergies here. We are delivering pretty rapidly in the case of NES as well. I would say those are comparable. First part of your question was around ROIC, was it, Steven? Yes. Yeah. The ROIC, around 18 months, what do we say? All of this has got to come together in a way that is reasonable, but we believe that is very possible to do, and that is the statement that we made. I am sorry, I am missing the essence of your question. So ask it again so that I can- Not really. The question was around what has to happen because you put 18 months in the slide. You mentioned two years on the synergies. Yep. How much of the synergy do you anticipate capturing all the synergies within that 18 months to get to your ROIC? Or were there other specific factors? No, we said two years on the synergies. That is the way we put it in the model. It will contribute what it contributes by that 18-month profile. The other assumptions that we made, we said three years on the cross-sell. It will be building still by the end of the 18 months or the two-year period. We model out all of these things in a way that we think is reasonable and achievable. That is what leads us to the statements that we make about time frames of hitting things. I do not know that I can give a lot more detail than that. The one big thing, obviously, that could swamp all of this is how the cycle plays out, right? That is a very key consideration. It is one we think about very carefully. We have confidence that this current cycle has some ways to run yet. Therefore, we will have time to realize the synergies to drive the cross-sell, to be able to do the things that we assume in the model. Obviously, if we are wrong, then it could go against us. But if it is even close to right, we feel pretty comfortable about hitting the time frames that we have given. Great. Thanks a lot. Thank you. Thank you. Our next question will come from the line of Seth Weber with RBC Capital Markets. Please proceed. Hey, Seth. Hey, guys. Good morning. Morning. Wanted to go back to the rate discussion just for a minute. Neff's rental rates have been particularly good. I think they're up 150 bps or something in the second quarter, year-to-year. Do you have any insight into what's been driving the rate strength for Neff? Have you had a chance to look at length of contract or anything that might be particularly driving this rate outperformance relative to some of the other guys that are out there? Seth, I would just say, first and foremost, it's focus of their leadership team. I think the team's done a great job, especially in the past couple of years of being disciplined. As far as where it is relative to ours, we don't have that exact data on the relative rate right now. But if you look at their margins and our information about who they are in the market, they're not a price seller. They're a value seller. It's one of the reasons why we think this is a very good fit. We think that they value customer service and price accordingly. Some of the niches that they're in also, we think that they have the opportunity to be a strong provider to their customers and to get paid for it. I think that their pricing discipline is probably in the top half of the industry. That's about as far as I'll go. We just don't know the information. As Bill stated earlier, we certainly feel that the gap would be less than many other opportunities out there in the industry. Sure. Okay. Have you had a chance to look at, can you handicap what the customer overlap might be at this point? Is there any details that you've been able to get insight into as far as their customers versus yours, differences? You kind of went into some of this with the NES deal. I'm just wondering if you've had a similar timeframe to look at Neff yet. Yeah. It's not solid enough for me to say openly on the mic right now. We obviously feel comfortable enough to put cross-sell numbers in there, that there's some good opportunity there, so that the overlap certainly isn't 100%, but we'll refine that and communicate it as we go forward. But right now, I think it'd be premature. That'll get to whether that whole cross-sell number is- Right conservative or not. Right. Okay, and maybe just for Bill, once the dust settles here at the end of the year, do you think you'd start to do share repurchase again next year, or how are you thinking about share repo versus debt reduction? Thanks. Yeah, thanks, Seth. Obviously, this deal complicates that decision a little bit. We were on a path to reconsider that question here in the next month or two. Obviously, we will discuss the path of share repurchase in the next month or two, and make a call, but we want to make sure that we're being very conscious of how the Neff close will impact our leverage and the cash flow profile. So more work to do there, but I think it's fair to say that had we not done this Neff deal, we were on a pretty good path to get restarted here in the late part of 2017. With this deal, we just want to look at it more carefully before we make that call. So, stay tuned. My comments earlier about the path of leverage, especially as you extend it out to the end of next year, is a pretty good environment for us. I think that's given us some confidence that we'll get back to repurchasing at some point in the not too distant future. Whether we do it over the course of the remainder of this year is just a question we want to look a little closer at. Okay, great. Thanks very much, guys. Appreciate it. Thank you. Thank you. Thank you. Our next question will come from the line of Ross Mulari with Bank of America. Please proceed. Hey, Ross. Good morning. Michael, I just wanted to talk a little bit more on the decision to go after Neff and move into earthmoving. You've addressed, but you look at this, Neff IPO'd at $15 a share. The stock went to $5 a share. Wayzata has had this stake available for a long time. It's not until a regional competitor is about to buy Neff that you guys step in to acquire Neff. Is part of the motivation here just that you've got a regional competitor that potentially in H&E was going to get bigger and tougher, if they had proceeded with this transaction? Because let's just face it, as you addressed before, this isn't a category you guys have been wild about in the past. Yeah, just to be clear, absolutely not. I think we are very disciplined. It fits very well with our strategic point of view. Maybe we didn't articulate that as well as we could have at our Investor Day when we talked about infrastructure in the vertical. As Matt Flannery pointed out, a large category of their assets are really already within our bandwidth of what we purchase today. They do have the ability to manage other assets, but more importantly is the way in which they connect their customer with their broader range of products that they offer. No, this was really more strategic, the economics, and cultural. Everything that we do is extremely disciplined. I give my team a lot of credit for passing on deals for various reasons. When we talked about timing was right. We are in the area that we have been growing our presence and infrastructure. It's an opportunity for us. It's a lot of white space for us, to be quite clear. That was the opportunities that we saw, but had nothing to do with someone else trying to get bigger. Absolutely not. Okay, and just going forward, do you feel like this is the earthmoving category is a category that you potentially acquire even further into? Does this put you more head-to-head in competition with the Cat and Deere and CNH dealerships of the world? How do you- Yeah. I think as Matt mentioned, there's only a handful of categories that go above and beyond, and particularly in the excavators. We already are in the 200 excavators. Will we compete? I'm sure we compete today. We go head-to-head with everybody. For us, it's more about a product offering with our customer base and the value proposition that we have, not just products, but also everything else that goes along with it, that we think is a pretty attractive opportunity for our customers. I don't know where it leads. I don't necessarily know that we will compete, in the way in which you're trying to describe it. I just see it as the opportunity, expanding the infrastructure. Expanding the sweet spot that they have and the knowledge they have throughout United Rentals organization. Ross, I would just add, this is clearly a rental penetration play in this space, and we think there's an opportunity there. I don't necessarily feel that that's compete with the dealership model or the dealership network, although you do see some of them trying to get more into rental. We're a rental company. We feel we're very good at it, and we do feel that this category is going to get more rental penetration. That's our view here. Got it. Thanks, guys. Thank you. Our next question will come from the line of Tim Fine with Citigroup. Please proceed. Hi. The first question is just on the regional footprint here. Obviously, you called out the growth in the Southeast. It's been true, not just on a macro level, but it's also one that has been fairly heavily fleeted as well. I think over time, you've seen that reflected in rates, maybe not necessarily for Neff, but more broadly speaking. I'm just curious how you think your current footprint in that territory is from a branch perspective, and does this bring the opportunity for potentially some branch consolidation in that Southeast region? Tim, I think primarily very similar to how this was with the NES deal. This is a capacity for growth play for us and expertise, both technical and sales expertise that we're adding to the team. That's the primary play here. David Raso had mentioned earlier on the first question about that the synergy seemed light. That's because we think the expertise here is even greater differentiator from previous acquisition. I wouldn't look at this as that that's our go-forward goal is to consolidate stores. If local managers feel that there's a couple opportunities, then they'll make that decision, but this is not a slam them together and try to squeeze it into one store. We think there's a lot of opportunity for growth in this existing network, and that's where our focus will be. Okay, got it. Bill, on the $220 million tax benefit number that you referenced, could you provide any detail there? I'm assuming the NOL, is it right to think that's, call it, 10% or so of that number?